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Law360 (July 20, 2021, 6:36 PM EDT ) A New Jersey appellate panel on Tuesday declined to overturn Gov. Phil Murphy's executive order allowing tenants to use their security deposits to cover back rent during the COVID-19 pandemic, finding the order permissible under the state's Civil Defense and Disaster Control Act.
In a 48-page published opinion, a three-judge panel determined that Executive Order 128 satisfies a two-pronged test established by the New Jersey Supreme Court. The order is sufficiently related to protecting the public, they said, as well as appropriately tailored.
E.O. 128 "clearly bears a rational relationship to the health and economic crises created by COVID-19," the opinion states, noting that it allows tenants "access to additional funds to pay for health care during the pandemic."
It also is not overly broad, the judges added, pointing out that the order "does not hinder landlords' ability to obtain judgments for unpaid rent or damages" and that it is time-limited.
The appellant landlords had argued that the order fell outside a narrow list of executive powers in the New Jersey Civil Defense and Disaster Control Act — which was originally intended for war-related emergencies, such as relegating blackouts and air raid warnings.
But the judges were not persuaded, finding that the act "also provides a more comprehensive authorization to the governor to issue executive orders" to protect public health, safety and welfare.
Tuesday's decision also rejects the landlords' assertions that E.O. 128 wrongly meddled in private contracts, finding that the landlords still have avenues to recover missing rent and that their contractual rights were not "substantially" impaired.
Signed into law on April 24, 2020, E.O. 128 was designed in part to protect tenants from accumulating interest and late fees on unpaid rent and from harming their credit scores.
The order states that landlords can still recoup the cost of damages that would have been covered by the security deposit and that tenants who decide to renew their leases will eventually have to replenish their deposit in full.
Though New Jersey's state of emergency ended July 4, Tuesday's order notes, E.O. 128 still applies to rent due up to 60 days from that date.
Several small landlords filed the instant suit in Cumberland County in December, arguing that Murphy had abused his powers and wrongly waived laws governing the security deposits that protect them against the risk of property damage. The suit named the state attorney general and New Jersey Health Commissioner Judith Persichilli as co-defendants.
In June 2020, the plaintiffs also challenged the executive order in a separate suit in New Jersey federal court. That case was dismissed in March, and it is now on appeal.
Jared McClain of the New Civil Liberties Alliance, the legal group representing the landlords, condemned Tuesday's decision in a statement.
"No law or contract in New Jersey is safe now anytime the state faces an economic downturn," McClain said, adding that he and his clients "are still discussing what to do next."
New Civil Liberties Alliance, which is dedicated to curtailing what they call the "Administrative State," has also represented parties seeking to halt a federal eviction moratorium.
Murphy's office deferred to the attorney general for comment. A representative of that office pointed to a Tuesday tweet by acting Attorney General Andrew Bruck stating that the governor had "protected individuals from public health and economic harms" and that the state had "won big" with Tuesday's decision.
Groups including the Fair Share Housing Center, Lawyers' Committee for Civil Rights Under Law, Housing & Community Development Network of New Jersey, New Jersey State Conference of the NAACP and the Latino Action Network submitted a brief in the case, arguing in part that overturning E.O. 128 would have "tremendous implications" for disproportionately Black and Latino families in New Jersey.
Tuesday's decision is an "unequivocal win for tenants rights and the need for determined governmental action to protect them from displacement due to causes outside of their control," Bassam Gergi, a staff attorney at Fair Share Housing Center, told Law360 in a statement.
Judges Carmen Messano, Richard S. Hoffman and Karen L. Sutter sat on the panel for the Appellate Division.
The appellants are represented by Jared McClain, Harriet Hageman and Kara Rollins of the New Civil Liberties Alliance and Walter S. Zimolong of Zimolong Law.
Murphy, former Attorney General Gurbir Grewal and Health Commissioner Judith M. Persichilli are represented by Assistant Attorney General Stuart M. Feinblatt.
The amici are represented by Joseph C. O'Keefe, Lindsey Olsen Collins and Michelle M. Ovanesian of Proskauer Rose LLP.
The case is Charles Kravitz et al. v. Philip D. Murphy et al., case number A-1584-20, in the Superior Court of New Jersey, Appellate Division.
--Additional reporting by Jeannie O'Sullivan. Editing by Steven Edelstone.
Update: This story has been updated to clarify the description of New Civil Liberties Alliance.
For a reprint of this article, please contact reprints@law360.com.
