A Gym’s Claim for Compensation for COVID-19 Closures Under the Governor’s Executive Orders Fails

JWC Fitness, LLC v. Murphy, ___ N.J. Super. ___ (App. Div. 2021). This opinion by Judge Rothstadt involved the claims of plaintiff, a gym, for compensation from the State because Governor Murphy’s Executive Orders required the gym to close (though it could and did continue to offer certain services) as a result of COVID-19. Plaintiff argued both statutory and constitutional grounds for compensation. The Appellate Division, however, rejected plaintiff’s contentions.

The statutory basis for plaintiff’s compensation claim was the Disaster Control Act. N.J.S.A. App. A:9-30 to -63. The key language of that statute authorizes payment of the reasonable amount of privately owned property that the Governor may “commandeer and utilize.” Applying principles of statutory interpretation that call for giving words not defined in a statute their ordinary meaning, and using dictionary definitions of “commandeer” and “utilize,” Judge Rothstadt held that the statutory requirements for compensation had not been met.

To “‘commandeer’ property entails seizing the property or taking possession of it akin to a physical taking under the constitution,” Judge Rothstadt said. Similarly, to “‘utilize’ property also anticipates a physical taking of property for public use, as with a physical taking under the constitution.” Since the two terms were connected by “and,” that meant that “the most reasonable understanding of the statute is that it authorizes the government to seize private property or take possession of it akin to a physical taking under the constitution, i.e., to ‘commander’ the property, and thereafter ‘utilize’ the property for the governmental purpose of avoiding or protecting against an emergency.”

Neither of those things happened here. Instead, the Executive Orders merely regulated use of plaintiff’s property, and in the same way that many other properties, of gyms and other types, were simultaneously being regulated, all in the public interest of dealing with COVID-19. Judge Rothstadt noted that both the Disaster Control Act and “a related statute,” the Emergency Health Powers Act, N.J.S.A. 26:13-1 et seq., afforded compensation for physical takings, destruction, or utilization of private property, but not for regulating property.

Plaintiff’s claims of unconstitutional taking of property, under both the New Jersey and United States Constitutions, fared no better, “for numerous reasons. First, and most fundamentally, plaintiff has not asserted a recognizable property right for purposes of a constitutional takings claim. Plaintiff does not own the real property at issue; instead, it is a tenant. Moreover, the State has not physically taken any property owned by plaintiff. The State has not occupied, or claimed ownership of, the physical property plaintiff leases, nor has it taken or seized any physical assets of plaintiff’s business.” Plaintiff complained only about “temporary regulatory restrictions on the ability to operate its business. However, conducting a business does not constitute a property right.” Judge Rothstadt cited a number of authorities from the Supreme Court of the United States and other jurisdictions on this point.

Nor was there a regulatory taking. The Executive Orders “had a significant impact on the operations of gyms and fitness centers. However, plaintiff was never deprived of all economic beneficial or productive use of its property.” It operated live-streamed kickboxing classes for which it made a “business decision” not to charge. When gyms were permitted to re-open, with limitations, plaintiff did not take full advantage of that opportunity.

“Finally, and most important, the nature of the governmental action strongly weighs against finding a taking. The limitations placed on plaintiff’s business were not specific to plaintiff, or even to gyms and fitness centers as a group. The same or similar limitations were placed on numerous categories of businesses, and it is undisputed that these limitations constituted valid exercises of the State’s police powers in the context of a public health emergency, to mitigate the spread of COVID-19.” Judge Rothstadt again cited cases from elsewhere. He also noted that “plaintiff has not presented any cases in which courts have found takings in this context.” Accordingly, plaintiff’s demand for compensation failed.