Two From the Appellate Division (Both by Judge Hoffman)

Kravitz v. Murphy, ___ N.J. Super. ___ (App. Div. 2021); Johnson v. McClellan, ___ N.J. Super. ___ (App. Div. 2021). The Kravitz case, in which Judge Hoffman authored the panel’s opinion, involves another Executive Order issued by Governor Murphy as a result of the COVID-19 pandemic. This one was Executive Order No. 128, which authorized residential tenants to use their security deposits to pay rent.

Individuals and businesses that own or manage leased residential premises challenged the Executive Order on several grounds. Those grounds included the argument that the Executive Order exceeded the Governor’s powers under the Emergency Health Powers Act, N.J.S.A. 26:13-1 to -31 (“EHPA), and the New Jersey Civil Defense and Disaster Control Act, N.J.S.A. App. A: 9-30 to -63 (“Disaster Control Act”). Appellants also asserted that the Executive Order violated constitutional provisions forbidding the impairment of contracts, creating a separation of powers among the branches of government, and guaranteeing due process.

Judge Hoffman was not writing on an entirely clean slate. Appellants had filed a prior case in federal court that had raised Contracts Clause, due process, and other federal arguments seeking to invalidate the Executive Order. State law claims in that case were dismissed without prejudice for appellants to pursue in state court. But the federal court dismissed the remaining challenges. Johnson v. Murphy, No. 20-cv-6750-NLH, 2021 WL 1085744 (D.N.J. Mar. 22, 2021).

Judge Hoffman first addressed the argument about the EHPA. He noted that the Stat’s brief “advance[d] no arguments pertaining to the EHPA.” After discussing that statute, he concluded that “the EHPA addresses public health emergencies and that most powers authorized by that statute are directed toward the Commissioner of Health, not the Governor.” Accordingly, “the EHPA does not provide authority for the Governor’s issuance [of] EO 128 because it was not directly related to the public health.”

The Disaster Control Act, however, did afford grounds for the Executive Order. Originally designed to address only war emergencies, that statute was expanded “to address any unusual incident which endangers the public health, safety, or welfare,” Judge Hoffman said, citing Worthington v. Fauver, 88 N.J. 183 (1982). That same case said that “the Governor’s power under the Disaster Control Act must be liberally construed to accomplish its crucial legislative purpose.” And since the Governor’s action was “rationally related” to the Legislature’s goal of protecting the public from evictions and was “closely tailored to the magnitude of the emergency,” the Executive Order was authorized by the Disaster Control Act.

Judge Hoffman then analyzed and rejected appellants’ state constitutional arguments. There was no impairment of contract, the separation of powers was not violated (among other things, the Legislature had given the Governor broad authorization to act as he did), and the due process claim was not valid, a ruling that the federal court had made under the United States Constitution in the predecessor Johnson v. Murphy case. Accordingly, the panel upheld the Executive Order.

Johnson v. McClellan, a decision also written by Judge Hoffman, involved a complicated set of facts. The essence of the case and the panel’s ruling, which employed de novo review, was well-summarized in the following paragraphs from the start of the opinion:

“Plaintiff Cindy Johnson, in her capacity as administrator of her late husband’s estate, brought a civil action against defendant Frank McClellan, under N.J.S.A. 2C:21-22a, for damages resulting from defendant’s alleged unauthorized practice of law regarding his involvement in plaintiff’s prior medical malpractice suit. Plaintiff also sought disgorgement of a referral fee she claimed defendant received improperly.

Plaintiff moved for summary judgment, which the motion court granted. On February 28, 2020, the motion court entered an Amended Order for Final Judgment, awarding plaintiff a total of $308,181.68, with $52,145.42 representing the ‘[r]eturn of [i]mproper [r]eferral [f]ee [s]um [o]rdered disgorged,’ and $256,036.26 representing treble damages and attorney’s fees, under N.J.S.A. 2C:21-22a. This appeal followed. Because disgorgement is a remedy, not a cause of action, and because we find no evidence that plaintiff sustained an ‘ascertainable loss,’ a required element for a cause of action under N.J.S.A. 2C:21-22a, we reverse.”

Well worth reading in full, the opinion rightly drew upon “ascertainable loss” law under the Consumer Fraud Act, N.J.S.A. 56:8-19 (“CFA”), which is perhaps the best known use of that phrase in legislation. Judge Hoffman noted that that language in the CFA has been interpreted as a “causation provision,” and went on to discuss extensively the CFA caselaw about the larger meaning of “ascertainable loss.”

The opinion also carefully addressed the similarities and differences between disgorgement, an equitable remedy, and restitution. That discussion cited not only New Jersey cases, but federal authority and the Restatement (Third) of Restitution and Unjust Enrichment. Judge Hoffman also touched on the law of assignment and the doctrine of in pari delicto, along with a detailed analysis of the unauthorized practice of law and applicable Rules of Professional Conduct. Thus, this opinion had a little bit of just about everything, and something from which just about everyone can learn.