TRENTON – Acting Attorney General John J. Hoffman and Department of Environmental Protection Commissioner Bob Martin announced today that a legal dispute over compensation for the partial taking of a couple’s beachfront property in Harvey Cedars has been settled – for one dollar – as compensation for an easement obtained by the borough for its construction of a storm-abating sand dune.
The settlement has far-reaching implications for New Jersey’s efforts to fortify its coastline and protect shore communities from flooding and wind damage through the legal acquisition of small portions of beachfront property easements for construction of sand dune systems. The settlement was reached given the new state of the law in New Jersey governing compensation for shoreline easements since Superstorm Sandy, and should guide all future disputes and settlements.
Settlement with Harvey Cedars property owners Harvey and Phyllis Karan comes in the wake of a lengthy litigation process that began with the Borough of Harvey Cedars seeking to obtain an easement from the Karans to build a 22-foot-high dune on a portion of their lot. The municipality used its power of eminent domain to acquire the needed easement. However, the parties could not agree on fair compensation and ended up in court, where the New Jersey Department of Environmental Protection (DEP) ultimately became an intervenor.
A trial jury placed the value of the easement at $375,000, and the Superior Court’s Appellate Division subsequently upheld that verdict. On July 8, 2013 the state Supreme Court overturned the Karan’s $375,000 jury award and ordered a new trial. In reversing the jury award, the Supreme Court held in a landmark decision that homeowners who are subject to property-taking on behalf of public projects “are not entitled to a windfall.”
The Supreme Court rejected the Karans’ argument – successful at the Appellate level -- that storm protection provided by the sand dune benefited the entire community, and therefore could not be considered an individualized, special benefit that boosted the value of the Karan’s home. Instead, the Court held that quantifiable storm protection benefits provided by sand dunes and beach replenishment must be factored into the fair compensation equation.
In rendering its decision, the Supreme Court endorsed a “straightforward fair market value” approach to determining just compensation for the Karans and rejected the “general benefits doctrine” applied at the Appellate level as obsolete and having no resonance in modern times. The ruling represented a significant change in the law with regard to partial property takings for public improvement projects, and paved the way for the settlement announced today.
“This settlement represents an important outcome for the citizens of New Jersey, for our precious natural resources along the coast, and for the rebuilding of our Jersey Shore communities. It is to the Karans’ credit that they were willing to put a halt to this protracted legal dispute following the Supreme Court’s decision,” said Acting Attorney General Hoffman.
“Superstorm Sandy proved that beaches and dunes built to Army Corps of Engineers’ specifications work – they protected property and they saved lives,” DEP Commissioner Martin said. “The Christie Administration is committed to securing the remaining easements needed to build a full coastal protection system for New Jersey that meets these standards. Now is the time for the remaining holdouts to step forward and provide easements that will protect not only their own properties but will also protect their neighbors’ properties and their entire town. To them we say, do the right thing and help us to protect the Shore which all of us share and treasure.”
“The Supreme Court has changed the law significantly – and appropriately – so that windfalls at the public’s expense may be avoided,” said Division of Law Director Christopher S. Porrino, who also argued the matter in the Supreme Court. “Looking ahead, we expect that other beachfront property owners will recognize this reality, and will take their cue from the outcome in this case.”
Separate and apart from the $1 compensation paid to the Karans for the borough’s easement, the borough agreed to reimburse counsel's out-of-pocket litigation costs in the amount of $24,260. No legal fees were paid. The reimbursement for litigation costs was appropriate in this situation because the Karans’ original complaint long predated the recent change in law by the Supreme Court. No post-Sandy cases going forward will be treated similarly in this regard.