E-Newsletter Alerts

INTRODUCTION

In this issue of In-Sites, the articles cover a wide variety of topics ranging from new federal standards for due diligence to New York's expansion of a landlord's common law duty. The first article highlights the new federal standard for pre-acquisition due diligence for buyers of contaminated or potentially contaminated property. In another article, we evaluate the substantial burden standard encompassed in the Religious Land and Institutionalized Persons Act and the impact that decisions interpreting that Act have had on religious organizations. A third article outlines how to give a complex commercial lease a "quick look" for key issues. Another article describes the heightened judicial scrutiny of procedural due process that courts have imposed following the United States Supreme Court's decision in Kelo v. City of New London, Connecticut. Since it has become harder to rein in the power of eminent domain on a substantive basis, courts have turned to procedural due process issues as a way of tempering the impact of Kelo. Another article evaluates the use of the Lanham Act to protect trademark logos on signs. This gives shopping center developers and trademark holders an alternative avenue to prevent sign color restrictions in outdoor signage.

An article on the recent decision in United States v. E.I. DuPont deDemours & Co. describes the startling reversal of precedent decided by the Third Circuit. An article that appeared in The New York Law Journal in November 2005 describes the expansion of a landlord's common law duty to take minimal precautions to protect tenants and visitors from foreseeable harm. The last article is a practical analysis of how a developer should decide on whether to seek a zoning variance or a zoning amendment when a proposed development does not conform with at least one zoning requirement.

NEWS OF INTEREST

Russell Bershad Among Contributing Authors for ICLE's New Book: Commercial Real Estate Transactions in New Jersey

Russell Bershad, Chair of the Real Property and Environmental Department, contributed content on financing for the newest edition of the New Jersey Institute for Continuing Legal Education's source manual "Commercial Real Estate Transactions in New Jersey 2nd Edition." The comprehensive "solution-based" resource guide will provide readers with information on how to handle virtually every aspect of a commercial real estate transaction in New Jersey. The panel of contributing authors provides the theory to address a wide range of commonly confronted transactional issues, and then follows with practical solutions and contract language to address the needs of reader's clients.

For more information, please visit www.njicle.com/catalog/books/comrealest_103303.htm

Howard Geneslaw Presents on Zoning and Land Use Issues

Howard Geneslaw, a Director in the Gibbons Real Property & Environmental Department, is among the speakers at the Lorman Education Services program on eminent domain. This program will be held in October 10, 2006, in Parsippany, New Jersey.

Howard Geneslaw will discuss eminent domain in the context of redevelopment. For more information or to register visit Lorman Education Services' website at www.lorman.com or call (866) 352-9539.

Growth and Expansion for the Gibbons Real Property & Environmental Department

David A. Brooks has joined Gibbons as an Associate in the firm's Real Property and Environmental Department. Mr. Brooks concentrates his practice in the area of environmental law, especially regulatory compliance, including compliance with the Industrial Site Recovery Act; solid waste and hazardous waste and substances management; Brownfields redevelopment; and remediation and litigation under the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund) and the New Jersey Spill Compensation and Control Act. He previously served as Deputy Attorney General for the State of New Jersey Department of Law and Public Safety, Division of Law. In this capacity, he represented and advised the New Jersey Department of Environmental Protection and the New Jersey Board of Public Utilities in connection with solid waste, telecommunications, cable, energy, and water matters. Mr. Brooks is a graduate of the University of Denver and University of Chicago, and is admitted to practice in New Jersey, New York and Massachusetts. He can be reached at (973) 596-4719 or dbrooks@gibbonslaw.com.

Jennifer M. Porter has also joined Gibbons as an Associate in the Real Property and Environmental Department. Ms. Porter's past experience includes representing clients on site plan, special permit, use and area variance applications and zoning interpretations before municipal boards, principally in New York. Prior to joining the firm, Ms. Porter served as legal counsel to the Village of Rye Brook Planning Board and special counsel on land use/environmental matters to the Town of Red Hook. She was also responsible for drafting local laws for municipal clients on numerous land use and zoning topics including open space preservation and funding sources, historic preservation, the site plan and subdivision review process, affordable housing, special permits, home occupations, planning and zoning board powers, nonconforming uses and overlay districts. Ms. Porter is a graduate of the Pace University School of Law and Indiana University of Pennsylvania, and admitted to practice in New York and Connecticut. She can be reached at (973) 596-4615 or jporter@gibbonslaw.com.

Real Property & Environmental Department to Exhibit at ICSC Show

The Gibbons Real Property & Environmental Department will again exhibit at the International Conference of Shopping Centers (ICSC) Idea Exchange Shows in Philadelphia and New York.

The shows attracts attendees from a variety of industries to network and attend programs on hot topics in the industry. The Philadelphia conference will be held from September 20 - 21, 2006, at the Philadelphia Convention Center and the New York conference will be held from December 4 - 6, 2006, at the New York Hilton & Towers, New York, NY.

For more information or to attend these events, please visit http://www.icsc.org/apps/meeting_list.php.

Gibbons Acquires Hecker Brown Firm, Expanding Philadelphia Office to 28 Lawyers

Gibbons announces the expansion of its Philadelphia office with the addition of 25 attorneys from Hecker Brown Sherry and Johnson, a prominent Philadelphia civil litigation boutique. This expansion is a key aspect of Gibbons' strategic plan to enhance its ability to serve clients from offices throughout the region. With the addition of Hecker Brown, Gibbons' presence in Philadelphia will grow to 28 attorneys concentrating in a wide range of practice areas, including products liability, mass torts, commercial litigation, employment law and complex insurance litigation, complementing the firm's existing capabilities in its New Jersey and New York offices.

Real estate practice, at least with respect to contaminated or potentially contaminated property, is about to get easier -- and harder. Four years after Congress amended CERCLA via the so-called "Brownfields Amendments," EPA has issued its final "All Appropriate Inquiries" ("AAI") rule, which specifies the pre-acquisition investigations that purchasers must conduct in order to be eligible for exemptions from CERCLA liability as "innocent landowners," "bona fide prospective purchasers" (for sites acquired after January 11, 2002), or owners of properties that are contiguous to contaminated sites. (Those seeking to enjoy any of these protections must show that they satisfy numerous requirements, only one of which is compliance with the applicable AAI standards.) EPA's rule, which will go into effect on November 1, 2006, also explicitly references, as fully consistent with its provisions, and indeed guided the development of, ASTM's revised Standard E1527-05 for Phase I assessments. The new AAI rule will thus become the new "default" standard for pre-acquisition due diligence, regardless of the level of concern about CERCLA liability, increasing Phase I costs but reducing uncertainty for both buyers and lenders.

The Religious Land Use and Institutionalized Persons Act ("RLUIPA") prohibits a government regulation that substantially burdens religious exercise unless the regulation serves a compelling interest and is the least restrictive means to achieve that interest. 42 U.S.C. Section 2000cc(a)(1). The plaintiff bears the burden of proving that the challenged law substantially burdens the plaintiff's exercise of religion. 42 U.S.C. Section 2000cc(a)(1); Section 2000cc-2(b). RLUIPA's legislative history indicates that Congress did not intend RLUIPA's substantial burden standard to receive any broader interpretation than the Supreme Court's articulation of the concept of substantial burden. 146 CONG. REC. 7774-01, 7776 (2000).

Clients, and sometimes our partners on behalf of their clients, often ask us to take a "quick look" at a lease and let them know if there are "any problems." Every real estate attorney with any leasing experience has heard this request. Many office leases exceed 40 pages and 100+ page leases are not extraordinary. Short of not reading the whole lease - not recommended - it is difficult to take a proverbial quick look at a long lease. Self censorship is hard for lawyers.

The United States Supreme Court's decision Kelo v. City of New London, Connecticut, has substantially limited the judiciary's review of the exercise of eminent domain powers by being overly deferential to government determinations as to what constitutes a "public use." Still however, courts remain vigilant with respect to reviewing whether or not adequate evidence supports the determination that a particular project furthers a public interest. After Kelo, it would appear that the power of eminent domain may be unleashed so long as there is some perceived public benefit, which after the Kelo decision may consist of only general economic development undertaken with the hopes of increasing tax revenue. While it may have become more difficult for a court to invalidate the exercise of eminent domain as not in furtherance of a "public use," subsequent cases demonstrate an apparent heightened judicial scrutiny as to the procedural aspects of municipal redevelopment. It may be inferred that the strict scrutiny given to the procedural aspects of redevelopment projects is part of the backlash generated by the Kelo decision even though the case is not expressly mentioned in some of the post-Kelo decisions.

Trademark identification is a major business asset. A trademark, with its recognizable design and colors, can boost business by increasing customer identification of particular goods and services. Franchise establishments invest substantial funds in their trademarked logos so that franchisees can benefit from the goodwill associated with their specific brands. However, some municipalities are trying to avoid the "rainbow" effect caused by the use of several multi-colored logos in shopping centers by restricting the number and type of colors permitted on outdoor signage. Shopping center developers and trademark holders may have a Federal avenue to prevent enforcement of such sign color restrictions.

Recently, in United States v. E.I. Dupont De Nemours and Co., Inc., et al. ("Dupont"), the Third Circuit Court of Appeals held that the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"). 42 U.S.C. Section 9601 et seq. authorizes the United States to recover oversight costs for supervising a hazardous waste cleanup being conducted directly by the responsible parties, thereby completely overruling their own previous decision in United States v. Rohm & Haas Co., 2 F.3d 1265 (3d Cir. 1993) ("Rohm & Haas").

Landlords have a common-law duty to take minimal precautions to protect tenants from foreseeable harm, including foreseeable criminal conduct by a third person.' Mason v. U.E.S.S Leasing Corporation, 730 N.Y.S.2d 770 (Ct. App. 2001). This apparently simple sentence set forth in a memorandum opinion of the New York State Court of Appeals succinctly sets forth the law of the State of New York governing the liability of landlords to tenants for third party acts. The Appellate Division, First Department, has "quoted" this standard to include a duty to "visitors" as well as tenants, Gross v. Empire State Building Associates, 773 N.Y.S.2d 354, 355 (1st Dept. 2004). Whether a harm is "foreseeable," and what constitutes "minimal precautions" are fact-driven inquiries. However, it seems inevitable that it is only a matter of time before a commercial landlord is found to have failed to discharge its duty to provide minimal precautions against foreseeable harm to its tenants and visitors, and be found liable in damages.

Given the possibility of terrorist acts (whether politically motivated acts of foreigners serving a "cause," or inexplicable acts of U.S. residents with no apparent motivation) harming or killing hundreds and even thousands of people in a single moment, the amount of damages for which a landlord might find itself liable in any such situation is almost without limit.

More often than not, a proposed development does not conform with at least one zoning requirement. The developer then must decide, early in the process, among four choices: (a) redesign the project to meet all zoning requirements; (b) abandon the project or seek another site; (c) apply for a variance; or (d) seek a modification of the zoning requirement(s) that the project does not meet. Redesigning or abandoning the project usually are not among the preferred alternatives, so this article will focus on how to decide between applying for a variance and seeking a zoning amendment.