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Law360 (December 16, 2020, 4:43 PM EST) -- New Jersey Gov. Phil Murphy and members of his cabinet were hit with a lawsuit Tuesday by a group of landlords challenging his executive order allowing tenants to use their security deposits to cover back rent during the COVID-19 crisis. The lawsuit contends the governor does not have the right to meddle in private contracts.
In a state court complaint filed in Cumberland County, the landlords said Executive Order 128, signed in April, illegitimately waived laws governing the security deposits that protect rental owners against the risk of damage and was unveiled without the consent of the contracting parties or state legislature. Murphy abused his power, the complaint said, by interfering with contractual rights and obligations of private citizens.
The landlords made clear the issue is not one of agreement or disagreement about the effectiveness of Murphy's pandemic policies but rather one of the Constitution and separation of powers.
"This case focuses explicitly on whether the New Jersey Governor can rely on his own declared public-health emergency to assume authority neither the state Constitution nor the legislature ever granted to waive or amend provisions in private contracts, as well as to override and amend explicit statutory provisions as he chooses," the complaint read.
The landlords want a declaration that Murphy doesn't have the authority to issue Executive Order 128 nor the "power to interfere with leasehold contracts or to waive statutory law." In addition to Murphy, the suit names New Jersey Attorney General Gurbir S. Grewal and Health Commissioner Judith Persichilli as defendants. They're being sued in their official capacities.
The order, and others imposing various business restrictions and safety protocols, followed Murphy's state of emergency declaration in March. Murphy has renewed many of the orders as the pandemic raged on. New Jersey, at one point early in the outbreak, became the second-hardest-hit state behind New York in terms of case numbers and deaths.
Executive Order 128 allows tenants who may be suffering financial hardships related to the pandemic to use their security deposits as rent, noting that New Jerseyans had filed 856,528 unemployment claims over the previous five weeks. The tenant won't be obligated to make another security deposit to replace the one used unless the lease agreement is extended, according to the order.
According to text of the order, allowing the use of security deposits as rent aims to "mitigate the consequences" upon the termination of an earlier executive order Murphy issued establishing a moratorium on evictions until after the public health crisis is over.
Landlords who violate the order could be hit with a fine of up to $1,000 and/or a prison term of up to six months. Executive Order 128 states that none of its provisions shall be considered to violate New Jersey Revised Statutes' Section 46:8-19, which governs security deposits.
The measure is "plainly in the public interest," according to the order. But the landlords said state laws remain the territory of the legislature, not the governor.
"Governor Murphy has unfairly scapegoated landlords, most of whom depend on their rental income to make ends meet. The pandemic and the business closures are hurting all New Jerseyans. But rather than seeking a legislative solution that treats everyone fairly, Governor Murphy circumvented the legislature and singled out landlords to take away their rights," the New Civil Liberties Alliance, which is representing the landlords, said in a statement about the lawsuit.
The properties at the heart of the lawsuit include a duplex in Vineland and houses in Glassboro and Millville. The respective owners collected security deposits of $1,230 on the Vineland property, $2,000 on the Glassboro property and $2,175 on the Millville property, according to the complaint.
A representative for Murphy didn't immediately respond to a request for comment. Spokespersons for Grewal and Persichilli said their departments don't comment on pending litigation.
The landlords are represented by Kara Rollins, Harriet Hageman and Jared McClain of the New Civil Liberties Alliance and by Walter S. Zimolong of Zimolong LLC.
Counsel information for the defendants is unknown.
The case is Charles Kravitz et al. v. Philip D. Murphy et al., case no. L-000774-20, in the Superior Court of New Jersey, Cumberland County.
--Editing by Andrew Cohen.
For a reprint of this article, please contact reprints@law360.com.
