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New Jersey developers whose land is in the Highlands preservation area have been handed an unpleasant choice: apply for a hardship waiver from tough new regulations or wait out the appeal of an unfavorable court ruling. Their lawyers are not looking forward to either alternative, as both will take up valuable time. The developers’ dilemma is the result of an Appellate Division ruling on Aug. 10 in OFP L.L.C. v. New Jersey , A-3190-05. The reported decision held that the 2004 Highlands Water Protection and Planning Act did not constitute an unconstitutional taking, that property owners must first exhaust administrative remedies by seeking a waiver and that the act’s retroactivity provision was valid. In an unreported case released the same day, Castle Rock Estates Corp. v. New Jersey , A-5389-05, the appeals court rejected claims that the act violated the federal and state constitutions by permitting an unlawful taking. So, developers can wait to see the results of an expected appeal to the state Supreme Court or they can seek a waiver from the state Department of Environmental Protection. Six other challenges to the law and 30 challenges to the DEP Highlands regulations are pending. OFPand Castle Rock Estatesare the first appellate decisions on the Highlands statute, which regulates development and ensures availability of potable water by placing 860,000 acres in 88 northwestern municipalities in a preservation zone. The losing lawyer in OFP, Brian Mulligan, says he will appeal. But for now, OFPis the controlling law and “the state is going to cite OFPas precedent in other pending cases,” says Mulligan, of Trenton’s Sterns & Weinroth. “What my clients do depends on their financial situation.” Property owners in dire financial straits may decide to apply for a waiver, which permits some development. “But I’ll tell them that once the DEP has made a decision, they have to live with that,” he says. “Other clients, those who have invested a lot of time and money, maybe they can afford to take a gamble” and hope the state Supreme Court overturns the Appellate Division rulings, Mulligan says. “This was just a stopping point in the litigation,” says Lewis Goldshore, an environmental lawyer with Lawrenceville’s Goldshore, Cash & Kalac who was not involved in either case. Goldshore says he expects the Court to hear at least one of the two cases, probably OFP, but not until December at the earliest because of the complexity of the constitutional questions. Thus, if it agrees to hear the case, the Court will likely not issue a ruling until next year. “The Supreme Court should address this issue, and I hope it will,” says the losing lawyer in Castle Rock Estates, Louis Pell, of Woodcliff Lake’s Price Meese Shulman & D’Arminio. But Goldshore, like Mulligan, says developers may not want to pin too much hope on a reversal. “I’m hoping they [the justices] will, but [ OFP] is a strong decision. It’s predictable, but it applies the customary standards for cases involving constitutional questions. Overcoming environmental laws is very, very difficult.” The plaintiffs in OFPand Castle Rock Estates,a per curiam ruling decided by the same judges ,were in unusual positions. Their final water use applications were pending before the DEP when the Legislature passed the Highlands act. OFP’s property, 93 acres in Washington Township in Morris County for 26 residential lots, and Castle Rock Estates’ tract, 28 acres in West Milford in Passaic County for17 residential lots, are within the preservation areas. The act applies the regulations retroactively; property owners must get DEP permission under the act’s heightened standards, even though municipal approvals have been given. The plaintiffs argued in both cases that such retroactivity amounted to a “manifest injustice.” Appellate Division Judge Stephen Skillman disagreed in OFP, noting that the act specifically allows such property owners to apply for a waiver, but neither plaintiff exhausted that route before filing the constitutional challenge, continued Skillman, joined by Judges Joseph Lisa and John Holston Jr. Goldshore says an administrative appeal is “exhausting to the landowner. It’s painful and expensive, and the result is usually predetermined.” The appellate judges focused the bulk of their discussion on the OFPcase. The panel said Morris County Superior Court Judge Theodore Bozonelis correctly dismissed the constitutional challenge on summary judgment. Skillman added that the trial court rightly concluded that the limited retroactivity to projects that won administrative approval between the statute’s introduction and enactment did not violate OFP’s due process or equal protection rights. Moreover, he said, there was a rational basis for retroactivity – “to prevent a rush by landowners to obtain development approvals while the Act was proceeding through the legislative process, which would reduce the amount of land subject to its regulatory provisions.” Lee Moore, a spokesman for the Attorney General’s Office, issued a statement in favor of the appeals court ruling. Deputy Attorney General Dean Jablonski, who represented the DEP, could not be reached for comment.

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