CHARLES KRAVITZ VS. PHILIP D. MURPHY (L-0774-20, CUMBERLAND COUNTY AND STATEWIDE), A-1584-20

Background

Plaintiffs are five individual landlords and three related businesses who leased residential properties and received tenant security deposits under written leases.
In response to COVID-19, Gov. Murphy issued Executive Order No. 128 (Apr. 24, 2020), temporarily permitting tenants to apply their security deposits (and associated interest) toward rent due during the public‑health emergency.
EO 128 was time‑limited, required tenants to replenish deposits on lease renewal (and within six months after the emergency), and preserved landlords’ ability to recoup monies expended and to pursue judgments for unpaid rent and damages.
Plaintiffs sued, arguing EO 128 exceeded gubernatorial emergency powers (EHPA and Disaster Control Act), violated separation of powers and the nondelegation doctrine, impaired contracts (security‑deposit provisions), and denied due process; a federal district court dismissed related federal claims, and the Appellate Division reviewed the order.
The court held the EHPA did not authorize EO 128 (it targets public‑health tools), but the Disaster Control Act did; it rejected plaintiffs’ separation‑of‑powers, Contracts Clause, nondelegation, and due process challenges and affirmed EO 128.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
1. Authority to issue EO 128 under emergency statutes	Murphy exceeded his statutory emergency powers; EHPA/Disaster Control Act do not authorize permitting use of security deposits for rent	EO 128 is authorized by the Disaster Control Act as a response to COVID‑19’s public‑health and economic emergency; measures are rationally related and time‑limited	EHPA does not authorize EO 128; Disaster Control Act does — EO 128 is a valid emergency exercise of gubernatorial power
2. Separation of powers / nondelegation	EO 128 usurps legislative lawmaking and creates criminal sanctions; Disaster Control Act delegation is unconstitutionally broad	Legislature vested emergency authority in Governor; delegation includes standards and limits (rational relation, close tailoring); emergencies can include economic harms	No separation‑of‑powers or nondelegation violation; Disaster Control Act delegation is lawful and EO 128 falls within it
3. Contracts Clause	EO 128 substantially impairs lease terms and landlords’ bargained security‑deposit protections	Landlord remedies preserved; housing is heavily regulated so interventions are foreseeable; EO 128 is temporary and narrow	No substantial impairment of contracts — plaintiffs retain remedies and obligations remain unchanged
4. Due process (substantive & procedural)	EO 128 deprives landlords of property rights in deposits and procedural protections (including via criminal penalties)	The interests are addressed by contracts analysis; deposit is tenant property; remedies and process remain available; Disaster Control Act authorizes penalties	No due process violation — no independent protected property interest shown beyond contracts; procedural protections preserved

Key Cases Cited

Worthington v. Fauver, 88 N.J. 183 (N.J. 1982) (standards for reviewing gubernatorial emergency orders)
County of Gloucester v. State, 132 N.J. 141 (N.J. 1993) (test: rational relation and close tailoring for emergency powers)
N.J. Republican State Comm. v. Murphy, 243 N.J. 574 (N.J. 2020) (recognizing COVID‑19 as both health and economic crisis)
Home Bldg. & Loan Ass'n v. Blaisdell, 290 U.S. 398 (U.S. 1934) (upholding temporary impairments of contracts during public calamity)
Loretto v. Teleprompter Manhattan CATV Corp., 458 U.S. 419 (U.S. 1982) (state regulatory power over property interests)
Sveen v. Melin, 138 S. Ct. 1815 (U.S. 2018) (framework for substantial‑impairment Contracts Clause analysis)
Elmsford Apartment Assocs., LLC v. Cuomo, 469 F. Supp. 3d 148 (S.D.N.Y. 2020) (upholding similar executive order on security deposits)