FRIENDS OF RAHWAY BUSINESS, LLC VS. RAHWAY MUNICIPAL COUNCIL AND CITY OF RAHWAY(L-0410-15, UNION COUNTY AND STATEWIDE), A-1335-15T1

Background

Rahway enacted a Special Improvement District (SID) ordinance in 1993; in 2014 it adopted Ordinance No. O-42-14 expanding the SID to include all non-residential and non-public properties and residential properties with more than four units.
Notice of the December 8, 2014 public hearing was mailed to affected owners; some claim late receipt but dozens attended the hearing.
Property owners formed Friends of Rahway Business, L.L.C. and challenged the Ordinance in Law Division, arguing statutory misinterpretation, insufficient notice, unprecedented scope, and constitutional violations; they sought counsel fees under civil-rights statutes.
The trial court invalidated the Ordinance, concluding the SID statutes did not allow a citywide, noncontiguous, or non-downtown SID and that certain property classes should be excluded; it denied counsel fees.
On appeal, the Appellate Division reversed some aspects of the trial court’s statutory interpretation, held the statutes do not prohibit a citywide or noncontiguous SID nor mandate exclusion of non‑commercial/residential properties, affirmed denial of counsel fees, and remanded for further proceedings on the Ordinance’s merits.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Ordinance is entitled to the presumption of validity	Ordinance conflicted with legislative intent and was arbitrary; presumption overcome	Ordinance presumed valid; municipality has broad discretion under the SID statute	Court rejected trial judge's narrow reading; presumption stands and trial court misinterpreted statute; remand for merits review
Whether statute permits a citywide SID	Legislature intended SIDs to be limited to specific areas, not an entire municipality	Statute does not prohibit a citywide SID; governing body may find any area would benefit	Court held statute does not prohibit a citywide SID; size/boundaries are not fatal if statutory finding requirements are met
Whether SIDs must be contiguous or limited to downtown business districts	SID must be contiguous and target downtown business districts	Statute allows exemptions and separately authorizes downtown business improvement zones; SIDs are not limited to downtowns or strictly contiguous areas	Court held statute permits noncontiguous SIDs (through exemptions) and does not limit SIDs to downtowns
Whether non‑commercial/residential and industrial properties must be excluded; entitlement to counsel fees under civil‑rights statutes	Certain property classes should be excluded and defendants violated constitutional/tax uniformity rights entitling plaintiffs to fees	Statute permits (but does not require) exclusion; no constitutional violation shown	Court held statutes allow but do not mandate exclusion; plaintiffs did not establish civil‑rights violations or entitlement to counsel fees; denial of fees affirmed

Key Cases Cited

Fanelli v. City of Trenton, 135 N.J. 582 (1994) (scope of municipal authority under SID statute reviewed for reasonableness)
2nd Roc-Hersey Assocs. v. Town of Morristown, 158 N.J. 581 (1999) (special assessments distinguished from taxes)
Cell S. of N.J., Inc. v. Zoning Bd. of Adjustment of W. Windsor Twp., 172 N.J. 75 (2002) (courts defer to municipal zoning decisions absent arbitrariness)
Medici v. BPR Co., 107 N.J. 1 (1987) (standard for judicial review of municipal actions)
Tumpson v. Farina, 218 N.J. 450 (2014) (civil rights remedies and attorney’s fees for violations of substantive rights)
Lake Valley Assocs., LLC v. Twp. of Pemberton, 411 N.J. Super. 501 (App. Div.) (2010) (presumption of validity for municipal ordinances)