[FINANCE] DD 10/13/06 Must Big Associations Provide Free Speech Rights? N.J. Court Says "Yes."

Daily Development for Friday, October 13, 2006
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
dirt@umkc.edu

CONSTITUTIONAL LAW; FREE SPEECH; COMMUNITY ASSOCIATIONS:  A Planned Unit Development's governing association is the functional equivalent of a government body and cannot deprive residents of their rights to express their views on matters of public or community concern. 

Committee for a Better Twin Rivers v. Twin Rivers Homeowner's Association, 383 N.J. Super. 22, 890 A.2d 947 (App. Div. 2006)

The New Jersey Supreme Court granted a petition for certiorari to review this decision, but it is an important one to watch, so we’re posting the lower court decision.  The Community Associations Institute filed an amicus brief in the lower court case, and the editor suspects that others are joining the fray at the New Jersey Supreme Court level.

The Supreme Court likely could decide this case on state constitutional grounds and immunize it from U.S. Supreme Court appeal, but if the court decides it on the basis of the U.S. Constitution, we may see this case “go big.”  There is, however, a standing issue that may cause problems, and at least at one time before the decision below, the plaintiff’s group had shrunk to three people.    It’s hard to live where you’re not wanted.

Several residents of a large planned unit development (PUD) challenged the manner in which the PUD was administered.  The community was organized as a planned unit development by deed to a community trust.  The trust was responsible for owning, operating, and maintaining the common property.  The management of the common property was delegated to a homeowners' association.  The PUD was similar to a miniature town and provided parks, pools, ball fields, and other amenities exclusively to its residents.  There was a privately owned shopping center and a security force that provided first aid and other services often provided by police departments.  

Several residents attempted to change the manner in which the PUD was administered and attempted to publicize their position to the other residents.  Those residents challenged the association's policies that restricted their rights to place signs on residents' lawns.  They charged that the association charged excessive fees for use of the community room, and denied them access to the financial records and equal coverage in the community newspaper.

The lower court held that the homeowners' association was not subject to the constitutional limitations that are imposed on the public sector.  It found that the homeowner's association did not have governmental powers delegated to it and did not perform governmental functions.  The lower court agreed with the association's argument that, as a private condominium association, the homeowners' associations decisions were to be upheld under the business judgment rule unless the residents could show that those decisions were fraudulent, self-dealing or unconscionable.  Since the residents asserted that they could not demonstrate that the association's restrictions were unconscionable or as a result of self-dealing or fraud, the lower court found those restrictions acceptable. 

On appeal, the Appellate Division disagreed and reversed, noting that the New Jersey Supreme Court had adopted a balancing test for resolving the conflict between the protections private property owners are entitled to and the rights of expression on private property.  In State v. Schmid, 84 N.J. 535, 423 A.2nd 615 (1980), the New Jersey Supreme Court set the following standards to be considered: (a) the nature, purposes, and primary use of the private property; (b) the extent and nature of the public's invitation to use the property; and (c) the purpose of the expressional activity on that property in relation to the private and public use of that property.  The Court found that the PUD was a quasi-municipal entity that provided many of the basic services a governmental entity would normally perform for its residents.  As such, the association was the functional equivalent of a government body and could not deprive the residents of their rights to express their views on matters o

f public or community concern.

Comment: New Jersey is far more liberal on issues of this sort than most other states.  It is one of the few states that has recognized free speech rights in private shopping centers and also has had a number of decisions involving certain kinds of special protections for political action in community associations.  See, e.g.  Guttenberg Taxpayers and Rent Payers Association v. Galaxy Towers Condominium Association, 688 A.2d 156 (N.J.Super.Ch. 1996) (the DIRT DD for 10/30/97) (Condominium association that had actively endorsed certain political candidates by distributing campaign flyers, effectively dedicated otherwise private property to political and thus public use, and therefore could not deny access to its privately owned property to citizens group that wished to distribute the same type of literature.)

The difference between the shopping center cases and this case, however, is that here the association did not invite the public into its community.  The sole question addressed was the rights of the community residents and the power of their own association to regulate them.

The case is different from Galaxy Towers because the public voting franchise was not at stake here.  The disputes involved internal association disputes. 

Comment 2: An interesting side issue was the question of voting rights.  The dissidents argued that it was unconstitutional, in light of the “public functions” performed by the association, for voting rights to be weighted in proportion to the value of the units in  question. The court disagreed, noting that public corporations are permitted to weight their votes, and noting further that the dissidents still were not arguing for “one person/one vote,” but for “one unit/one vote.”  There was nothing inconsistent, in the court’s view, with recognition of free speech rights and upholding the private voting arrangements for control of the association’s activities.  The New Jersey Supreme Court denied certiorari on the cross appeal of this issue.

Readers are encouraged to respond to or criticize this posting.

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