Opinion
Docket No. 002249-2014
05-04-2015
Re: Toranco Somerset v. Township of Franklin
NOT FOR PUBLICATION WITHOUT APPROVAL OF THE TAX COURT COMMITTEE ON OPINIONS
John F. Casey, Esq.
Chiesa, Shahinian & Giantomasi, P.C.
One Boland Drive
West Orange, New Jersey 07052
Richard A. Rafanello, Esq.
Shain, Schaffer & Rafanello, P.C.
150 Morristown Road, Suite 105
Bernardsville, New Jersey 07924
Dear Counsel:
This letter amplifies the findings of fact and conclusions of law supporting the court's bench decision pursuant to R. 1:38-11 to seal a portion of the testimony adduced during the April 29, 2015 reasonableness hearing in the above-referenced matter.
I. Findings of Fact and Procedural History
Plaintiff Toranco Somerset is the owner of real property in defendant Franklin Township. Somerset County. The property is designated in the records of the municipality as Block 467, Lot 1.02, and is commonly known as 100 Davidson Avenue. The subject property is improved with a Class A office building, which plaintiff rents to tenants. For tax year 2014, the property was assessed as follows:
| Land | $ 918,000 |
| Improvements | $5,482,000 |
|---|---|
| Total | $6,400,000 |
On March 5, 2014, plaintiff filed a Complaint challenging the assessment on the property for tax year 2014.
On March 31, 2014, the municipality moved for relief pursuant to N.J.S.A. 54:4-34, which is commonly known as Chapter 91. That statute provides
Every owner of real property of the taxing district shall, on written request of the assessor, made by certified mail, render a full and true account of his name and real property and the income therefrom, in the case of income-producing property . . . . No appeal shall be heard from the assessor's valuation and assessment with respect to income-producing property where the owner has failed or refused to respond to such written request for information within 45 days of such request . . . .
[N.J.S.A. 54:4-34.]
The municipality's moving papers established that on August 9, 2013, the tax assessor requested in writing that plaintiff provide an account of the income and expenses associated with the operation of the subject property. The request was made to assist the assessor in determining the assessment for the subject property for tax year 2014. Plaintiff failed to respond to the assessor's inquiry.
On June 25, 2014, the court granted the municipality's motion. Pursuant to the holding in Ocean Pines, Ltd v. Borough of Point Pleasant, 112 N.J. 1 (1988), the court limited plaintiff to a reasonableness hearing. Such a hearing is "sharply limited," and likely summary, and reviews of the reasonableness of the assessor's valuation based upon the data available to the assessor when the valuation was made. The inquiry at a reasonableness hearing is limited to "(1) the reasonableness of the underlying data used by the assessor, and (2) the reasonableness of the methodology used by the assessor in arriving at the valuation." Id. at 11.
The reasonableness hearing was held on April 29, 2015.
Plaintiff called Richard J. Carabelli, Jr., the municipal tax assessor, as a witness. He was asked to identify the information upon which he relied to arrive at the tax year 2014 assessment for the subject property. Mr. Carabelli testified that, among other information, he reviewed all of the responses he received to his written requests for income and expense information from the owners of income-producing property in the township.
During Mr. Carabelli's direct testimony, plaintiff's counsel marked for identification three written responses to Mr. Carabelli's Chapter 91 inquiries for income and expense information. Those responses were from the owners of real property in the vicinity of the subject property improved with income-generating office buildings of a type similar to the subject. It was established at trial that the owners of those properties were in competition with each other, plaintiff, and other owners of income-producing office buildings in Franklin Township. The Chapter 91 responses, marked as Exhibits P3, P4 and P5, contained detailed information concerning, among other things, rental rates, vacancies rates, lease termination dates, lease terms, operating expenses, and reserves associated with the operation of the property owners' rental office buildings.
Before Mr. Carabelli was permitted to testify with respect to the contents of those documents the court raised with counsel the question of whether P3, P4 and P5 contain confidential information which should be shielded from public disclosure. Both parties took the position that P3, P4 and P5 contain sensitive proprietary financial information which, if disclosed, would put the owners of the properties addressed in P3, P4, and P5 at a competitive disadvantage in the office space rental market. In addition, both parties took the position that the information in P3, P4, and P5 was disclosed to the assessor pursuant to N.J.S.A. 54:4-34 in order to avoid the statute's appeal-preclusion sanction and with the expectation that the information would be used by the assessor in the execution of his officials duties and not disclosed to the public. Defendant's counsel confirmed that a request for production of a taxpayer's response to a Chapter 91 request for income and expense information under the Open Public Records Act, N.J.S.A. 47:1A-1, et seq., would be denied because the responses contain "trade secrets and proprietary commercial or financial information obtained from any source." N.J.S.A. 47:1A-1.1.
The court placed findings of fact and conclusions of law on the record, holding that the recording of any testimony revealing the contents of P3, P4 and P5 would be sealed from public disclosure pursuant to R. 1:38-11. In addition, the court closed the courtroom during such testimony. There were no spectators in the courtroom at any point in the proceedings and no member of the public attempted to enter the courtroom at any point during the hearing.
In response to direct examination questions, Mr. Carabelli revealed some of the contents of P3, P4 and P5, including, among other things, the amounts of rentable square footage, amounts of rentable square footage not occupied by a tenants, vacancy rates in percentages, and lease terms at the office buildings on the properties addressed in the documents. Mr. Carabelli's testimony on these points appears at the recorded testimony at 2:42:03 p.m. to 2:44:51 p.m. and again at 3:12:55 p.m. to 3:27:14 p.m. In total, the court sealed approximately 18 minutes of a two-hour hearing. At the conclusion of its case, plaintiff did not move P3, P4 and P5 into evidence.
Shortly after the close of proofs, the court ruled in favor of the municipality on the underlying claim and issued a bench opinion explaining its holding that plaintiff had not met its burden of establishing that either the underlying data used by the assessor or the methodology he used to arrive at the 2014 assessment on the subject property were unreasonable. As a result of this conclusion, the court dismissed the Complaint pursuant to N.J.S.A. 54:4-34.
II. Conclusions of Law
Public access to court records is firmly established and intended to be broad. According to R. 1:38-1,
Court records and administrative records as defined by R. 1:38-2 and R. 1:38-4 respectively and within the custody and control of the judiciary are open for public inspection and copying except as otherwise provided in this rule. Exceptions enumerated in this rule shall be narrowly construed in order to implement the policy of open access to records of the judiciary.Rule 1:38-2 defines court records include
(1) any information maintained by a court in any form in connection with a case of judicial proceeding . . . .
* * *
(3) any official transcript or recording of a public judicial proceeding, in any form . . . .
The court rules contain several exceptions from public access, including one relevant here:
The following court records are excluded from public access:
(f)(4) Records that are impounded, sealed pursuant to R. 1:38-11, or subject to a protective order pursuant to R. 4:10-3 . . . .
Rule 1:38-11 allows for court records to be sealed under limited circumstances. The rule provides as follows:
(a) Information in a court record may be sealed by court order for good cause as defined in this section. The moving party shall bear the burden of proving by a preponderance of the evidence that good cause exists.
(b) Good cause to seal a record shall exist when:
(1) Disclosure will likely cause a clearly defined and serious injury to any person or entity; and
(2) The person's or entity's interest in privacy substantially outweighs the presumption that all court and administrative records are open for public inspection pursuant to R. 1:38.
The court concludes that R. 1:38-11 permits the portion of the record in which the contents of P3, P4 and P5 were disclosed during the testimony of the municipal tax assessor to be sealed. As noted above, the exhibits are written responses by property owners who are not parties to this action to the Franklin Township tax assessor's requests for income and expense information pursuant to N.J.S.A. 54:4-34. "The purpose of Chapter 91 is to assist the municipal tax assessors, who are charged with the responsibility for property valuations, by affording them access to fiscal information that can aid the valuation of property." Lucent Techs, Inc. v. Township of Berkeley Heights, 405 N.J. Super. 257, 263 (App. Div. 2009), rev'd in part, aff'd in part, 201 N.J. 237 (2010). "The correct and timely availability of this information to the tax assessor 'avoid[s] unnecessary expense, time and effort in litigation.'" Ibid. (quoting Ocean Pines, supra, 112 N.J. at 7)(internal quotations omitted). The statute contains a significant sanction for the owners of income-producing property who fail to respond to the assessor's information request. J&J Realty Co. v. Township of Wayne, 22 N.J. Tax 157, 165 (Tax 2005).
Here, three owners of real property improved with rental office buildings responded in good faith the assessor's information requests. They provided a detailed written account of rents, lease terms, expenses, vacancy rates, unrented space and other information relating to their income-producing properties. The property owners who submitted the responses are in competition with each other, plaintiff and other owners of Franklin Township office buildings. Public disclosure of this information would undercut these property owners in the office rental market. Notably, the property owners submitted the information so that it might be used by the assessor in determining the assessments to be placed on their properties. The property owners did not expect that their responses would be disclosed to the public. Indeed, at trial the municipality confirmed that it would deny a request for disclosure of a Chapter 91 response under the Open Public Records Act, as protected proprietary business information. N.J.S.A. 47:1A-1.1. The court concludes that being placed at a competitive disadvantage in the marketplace is a clearly defined and serious injury within the meaning of R. 1:38-11(a)(1) that is likely to occur if the third party Chapter 91 responses are disclosed to the public.
The court also concludes that the property owners' interest in privacy substantially outweighs the presumption that court records will be available for public inspection. R. 1:38-11(a)(2). The three property owners are not parties to this action. They provided their confidential information to the assessor to avoid the significant sanction imposed by N.J.S.A. 54:4-34 for failure to respond to the assessor's information requests. Their compliance with the statute, which furthers the purposes of N.J.S.A. 54:4-34, should not lead to the involuntary public disclosure of their proprietary financial information. Nor should the court encourage property owners to refrain from complying with N.J.S.A. 54:4-34 by allowing public disclosure of third-party financial information.
This is particularly true here, where the court sealed only approximately 18 minutes of a two-hour hearing. The public portions of the testimony contain a full accounting of how the Franklin Township assessor determined the assessment for the subject property, as well as the court's complete findings of fact and conclusions of law with respect to why plaintiff failed to meet its burden to establish that the assessor acted unreasonably. The only portions of the recorded testimony sealed by the court concern questions by plaintiff's counsel to the assessor about information in the responses of third-party property owners and why that information did not cause the assessor to reach a different assessment for the subject property. The information elicited was of limited significance and was not relied upon by the court in reaching its decision.
The court notes that in 510 Ryerson Road, Inc. v. Borough of Lincoln Park, 28 N.J. Tax 184, 190 n.6 (Tax 2014), Judge Bianco issued a Protective Order barring the disclosure of the testimony and transcript of a reasonableness hearing in which the responses of third parties to an assessor's requests for income and expense information were discussed.
The court will enter an Order sealing the following portions of the recording of the April 29, 2015 hearing in this matter: 2:42:03 p.m. to 2:44:51 p.m. and 3:12:55 p.m. to 3:27:14 p.m.
Very truly yours,
/s/ Hon. Patrick DeAlmeida, P.J.T.C.