On Appeal from the United States District Court for the District of New Jersey, D.C. Civil No. 87-3656.
Seitz,*fn* Sloviter, and Greenberg, Circuit Judges.
This appeal arises out of a grant of summary judgment in favor of plaintiffs Old Coach Development Corporation (Old Coach) and Land's Edge Enterprises, Inc. (Land's Edge) on their claim that the New Jersey Land Sales Full Disclosure Act, N.J. Stat. Ann. §§ 45:15-16.3.26 (West 1978) (LSFDA) violated the dormant Commerce Clause. The district court declared the LSFDA unconstitutional because it discriminated in its plain effect against interstate commerce, and permanently enjoined its enforcement against plaintiffs. The district court had jurisdiction pursuant to 28 U.S.C. § 1331, and we have jurisdiction over a final order of the district court pursuant to 28 U.S.C. § 1291. Our review of the grant of summary judgment is plenary.
The relevant facts are largely undisputed and are fully set forth in the opinion of the district court. Old Coach Development Corp. v. Tanzman, 692 F. Supp. 424 (D.N.J. 1988). We reiterate only those facts necessary to our consideration of this appeal.
Plaintiffs are affiliated Pennsylvania corporations which market Unimproved subdivided lots of real estate in Pennsylvania primarily to residents of New Jersey, New York, and Pennsylvania. As part of their Promotional plan, plaintiffs placed an advertisement in a New Jersey newspaper offering to sell their lots. As a consequence, the New Jersey Real Estate Commission (Commission), the state agency charged with enforcing the LSFDA, informed plaintiffs that the advertisement violated the LSFDA and related regulations, see N.J.Admin.Code tit. 11 §§ 11:5-1.1 et seq. Plaintiffs were given the option of complying with the LSFDA's registration and disclosure requirements, or stating in future advertisements, "This advertisement is not an offering to New Jersey residents." App. at 59.
Plaintiffs filed suit against members of the Commission (defendants), claiming that the LSFDA and its regulations were invalid under the Commerce Clause because they discriminated against interstate commerce, and under the First Amendment because the regulations included provisions which constituted a prior restraint on commercial speech. The National Association of Real Estate License Law Officials participated in the litigation as an amicus curiae on defendants' behalf.
Defendants agreed to refrain from applying the LSFDA against plaintiffs pending resolution of the litigation. The district court decided for plaintiffs on cross motions for summary judgment, striking down the LSFDA in its entirety as violative of the Commerce Clause, and therefore did not reach the First Amendment issue. In their appeal, defendants contend that the district court erred in finding the LSFDA invalid on its face, and argue that the court should have applied the more deferential balancing test of Pike v. Bruce Church Inc., 397 U.S. 137, 142, 25 L. Ed. 2d 174, 90 S. Ct. 844 (1970). Alternatively, defendants argue that the district court erred by striking down the entire statute rather than excising the offending portions pursuant to a severability provision in the statute. The parties agreed to a stay of the district court's order pending the resolution of this appeal.
We review first the statutory and regulatory framework which the district court examined in reaching its decision. The LSFDA, enacted in 1975, regulates the offer and sale within New Jersey or to New Jersey residents of subdivided land located outside of New Jersey, if such offer and sale is via a common promotional plan. See N.J.Stat.Ann. § 45:15-16.4(f). Subdivided land offered by a "single developer or a group of developers acting in concert" which is "contiguous or is known, designated or advertised as a common unit or by a common name . . . shall be presumed . . . as being offered . . . as part of a common promotional plan." Id.
The LSFDA requires registration with the Commission of any such subdivision before any property may be offered or sold to New Jersey residents. See N.J.Stat.Ann. §§ 45:15-16.7, 45:15-16.21. Similar to federal securities laws, the registration process requires disclosure of ownership interests, audited financial statements, and condition of the land, encumbrances, and plans for completion of promised improvements. N.J.Stat.Ann. § 45:15-16:10; N.J.Admin.Code tit. 11 § 11:5-1.25(a) (6) & (7). It also requires that a proposed public offering statement be distributed to New Jersey consumers. See N.J.Stat.Ann. §§ 45:15-16.12. Initial registration fees and annual renewal fees are assessed pursuant to N.J.Stat.Ann. § 45:15-16.8.
In addition to the protections afforded by the registration process, the LSFDA provides purchasers with a one-week period for rescission. N.J.Stat.Ann. 45:15-16.12(d). The LSFDA provides a number of criminal and civil enforcement mechanisms for non-compliance and fraudulent statements, including fines of up to $50,000 and/or one-year imprisonment. See N.J.Stat.Ann. § 45:15-16.22(a).
The LSFDA, however, only regulates sales of land located outside of New Jersey. See N.J.Stat.Ann. § 45:15-16.4(f). In 1978, the state chose to regulate sales of subdivided land located within New Jersey by a separate statutory scheme, the Planned Real Estate Development Full Disclosure Act, N.J.Stat.Ann. §§ 45:22A-21 to 42 (West Supp. 1989) (PREDA). Like the LSFDA, the PREDA applies to real estate sold via a common promotional plan, but it is administered by the Division of Housing and Urban Renewal of the State Department of Community Affairs (Department) rather than by the New Jersey Real Estate Commission. See N.J.Stat.Ann. §§ 45:22A-23(h), -24. The PREDA ...