On Appeal from the United States District Court for the District of New Jersey, (No. 04-cv-06043), District Judge: Hon. Garrett E. Brown, Jr., Chief Judge.
The opinion of the court was delivered by: Chagares, Circuit Judge.
Argued: Tuesday, January 23, 2007
Before: SCIRICA, Chief Judge, FUENTES and CHAGARES, CircuitJudges.
We consider whether a real estate developer with an option to buy a parcel of land has standing to challenge zoning restrictions that prevent its planned development from going forward. We hold that it does.
Appellant Toll Brothers, Inc. describes itself as "the nation's leading builder of luxury homes . . . ." See Toll Brothers, http://www.tollbrothers.com (last visited January 15, 2009).*fn1 Toll Brothers prides itself on developing communities in prime locations; it carefully chooses "the most scenic areas that offer a blend of rural charm and suburban convenience." Id. In early 2001, Toll Brothers found just such a setting on a 160-acre tract of land in the Township of Readington, New Jersey ("the Township"). Toll Brothers entered into an option contract with the tract's owner, Readington Properties, LLC.
Pursuant to the contract, Readington Properties granted Toll Brothers an exclusive option to buy the tract at a fixed price. In exchange, Toll Brothers promised to make periodic payments to Readington Properties. The original contract stated a five-year option with an expiration date of January 2006. Subsequent amendments have extended the option period, and Toll Brothers' exclusive option remains in force. During the life of the option, Readington Properties cannot "enter into any lease, agreement of sale," or any other agreement affecting the property. Appendix ("App.") 203. In addition, Toll Brothers has the right to come onto the property "to perform engineering, environmental and such other feasibility studies" as it deems necessary. App. 200.
At the time of the contract's formation, the Township's zoning laws classified part of the tract as "research-office," and part as "rural-residential." The rural-residential classification allowed for "development of detached single-family dwelling units, farm and agricultural uses, and open space and parks." App. 45. Residential development in this zone could not exceed one unit per three acres. In the research-office zone, "general office development" was permitted. Id.
Toll Brothers quickly began to formulate plans for both the rural-residential and research-office portions of the property. For the rural-residential zone, the company "engaged in preliminary planning" to develop housing "for families with children." App. 46, 49. As to the research-office zone, Toll Brothers drafted plans for an office park. For whatever reason, the office plans advanced more rapidly than the residential plans. In May 2002, Toll Brothers submitted a formal application to the Township Planning Board requesting approval for construction of an office development. Toll Brothers claims that this proposal was consistent with the Township's zoning ordinance "and with the general character" of the area. App. 46.
The Township did not approve Toll Brothers' application. Instead, it passed an ordinance rezoning the entire tract "agricultural-residential." The agricultural-residential zone allowed for just three uses by right: "(1) farms; (2) open space and parks; and (3) residential uses at one residential dwelling per six acres." App. 47. As a result, office parks were prohibited. The requirement of six acres per dwelling, according to Toll Brothers, made any residential development economically unfeasible. Toll Brothers' development plans thus have been thwarted.
Toll Brothers contends that this change in law was no ordinary zoning decision. It was instead part of a nefarious plot hatched by Township officials to "reduce the fair market value of properties held by disfavored landowners." App. 33. By frustrating the lawful plans of Toll Brothers and other developers, Township officials sought to "drive down the value of the [targeted] propert[ies] and acquire [them] cheaply at . . . price[s] below their fair market values." App. 36. They also "intended to discriminate against families with children . . . in an effort to reduce [their] residential opportunities" within the Township. App. 41-42.
Toll Brothers claims the Township's actions have caused it considerable injury. The company is in the real estate development business, but the Township has prevented all profitable development of the Readington Properties parcel. Toll Brothers is maintaining its option by rendering periodic payments to Readington Properties. If and when the Township approves Toll Brothers' plans, the company still intends to exercise its option. In the meantime, Toll Brothers has spent considerable amounts of money on planning, including fees for "architects and other professionals." App. 291. In addition to these "sunk costs," Toll Brothers has also lost out on the potential profits.
In August 2002, Toll Brothers filed a lawsuit against the Township in New Jersey Superior Court. The complaint alleged violations of the New Jersey Municipal Land Use Law, N.J. Stat. Ann. §§ 40:55D-1 to -163; the Equal Protection Clause; the Due Process Clause; the Takings Clause; equivalent provisions of the New Jersey Constitution; and the public policy and law of New Jersey ...