GEORGE E. NORCROSS VS. PHILIP DUNTON MURPHY (L-1007-19, MERCER COUNTY AND STATEWIDE) ( 2020 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited . R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-5237-18T4
GEORGE E. NORCROSS, CONNER
STRONG & BUCKELEW, LLC, NFI,
LP, THE MICHAELS ORGANIZATION,
LLC, COOPER UNIVERSITY HEALTH
CARE, and PARKER MCCAY, PA,
Plaintiffs-Appellants,
v.
PHILIP DUNTON MURPHY, in his
official capacity as Governor of the
State of New Jersey, THE TASK FORCE
ON THE EDA'S TAX INCENTIVES,
RONALD K. CHEN, in his capacity as
the Governor's Designee under N.J.S.A.
52:15-7, WALDEN MACHT & HARAN
LLP, JIM WALDEN, and QUIÑONES
LAW PLLC,
Defendants-Respondents,
and
THE NEW JERSEY ECONOMIC
DEVELOPMENT AUTHORITY,
Nominal Defendant.
_________________________________
Submitted March 30, 2020 – Decided July 6, 2020
Before Judges Moynihan and Mitterhoff.
On appeal from the Superior Court of New Jersey, Law
Division, Mercer County, Docket No. L-1007-19.
Brown & Connery, LLP, and Critchley, Kinum &
Denoia, LLC, attorneys for appellants Strong &
Buckelew, LLC, NFI, LP, and The Michaels
Organization, LLC (William M. Tambussi and Michael
D. Critchley, on the joint briefs).
Stern Kilcullen & Rufolo, LLC, attorneys for appellant
Cooper University Health Care (Herbert J. Stern, on the
joint briefs).
Marino Tortorella & Boyle, PC, attorneys for appellant
Parker McCay, PA (Kevin H. Marino, on the joint
briefs).
Rahat N. Babar and Theodore V. Wells, Jr. (Paul,
Weiss, Rifkind, Wharton & Garrison LLP) of the New
York bar, admitted pro hac vice, attorneys for
respondents (Alison R. Benedon, Kannon K.
Shanmugam (Paul, Weiss, Rifkind, Wharton &
Garrison LLP) of the New York bar, admitted pro hac
vice, Yahonnes Cleary (Paul, Weiss, Rifkind, Wharton
& Garrison LLP) of the New York bar, admitted pro
hac vice, Benjamin Moskowitz, of the New York bar,
admitted pro hac vice, Jamie Witte (Paul, Weiss,
Rifkind, Wharton & Garrison LLP) of the New York
bar, admitted pro hac vice, and Daniel R. Friel (Paul,
Weiss, Rifkind, Wharton & Garrison LLP) of the New
York bar, admitted pro hac vice, of counsel; Rahat N.
Babar and Theodore V. Wells, Jr., of counsel and on the
brief).
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2
PER CURIAM
Plaintiffs George E. Norcross, Conner Strong & Buckelew, LLC (Conner
Strong), NFI, L.P. (NFI), The Michaels Organization, LLC (Michaels), Cooper
University Health Care (Cooper Health), and Parker McCay, P.A. (Parker
McCay), appeal from the July 31, 2019 dismissal of count two of their
complaint, in which they alleged four companies—Conner Strong, NFI,
Michaels, and Cooper Health—that applied for tax incentives from the New
Jersey Economic Development Authority (EDA) were wrongfully investigated
by the Task Force on EDA's Tax Incentives (Task Force), created by Governor
Philip Dunton Murphy. On appeal, plaintiffs contend that the judge erred in
considering extrinsic evidence in dismissing count two but also that their
allegations sufficed to survive dismissal. Alternatively, plaintiffs contend that
dismissal should have been without prejudice. Having reviewed the record in
light of the governing law, we affirm the dismissal, with prejudice, of count two
of plaintiffs' complaint.
I.
On January 19, 2017, State Auditor Stephen M. Eells provided the
Governor's Office with a report (State Auditor's report), which summarized his
findings from an audit of three EDA incentive programs for the period of July
A-5237-18T4
3
1, 2011 through September 30, 2016. Stephen M. Eells, N.J. State Legislature,
Office of Legislative Servs., Office of the State Auditor, New Jersey Economic
Development Authority Selected Incentive Programs (2017). The audit's
purpose was "to determine whether adequate controls were in place at the [EDA]
to award and administer business[-]incentive program grants in compliance with
statutory requirements and whether the [EDA] was monitoring grant recipients
for compliance with statutory requirements." Id. at 1.
One of the programs audited was the Grow New Jersey Assistance
Program (GROW).1 Id. at 3-4. Eells observed that when a business (other than
proposing a project in the City of Camden) applies for GROW incentives, it
must show "that existing full-time jobs are at risk of leaving the state or of being
eliminated, and that the award of tax credits under the program will be a material
factor in the business'[] decision to retain the jobs or create new jobs in New
Jersey." Id. at 3. Thus, the EDA required applicants to submit a cost-benefit
analysis, detailing "the costs to continue operations in New Jersey and the lower
1
GROW was created "to encourage economic development and job creation
and to preserve jobs that currently exist in New Jersey but which are in danger
of being relocated outside of the State." N.J.S.A. 34:1B-244(a). As of
September 30, 2016, the EDA had "awarded 207 GROW grants valued at $3.9
billion of which $10.8 million in tax credits ha[d] been certified." New Jersey
Economic Development Authority Selected Incentive Programs at 1.
A-5237-18T4
4
costs to relocate to proposed out-of-state sites." Ibid. Eells examined the EDA's
review of the cost-benefit analyses submitted for four projects. Ibid.
Based on the audit, Eells concluded that the EDA lacked adequate controls
in its process for awarding tax incentives under GROW. Id. at 2. He
recommended that "the [EDA] maintain a more complete file of [its] review of
the cost[-]benefit analysis submitted by an applicant," and an "award of tax
credits should not be forwarded to the [EDA] board for approval until the proper
supporting documentation has been obtained . . . and the out-of-state option has
been proven to be more economical." Id. at 3-4. He also observed that the
formulas the EDA was using for projects in the City of Camden "might not yield
the intended benefits." Id. at 7.
On January 19, 2018, Governor Murphy issued Executive Order No. 3
(EO 3), wherein he explained that "New Jersey's current economic incentive
programs have proven less effective than those in other states," and "despite the
dramatic increase in tax incentives, New Jersey's economic recovery from the
recession caused by the financial crisis has lagged behind competitor states."
Exec. Order No. 3 (Jan. 19, 2018), 50 N.J.R. 883(a) (Feb. 20, 2018). Referring
to the State Auditor's report, the Governor noted that "the EDA needed to
A-5237-18T4
5
improve its efforts to verify several aspects of applications submitted by
businesses" and "strengthen procedures designed to ensure compliance with the
terms of the EDA grants." Ibid. Consequently, he directed the Office of the
State Comptroller to "conduct a complete performance audit of [GROW] and
the Economic Redevelopment and Growth Grant Program [(ERG)], and
predecessor programs, from 2010 onward." The audit was intended to "inform
the public about the EDA's operations and assist lawmakers in their deliberations
as to whether these programs should be reauthorized when they expire on July
1, 2019." Ibid.
On January 9, 2019, State Comptroller Philip James Degnan issued a
report (State Comptroller's report), which summarized his findings and
conclusions from the performance audit. Philip James Degnan, State of N.J.
Office of the State Comptroller, New Jersey Economic Development Authority:
A Performance Audit of Selected State Tax Incentive Programs (2019). He
concluded that the EDA lacked key internal controls to administer its incentive
programs, monitor recipients' compliance after approving an award, and
evaluate the effectiveness of the programs. Id. at 9. Because of the deficiencies
in the application and performance review processes, "incentive awards have
been improperly awarded, overstated, and overpaid." Id. at 20.
A-5237-18T4
6
In response to the State Comptroller's Report, Governor Murphy issued
Executive Order No. 52 (EO 52). Exec. Order No. 52 (Jan. 24, 2019), 51 N.J.R.
190(b) (Feb. 19, 2019). EO 52 established the Task Force, a "purely advisory"
body, "to conduct an in-depth examination of the deficiencies in the design,
implementation, and oversight of [GROW] and ERG, including those identified
in the State Comptroller's performance audit." Ibid. It also authorized the Task
Force to hold public hearings and seek information from "any department,
office, division or agency of this State" and "voluntary cooperation from any
individuals or entities who have access to information pertinent to the Task
Force's mission." Ibid.
The Governor appointed Rutgers law professor Ronald K. Chen to serve
as Chair of the Task Force, and he retained Jim Walden, of Walden Macht &
Haran LLP (Walden Macht), and Pablo Quiñones, of Quiñones Law PLLC
(Quiñones Law), to advise. On March 22, 2019, he further authorized Chen,
under N.J.S.A. 52:15-7, "to examine and investigate the management and affairs
of the EDA, and the management by any State officer of the affairs of the EDA,
relating to New Jersey's tax[-]incentive programs."
Meanwhile, in February 2019, the Task Force began its investigation.
Walden sent document-preservation letters to companies that were certified to
A-5237-18T4
7
and did receive tax credits and to an additional group of companies that were
later identified during the investigation. The plaintiff companies were among
the companies that received these letters. Walden directed the companies to
"preserve all documents and communications that may be potentially relevant to
the Task Force's investigation" into deficiencies in administering GROW and
ERG, including documents from January 1, 2010 to the present that were related
to GROW or ERG incentives received or applied for, data or certifications
related to GROW or ERG, jobs created or retained and capital investments made
in accordance with program requirements, dates of retention and termination of
all New Jersey-based employees, potential relocation of or offers to relocate
offices outside of New Jersey, and all communications about the programs with
private third parties or employees or agents of the State.
On March 28, 2019, the Task Force held a public hearing, at which it
presented an overview of the investigation. It offered testimony from the State
Comptroller; a whistleblower, who alleged that her former employer "knowingly
submitted false information to [the] EDA in order to get the tax incentives;" and
representatives of the Pew Charitable Trusts and the New Jersey Policy
Perspective, both of which advocated for caps on the EDA's incentive programs.
A-5237-18T4
8
Thereafter, Chen issued subpoenas to Conner Strong, NFI, Cooper Health,
and Michaels. He sought information relevant to "(a) whether [the] EDA's
policies and procedures were sufficient to identify potential fraud or misuse of
[GROW and ERG] and (b) whether any company was able to defraud or misuse
[these] programs through any oversight failures." Specifically, he focused on
information about the consideration of an alternate location, including
documents about site visits, business plans about the proposed use of the
alternate location, analyses of the suitability of and relocation costs associated
with the alternate location, communications with the owner of the alternate
location, communications with the EDA about the alternate location, and
documents provided to any law enforcement agency, starting on January 1, 2015,
related to the alternate location.
On May 1, 2019, Walden wrote to plaintiffs, informing them that the Task
Force planned to hold another public hearing the following day. He advised that
information adverse to their interests might be offered; therefore, under N.J.S.A.
52:13E-6, they were "afforded the opportunity to submit a sworn, written
statement to be incorporated into the record," addressing any such evidence.
At the hearing, Walden explained that the Task Force was concerned that
it found "evidence of two schools of thought within the EDA" about whether
A-5237-18T4
9
applicants proposing projects in the City of Camden were required to show that
jobs were at risk of leaving the State. The impact of making such a showing
was significant, as a company that did would be able to show a greater net
benefit to the State from their project, resulting in a greater GROW incentive.
Based on the Task Force's investigation, with the exception of one company,
"every single applicant promising to move jobs from within New Jersey to
Camden actually certified that they were considering an out-of-state location."
Therefore, the Task Force examined applications from four companies that
"claimed to have an out-of-state location to demonstrate that jobs were at risk"
to determine "the level of diligence that was applied" in reviewing the
applications, not to "insinuat[e] that anyone broke the law."
After Walden's opening remarks, there was testimony from Walden's
colleague and an EDA senior vice president about a whistleblower formerly
employed at the EDA; a different whistleblower; the principal of a corporate site
selection firm; the EDA's Managing Director of Underwriting, David Lawyer;
the EDA's former President and Chief Operating Officer, Timothy Lizura; and
the President of the New Jersey Policy Perspective.
Lawyer explained the EDA's process for evaluating GROW applications,
and it was his understanding that all applicants, including those proposing
A-5237-18T4
10
projects in the City of Camden, were required to show that jobs were at risk of
leaving the State. Walden then asked him to discuss the files for the four
plaintiff companies. He explained that Conner Strong, NFI, and Michaels all
submitted expired letters of intent for their proposed out-of-state locations, and
when asked to extend the letters of intent, several months later they produced
new letters for similar space with smaller square footages and different
configurations, and two of the letters were only good for under two weeks. Upon
reviewing these files, Lawyer was concerned that the underwriter had not
questioned any of the notable differences or the length of time it took the
companies to obtain updated letters of intent. With respect to Cooper Health's
application, Lawyer expressed concern that the underwriter did not question its
original statement that there were no jobs at risk of leaving the State and the
competitor state was to be determined, while Cooper Health then began site
visits after it submitted its application.
Lizura disagreed with Lawyer's view that applicants proposing projects
in the City of Camden were required to show that jobs were at risk. Aside from
this issue, he largely testified about the New Jersey Economic Opportunity Act
A-5237-18T4
11
of 2013, L. 2013, c. 161,2 which restructured the EDA's tax-incentive programs.
He noted that a Parker McCay lawyer was involved in editing a draft of the bill.
Four days after the hearing, the plaintiff companies wrote to Walden,
objecting to the Task Force's investigation and "demand[ing] an opportunity to
submit a public presentation to the Task Force at its next scheduled hearing."
Walden responded, offering each company the opportunity to present fact
witnesses at the next hearing.
On May 21, 2019, plaintiffs filed a complaint against defendants. In count
two, they sought "a declaratory judgment that N.J.S.A. 52:15-7 does not
authorize an investigation of entities and individuals who are not involved in the
management and affairs of state government." 3 Plaintiffs asserted that by
investigating them, the Task Force, Chen, Walden Macht, and Quiñones Law
were "not conducting a bona fide examination of any State officer or the
2
This law is codified as amended in scattered sections of Titles 34 and 52 of
the New Jersey Statutes.
3
Count two was asserted against the Task Force, Chen, Walden Macht, and
Quiñones Law. The other counts alleged (1) the creation of the Task Force for
its stated purpose was unlawful under N.J.S.A. 52:15-7; (2) the Task Force's
denial of trial-like rights at the public hearings was unlawful under the federal
and state constitutions and N.J.S.A 52:15-7; (3) compensatory payments to
Walden Macht and Quiñones Law were unlawful under N.J.S.A. 52:15-7; and
(4) Walden knowingly engaged in the unauthorized practice of law in New
Jersey.
A-5237-18T4
12
management and affairs of any department of State government," thereby
exceeding their authority under the statute.
In June 2019, the Task Force planned to hold a third public hearing.
Plaintiffs filed an order to show cause with temporary restraints, seeking to
preclude the Task Force from holding further public hearings and publishing
reports based on its investigation. The Task Force agreed to cancel the hearing
to allow the court to address plaintiffs' application. After hearing oral argument,
Judge Mary C. Jacobson denied plaintiffs' request in an oral decision.
Soon after, the Task Force released its first report. Ronald K. Chen,
Walden Macht & Haran LLP & Quiñones Law, PLLC, Governor's Task Force
on EDA Tax Incentives (2019). The Task Force explained that although the
focus of the investigation "has been and shall remain on the EDA, [the]
investigation necessarily involves a review of companies' tax-incentive
applications to determine how the EDA administered the [GROW] and ERG
programs." Id. at 6. In explaining the scope of the investigation, the Task Force
noted Parker McCay's representation of some applicants raised "red flags," as
the firm had been involved in editing the incentive legislation in a way that
"seemed to be adding special provisions . . . to benefit particular clients." Id. at
A-5237-18T4
13
12. The Task Force found that Parker McCay represented each of the plaintiff
companies around the time they applied for GROW incentives. Id. at 50, 55-57.
The investigation revealed that the EDA lacked adequate procedures to
train its employees to review incentive applications and conduct research to
verify information included in the applications. Id. at 3-4. For example, a
"simple Internet search revealed that three companies—[Conner Strong,
Michaels, and NFI]—committed to move to Camden more than a year before
submitting their applications for tax incentives, in which they claimed they were
considering relocating to Pennsylvania as a potential alternative." Id. at 4. This
information may have led to the denial of incentives, had it been uncovered at
the time. Ibid. Further, Cooper Health stated in its application that no jobs were
at risk of leaving the State, but then "[t]he EDA subsequently accepted, without
any skepticism or further diligence, Cooper Health's later claim that it was
considering an out-of-state relocation, and approved Cooper Health for nearly
$40 million in tax incentives." Id. at 5. If the award had been based on the
statement that no jobs were at risk, the award would have only been around $7
million. Ibid. A more detailed background of each of these concerns was
provided later in the report. Id. at 49-63.
A-5237-18T4
14
After the report was published, Chen reissued subpoenas to the plaintiff
companies, again requesting information related to the alternate location the
companies stated they considered when applying for GROW incentives.
Defendants moved to dismiss plaintiffs' complaint. Judge Jacobson heard
oral argument and, in another oral decision, dismissed plaintiffs' entire
complaint with prejudice.
The judge first concluded that N.J.S.A. 52:15-7 authorized the Governor
to investigate the EDA. In addressing count two, the judge noted that defendants
conceded that N.J.S.A. 52:15-7 did not authorize the Task Force to investigate
private entities or individuals; therefore, she considered whether the Task Force
exceeded its authority by investigating the plaintiff companies as part of its
investigation into the EDA.
The judge determined that it was appropriate to consider the findings in
both the State Auditor's report and the State Comptroller's report:
[T]he [c]ourt can look at . . . the four corners of the
complaint, documents referred to in the complaint, even
if not attached, matters of public record, or . . . anything
relied on in the complaint, without converting the
motion to dismiss into one for summary judgment.
And . . . the complaint attached [EO] 52, which
refers to the [State Comptroller's] report. The [State
Comptroller's] report has in it the reference to the [State
Auditor's] report. The [State Auditor's] report is a
matter of public record.
A-5237-18T4
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She further explained,
[T]he aim of the rule about . . . not going outside the
complaint is a sense of fairness and not . . . considering
things that are a surprise to the plaintiff . . . and, of
course that . . . doesn't apply here because the whole
history of the concerns raised about [the] EDA are well
known to . . . everyone.
Both reports were relevant, as they provided critical context:
[T]here was a basis in those reports, whether they were
true or not, you certainly had . . . independent public
entities, the [A]uditor and the [C]omptroller, saying
there are issues with the EDA. There's not appropriate
oversight. There's not appropriate due diligence. This
needs to be addressed. The [C]omptroller had a whole
host of recommendations, and then the Governor told
the Task Force [to] look into what [we can] do with
legislation to try to address these problems. What can
we do with the internal management and control of the
EDA?
The judge also considered the subpoenas Chen issued, and plaintiffs' claim
that they were not issued as part of a bona fide investigation: "The subpoenas,
both the earlier ones and the later ones, sought . . . wide-ranging information
from . . . plaintiffs, . . . primarily regarding alternate locations[, which] are . . .
relevant under the EDA statute." Plaintiffs' reliance on these subpoenas was
inadequate to survive the motion to dismiss, as the subpoenas were a response
to the Governor's "legitimate concerns about the EDA."
A-5237-18T4
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The judge then considered the second public hearing, including Lawyer's
testimony that the plaintiff companies' applications raised red flags. Having
reviewed the hearing transcript, the judge concluded that plaintiffs' claims were
unsupported, considering the Task Force's "requirement to do due diligence" and
the EDA's "lack of follow-up . . . for these four . . . applications."
Ultimately, the judge concluded that plaintiffs' "claim[s] that the Task
Force exceeded its authority and targeted these individuals and [that] it was a
sham and not bona fide" were unsupported. The subpoenas and public hearings
addressed "legitimate issues for an investigatory task force to explore." To state
otherwise, without additional supporting facts, would give rise to bald assertions
insufficient to support a cause of action. This appeal ensued.
On appeal, plaintiffs argue that the judge erred in considering the State
Comptroller's report and the State Auditor's report in dismissing count two, as
both documents constitute evidence outside the pleadings. Next, they argue that
the judge erred in dismissing count two because they alleged sufficient facts
showing that the investigation was conducted for the prohibited purpose of
targeting plaintiffs. Lastly, plaintiffs argue that dismissal should have been
without prejudice, as they claim they can plead additional facts revealing that
the Task Force improperly targeted them.
A-5237-18T4
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II.
First, we consider plaintiffs' contention that the judge erred in considering
extrinsic evidence when deciding the motion to dismiss. We review a motion to
dismiss for failure to state a claim de novo, applying the same standard under
Rule 4:6-2(e) that governed the trial judge. See Frederick v. Smith, 416 N.J.
Super. 594, 597 (App. Div. 2010).
When considering whether a party has asserted a claim for which relief
may be granted, the "inquiry is limited to examining the legal sufficiency of the
facts alleged on the face of the complaint." Printing Mart-Morristown v. Sharp
Elecs. Corp., 116 N.J. 739, 746 (1989). The inquiry may also include
consideration of "exhibits attached to the complaint, matters of public record,
and documents that form the basis of a claim." Banco Popular N. Am. v. Gandi,
184 N.J. 161, 183 (2005) (quoting Lum v. Bank of Am., 361 F.3d 217, 221 n.3
(3d Cir. 2004)). Further, the "court may consider documents specifically
referenced in the complaint 'without converting the motion into one for summary
judgment.'" Myska v. N.J. Mfrs. Ins. Co., 440 N.J. Super. 458, 482 (App. Div.
2015) (quoting E. Dickerson & Son, Inc. v. Ernst & Young, LLP, 361 N.J. Super.
362, 365 n.1 (App. Div. 2003), aff'd, 179 N.J. 500 (2004)); see also In re
Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir. 1997).
A-5237-18T4
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In considering these documents, the court must "search[] the complaint in
depth and with liberality to ascertain whether the fundament of a cause of action
may be gleaned even from an obscure statement of claim." Printing Mart, 116
N.J. at 746 (quoting Di Cristofaro v. Laurel Grove Mem'l Park, 43 N.J. Super.
244, 252 (App. Div. 1957)). Although "plaintiffs are entitled to every
reasonable inference of fact," ibid., they may not rely on conclusory allegations,
hoping that discovery will allow them to find that a cause of action exists, id. at
768. If the judge perceives no legal basis for relief, he or she must dismiss the
complaint. Sickles v. Cabot Corp., 379 N.J. Super. 100, 106 (App. Div. 2005).
Having reviewed plaintiffs' complaint, we conclude that the judge did not
err in considering the State Auditor's report and the State Comptroller's report
in dismissing count two. Both reports could have been considered on the basis
that they are matters of public record. See Banco Popular, 184 N.J. at 183;
Teamsters Local 97 v. State, 434 N.J. Super. 393, 414 (App. Div. 2014) (citing
Hall v. Virginia, 385 F.3d 421, 424 n.3 (4th Cir. 2004)). The Offices of the State
Comptroller and the State Auditor are offices of the Executive Branch and
Legislative Branch, respectively, N.J.S.A. 52:15C-2(a); N.J.S.A. 52:24-3, and
the reports from both offices are publicly available on their respective websites.
A-5237-18T4
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Additionally, both reports considered in this matter provide necessary
context. As the judge noted, plaintiffs' complaint referenced EO 52 and included
a copy as an exhibit. A substantial portion of EO 52 discusses and quotes
findings from the State Comptroller's report that signaled a need to investigate
deficiencies in the design, implementation, and oversight of the EDA's tax -
incentive programs, and the State Comptroller's report, as well as EO 3,
discusses the State Auditor's report. Plaintiffs' complaint also cites to a finding
in the State Comptroller's report that "the EDA had approved [1000] projects
under its various programs," as support for their allegation that "the Task Force
immediately singled out [the plaintiff companies]." Although the reference to
the State Comptroller's report is brief, and there is no reference to the State
Auditor's report, we do not find the link between these documents to be so
attenuated as to preclude their consideration.
Moreover, while consideration of a motion to dismiss is generally "limited
to examining the legal sufficiency of the facts alleged on the face of the
complaint," Printing Mart, 116 N.J. at 746, allowing for review of the State
reports in this case serves the purpose for which the exception to this rule was
created. The Third Circuit explained,
The rationale underlying this exception is that the
primary problem raised by looking to documents
A-5237-18T4
20
outside the complaint—lack of notice to the plaintiff—
is dissipated "[w]here [the] plaintiff has actual notice
. . . and has relied upon these documents in framing the
complaint." What the rule seeks to prevent is the
situation in which a plaintiff is able to maintain a claim
of fraud by extracting an isolated statement from a
document and placing it in the complaint, even though
if the statement were examined in the full context of the
document, it would be clear that the statement was not
fraudulent.
[Burlington Coat Factory, 114 F.3d at 1426 (first and
third alterations in original) (citation omitted) (quoting
Watterson v. Page, 987 F.2d 1, 4 (1st Cir. 1993)).]
Although plaintiffs did not allege fraud, we are persuaded by the Third
Circuit's reasoning, as was the trial judge. Plaintiffs' factual allegations relevant
to count two are limited to commenting on the Governor's intent in creating the
Task Force, as set forth in EO 52, and contesting the lawfulness of the document-
preservation letters and subpoenas. However, to support their cause of action,
plaintiffs' allegations only included "isolated" statements from the documents
that formed the basis for the Task Force's investigation. Both the State Auditor's
report and the State Comptroller's report enhance the narrative and provide
necessary context to understand the Task Force's actions. They reveal the
Governor's legitimate concerns about a State entity's administration of tax-
incentive programs, thereby supporting his creation of the Task Force and the
A-5237-18T4
21
Task Force's subsequent actions, which included issuing the letters and
subpoenas.
III.
Next, we consider plaintiffs' claim that they alleged specific facts showing
that defendants violated N.J.S.A. 52:15-7, as a showing of improper motive is
sufficient to withstand defendants' motion. Specifically, their complaint alleged
the issuance of document-preservation letters and subpoenas and the comments
made during the public hearing demonstrate that the Task Force improperly
targeted the four plaintiff companies, all of whom are private entities.
N.J.S.A. 52:15-7 does not authorize the Governor to investigate private
individuals or entities; rather, it provides in part,
The Governor is authorized at any time, either in person
or by one or more persons appointed by him [or her] for
the purpose, to examine and investigate the
management by any State officer of the affairs of any
department, board, bureau or commission of the State
and to examine and investigate the management and
affairs of any department, board, bureau or commission
of the State. The Governor and the persons so
appointed . . . are empowered to subpoena and enforce
the attendance of witnesses, to administer oaths and
examine witnesses under oath and to require the
production of any books or papers deemed relevant or
material.
[Ibid.]
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Any investigation that exceeds the authorization defined in the statue is invalid.
See Commc'ns Workers of Am., AFL-CIO v. Christie, 413 N.J. Super. 229, 259
(App. Div. 2010) ("An executive order is invalid if it usurps legislative authority
by acting contrary to the express or implied will of the Legislature."). However,
"when the Governor is acting consistently with express or implied authority
from the Legislature, his or her action should be given 'the widest latitude of
judicial interpretation, and the burden of persuasion would rest heavily upon any
who might attack it.'" Id. at 259-60 (internal quotation marks omitted) (quoting
Bullet Hole, Inc. v. Dunbar, 335 N.J. Super. 562, 575 (App. Div. 2000)).
The trial judge found, and the parties do not dispute on appeal, that
N.J.S.A. 52:15-7 authorized the Governor to create the Task Force to investigate
deficiencies in the design, implementation, and oversight of the EDA's tax-
incentive programs. The statute also allowed the Task Force to require the
production of any relevant or material documents. N.J.S.A. 52:15-7.
In light of the focus of the Task Force's investigation, plaintiffs' claim that
the document-preservation letters and subpoenas were issued to improperly
target them is a conclusory allegation. As plaintiffs applied to the EDA for tax
incentives, the information they supplied in support of their applications is vital
to the Task Force's ability to succeed in uncovering deficiencies in the EDA's
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evaluation of applications and post-award compliance monitoring. The purpose
and wording of the subpoenas indicate the target of the investigation was the
EDA's administration of its tax-incentive programs. The investigation of a State
agency charged with administering such programs involves the agency's
processing and grant of related applications. A natural extension of the
investigation is the examination of the applicants' submissions to determine
whether the agency properly handled them. Parties—even private parties—have
no right to expect that their applications—made to a public agency for public
incentives—will remain private or that those applications are immune from
public scrutiny, especially those authorized by statute.
As to plaintiffs' concerns about comments referring to them during the
second public hearing, we find that plaintiffs have taken any statements out of
context. The focus of the hearing was the EDA's processing and oversight
practices, not just a review of the plaintiff companies' applications . Any
references to the companies were to demonstrate "the level of diligence [the
EDA] applied" in reviewing incentive applications, not to "insinuat[e] that
anyone broke the law."
Upon consideration of the facts alleged in plaintiffs' complaint and the
publicly available information that sheds light on the purpose of the Task Force's
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investigation, we conclude that the trial judge did not err in dismissing count
two of plaintiffs' complaint for failure to state a cause of action.
IV.
Finally, we address plaintiffs' argument that dismissal should have been
without prejudice. If granted the opportunity to amend their complaint, they
would have included additional allegations of improper targeting that occurred
after their complaint was filed. Specifically, they assert that "after . . . Norcross
published a March 11, 2019 op-ed on NJ.com defending the state's tax[-
]incentive programs, 'the Task Force decided to review the applications for those
companies' associated with him." Then, in its published report, the Task Force
concluded, without a factual basis, that the plaintiff companies were awarded
"over $70 million in improperly approved tax-incentive awards." Further, they
claim that the report "severely criticized Parker McCay for being 'involved in
the drafting process' of the legislative amendments to [GROW]."
Generally, dismissal under Rule 4:6-2(e) should be without prejudice to
allow for the filing of an amended complaint. Printing Mart, 116 N.J. at 772.
However, judges "are free to refuse leave to amend when the newly asserted
claim is not sustainable as a matter of law." Notte v. Merchants Mut. Ins. Co.,
185 N.J. 490, 501 (2006) (quoting Interchange State Bank v. Rinaldi, 303 N.J.
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Super. 239, 256-57 (App. Div. 1997)); see, e.g., Nostrame v. Santiago, 213 N.J.
109, 128 (2013) (affirming dismissal with prejudice where the "plaintiff
conceded that he had no further facts to plead [and] instead fil[ed] the complaint
in the hope that he could use the tools of discovery to uncover evidence of
wrongdoing").
Having reviewed the Task Force's published report, we conclude that
plaintiffs' proposed additions would not save count two from dismissal. First,
plaintiffs misstate the reason for the Task Force's response to Norcross' op-ed.
Norcross stated that "[t]he [tax] credits were not intended to entice firms that
were leaving the state to remain." George E. Norcross, III, George Norcross:
We Need Tax Incentives to Continue to Rebuild Camden, NJ.com (Mar. 11,
2019), https://www.nj.com/case/p2019/03/george-norcross-we-need-tax-
incentives-to-continue-to-rebuild-camden.html. The Task Force became
concerned because all but one of the "in-state compan[ies] that proposed a move
to Camden did . . . certify that jobs were 'at risk' of leaving the State[,] . . .
including applications from entities with affiliations to . . . Norcross, including
[Conner Strong] and Cooper Health." Governor's Task Force on EDA Tax
Incentives at 48. It also became concerned about Michaels and NFI, as they
"were affiliated with . . . Norcross in that their applications were related to
A-5237-18T4
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[Conner Strong's] application." 4 Ibid. Upon a cursory review of the plaintiff
companies' applications, "additional concerns arose, and the Task Force
determined that an examination of the EDA's oversight of these applications was
appropriate."
Additionally, any of the unfavorable comments made about plaintiffs do
not show improper motive. The comments pertaining to misstatements in
incentive applications and the possibility that the EDA improperly awarded over
$70 million of incentives were findings from the Task Force's investigation of
deficiencies in the EDA's application process, not of plaintiffs' actions in making
those misrepresentations.
The allegations that plaintiffs propose to include in an amended complaint
are insufficient to show that the Task Force improperly investigated private
entities. Plaintiffs' proposed allegations represent findings of the Task Force's
investigation, and the fact that they do not portray plaintiffs in a positive light
does not cast doubt on the lawfulness of its investigation. Because plaintiffs
have failed to offer any additional allegations to suggest that the Task Force
4
According to the report, Conner Strong, Michaels, and NFI had "joint plans to
move into a new office tower on the Delaware River waterfront of Camden."
Governor's Task Force on EDA Tax Incentives at 55.
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unlawfully investigated them in violation of N.J.S.A. 52:15-7, we conclude that
dismissal with prejudice was appropriate.
To the extent that we have not addressed the parties' remaining arguments,
we conclude that they lack sufficient merit to warrant discussion in a written
opinion. R. 2:11-3(e)(1)(E).
Affirmed.
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