COURT OF CHANCERY OF THE S AM G LASSCOCK III

V ICE C HANCELLOR STATE OF DELAWARE C OURT OF C HANCERY C OURTHOUSE 34 T HE C IRCLE G EORGETOWN , D ELAWARE 19947 Date Submitted: August 15, 2019 Date Decided: September 20, 2019 William J. Rhodunda, Jr., Esq. Chandra J. Williams, Esq. Rhodunda, Williams & Kondraschow Brandywine Plaza West 1521 Concord Pike, Suite 205 Wilmington, DE 19803 Richard A. Forsten, Esq. Pamela J. Scott, Esq. Elizabeth S. Fenton, Esq. Saul Ewing LLP 1202 Market Street, Suite 2300 Wilmington, DE 19801 Max B. Walton, Esq. Connolly Gallagher LLP 267 East Main Street Newark, DE 19711

Re: Ocean Bay Mart, Inc. v. The C ity of Rehoboth Beach, Delaware , C.A. No. 2019-0467-SG

Dear Counsel: This litigation involves the proposed redevelopment of the old Ocean Bay Mart Shopping Center in Rehoboth Beach. The matter is currentl y before me on a Motion to Intervene pursuant to C hancery Court Rule 24. Movant s Carol P. Tello and James W. Tello (the “Tellos” ) seek to intervene in an actio n filed by Ocean Bay Mart, Inc. (“Ocean Bay Mart”) against the City of Rehoboth Beac h, Delaware (the “City”) seeking a permanent injunction and a declaration of “ve sted rights” in connection with its proposed la nd development project. Ocean B ay Mart filed a2 complaint in this action on June 18, 2019. The City filed its answer on July 19, 2019 and its first amended answer on July 30, 2019. Ocean Bay Mart is the owner of a residential shopping center an d seeks to redevelop the property as a res idential condominium community a nd has submitted a site plan to such effect to the City. Under the Municipal Co de of the City of Rehoboth Beach (the “City Code”), the City’s Building Inspector must perform an initial review of the site plan and if the Building Inspector d etermines that the site plan complies with the City Code, the site plan is then forward ed to the Planning

Commission. 1 The Planning Commission is then tasked with its own review of the site plan and the site plan is placed on the Planning Commissio n’s agenda for a public hearing. 2 The City’s position is that the site plan does not conform to t he City Code and is prohibited by Ordinances 1116-01, 1016-2 and 0519-01 (the “O rdinances”), each

enacted after the initial submission of the s ite plan. The City argued in a related but independent action in the Superior Court 3 that Ordinance 1116-01 requires a major subdivision plan application for the property at issue here. 4 The Superior Court ruled it could not determine whether Ordinance 1116-01 applies to the site plan on

1 City of Rehoboth Beach, Delaware Municipal Code §236-32(A). 2 City of Rehoboth Beach, Delaware Municipal Code §236-32. 3 Ocean Bay Mart, Inc. v. The City of Rehoboth Beach , 2019 WL 1126351 (Del. Super. Ct. March 12, 2019). 4 First Am. Ans. ¶ 18.3 procedural grounds. 5 Ocean Bay Mart seeks to enjoin the Planning Commission to conduct a review of the site pla n in accordance with the City C ode as it existed on June 18, 2015, before the en actment of the Ordinances. The Tellos maintain a home on a property that is directly adjac ent to the property at issue in this action but that is not within the lim its of the City of Rehoboth

Beach. Their motion identifies several feared harms should thi s Court grant Ocean Bay Mart the relief it seeks. The Tellos seek to intervene in this action either as a matter of right under Chancery C ourt Rule 24(a)(2), or, in the alternative, permissively under Chancer y Court Rule 24(b)(2). Chancery Court Rule 24(a)(2) pe rmits intervention in an action as a matter of right “when the applicant claims an interest relating to the pr operty or transaction which is the subject of the action and the applicant is so situ ated that the disposition of the action may as a practical matter impair or impede the ap plicant’s ability to protect that interest, unless the applicant’s interest is adequ ately represented by existing parties.” 6 The Tellos contend that they ha ve an “interest related to” Oc ean Bay Mart’s property by virtue of the fact that it is adjacent t o the property where they maintain a home. As proof of their interest, the Tellos c ite requirements that,

5 The Court noted that “[t]he m eaning and application of Ordinan ce 1116-01 to [the site plan] have not been addressed by any City official as part of the lan d use process. It should be addressed there first and not r aised here for the first time on certiorari review. For me to address it now would require me to give an advisory opinion, which woul d not be appropriate.” Ocean Bay Mart, Inc. , 2019 WL 1126351, at *3 (footnote omitted). 6 Del. Ch. Ct. R. 24.4 under (i) the Sussex County Board of Adjustment Rule 4.3, a cop y of the public notice of the public hearing must be mailed to each person whos e property lies within a 200-foot radius of the property subject to the appeal or appl ication 7 (which would include the Tellos) and (ii) under the City Code §236-6A, an “a ggrieved party,” may appeal a Planning Commission decision. 8 I appreciate that the outcome of this case and any subsequent d evelopments may impact the Tellos as abutti ng landowners. However, the Tel los’ motion to intervene under Rule 24(a)(2) must be denied because the instan t action only seeks a ruling whether the City may e nforce the Ordinances with respe ct to the site plan for the Ocean Bay Mart property, a plan pending before the Ordi nances’ enactment. The Court is not asked to review the site plan. Should the sit e plan be subject to a public hearing before the Planning Commission, the Tellos will have the opportunity to participate in the proceedings. Having conceded that they are not property owners in Rehoboth B each, the Tellos do not have a legally cogni zable interest in the applica tion of the Ordinances to the Ocean Bay Mart property. By way of example, a property owner holding a similar parcel of land in the City of Rehoboth Beach for which a site plan is pending may be able to show a cognizable i nterest to mandate interventi on under Rule 24(a),

7 Mot. to Intervene ¶ 5. 8 Id . at ¶ 6.5 as any decision in this case could change the permissible use o f such person’s property. That is not the circu mstance here. T he Tellos do no t own property that is subject to the Ordinances.

Even if the Tellos could claim a cognizable interest under Rule 24(a)(2), they have not shown that the City cannot adequately represent such i nterest. The Tellos’ interest appears to be congruent with that of the City: applica tion of the Ordinances to the pending site plan. The case of York Beach Mall, Inc. v Bd. of Adjustment of the Town of South Bethany 9 is instructive. There, Con cerned Citizens of South Bethany, Inc. (“CCSB”) sought to intervene in an appeal to the Delaware Superior Court of two decisions of the Board of Adjustment of the Town o f South Bethany (the “Board”) regarding two notices of violation issued to York Beach Mall, Inc. (“York Beach”). CCSB was a non-stock corporation that did not own property in South Bethany, but consisted of n inety-seven members, each of w hom did own property in South Bethany. 10 The Court rejected CCSB’s motion to intervene under Rule 24(a) because “CCSB nowhere a ttacks the Board’s compositio n, intentions, or ability to protect the property interests of South Bethany resi dents.” 11 The Court

9 1999 WL 167788 (Del. Super. Ct. Feb. 22, 1999). 10 Id . at *1. 11 Id . at *4.6 also noted that CCSB and the Board had a common member, a “stro ng indication of their mutual purpose.” 12 The Tellos argue that York Beach Mall is distinguishable from the facts underlying their motion because CCSB consisted of property owne rs of the municipality whose decision was being challenged whereas the Te llos’ property is not within Rehoboth Beach, and, the refore, the City cannot adeq uately represent their interests. Yet, like in York Beach Mall the Tellos have failed to point to any aspect of the City’s “compositi on, intentions or ability” that would leave an interest of the Tellos unprotected. The Tellos hypothesize that the Cit y could compromise with Ocean Bay Mart or resolve this matter without a final deci sion from this

Court. 13 Yet, as noted above, no matter the outcome of this action, in order to gain final approval the site plan must still be subject to a public hearing. This case concerns only the applicability o f the Ordinances. As evidence d by the filing of the City’s Amended Answer to Ocean Ba y Mart’s Complaint on July 30, 2019, the City

intends to defend the Ordinances. Even if the Tellos had a cog nizable interest in the enforcement of the Ordinances, they have failed to show the Cit y cannot adequately protect that interest.

12 Id

. 13 Mot. to Intervene ¶ 10.7 The Tellos alternatively seek t o intervene under Chancery Court Rule 24(b)(2), which allows for permissive intervention “when an app licant’s claim or

defense and the main action have a question of law or fact in c ommon. In exercising

its discretion the Court shall consider whether the interventio n will unduly delay or prejudice the adjudication of the rights of the original partie s.” 14 The Tellos argue that this Court should grant permissive intervention because “t he current Petition . . . includes the very same factual issues and legal issues for the Tellos and for the City of Rehoboth and Ocean Bay Mart.” 15 However, the Tellos do not have

a “claim” or “defense” to assert. The Tellos simply desire the same outcome in the litigation as the City. That does not create a basis for permi ssive jurisdiction under Rule 24(b)(2). To the extent the foregoing requires an Order to take effect, I T IS SO

ORDERED.

Sincerely,

/s/ Sam Glasscock III

Sam Glasscock III

14 Del. Ch. Ct. R. 24. 15 Mot. to Intervene ¶ 11.