Part II of this article appears in the May 2005 issue of The Metropolitan Corporate Counsel.
New Jersey state and federal courts addressed environmental issues in a wide variety of contexts this past court year, from typical disputes over land development and insurance coverage to more obscure controversies such as whether solid waste transporter fees imposed by the DEP violate the commerce clause. Part I of this article addresses several important decisions this year that established significant precedent in the land use and CERCLA arenas. Part II of this article will appear in the May issue of The Metropolitan Corporate Counsel.
Land use cases predominated in environmental decisions this year. In continuing contrast to the early days of environmental jurisprudence, these disputes no longer automatically result in victories for DEP. Though courts continue to grant deference to the agency on technical matters within its areas of expertise, we see more frequently, as the law in this area has matured, that important policy considerations often prevail over DEP's judgment, especially where the agency overreaches in its regulations and enforcement.
Several land use cases this year centered on DEP's interpretation of its regulations and exercise of its enforcement authority in controlling development. In a significant victory for developers, the Supreme Court of New Jersey, in Island Venture Associates v. NJDEP, 179 N.J. 485 (2004), upheld the Appellate Division decision reported here last year that a bona fide purchaser of real estate was not subject to a land use restriction that DEP had imposed on a predecessor-in-title but which in error had not been properly recorded. The Court rejected DEP's attempt to impose the restriction notwithstanding the recording error, finding that the public's interest in maintaining the integrity of the recording system outweighed DEP's interest in enforcing its land use regulations.
Faced with unsympathetic plaintiffs, however, the Appellate Division in Breitinger v. NJDEP, No. A-426-03T5 (App. Div. June 9, 2004), not surprisingly rejected a claim that DEP's regulations allowing them to construct only a dock and not a house on their bay-front property - which contained a marshy beach with wetlands and intertidal shallows - resulted in a taking. Noting that the plaintiffs were experienced real estate investors who had purchased the property for a nominal sum out of tax foreclosure, the Appellate Division concluded that plaintiffs' expectations that a house could be built on the property were not reasonable given that wetlands regulations had been in existence for approximately 30 years and that plaintiffs had constructive notice of the presence of wetlands on the property prior to purchase.
Similarly, in Tanurb v. N.J. Dept. of Environmental Protection, 383 N.J. Super. 492 (App. Div. 2003), the Appellate Division upheld DEP's denial of the applicant's plan to construct an addition on its existing building that would have resulted in elimination of three-quarters of the freshwater wetlands located on site. Among the factual arguments raised by the applicant was a claim that the wetlands in question had already been severely degraded and therefore possessed little ecological value. The Appellate Division found this argument disingenuous, noting that the degradation resulted from the applicant's own neglect and mistreatment. See also NJDEP v. Roc Harbour Condo Assn., No. A-607-02T3 (App. Div. Mar. 16, 2004), where the Appellate Division upheld DEP's assessment of substantial penalties against a condominium association for illegally filling wetlands on its property as another example of the deference granted to DEP's enforcement authority.
Cases brought by environmental advocacy groups challenging DEP's permitting decisions were treated even-handedly by the courts. In I/M/O Application of State, D.E.P., No. A-0529-02T5 (App. Div. Oct. 6, 2003), the Appellate Division, relying on the traditional deference granted to regulatory agencies regarding technical matters within the agency's special competence, refused to overturn DEP's approval of a county plan to divert parkland for the construction of community college facilities, against a challenge that the county's alternatives analysis did not contain sufficient findings of fact to demonstrate "no feasible alternative" to the project.. But in I/M/O Permit No. 1512-02-0007.1, No. A-3461-02T2 (App. Div. Mar. 12, 2004), the Appellate Division vacated and remanded DEP's grant of a combined CAFRA and wetlands permit to allow commercial development on property that contained vernal habitat, finding that the agency had failed to make the necessary factual findings required by statute.
In several cases involving challenges to DEP rule-making under statutory land use programs we observe an increased willingness of the courts to rein in the agency when it pushes its statutory mandate too far. This was evident in I/M/O Freshwater Protection Act Rules, 180 N.J. 478 (2004), where the Supreme Court of New Jersey invalidated rules adopted by DEP under the Freshwater Wetlands Protection Act that effectively increased beyond what was authorized by statute the required transition area buffers for residential construction projects and changed the definition of "exceptional resource value" wetlands to include vernal habitat. The Court found that because the Act establishes transition area buffers and defines "exceptional resource value" wetlands in terms that are "clear and unambiguous," DEP's attempt to expand the reach of the statute by rule was ultra vires. Conversely, in a decision that represents an easy victory for the agency, I/M/O Freshwater Wetlands Protection Act Rules, Statewide General Permit, Cranberry Expansion, 180 N.J. 415 (2004), the Court rejected the claims of various environmental groups that General Permit 23, permitting the limited expansion of existing cranberry growing operations in the Pinelands, violates federal and state water pollution control statutes based on the well-settled principle that the regulations of an administrative agency charged with the enforcement of an enabling statute should be afforded great weight.
The cases regarding DEP rule promulgations also split fairly evenly at the appellate level in ruling for and against the agency's rules. In a particularly disappointing decision for developers, I/M/O Adopted Amendments to N.J.A.C. 7:7A-2.4, 365 N.J. Super. 255 (App. Div. 2003), the Appellate Division approved DEP's adoption of the Landscape Project Method to classify wetlands of "exceptional resource value," replacing a method that relied on actual species sightings or documented presence. This new method of classification is likely to increase the amount of wetlands classified as "exceptional resource value." But see New Jersey Association of Realtors v. NJDEP, 367 N.J. Super 154 (App. Div. 2004), where the Appellate Division voided as ab initio a DEP regulation requiring the New Jersey Association of Realtors to compile a "deed notice" register because it contravenes the New Residential Construction Off-Site Conditions Disclosures Act.
For an interesting case construing the authority of the New Jersey Pinelands Commission, see Mendelsohn v. N.J. Pinelands Commission, No. A-0258-02T3 (App. Div. Oct. 1, 2003), certif. den., 178 N.J. 374 (2003), where the Appellate Division upheld a Commission regulation requiring review of preliminary local approvals, whereas the Pinelands Protection Act authorizes the review only of final local approvals. See also Rolling Meadows at Readington, LLC v. Readington Twp. Bd. of Health, No. A-2968-02T5 (App. Div. Oct. 8, 2003) for a case that demonstrates the tension between municipal authority to control development and DEP regulation of freshwater wetlands.
CERCLA And Spill Act
Two cases of note were decided this past court year. Morton Int'l, Inc. v. A. E. Staley Mfg. Co., 343 F. 3d 669 (3d Cir. 2003), arose out of the seemingly perpetual litigation related to the mercury contamination at the Ventron/Velsicol Superfund Site in Wood Ridge. The case turned on whether defendant, a customer of the former site operator, should be responsible under CERCLA for remedial costs because it had "arranged for" the processing of its mercury at the facility for many years, resulting in the release of hazardous waste into the environment. After carefully examining the language of CERCLA and considering the standards adopted by other courts, the Third Circuit concluded that the most important factors in determining arranger liability are: (i) ownership or possession of a material by defendant; (ii) defendant's knowledge that the processing of that material can or will result in the release of hazardous waste; or (iii) defendant's control over the production process. Reviewing decisions in other jurisdictions, the Third Circuit found general agreement that the determination of arranger liability is a fact-sensitive inquiry requiring a multi-factor analysis, and that courts must look beyond a defendant's characterization of transactions in order to determine whether in fact they involve an arrangement for the disposal or treatment of hazardous substances. Beyond that, the decision notes the lack of agreement among the circuits as to which factors in a multi-factor "arranger liability" test should be considered or what priority they should receive. This case is significant in that it suggests an extension of liability to customers that use a facility for the processing of a product, not merely to dispose of a waste.
In E. I. Du Pont De Nemours and Company v. U.S., 297 F. Supp. 2d 740 (D.N.J. 2003), the owner of a facility from which there had been a release or threat of a release of hazardous substances into the environment brought a contribution action under §113 of CERCLA against the United States as a PRP. The court held squarely that a plaintiff may not seek contribution from another party absent a prior or ongoing primary action against the contribution plaintiff brought under §106 or §107 in which it has discharged or will discharge its entire CERCLA liability. The court held that a CERCLA contribution action can be brought only: (i) during or after a CERCLA §106 or §107 action; (ii) following a judicially or administratively approved settlement of CERCLA liability pursuant to CERCLA §113(f)(3); or (iii) pursuant to the so-called "savings clause" under CERCLA §113(f)(1). Because none of these conditions had been satisfied, the plaintiff was unable to maintain a contribution action. Though other circuits have reached conflicting results under similar facts, this matter recently was settled by the United States Supreme Court in Cooper Industries, Inc. v. Aviall Services, Inc., 125 S.Ct. 577 (2004), holding that a private party which had not resolved its own CERCLA liability could not bring a contribution claim against other PRPs under §113(f) of CERCLA.
For an interesting case turning on the timing of contamination, see Lacey M.U.A. v. NJDEP, 848 A.2d 843 (App. Div. 2004), where the Appellate Division agreed that the Spill Compensation Fund should reimburse the local municipal utility for the cost of constructing water supply infrastructure in an area where wells had been polluted, finding that the utility had sustained its burden under the Spill Act of proving that it was more likely than not that the pollution had been caused by a discharge occurring after the effective date of the Spill Act.
The land use cases decided this year reveal a continuing maturation of New Jersey's environmental jurisprudence. Courts which once hesitated to overrule DEP did so in approximately half the decided cases, carefully balancing the agency's expertise in the administration of its regulatory programs against its statutory authority. The CERCLA decisions both expand liability and limit the ability of a private party to recover costs from other contributors.
Dennis J. Krumholz heads the Environmental Practice Group at Riker Danzig Scherer Hyland & Perretti LLP. He gratefully acknowledges the assistance of Christine A. LaRocca, an Associate in the Group, in the preparation of this article. This article is Part I of a condensed version of the Environmental Year in Review, published in New Jersey Lawyer on November 29 and December 6, 2004.