Environmental Year in Review

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Environmental Year in Review
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New Jersey Lawyer Magazine
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New Jersey state and federal courts addressed environmental issues in a wide variety of contexts this past year, from typical disputes over land development and insurance coverage to more obscure controversies such as whether solid waste transporter fees imposed by the New Jersey Department of Environmental Protection ("DEP") violate the commerce clause. Several important decisions establishing significant precedent were handed down in the land use, CERCLA and insurance arenas. Of note this year is the infrequency of private party disputes and the absence of toxic tort litigation, although toxic tort claims underlie several insurance disputes. The courts continue to allow considerable deference to DEP, particularly in its decisions concerning development, except where the agency clearly oversteps statutory or constitutional bounds.

Land Use

Land use cases predominated in environmental decisions this year. In continuing contrast to the early days of environmental jurisprudence, these disputes no longer typically 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 recorded. Plaintiff had acquired unimproved lots, intending to build residential housing. Although a diligent title search revealed no relevant restrictions, the lots in fact contained a limitation to "water-dependent" uses imposed under CAFRA. The restriction was not revealed in the title search, however, because the prior owner's recorded master deed contained an incorrect metes and bounds description. 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 its interest in the policies underlying CAFRA.

Faced with unsympathetic plaintiffs, however, the Appellate Division in Breitinger v. NJDEP, No. A-426-03T5 (App. Div. June 9, 2004), not surprisingly affirmed summary judgment dismissing a complaint contending 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. Plaintiffs were experienced real estate investors who had purchased the property for a nominal sum out of tax foreclosure. Various permit applications to construct a single-family residence on the property then were rejected by DEP, and plaintiffs filed an inverse condemnation action alleging categorical and regulatory takings. As to a categorical taking, the Appellate Division concluded that DEP had not prohibited all economically viable use of the property as the construction of a dock would increase its value. With respect to a regulatory taking, the Appellate Division agreed with the trial court that plaintiffs had failed the test outlined in Penn Central Trans. Co. v. New York City, 438 U.S. 104 (1978), of whether the regulation at issue deprived plaintiffs of virtually all economically viable uses of the property, and whether plaintiffs had any distinct investment-backed expectations at the time of acquisition that were destroyed by the regulation. The Appellate Division concluded that plaintiffs' expectation that a house could be built on the property were sincere but not reasonable given that the regulations governing wetlands 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. The applicant argued that DEP's findings with respect to the application were arbitrary, capricious and unreasonable and that the provisions of the Freshwater Wetlands Protection Act allowing permits to be issued only if there is "no practicable alternative" and where there is "minimum feasible alteration or impairment of the aquatic ecosystem" are vague and therefore unconstitutional. The Appellate Division disagreed, rejecting both challenges. 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.

The Appellate Division upheld DEP action in another case demonstrating deference to its enforcement authority. In NJDEP v. Roc Harbour Condo Assn., No. A-607-02T3 (App. Div. Mar. 16, 2004), the Appellate Division upheld the agency's assessment of substantial penalties against a condominium association for filling wetlands on its property in violation of the law and its own deed restriction against arguments that DEP should be estopped for having failed to enforce its regulations against the original developer who had engaged for twenty years in the same illegal activity as the condominium association.

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), various groups challenged DEP's approval of a county plan to divert parkland for the construction of community college facilities, to be replaced by the purchase and dedication of other lands for conservation and recreation purposes, on the basis that the county's alternatives analysis did not contain sufficient findings of fact to demonstrate "no feasible alternative" to the project. The Appellate Division refused to overturn DEP's approval, again relying on the traditional deference granted to regulatory agencies regarding technical matters within the agency's special competence.

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 the agency's grant of a combined permit -- including a CAFRA permit, two freshwater wetlands general permits, and a freshwater wetlands transition area waiver -- to allow commercial development on property that contained vernal habitat. The objectors, comprised of various environmental groups, contended that the applicant should have been required to seek individual permits under regulations that were adopted prior to, but became effective after, the date on which the application was deemed complete. In addition, the objectors contended that the specific findings required by statute were not made. Though the Court held that the application was not subject to the new regulation governing vernal habitat, it found that the agency had failed to make the necessary factual findings, and therefore vacated issuance of the permit.

Several cases this year involved challenges to DEP rule-making under statutory programs intended to manage land use and development, particularly in freshwater wetlands. Again we observe an increased willingness of the courts to rein in the agency when it pushes its statutory mandate too far.

The Supreme Court of New Jersey examined two aspects of DEP's Freshwater Wetlands Protection Act Rules this year, ruling both against and for the validity of the regulations. In a case with far-reaching implications, I/M/O Freshwater Protection Act Rules, 180 N.J. 478 (2004), the Supreme Court of New Jersey invalidated rules adopted by DEP under the Freshwater Wetlands Protection Act, N.J.S.A. 13:9B-1 et seq., that effectively increased beyond what was authorized by statute the required buffer area for residential construction projects near wetlands transition areas. One part of the challenged rule changed the definition of "residential development project" to encompass both the footprint of the building and the area that extends 20 feet from the structure on all sides, regardless of the quality of the nearby wetlands, effectively adding an additional buffer to all such residential construction. The New Jersey Builders Association challenged the rules, asserting that DEP had exceeded its authority by adding 20 feet to the statutory transition area widths for exceptional and intermediate resource value wetlands and by creating a buffer for wetlands of ordinary value even though they are not required by the Act. The Association also challenged DEP's rules that regulated activities in vernal habitats.

 

DEP defended the rules by asserting that, based on its vast experience, it was inevitable that the activities of home owners would spill from their land into nearby wetlands or transition areas. The agency considered the cost of eradicating such violations on a case-by-case basis as prohibitive and preemptively sought to prevent such violations from occurring in the first instance through the rule promulgation. DEP also argued that the rules regarding vernal habitat were necessary because destruction of such habitats will have more than a minimal impact on the environment.

 

The Court invalidated the rule, finding that because the Act establishes the width of transition area buffers in terms that are "clear and unambiguous," DEP's attempt to expand the reach of the statute by rule was ultra vires. The Court further held that the agency's attempt to restrict activities in vernal habitats by expanding the definition of "exceptional resource value" wetlands (for which no general permit may be issued) to include vernal habitats, also exceeded its statutory authority.

 

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, which permits the limited expansion of existing cranberry growing operations in the Pinelands, violates the federal Water Pollution Control Act, the Freshwater Wetlands Protection Act, or the state's Surface Quality Water Standards. Again applying 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 Court upheld the General Permit.

 

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 – against a challenge of the New Jersey Builders Association that the new regulation was ultra vires - 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."

 

In New Jersey Association of Realtors v. NJDEP, 367 N.J. Super 154 (App.Div. 2004), however, the Appellate Division voided a DEP regulation requiring the Association to receive copies of all filed "deed notices" and to compile a deed notice register as an additional resource to provide notice to buyers of off-site disclosures. The Appellate Division found the regulation void ab initio because it contravenes the New Residential Construction Off-Site Conditions Disclosures Act, N.J.S.A. 46:3C-1 et seq., which provides that no seller shall be required to compile or to contribute to the compilation of lists of off-site conditions required to be made available by municipal clerks pursuant to the Act.

 

Developers were unsuccessful in an interesting case construing authority of the New Jersey Pinelands Commission. In Mendelsohn v. N.J. Pinelands Commission, No. A-0258-02T3 (App. Div. Oct. 1, 2003), certif. den., 178 N.J. 374 (2003), the Appellate Division upheld a Commission regulation requiring review of preliminary local approvals, whereas the Pinelands Protection Act, N.J.S.A. 13:18A-1 et seq. authorized the review only of final local approvals. In Mendelsohn, the Commission had approved a developer's application for subdivision on the condition that he redeem Pinelands Credits, at significant cost, to account for his proposed exceedence of the "by right" residential density in that district. While the developer's application was pending before the Commission, the local planning board adopted a zoning change that reduced the development density in the district where the subject property was located, causing a decrease in the allowable density of the proposed project. This zoning change was certified by the Commission as consistent with the Commission's Comprehensive Management Plan, also while the developer's application was pending. The developer challenged the conditional approval, contending that the Commission's review of the developer's preliminary approval, allowed under Commission regulations, conflicted with the Pinelands Act and that his preliminary approval from the municipality, which was obtained when the higher development density was in effect, was protected under the Municipal Land Use Law, N.J.S.A. 40:55D-1 et seq.

 

The Appellate Division concluded that the regulations do not conflict with the Pinelands Act, noting that the grant of power to a regulatory agency is liberally construed in order to allow the agency to fulfill its statutory responsibilities and fully effectuate the legislative intent. In this case, the Commission's review of a preliminary approval made sense in order to alert the developer at an early stage to any non-conformance with the Plan. The developer also took issue with the Commission's position that his preliminary approval did not become effective until review by the Commission occurred, arguing that his preliminary approval was protected from zoning changes for three years under the Municipal Land Use Law. The Appellate Division held that to the extent any conflict between the Municipal Land Use Law and the Pinelands Act exists, the Pinelands Act prevails. Therefore, the Commission regulation providing that a preliminary municipal approval subject to Commission review does not become effective until the applicant receives final approval from the Commission was determined to be controlling.

 

In a dispute that demonstrates the tension between municipal authority to control development and DEP regulation of freshwater wetlands, in Rolling Meadows at Readington, LLC v. Readington Twp. Bd. of Health, No. A-2968-02T5 (App. Div. Oct. 8, 2003), the Appellate Division concluded that a municipal board of health had exceeded its authority in denying the applicant's request for a certification that various residential lots in its development met subsurface soil testing requirements for septic systems. The basis of the denial was the applicant's refusal to permit the board of health to enter the property for the purpose of verifying DEP's wetlands delineation, which the board had claimed was necessary in order to confirm that the septic systems would be located outside the required buffer zone. The court found that the denial of the certification was arbitrary, capricious and unreasonable because DEP, rather than the municipal board of health, has proper jurisdiction over delineation of wetlands under the Freshwater Wetlands Protection Act, N.J.S.A. 13:9B-1 et seq. The municipal board had no authority to order an inspection of the property to verify DEP's wetlands delineation because the municipal ordinance was preempted by the Act. This case can be seen as one in a long line of cases protecting the authority vested in DEP from usurpment by local authorities.

 

CERCLA and Spill Act

Two cases of note were decided this 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 plaintiff argued that the defendant, a customer of the former site operator, should be responsible under CERCLA for certain of the remedial costs incurred at the site because it had "arranged for" the processing of mercury at the facility for many years, resulting in the release of hazardous waste into the environment. The Third Circuit vacated the District Court's grant of summary judgment to the defendant and remanded for further proceedings on the basis that disputed material facts existed with respect to plaintiff's claims, including whether the defendant owned or processed mercury, had knowledge of the environmental hazards associated with mercury processing or had control over the hazardous waste disposal practices at the site. 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. A review of decisions in other jurisdictions led the Third Circuit to conclude that courts are virtually unanimous with respect only to two points: that the determination of arranger liability is a fact-sensitive inquiry that requires 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 a hazardous substance. Beyond that, the decision reflects a lack of agreement among the circuits in conducting a multi-factor "arranger liability" analysis as to which factors 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 Section 113 of CERCLA against the United States as a potentially responsible party ("PRP"). The court granted defendant summary judgment, holding squarely that a plaintiff may not seek contribution from another party absent a prior or ongoing primary action against the contribution plaintiff brought under Sections 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 in only three circumstances: (i) during or after a CERCLA Section 106 or 107 action; (ii) following a judicially or administratively approved settlement of CERCLA liability pursuant to CERCLA Section 113 (f)(3); or (iii) pursuant to the so called "savings clause" under CERCLA Section 113 (f)(1). Because there was no primary lawsuit underlying plaintiff's contribution action, no Section 106 or 107 action and no prior settlement made under Section 113(f)(3), the plaintiff was unable to satisfy its threshold contribution requirements.

 

The Du Pont court notably criticized the holding in Aviall Serv., Inc. v. Cooper Indus., Inc. , 312 F.3d 677 (5th Cir. 2002) (en banc), cert. granted, 124 S.Ct. 981 (2004) ("Aviall II"), which held that not only was a Section 106 or 107 CERCLA action unnecessary as a prerequisite to bringing a CERCLA contribution claim, but also that a contribution plaintiff need not resolve its CERCLA liability at all prior to bringing a CERCLA contribution action. The court explicitly rejected the Aviall II decision as inconsistent with established Third Circuit case law as stated in In re Reading , 115 F.3d 1111 (3rd Cir. 1997), which required the bringing of a predicate action to discharge the contribution plaintiff's CERCLA claim prior to the initiation of a contribution action. It is anticipated that the United States Supreme Court will resolve this question when it decides the Aviall II case later this term.

 

Two decisions turned on the timing of contamination. In Nathan Barry Co. v. Kimber Petroleum Corp. , No. A-2894-01T3 (App. Div. Mar. 19, 2004), the Appellate Division upheld dismissal of the complaint of the plaintiff-landlord, which sought recovery under the Spill Act from a prior tenant for the costs of investigation and remediation of a discharge of gasoline from underground storage tanks. Following what it described as a "battle of the experts," the court determined that the contamination occurred after the tenant had vacated the property. In Lacey M.U.A. v. NJDEP , 2004 WL 1103544, 848 A.2d 843 (App. Div. 2004), the Appellate Division affirmed the decision of an arbitrator against the objections of a PRP, ordering the Spill Compensation Fund to reimburse the local municipal utility for the cost of constructing water supply infrastructure in an area where wells had been polluted. The Court held 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, and it refused to require the utility to "prove a negative" by disproving the existence of any pre-Act discharge. Further, the fact that ratepayers initially had paid the cost of the water system expansion did not preclude reimbursement by the Spill Fund under the regulations prohibiting double recovery of costs because the utility will use the reimbursed funds to provide rate relief.

 

Insurance

In Benjamin Moore & Co. v. Aetna Casualty & Insurance Co., 179 N.J. 87 (2004), the Supreme Court of New Jersey determined that an insured must satisfy the full deductible for each triggered policy in a "long-tail" environmental exposure case before it is entitled to indemnity from the insurer. In reaching its conclusion, the Court applied Owens-Illinois, Inc. v. United Insurance Co., 138 N.J. 437 (1994), which posits that environmental injury occurs during each phase of contamination from exposure to manifestation, thereby triggering each applicable insurance policy (known as the "continuous-trigger" theory of liability). Owens-Illinois also instructs how to allocate responsibility among different carriers once it is determined which policies have been triggered. Under Owens-Illinois, each carrier's share is allocated according to the "pro-rata approach," which is based upon the time its policies cover the risk and the coverage limits in its policies. The Court also applied Carter-Wallace, Inc. v. Admiral Insurance Co., 154 N.J. 312 (1998), which held that each layer of excess insurance must be exhausted in each policy year before the next layer is reached.

 

The Court rejected the argument of the policy holder in Benjamin Moore that it be allowed to select one triggered policy to cover its claims and pay a single deductible for that policy only, known as the "joint and several" approach to allocation. The Court held there was "no principled basis" to treat progressive environmental damage as separate occurrences in order to maximize insurance coverage and, therefore, that it needs to be characterized as a fractionalized single occurrence in determining the applicability of deductibles. In short, the Court found that policy holders wishing to live by Owens-Illinois also must be prepared to die by it. This holding will dismay policy holders who now must pay in full all deductibles for all triggered policies before being entitled to coverage as a result of environmental injury occurring over a number of years.

 

In Rohm and Haas Co. v. Allianz Underwriters, Inc., No. MER-L-4664-95 (Law Div. Jan. 6, 2004) the trial judge rejected the recommended conclusions of the Special Master who had found that, although the policy holder had proved its entitlement to insurance coverage under its CGL policies for the cost of remediation of contaminated sites, the insurer was entitled to a defense to coverage on the basis that the insured had "expected or intended" pollution as a result of its actions. Applying a "contrary to the weight of evidence" standard, the court held that the Special Master had "clearly erred" in determining that merely because the policy holder was aware of a "known risk" of pollution, it had acted with a "substantial certainty" that harm would result. The court concluded that the insurer failed to meet its burden of showing that the policy holder was "substantially certain" it would cause environmental harm because the trial record showed that its disposal methods conformed to an adopted industry standard, thereby demonstrating that the policy holder did not expect or intend to cause environmental injury.

 

Several summary judgment decisions were remanded for the taking of evidence on whether facts fit within policy coverage or exclusions. The insurance dispute in Nav-Its, Inc. v. Selective Insurance Company of America, No. A-1566-02T2 (App. Div. Dec. 23, 2003) arose from a claim filed against a contractor who was performing tenant "fit-out" work on a commercial building which resulted in fumes being released into the space of an adjoining tenant, allegedly injuring him. The contractor sought coverage from its insurer, which denied on the basis of the pollution exclusion in the policy. The policy stated that damages arising out of a "pollution hazard" were not covered, except if the injury or damage arose from the "actual discharge or release of any ‘pollutants' that take place entirely within a building or structure" if the injury results from a release "beginning and ending within a single forty-eight (48) hour period" and "the exposure occurs within the same forty-eight (48) hour period." The injured tenant had reported being exposed to the fumes only "while he was at work," on three occasions over a six-day period. The Appellate Division reversed summary judgment in favor of the insured and remanded for trial the issue of whether the pollution exclusion applied based on a factual examination of whether the tenant suffered separate exposures each day or one continuous exposure and also whether the insurer was prejudiced by the insured's noncompliance with the strict notice provisions in the policy.

 

Estate of Mimi v. Selective Ins. Co. of America, No. A-3976-02T2 (App. Div. June 8, 2004) arose out of a suit brought against the seller of cedar mulch alleging that exposure to toxins in the mulch caused the death of one of the mulch seller's customers. The mulch seller's insurer denied coverage and refused to defend the suit on the basis of the pollution exclusion in the policy. The Appellate Division reversed summary judgment for the insurer, concluding that there were ambiguities in the pollution exclusion provision of the insurance policy which excluded "an active or physical event" that could constitute a "discharge, dispersal, seepage, migration, release or escape" of a "pollutant," but not a general "exposure" to some unidentified substance described by the injured party as a "toxin" with no factual basis. As the claim reasonably could be interpreted to allege a cause of action falling outside the scope of the pollution exclusion, the Appellate Division found that an ambiguity existed which must be resolved at the summary judgment stage in favor of the possibility of coverage. See also Cycle Chem, Inc. v. Lumbermans' Mutual Casualty Company, 365 N.J. Super. 58 (App. Div. 2003), in which the Appellate Division held that it was error to grant summary judgment to the carrier without giving the insured an opportunity to demonstrate a sufficient factual nexus between its necessary and incidental operations at or from the insured premises and the occurrence out of which its alleged liability arose.

 

The insurance carrier in Atlantic Disposal Service, Inc. v. Federal Ins. Co., No. A-2980-01T2 (App.Div. June 14, 2004), failed in its attempt to disclaim litigation costs which arose out of the insured's defense of state and federal environmental actions brought against it. The insurer disclaimed responsibility for litigation expenses unless and until there had been a showing of an "occurrence" during the covered period which, according to the insurer, could not be established if the insured were to wage a successful defense against the environmental claim such that it were found not guilty of an act of pollution. In that event, there would be no "occurrence" and the insured would not be entitled to defense costs; on the other hand, if the insured were unsuccessful in defending the case, an "occurrence" would have been found and the insured would be entitled to said costs. The Appellate Division properly held that this argument "defies logic and common sense," as well as the "normal expectations of the policy holder," and emphasized that an insurer has a duty to defend the insured unless and until the insurer establishes non-coverage of the claim.

 

Solid Waste Management

Continuing a long-standing tradition, commerce clause issues in environmental law arose this year in the context of solid waste management. In American Trucking Associations v. State of New Jersey, 180 N.J. 377 (2004), the Supreme Court of New Jersey invalidated as an unconstitutional tax DEP's annual hazardous waste transporter registration fees. Plaintiffs had challenged the validity of the fees assessed by DEP pursuant to the New Jersey Solid Waste Management Act, N.J.S.A. 13:1E-1 et seq., alleging that their effect was to impose higher fees on out-of-state than in-state haulers. The crux of plaintiffs' argument was that the fees, which were imposed on a per vehicle basis, were not fairly apportioned because the same flat fee was imposed on each vehicle delivering or collecting waste in New Jersey, regardless of the number of trips made by each truck. Plaintiffs alleged that the effect of imposing the same fee on each truck was unfair to out-of-state haulers due to the greater frequency with which New Jersey haulers conducted their activities in-state. The narrow issue presented to the Court was whether the fees had the effect of charging a greater fee per activity to out-of-state than in-state transporters. Against DEP's argument that the fees were not an illegal flat tax but an allowable "user fee," the Court invalidated the fee on the basis that it was not fairly apportioned nor related to the payor's actual use of in-state facilities. In dicta, the Court noted that apportionment based on tonnage hauled or mileage would be a link to the level of activity that might render the fee constitutional.

 

In American Marine Rail v. City of Bayonne, 289 F. Supp. 2d 56 (D.N.J. 2003), a solid waste transporter sued a municipality and various county authorities alleging, among other claims, that the defendants had violated the Commerce Clause of the United States Constitution by denying its application for inclusion in the county Solid Waste Management Plan, a prerequisite for obtaining a solid waste facility permit for its new proposed facility. The transporter alleged that the standards defendants used to evaluate its project, including the requirement that the transporter be included in the Plan, were motivated by and had the effect of discriminating against interstate commerce. Specifically, the transporter alleged that because waste generated solely from New York City was to be processed at the proposed site, the requirement that the facility benefit county residents, as required under its Plan, discriminated against facilities that processed out-of-state waste, and therefore violated the dormant Commerce Clause. The court found that a fact issue as to whether the denial of the transporter's application had a discriminatory purpose or effect was presented, thereby precluding summary judgment.

 

DEP was soundly chastised in NJDEP v. Marisol, Inc., 367 N.J. Super. 614 (App. Div. 2004), where its assessment of penalties against a waste storage facility operator for violations of the Solid Waste Management Act was overturned by the Appellate Division, which concluded that the penalty assessment qualified for exemption under the Grace Period Law, N.J.S.A. 13:1D-125 et seq. The violations noted by DEP involved the lack of visibility of labels on drums at the operator's facility and the failure to affix labels to roll-off containers that were maintained on the premises for only a short period of time before shipment. The Appellate Division vacated the penalties, finding that the operator had addressed the violations immediately and that DEP could not prove that they were anything more than "minor violations" under the Grace Period Law. In a scathing opinion, the Court criticized DEP for failing to promulgate regulations implementing the Grace Period Law in the eight years since its enactment, interpreting this failure as "affirmative evidence of DEP resistance to the dictates of the GracePeriodLaw definition of ‘minor' [violation] … ." The Appellate Division observed that the agency "has proceeded upon an old regulatory framework and self-developed practices to assess monetary penalties which at worst violate the Grace Period Law and at best ignore its terms."

 

Contractual Agreements

Cirignano v. Recuperacion De Terrenos S.A. de C.V., No. A-5395-02T2 (App. Div. Apr. 30, 2004), is a cautionary decision for draftsmen of contracts. The facts arose out of a lease with an option to purchase which was to be triggered when the property, which was impacted by environmental contamination, received a no further action letter ("NFA") from DEP. The lease contained no representation as to the time frame in which landlord would complete the remediation and provided that the option to purchase would be null and void if landlord should fail to obtain an NFA. The tenant sought to exercise the option and sued, claiming delay by the landlord in satisfying DEP requirements. The Appellate Division affirmed the dismissal of the complaint, finding no requirement under the lease for landlord to satisfy agency requirements within any particular time frame and, in fact, finding that the landlord had no obligation under the lease actually to obtain the NFA.

 

Shareholder Liability

In NJDEP v. Camden Asphalt and Concrete Co., No. A-6786-02T5 (App.Div.Jul. 13, 2004), a concrete company and its sole shareholder appealed from DEP's determination that each was jointly and severally liable for the removal and disposal of solid waste from an industrial site and for payment of a fine for illegally operating a solid waste facility without a permit. The Appellate Division found the shareholder liable on the basis that he was in control of the events that led to the violation and had legal responsibility to determine whether his company should continue to operate without the necessary permit.

 

Conclusion

The many 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 number of appellate decisions in the insurance area overturning trial court rulings suggests continued confusion over coverage issues, particularly the applicability of pollution exclusion clauses, and the Benjamin Moore decision is a noteworthy set-back for policyholders. The CERCLA decisions both expand liability and limit the ability of a private party to recover costs from other contributors. Although less frequently than in past years, environmental issues continue to overlap other practice areas, including contract and commercial law disputes.