Search Icon
The ExxonMobil NRD Settlement: Beyond the Headlines Banner Image

The ExxonMobil NRD Settlement: Beyond the Headlines

Month: June 2018

The ExxonMobil NRD Settlement: Beyond the Headlines

Posted on by rd_admin

The litigation between the State of New Jersey and ExxonMobil over natural resource damages allegedly caused by former Exxon oil refineries  in Bayonne and Linden appears to have come to a close earlier this year when the New Jersey Supreme Court rejected petitions filed by third parties challenging the State’s settlement of its claims against Exxon.  In particular, the State’s decision to settle after trial for $225 million—where the State had previously claimed damages of $8.9 billion—led to several challenges to the settlement.  Although the public attention surrounding the settlement focused on the large sums at stake and the attendant political controversy, the Appellate Division’s February decision approving the settlement, NJDEP v. ExxonMobil Corp., 453 N.J. Super. 272 (App. Div. 2018), set important precedents in New Jersey environmental law that will outlast the current controversy.  First, the Appellate Division found that one of the objectors lacked standing to challenge the settlement, a rare result in a state that has allowed liberal access to the courts to redress environmental grievances.  Second, the Appellate Division also issued the first binding legal precedent in New Jersey setting forth a standard for courts to evaluate and either approve or reject the State’s settlement of claims under the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq. (the “Spill Act”).

New Jersey courts rarely reject challenges to the State’s actions as an environmental regulator on the basis that the challenger, usually an environmental group, lacks a sufficient stake in the controversy, a legal concept referred to as “standing.”  This liberal view of standing in New Jersey is in contrast to the restrictive approach of the federal courts, which has increasingly denied access to the federal courts to those challenging government actions.  ExxonMobil, however, is a rare case where New Jersey courts held that a challenger lacked such access.

Among the parties challenging the ExxonMobil settlement were environmental groups, such as the Sierra Club and the Delaware Riverkeeper Network, and former New Jersey State Senator Raymond Lesniak.  The Court held that the environmental groups had standing to challenge the settlement, but that Senator Lesniak did not.  In a brief discussion, the Court concluded that Senator Lesniak did not have a sufficient “personal or pecuniary interest or property right adversely affected” by the allegedly inadequate settlement, but that the environmental groups had standing based on “their broad representation of citizen interests throughout this state.”  The justification for the disparate treatment is unclear.  Senator Lesniak represented the legislative district that includes the Linden refinery for decades and he lives in Elizabeth, near the Linden refinery, which would seem to qualify as the “slight additional private interest” that confers standing in cases of great public interest.  The somewhat cryptic discussion of standing in ExxonMobil awaits development in future cases that could more clearly elucidate a standard for determining whether challengers have standing.  It seems clear based on ExxonMobil, however, that environmental groups with a broad-based, geographically dispersed membership are more likely than an individual or a small group of people from a discrete geographical area to have standing in future similar cases.

The ExxonMobil decision also made new law for New Jersey on the substantive issue of whether the court should have upheld the terms of the settlement the State entered into with ExxonMobil.  Perhaps not surprisingly, the Law Division and then Appellate Division in ExxonMobil adopted the same standard that federal courts long have used to evaluate CERCLA consent decrees:  whether the proposed settlement is fair, reasonable, consistent with the goals of the statute, and in the public interest.  Although the State had advocated unsuccessfully before the trial court for an even more deferential standard that would uphold its settlements absent clear and convincing evidence of fraud, federal trial courts usually have deferred to the agency defending the settlement and approved contested settlements under the standard the Supreme Court adopted.  For example, the Law Division in ExxonMobil detailed the numerous litigation risks the State faced to conclude that the settlement amount was reasonable; although objectors criticized the amount as “pennies on the dollar” for the State’s claimed damages, these litigation uncertainties meant that the State might have recovered far less than $225 million if the litigation had continued.  These settlements become even more difficult to reverse on appeal, as they are “encased in a double layer of swaddling” because of the deference given to both the agency’s expertise and the evaluation of the trial court, whose decision will be upheld unless it abused its discretion.

Court review of a State settlement of Spill Act litigation is less likely to recur in the context of environmental groups’ objections to the settlement, as these cases typically do not attract the public scrutiny given to the case against ExxonMobil.  Rather, ExxonMobil’s standard for reviewing settlements will be important in cases where the State brings claims against multiple defendants for contributing to the same environmental harm.  This is because the Spill Act provides contribution protection to settling defendants, which may leave the jointly and severally liable non-settling defendants to bear more than their proportionate share of the liability.  Thus, in the more typical situation, other defendants, rather than members of the public, challenge the settlement on the basis that the settling party will bear an unfairly low share of the cost of remediation or natural resource damages.  The ExxonMobil standard could make it rather difficult for non-settling parties to overturn future settlements that they believe are too low.

The legal principles the courts applied in approving the ExxonMobil settlement will likely outlast today’s headlines.  This decision may make it more difficult for objectors to challenge the State’s actions as an environmental regulator, and will provide the standard for evaluating the State’s settlement of complex Spill Act litigation.

For more information, please contact the author Michael Kettler at mkettler@riker.com or any attorney in our Environmental Practice Group.

Pennsylvania Federal Court Dismisses RESPA Claim Arising Out of Captive Reinsurance Arrangements

Posted on by rd_admin

The United States District Court for the Western District of Pennsylvania recently dismissed a putative class action that alleged violations of the Real Estate Settlement Procedures Act (“RESPA”) for a captive reinsurance arrangement.  See Menichino v. Citibank, N.A., 2018 WL 502728 (W.D. Pa. 2018).  In the case, plaintiffs obtained residential mortgage loans from the defendant mortgagee, and plaintiffs were required to purchase primary mortgage insurance (“PMI”) because their down payments were less than 20% of the property value.  The PMI providers then contracted with reinsurance companies who were affiliated with the mortgagee.  Plaintiffs brought this action more than a year after their closing alleging that “this scheme is really a form of collusion (prohibited by RESPA’s anti-kickback and anti-fee splitting provisions) between the mortgagee and the PMI insurer, in which the mortgagee is referring its borrowers to specific PMI companies in order to then cash in on reinsurance agreements without taking on any real risk.”  Defendants moved to dismiss based on RESPA’s one-year statute of limitations, and the parties agreed to stay the action pending the Third Circuit’s decision in Cunningham v. M & T Bank Corp., 814 F.3d 156 (3d Cir. 2016), as amended (Feb. 24, 2016), which had similar facts.

Based on the Third Circuit’s Cunningham decision, the Court here granted the motion to dismiss.  There was no question that more than a year had passed since the closings, so the central question was whether plaintiffs’ claims would be equitably tolled.  The Court found that, as in Cunningham, plaintiffs received disclosures at the time of their closing that revealed the captive reinsurance program, but did not elect to opt out or challenge the program.  Thus, they did not show “reasonable diligence” and their claims were not tolled but instead accrued at the time of the closing.  Additionally, unlike in Cunningham, the Court rejected plaintiffs’ request to allow discovery on their equitable tolling claims.  “Unfortunately for Plaintiffs, there are no answers to be had from discovery because there are no questions to ask. The similarities between this case and Cunningham cannot be overstated. The relevant disclosures were materially the same between the two cases.  Just like the plaintiffs in Cunningham, Plaintiffs had all the facts at the time of closing to allege their claim under RESPA, but their inaction during the limitations period bars the application of equitable tolling under a theory of fraudulent concealment.”

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com.

New York Federal Court Dismisses FDCPA Class Action, Holds Limitations Period Under Federal Communications Act Did Not Preempt State Limitations Period

Posted on by rd_admin

The United States District Court for the Eastern District of New York recently dismissed a putative class action brought under the Fair Debt Collection Practices Act (the “FDCPA”) and held that the two-year limitations period under 47 USC § 415 for “all actions at law by carriers for recovery of their lawful charges” did not preempt New York’s statute of limitations for a lawsuit on a debt arising from an unpaid cell phone contract.  See Torres v. Midland Credit Mgmt., Inc., 2018 WL 2304771 (E.D.N.Y. May 21, 2018).  In the case, plaintiff incurred a debt for her cell phone bill that she did not pay.  In 2016, defendant sent a dunning letter regarding the debt.  Plaintiff then brought this action, alleging that the letter violated the FDCPA because it did not state that the statute of limitations had expired and that defendant legally could not bring any action to collect the debt.  Defendant moved to dismiss, arguing that the letter was sent within the six-year limitations period for collecting a debt under New York law.  Plaintiff opposed the motion and argued that 47 USC § 415 of the Federal Communications Act (the “FCA”) set a two-year limitations period for any actions brought by cell phone carriers and that this statute preempted New York’s statute.  See 47 USC § 415 (“All actions at law by carriers for recovery of their lawful charges, or any part thereof, shall be begun within two years from the time the cause of action accrues, and not after.”).

The Court granted defendant’s motion and dismissed the action.  Although the Court acknowledged the FCA’s plain language, a preemption analysis requires the Court to determine whether Congress intended the statute to preempt state law.  The Court found that the Fifth Circuit’s reasoning in Castro v. Collecto, Inc., 634 F.3d 779 (5th Cir. 2011) was persuasive.  In that action, the Fifth Circuit held that the term “lawful charges” in the FCA initially referred only to “tariffed charges,” and that it was unclear whether this definition had changed.  Thus, the Fifth Circuit held that “[b]ecause we conclude that the meaning of ‘lawful charges’ is ambiguous, we therefore decline to interpret the term in such a way that conflict preemption would apply.”  The Court here adopted that reasoning and dismissed the complaint, finding that the letter was not sent outside the limitations period.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com.

Texas Federal Court Denies Motion for Remand on Title Insurance Dispute

Posted on by rd_admin

The United States District Court for the Northern District of Texas recently held that it had diversity jurisdiction over an action regarding the existence of a title insurance policy because the full policy amount would exceed the $75,000 threshold amount.  See Jury v. WFG Nat’l Title Ins. Co., 2018 WL 1912713 (N.D. Tex. Apr. 23, 2018).  In the case, the title insurance company brought an action seeking declaratory relief against plaintiffs regarding the existence of an alleged title insurance policy.  Plaintiffs separately brought a state court breach of contract action against the title insurance company regarding the same issues.  The title insurance company removed the state action to federal court, and the Court consolidated the two actions.  Plaintiffs then filed a motion to remand, arguing that the Court did not have jurisdiction over the actions, and the title insurance company opposed.  The parties did not dispute the diversity of their citizenship, but rather whether the amount in controversy exceeds $75,000.

The Court first addressed the action brought by the title insurance company concerning whether the company was obligated to issue a policy to plaintiffs.  According to the title insurance company, plaintiffs were trying to “set [it] up” for a policy claim through a series of conveyances, and “if WFG were to acquiesce to the plaintiffs’ demand, WFG would instantly open itself to a claim for $355,000, the full value of the policy.” Thus, it brought the action for a declaratory judgment that it was not obligated to issue a policy.  The Court agreed with the company’s analysis, finding the amount in controversy to be the full amount of the alleged policy at issue, which was well in excess of $75,000.  The Court then analyzed the action brought by plaintiffs.  Although the Court acknowledged that plaintiffs stipulated in their motion that they would seek a maximum of $74,999 for their action, including attorneys’ fees, this was not dispositive.  The Court found that they also sought specific performance under the alleged title policy, and “the fulcrum of the plaintiffs’ claims—and of the entire case—is the issuance of an owner’s policy of title insurance with a policy limit of $355,000.00.”  As such, the Court denied the motion to remand.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com. 

California Federal Court Holds Alleged Misrepresentation in Loan Modification Agreement Did Not Violate FDCPA

Posted on by rd_admin

The United States District Court for the Eastern District of California recently held that a borrower’s claim that a lender made a misrepresentation in a loan modification agreement did not violate the Fair Debt Collection Practices Act (“FDCPA”).  See Thomas v. Select Portfolio Servicing, Inc., 2018 WL 2356758 (E.D. Cal. May 24, 2018).  In the case, plaintiff purchased a home in 2001 and obtained a loan to purchase the property.  She refinanced in 2007 and, in 2010, entered into a modification agreement that “provided a new principal balance of $380,329.65, deferred a portion of the principal balance as non-interest bearing, varied the interest rate and payments, waived unpaid late charges, and suspended foreclosure activities.”  The modification agreement also stated:  “If the Loan Documents currently provide for a balloon, the Balloon Amount resulting from this modification may be different. The balloon payment of $206,381.36 will be due on the maturity date unless due earlier in accordance with Section 2.D.”  Based on this language, plaintiff assumed there would be no balloon payment because her original loan did not provide for one.  Plaintiff claimed she did not discover that this provision provided for a balloon payment until 2017 when an attorney informed her of it.  Plaintiff then brought this action, alleging that defendant violated the FDCPA, among other statutes, by making a false representation in connection with the collection of a debt.  Defendant moved to dismiss the action.

The Court granted defendant’s motion and dismissed the action.  First, it held that the FDCPA did not apply to the loan modification agreement because “the loan modification agreement in and of itself is not a debt collection as covered by the FDCPA.”  Second, the Court held that plaintiff’s “misreading of the agreement” did not make that provision a “false representation” under the FDCPA.  Third, the Court held that the claim was barred by the FDCPA’s one-year statute of limitations because plaintiff did not file this action for eight years.  Although plaintiff made the conclusory argument that she was “unable to discover the misrepresentation” before 2017, the Court found no justification for delaying the accrual of the claim.  Thus, the Court dismissed the action.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com.

Wisconsin Supreme Court Holds Second Foreclosure Action Was Not Barred, Despite First Action Having Been Dismissed with Prejudice

Posted on by rd_admin

The Wisconsin Supreme Court recently held that a mortgage servicer was not barred from bringing a second foreclosure action after the first action was dismissed with prejudice.  See Federal Nat’l Mortg. Ass’n v. Thompson, 2018 WI 57 (Wis. 2018).  In the case, a mortgage servicer brought a foreclosure action against the defendant borrower in November 2010, alleging that the borrower defaulted on his April 2009 loan payment.  As part of the lawsuit, the servicer accelerated the debt.  In the August 2012 trial, the trial court dismissed the action with prejudice, finding that the servicer did not produce evidence that it possessed the original note or that it had sent the proper notice of intent to foreclose.  In December 2014, the new loan servicer brought a second action based on the borrower’s missed September 2009 payment.  The court found that the doctrine of claim preclusion barred any claim based on a default that occurred before the original trial, but that a post-trial default could give rise to a viable cause of action.  The servicer then amended the complaint to allege a post-trial default, and the court awarded plaintiff final judgment.  The borrower appealed, and the court of appeals certified the question to the Wisconsin Supreme Court.

On appeal, the Wisconsin Supreme Court affirmed the lower court judgment.  The parties agreed that two of the three elements of claim preclusion had been met: the identity of the parties in the two actions effectively was the same and there was a final judgment in the first action.  However, they disagreed on whether the case met the third element of claim preclusion:  an identity between the issues in the two lawsuits.  The borrower argued that the lawsuits brought the same cause of action and sought the same relief—that is, because the servicer sought the entire accelerated debt in the first lawsuit and lost, it was barred from seeking that same debt in the second.  The Supreme Court disagreed.  It held that, because the court dismissed the first lawsuit with prejudice, “it had the legal effect of conclusively establishing that [the borrower] was not in default for having missed installment payments due on the note up until the date of trial in the 2010 lawsuit (i.e., August 16, 2012). Thus, because it was never proved in the 2010 lawsuit that [the borrower] was in default, the entire balance of the note was never validly accelerated.”  As such, “[t]he borrower’s default resulting from the borrower’s failure to make an installment payment due after dismissal of the first lawsuit was not and could not have been litigated in the first lawsuit. Thus, the failure of the borrower to pay an installment after the termination of the first lawsuit created a new set of operative facts upon which the lender could base a subsequent foreclosure action.”

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com.

New Jersey Appellate Court Holds Landowner Could Not Bring Trespass Claim Because He Lost Title to the Disputed Property When It Became Submerged

Posted on by rd_admin

New Jersey’s Appellate Division recently affirmed the dismissal of a plaintiff landowner’s trespass claim against his neighbors because the disputed property was below the mean water line, plaintiff had not obtained a grant of riparian rights from the State, and plaintiff therefore did not have the authority to regulate the property.  See Rapisardi v. Estate of Lange, 2018 WL 14739181 (N.J. Super. Ct. App. Div. 2018).  In the case, plaintiff and defendants were neighbors, and their properties bordered a creek.  Plaintiff brought this action alleging that defendants trespassed on his property because they continued to use a “boat ramp” that was on his property—the boat ramp being just a depression in the ground used to launch boats into the creek.  Defendants did not dispute that they used the boat ramp on the property or that the disputed property was included in the legal description of the 1975 deed to plaintiff’s property.  Instead, they argued that the disputed property was completely submerged under the water and therefore was owned by the State.  In support of their argument, defendants proffered both a Tideland Search Certificate confirming that the State owns the waters up to the mean high water mark of the creek, as well as a survey showing the disputed property was completely submerged.  The parties cross-moved for summary judgment, and the trial court granted defendants’ motion.

On appeal, the Appellate Division affirmed the trial court’s decision.  Although it acknowledged that plaintiff’s deed included the disputed property, it found that this was not dispositive because of the apparently shifting direction of the creek.  When the property became submerged and fell below the mean high water line, plaintiff lost title to the property.  Thus, because there was no riparian grant from the State to the plaintiff, plaintiff did not have the right to restrict access to the boat ramp and defendants prevailed.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com.

California Appellate Court Holds Lender’s Deed of Trust Was an Enforceable First-Priority Lien Despite the Borrower Having Obtained Title Via a “Sham Transaction”

Posted on by rd_admin

The California Court of Appeals recently held that a deed of trust was a first-priority lien on a property even though the borrower who executed the deed of trust obtained title via a “sham transaction” because the lender was a bona fide encumbrancer for value.  See Bank of New York Mellon v. Nazaryan, 2018 WL 1736622 (Cal. Ct. App. 2018).  There, defendant and her husband purchased the subject property in 1998.  In 2002, defendant transferred her interest in the property to her husband, and her husband executed a deed transferring the property to his sister that same day.  In 2003, defendant filed a petition for dissolution of her marriage and recorded a lis pendens naming herself and her husband, but not the sister.  Later that year, she allegedly discovered the transfer of the property to the sister and named the sister in the dissolution action, but never amended the lis pendens.  In 2004, the sister executed a deed of trust encumbering the property.  In the dissolution action, the court found that the husband had defrauded defendant out of her interest in the property through a “sham transaction” with the sister, and awarded defendant sole ownership of the property.  Defendant continued making payments on the deed of trust for about six years.  In 2012, plaintiff was assigned the deed of trust and brought this action, seeking a declaratory judgment that it was a bona fide encumbrancer for value because its assignor did not have notice of the title dispute, and that defendant took title subject to the deed of trust.  Defendant opposed, arguing plaintiff knew or should have known about the sham transaction because she had filed a lis pendens.  The trial court granted plaintiff’s motion for summary adjudication.

On appeal, the Court affirmed.  It held that plaintiff was a bona fide encumbrancer for value despite defendant’s filing of the lis pendens because the lis pendens would not have appeared either in a search of the grantor/grantee index under the sister’s name (because she was not named in the lis pendens) or under the husband’s name (because he did not have title when the lis pendens was recorded).  Thus, the assignor did not have notice of defendant’s interest in the property, the deed of trust was an enforceable first-priority lien on the property, and defendant took title to the property subject to plaintiff’s deed of trust.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com or Dylan Goetsch at dgoetsch@riker.com.

Get Our Latest Insights

Subscribe