Search Icon
New Jersey Takes Aim at PFAS and Chemical Manufacturers Banner Image

New Jersey Takes Aim at PFAS and Chemical Manufacturers

Month: March 2019

New Jersey Takes Aim at PFAS and Chemical Manufacturers

Posted on by rd_admin

In a move that has assuredly grabbed the attention of the regulated community, the New Jersey Department of Environmental Protection (“NJDEP”) recently commenced two major initiatives in an effort to further address the emerging, hot-button issue of poly- and perfluoroalkyl substances (“PFAS”) contamination in the state.  Specifically, on March 13th, the NJDEP established new interim specific groundwater quality standards for two particular PFAS compounds, perfluorooctanoic acid (“PFOA”) and perfluorooctanesulfonic acid (“PFOS”), which became effective immediately.  Then on March 25th, the NJDEP issued a directive to five chemical manufacturing companies that it believes are the primary source of widespread PFAS contamination in New Jersey.   The directive requires these companies to provide a detailed accounting of their historical use and discharge of PFAS and notifies them that the State will hold them financially responsible for costs associated with the investigation and remediation of PFAS contamination for which they are responsible.  A few days later on March 27th, the NJDEP filed a suit against certain of these chemical companies seeking cleanup and removal costs and damages for injuries to natural resources.  With these new initiatives, New Jersey continues to be one of the states at the forefront of investigating and regulating PFAS chemicals.  (To see how New York is handling PFAS, see our March 4, 2019 Blog Article – New York Expands Requirement to Investigate Emerging Contaminants).

Significantly, in conjunction with establishing the new interim specific groundwater standards for PFOA and PFOS, both set at 0.01 micrograms per liter (ug/L) or 10 parts per trillion (ppt), the NJDEP issued a guidance document mandating that all remediating parties are required to evaluate the potential for, and if warranted investigate and remediate, PFOA/PFOS contamination at their sites.  The guidance document also makes clear that this requirement applies to all active site remediation cases, including those subject to upcoming regulatory and mandatory timeframes as well as those cases that received a limited restricted or restricted use response action outcome (in which case the evaluation must be performed prior to and reported in the next biennial protectiveness certification).  In making this clarification, the NJDEP recommends that if a remediating party cannot complete the evaluation and any required investigation and remediation by its applicable timeframes, it should apply for an extension.  Notably, however, if PFOA or PFOS is identified, a remediating party has the option to report the discharge and create a new case specifically for the PFOA/PFOS contamination that, going forward, will be subject to separate timeframes for completion of the remedial investigation and remedial action.

This new requirement to evaluate and address PFOA/PFOS is likely to have significant impacts on site remediation cases as well as parties involved in, or performing due diligence associated with, property and other business transactions.  Parties that may be at the end of their investigation or remediation may now be forced to go back and address these contaminants at significant unanticipated cost.   While some may question or, in the right case, may even challenge the enforceability of NJDEP guidance since it was not promulgated through the Administrative Procedures Act process, it is clear that the NJDEP is intent on making responsible parties evaluate, and if warranted, address PFAS contamination at their contaminated sites.  

For more information, please contact the author Jaan M. Haus at jhaus@riker.com or any attorney in our Environmental Practice Group.

Second Circuit Holds That Landlord May Be Liable Under the FHA for One Tenant’s Racial Harassment of Another

Posted on by rd_admin

In a split decision, the United States Court of Appeals for the Second Circuit recently reversed Judge Spatt of the Eastern District of New York and held that a landlord may be liable under the Fair Housing Act of 1968 (the “FHA”) for failing to address a situation in which one tenant repeatedly used racially-charged language to harass another.  See Francis v. Kings Park Manor, Inc., 917 F.3d 109 (2d Cir. 2019).  This decision is significant in that it opens the door to landlords being subject to a duty to intervene when made aware of discriminatory conduct between tenants.

A few months after plaintiff Francis, an African-American, moved into an apartment complex owned by defendant KPM, his next-door neighbor Endres began what the Court found “can only be described as a brazen and relentless campaign of racial harassment, abuse, and threats.”  During an eight-month period in 2012, the neighbor’s harassment led plaintiff to call the police four times, with the neighbor eventually being arrested for aggravated harassment.  After each incident, either the police or plaintiff notified defendant, but defendant never responded to plaintiff or did anything to address the harassment.  The neighbor remained in the complex until the expiration of his lease in January 2013.

In 2014, plaintiff brought this action claiming violations of sections 3604(b) and 3617 of the FHA, among other allegations.  Under section 3604, it is unlawful to “discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race, color, religion, sex, familial status, or national origin.”  See 42 U.S.C. 3604(b).  Section 3617 states, “[i]t shall be unlawful to coerce, intimidate, threaten, or interfere with any person in the exercise or enjoyment of, or on account of his having exercised or enjoyed, or on account of his having aided or encouraged any other person in the exercise or enjoyment of, any right granted or protected by section 3603, 3604, 3605, or 3606 of this title.”  See 42 U.S.C. 3617.  Defendant moved to dismiss the claims and the District Court granted the motion, finding that there was no basis to impute the neighbor’s behavior to defendant and that plaintiff had not adequately pleaded that defendant failed to intervene based on its own racial animus toward plaintiff.

On appeal, the Court reversed the District Court’s holding with regard to the FHA.  First, it found that the FHA applied “post-acquisition”—i.e., that it prohibits discriminatory actions that occur after a plaintiff buys or rents housing.  In this analysis, the Court reviewed the broad language of the FHA, decisions in other circuit courts, the similar language found in Title VII of the Civil Rights Act, and HUD regulations that “for thirty years clearly contemplated claims based on post-acquisition conduct, consistent with our interpretation of §§ 3604 and 3617.”  Second, the Court found that a landlord may be liable under the FHA for “intentionally failing to address tenant-on-tenant racial discrimination.”  In support of this finding, the Court cited the FHA’s broad language, a recent Seventh Circuit decision (Wetzel v. Glen St. Andrew Living Cmty., LLC, 901 F.3d 856 (7th Cir. 2018)) and the 2016 HUD final rule on discriminatory conduct.  The Court determined that landlord liability under the FHA for tenant-on-tenant discrimination is subject to a three-part test in which plaintiff must prove:  “‘(1) [t]he third-party created a hostile environment for the plaintiff . . . ; (2) the housing provider knew or should have known about the conduct creating the hostile environment;’ and (3) notwithstanding its obligation under the FHA to do so, ‘the housing provider failed to take prompt action to correct and end the harassment while having the power to do so.’”  Under this analysis, “the landlord can be held liable only in circumstances where the landlord had the power to take corrective action,” such as evicting the harassing tenant or barring that tenant from common areas, “yet failed to do so.”

Third, the Court found that intentional discrimination is not a necessary element of an FHA violation, and that “[t]o establish a violation of the FHA, a plaintiff need not show discriminatory intent but need only prove that the challenged practice has a discriminatory effect.”  Further, even if intentional discrimination were required, the Court found that plaintiff’s complaint has properly alleged this element because plaintiff “has alleged that the KPM Defendants had actual knowledge of Endres’s criminal racial harassment of Francis but, because it involved race, intentionally allowed it to continue even though they had the power to end it.”  Based on these holdings, the Court found that a landlord may be liable under the FHA for failing to intervene and reversed the District Court’s dismissal of the FHA claims.  The Court also reversed and remanded the District Court’s dismissal of claims under the Civil Rights Act of 1866 and the New York State Human Rights Law for the same reasons, but affirmed the dismissal of the negligent infliction of emotional distress claim.

In dissent, Judge Livingston argued that that majority “steers the FHA into ‘unchartered territory,’ where courts improbably discover new causes of action in half-century-old provisions, and heedless of the deleterious consequences for parties, courts, and the housing market.”  Among other things, Judge Livingston noted that although the majority correctly states that there is no circuit split as to whether the FHA applies to post-acquisition conduct, “the majority obfuscates the deep division that does exist as to ‘the scope or degree of the provision’s [post-acquisition] reach.’”  Specifically, circuit courts disagree as to whether prohibited post-acquisition conduct can include situations outside of a landlord’s constructive eviction of a tenant.

Likewise, Judge Livingston disagreed with the majority’s holding that intent is not a necessary element of an FHA claim, arguing that the majority “can do so only by ignoring th[e] clear statutory text and all or part of past decisions of this Court and others.”  Finally, Judge Livingston criticized the majority’s reliance on the 2016 HUD final rule—“promulgated after this litigation began”—and its use of Title VII to support its holding:  “Employers simply exert far more control over not only their employees, but also the entire workplace environment, than do landlords over their tenants and the residences those tenants quite literally call their own. Taken collectively, an employer’s ability to monitor, respond and enforce—all crucial aspects of our Title VII jurisprudence—differs substantially from the ability of a landlord to do the same.”

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

Florida Appellate Court Holds Lender Not Entitled to Summary Judgment on Bona Fide Lender Claim Because of “Series of Suspicious Documents” in Records

Posted on by rd_admin

A Florida appellate court reversed a trial court and held that a reverse mortgage lender was not entitled to summary judgment on the claim that it was a bona fide lender for value because there was a series of irregularities in the public records.  See CitiMortgage, Inc. v. Porter, 261 So. 3d 739 (Fla. Dist. Ct. App. 2018).  In 2005, the borrower executed a mortgage on his property that eventually was assigned to CitiMortgage.  In 2010, CitiMortgage initiated a foreclosure action and filed a notice of lis pendens.  During the course of the action, however, “a series of suspicious documents’ were filed in the public records that affected the chain of title.  First, on February 6, 2012, a satisfaction of the mortgage was recorded.  This satisfaction purportedly was executed in 2009 by one of CitiMortgage’s predecessors, but it was not recorded until almost three years later.  The borrower paid the recording fee on this document.  The company that supposedly prepared the satisfaction filed an affidavit claiming that none of its employees had done so.  Second, the law firm originally representing CitiMortgage withdrew from the action but, after the withdrawal, the firm allegedly executed a voluntary dismissal with prejudice and release of lis pendens that were recorded on June 8, 2012.  On June 26, 2012, CitiMortgage moved to strike these documents, arguing that CitiMortgage did not authorize their filing, and the trial court granted the motion on July 10, 2012.  CitiMortgage did not immediately record this order in the public records.  Finally, in May 2012, the borrower’s mother applied for a reverse mortgage on the borrower’s property.  The borrower conveyed the property to her on June 13, 2012, the reverse mortgage closed on August 21, 2012, and it was recorded in September 2012.  In 2014, CitiMortgage amended the action to add the reverse mortgagee as a junior lienholder.  The reverse mortgagee moved for summary judgment seeking an order that its lien had priority.  The motion was based on the claim that it was a bona fide lender for value because CitiMortgage’s action had been dismissed and the mortgage had been satisfied at the time of the reverse mortgage transaction.  The trial court granted the motion, finding that CitiMortgage was the “least innocent” of the parties.

On appeal, the Court reversed and found that the suspicious records put the reverse mortgagee on “notice of irregularities” and that “the recording of a void or forged instrument cannot create legal title or protect those who may claim under it.”  First, the Court found that the satisfaction of mortgage was dated October 30, 2009, which was inconsistent with the 2010 assignment of the same mortgage to CitiMortgage.  Second, a review of the CitiMortgage foreclosure docket would show that CitiMortgage had moved to vacate the dismissal and release of lis pendens three weeks after those documents were recorded, and that there was an order entered July 10, 2012.  Likewise, the docket revealed that CitiMortgage’s original foreclosure firm withdrew and another firm substituted in, yet the original firm filed the dismissal and release after it withdrew.  Third, there is no question the borrower was aware of the foreclosure action at the time he conveyed the property to his mother, and the borrower was also the one who apparently filed the satisfaction earlier that year.  Based on these factors, the Court found there are genuine issues of material fact as to whether the reverse mortgagee should have known about the prior mortgage and reversed the trial court.

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

Tenth Circuit Holds Title Insurance Company Had No Duty to Defend or Indemnify Insured Lender in Fraudulent Conveyance Action

Posted on by rd_admin

In a decision approved for publication, the United States Court of Appeals for the Tenth Circuit recently reversed a District Court and found that a title insurance company did not have a duty to defend an insured lender in an action alleging that the borrower’s conveyance of deeds of trust to the lender was fraudulent.  See Banner Bank v. First Am. Title Ins. Co., 2019 WL 924792 (10th Cir. Feb. 26, 2019).  In the case, the insured bank provided loans to a borrower who executed deeds of trust from two of his LLCs to the bank as collateral.  The title insurance company, First American, issued policies in connection with these transactions.  The SEC later filed an enforcement action against the borrower and his companies, alleging that he used his businesses to operate a Ponzi scheme.  A Receiver was appointed to represent the borrower’s creditors, and the Receiver brought an action against the bank challenging the deeds of trust and alleging that neither LLC received “reasonably equivalent value” for the deeds of trust.  The bank submitted a claim to First American, who denied the claim under policy exclusion 6, which excludes “[a]ny claim, by reason of operation of federal bankruptcy, state insolvency, or similar creditors’ rights laws, that the transaction creating the lien . . . is (a) a fraudulent conveyance or fraudulent transfer, or (b) a preferential transfer for any reason not stated in Covered Risk 13(b) of this policy.”  The bank eventually settled with the Receiver and brought this action against First American for breach of contract and breach of the implied covenant of good faith and fair dealing in failing to defend and failing to indemnify.  After the parties cross-moved for summary judgment, the District Court granted the bank’s motion, finding that First American had a duty to defend and indemnify under the policy.  The District Court also awarded the bank about $290,000 in attorneys’ fees.

On appeal, the Tenth Circuit reversed.  The Court applied the “eight corners” rule in interpreting the duty to defend, which requires it to look at the four corners of the policy and the four corners of the complaint.  First, it found that the Receiver’s complaint sought only “to avoid . . . [the] transfer of the deeds of trust as a fraudulent conveyance. . . . [and that] the allegations in the complaint are that [the borrower] was operating a wide-scale Ponzi scheme, and the transfer of the deeds was in furtherance of it and to defraud his creditor.”  Based on this reading of the complaint, the policy excluded coverage and First American could not be liable for failure to defend.  The Court denied the bank’s claim that the complaint also could be read as challenging the borrower’s authorization to convey these deeds of trust on the companies’ behalf.  Second, the Court found that First American did not have a duty to indemnify because this duty is narrower than the duty to defend.  In doing so, it rejected the bank’s argument that the settlement agreement between the bank and Receiver demonstrated that the Receiver’s action was covered under the policy.  “The duty to defend is broader than the duty to indemnify, but the duty to defend is determined from the face of the Receiver’s complaint. If the Receiver’s complaint was not enough to establish a duty to defend, how could the settlement agreement later create liability for indemnification? The Bank’s position reverses the normal timeline, and it would effectively allow the duty to defend to attach retroactively.”  Third, the Court found that because First American had no duty to defend or indemnify, it could not have breached the duty of good faith and fair dealing by investigating and denying the bank’s claim.  Finally, the Court reversed the holding for damages and attorneys’ fees, and ordered that the District Court vacate its prior orders and enter judgment in favor of First American.

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

New York Appellate Court Holds Judgment Creditor Can Recover from Jointly-Rented Safe Deposit Box

Posted on by rd_admin

New York’s First Department Appellate Division recently affirmed a lower court decision and held that a judgment creditor can recover property from a safe deposit box on which the debtor and his wife are joint tenants, despite the claim that the box’s property was solely owned by the wife.   See New York Cmty. Bank v. Bank of Am., N.A., 169 A.D.3d 35 (1st Dept. 2019).  In 2012, New York Community Bank (“NYCB”) obtained a judgment against a debtor.  In 2014, the debtor and his wife rented a safe deposit box at another bank.  As part of the rental process, they agreed to the bank’s safe deposit bank rules, which included a statement that “access to a Box rented in the names of two or more persons, . . . shall be under the control of each of them . . .  as fully as though the Box was rented in his or her name alone; and each may have access to the Box and the right to surrender the Box.”  NYCB later brought a special proceeding to turn over the contents of the box.  The wife objected, claiming that she was the sole owner of the box’s contents and that the debtor was only named a co-renter as a matter of convenience.  The Supreme Court granted NYCB’s petition and ordered that the other bank turn over the contents of the box.

On appeal, the First Department affirmed the Supreme Court’s decision.  The Court held that the general rule regarding joint bank accounts applies to safe deposit boxes:  “[w]hen two or more persons open a bank account, making a deposit of cash, securities, or other property, a presumption of joint tenancy with right of survivorship arises.”  Thus, the contents of the account (or box) are subject to a levy from a judgment creditor of one of the joint tenants.  In this case, the debtor and his wife submitted only an affirmation by their attorney that the contents of the box were solely owned by the wife.  The Court found this affirmation was insufficient to overcome the presumption of joint tenancy because the attorney has no personal knowledge of this claim.  Therefore, NYCB established its right to levy on all the contents of the box.

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

Third Circuit Holds Purchaser of Defaulted Debt Could Be a Debt Collector Under the FDCPA

Posted on by rd_admin

The United States Court of Appeals for the Third Circuit recently affirmed a lower court decision and held that an entity who purchases a defaulted debt and engages in any business the principal purpose of which is the collection of any debts can be a debt collector under the Fair Debt Collection Practices Act (“FDCPA”).  See Barbato v. Greystone Alliance, LLC, 2019 WL 847920 (3d Cir. Feb. 22, 2019).  Defendant regularly purchases defaulted debt and either refers it to another debt collector for collection or hires a law firm to collect on it.  Defendant “principally derives revenue from liquidating the consumer debt it has acquired.”  In 2013, one of the third parties retained by defendant contacted plaintiff in an attempt to collect a debt defendant had purchased.  Plaintiff then brought this action under the FDCPA against defendant, among others.

The FDCPA defines a debt collector as one who (i) engages “in any business the principal purpose of which is the collection of any debts” or (ii) regularly collects debts “owed or due another.”  15 USC 1692a.  In 2017, while this action was pending, the United State Supreme Court found that the second debt collector definition excludes those who purchase defaulted debts and attempt to collect on their own behalf.  See Henson v. Santander Consumer USA Inc., 137 S.Ct. 1718 (2017).  Although the Supreme Court did not address whether these defaulted debt purchasers could be liable under the first definition, defendant filed a motion for reconsideration with the District Court seeking an order dismissing it from the action and arguing that the Henson decision applied to both definitions of a debt collector.  The District Court denied the motion but certified the decision for interlocutory appeal.

On appeal, the Third Circuit affirmed, finding that defendant “overstates the effect of Henson” and that “the Supreme Court went out of its way in Henson to say that it was not opining on whether debt buyers could also qualify as debt collectors under that prong of § 1692a(6).”  The Court proceeded to find that a purchaser of defaulted debt could be a debt collector if it engages “in any business the principal purpose of which is the collection of any debts,” even if it outsources the collection work to others:  “The existence of a middleman does not change the essential nature—the ‘principal purpose’—of Crown’s business.”  Accordingly, the Court found that defendant was a debt collector and remanded the matter for a determination on whether it could be found vicariously liable for the third party’s actions here.

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

New York Expands Requirement to Investigate Emerging Contaminants

Posted on by rd_admin

New York began last year to require remediating parties to investigate whether groundwater at their sites was contaminated with the emerging contaminants 1,4-dioxane and PFAS (i.e., per- and polyfluoroalkyl substances).  (See our May 29, 2018 Blog Article – NYSDEC Requiring Site Owners to Investigate Emerging Contaminants.)  Now, the New York State Department of Environmental Conservation is broadening this requirement by mandating investigation of the presence of these contaminants in all environmental media, not just groundwater.  This represents a significant and costly expansion of the obligations of remediating parties in New York, the scope of which is not yet clear.

The new requirements are embodied in a February 2019 guidance document titled Sampling for 1,4-Dioxane and Per- and Polyfluoroalkyl Substances Under DEC’s Part 375 Remedial Programs.  The guidance specifically requires any new site brought into one of New York’s remedial programs (e.g., the State Superfund Program and New York Brownfield Cleanup Program) to incorporate sampling for 1,4-dioxane and PFAS into its investigation of soil, groundwater, surface water, sediment, and, in certain instances, animals and plants.  However, it is not clear whether this new requirement will be applied to sites already undergoing remediation.  It also is not clear what remediation will be required if emerging contaminants are identified at a site because New York does not yet have cleanup objectives for many of the environmental media that now must be sampled.  As a result, and until cleanup objectives are established, the extent of remedial activities required to address emerging contaminants will be addressed on a case-by-case basis.

The guidance further requires that any soil imported to a site in one of New York’s remedial programs must be tested for 1,4-dioxane and PFAS.  This includes soil imported for use as part of a cap or as backfill.  In other words, soil imported as part of remediation must be tested for emerging contaminants even if the soil comes from another site that is not otherwise required to conduct such sampling (e.g., from a site in another state that doesn’t require investigation of these emerging contaminants).  The risk of finding emerging contaminants at a site that is not otherwise required to sample for them may dissuade such sites from sending fill to remediation projects in New York and may make it difficult for New York projects to obtain necessary fill.

With this new initiative, New York continues to be at the forefront of the regulation of emerging contaminants.  While the initiative is an aggressive attempt to protect human health and the environment from the risks of emerging contaminants, it is likely to have a significant impact on remediation projects within New York, whether or not such projects involve emerging contaminants.

For more information, please contact any attorney in our Environmental Practice Group.

Get Our Latest Insights

Subscribe