In its reported decision in Musconetcong Watershed Association v. New Jersey Department of Environmental Protection, the Appellate Division provided much needed clarification of the procedures for challenging New Jersey Department of Environmental Protection (“NJDEP” or the “Department”) determinations, including permits.  The court held that the time for the Musconetcong Watershed Association (“MW Association”) to appeal a flood hazard area applicability determination (“FHA Determination”) to the Appellate Division did not begin to run until the Department decided on MW Association’s request for an adjudicatory hearing.  An adjudicatory hearing, also known as a “contested case” under the State Administrative Procedure Act, is a trial-type proceeding usually held before an administrative law judge in the Office of Administrative Law to create a record for decisions of agencies like NJDEP. The court also criticized the Department for taking four years to decide whether to grant MW Association’s hearing request, and it issued a ruling intended to speed up NJDEP’s decisions on hearing requests.  Although the four-year delay in this case was extreme, NJDEP typically has been slow to respond to hearing requests.  Because of these delays, and before this case clarified that NJDEP’s underlying decision was not final while the hearing request was pending, parties challenging NJDEP decisions had been forced to pursue litigation in the Appellate Division even before NJDEP decided whether the challenge would be heard in an adjudicatory hearing.

In 2016, developer Hampton Farm applied for an FHA Determination to confirm that a man-made swale was not a flood hazard area and therefore did not require a flood hazard area permit. NJDEP issued an FHA Determination in early 2017, confirming that the swale did not require a permit. Shortly thereafter, MW Association, an environmental group whose affiliate had submitted public comments to NJDEP challenging the sufficiency of Hampton Farm’s application, requested the Department conduct an adjudicatory hearing on the matter. Following four years of silence, NJDEP finally denied the hearing request in 2021.  MW Association subsequently appealed both the denial of its hearing request and the underlying 2017 FHA Determination. Before the case was briefed and argued on the merits, NJDEP argued by motion in the Appellate Division that the court should not hear MW Association’s challenge to the 2017 FHA Determination because the appeal was not filed in 2017, within forty-five days of the determination. In general, under the New Jersey court rules, an appeal must be filed within forty-five days of a final determination by NJDEP. A motions panel of the Appellate Division agreed with the Department and limited the scope of the appeal to NJDEP’s denial of MW Association’s hearing request. But the merits panel of the Appellate Division that ultimately decided the case reversed the motions panel and held instead that MW Association’s appeal from the 2017 FHA Determination was preserved because that decision did not become final, and thus appealable, until NJDEP denied the hearing request in 2021.

The Appellate Division’s decision relied on the doctrine of exhaustion of administrative remedies, which requires parties challenging agency decisions to avail themselves of internal agency appeals processes before challenging the decision in court.  The court explained that, although NJDEP was correct to deny MW Association’s hearing request because the Flood Hazard Area Control Act does not grant hearing rights to third-party permit objectors and MW Association did not have a constitutional right to an adjudicatory hearing, MW Association’s administrative remedies were not exhausted until NJDEP made a decision on the hearing request. “[W]hile the request was pending, no one knew whether the DEP would determine that there was a statutory right or a particularized property interest warranting an adjudicatory hearing.” There was no final agency action for MW Association to appeal from until NJDEP denied the hearing request in 2021.

The court directed the parties to file supplemental briefs addressing whether there is any time limit within which NJDEP must respond to a hearing request. In defending its four-year delay, the Department took the position that there was no such time limit in this case because neither the Flood Hazard Area Control Act nor NJDEP’s regulations promulgated under that act establish one. The court disagreed: “The public should be able to count on the DEP to turn square corners by making timely decisions.” The court relied on an existing provision of the Uniform Administrative Procedure Rules, N.J.A.C. 1:1-4.1(a), to impose new time constraints on NJDEP’s decisions on hearing requests. That rule allows any party to petition the agency to determine whether a matter is a contested case and requires that such determination be made within thirty days. So, the Court held, because a party that requests an adjudicatory hearing “is effectively contending that the administrative matter is a contested matter,” that party can petition NJDEP to decide its pending request for an adjudicatory hearing, and N.J.A.C. 1:1-4.1(a) requires NJDEP to decide within thirty days.

Because NJDEP has not sought review of the decision in the New Jersey Supreme Court, it now is bound by the court’s mandate in Musconetcong to speed up its consideration of adjudicatory hearing requests. It remains to be seen how the Department will apply this mandate in practice.  There is no apparent enforcement mechanism for the thirty-day deadline to respond in the Uniform Administrative Procedure Rules as applied in the case, so the administrative burdens of meeting this deadline may limit NJDEP’s compliance.  On the other hand, the burdens may not be onerous in many cases.  For example, the law is clear that third-party environmental groups objecting to NJDEP permits, like MW Association, are not entitled to adjudicatory hearings to challenge the Department’s permitting decisions.  The court appropriately observed that parties requesting hearings should receive a timely decision determining the appropriate venue for their challenge to NJDEP.  In Musconetcong, the correct venue clearly was the Appellate Division, so perhaps it will not be too difficult for the Department to speed up its process for deciding hearing requests in many cases.

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