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In Re Request by Forsgate Industrial Complex, L.P.

A-0908-07T2 (N.J. Super. App. Div. 2009) (Unpublished)

ENVIRONMENTAL LIABILITY — The Department of Environmental Protection’s review as to whether to revoke a No Further Action may be based solely on written submissions and oral presentations, without cross examination, and because the complaining landowner may still pursue its legal or equitable remedies, the complaining landowner has no grounds to force the Department of Environmental Protection to hold court-like hearings when making its revocation decision.

A company operating an industrial facility at three sites contaminated the soil and underlying groundwater at each. As a result of a transfer of its stock, the company became subject to the requirements of the Industrial Site Recovery Act (ISRA). A successor to the company assumed responsibility for remediation of the properties under the direction of the New Jersey Department of Environmental Protection (DEP). DEP issued a “No Further Action” and “Covenant Not to Sue” letter (NFA) to the successor with respect to one of the industrial sites. The NFA stated that the DEP would not bring a civil action against any person who undertook remediation of the property or against subsequent owners, lessees or operators of the property. The NFA further stated that it would not benefit any person liable under the Spill Compensation Control Act (Spill Act) and could be revoked by the DEP at any time after providing notice to a noncompliant party under the terms of the NFA.

Two months after the issuance of the NFA, a neighboring landowner sued the original company and its successor, demanding that the companies remediate environmental contamination allegedly emanating from the former owner’s industrial site. The suit also asked for damages. The landowner offered expert testimony that it was likely that contamination had migrated to its properties from the contaminated site. The expert identified two sources of groundwater contamination from two of the industrial sites, one of which was subject to the NFA. The landowner sought relief pursuant to the Spill Act. The company and its successor filed a motion for summary judgment.

The lower court ruled that it was appropriate to allow the DEP to consider the landowner’s claims in the first instance given the DEP’s extensive knowledge of the property and its technical expertise in matters of contaminated property. This ruling was unsuccessfully appealed. After the appeal was filed, the neighbor requested that the DEP revoke the NFA, reopen the ISRA case, and compel the successor company to investigate and remediate the off-site contamination. The former owner submitted an expert report concluding that its industrial site was not the cause of contamination. Ultimately, the DEP refused to revoke the NFA, finding insufficient proof that the contaminants had come from an off-site source. The landowner appealed to the Appellate Division. While the appeal was pending, the DEP advised that it would conduct a meeting to further consider its decision regarding the NFA subject to certain conditions. At that meeting, the parties would be permitted to furnish written submissions and oral presentations, but would not be subject to cross-examination. The landowner refused to attend, arguing a lack of due process protections such as the ability to cross-examine witnesses or the rendering of a decision by an impartial decision maker.

In the appeal before the Appellate Division, the landowner alleged that the DEP’s refusal to revoke the NFA and the DEP’s request to hold a meeting to further consider its decision should be reversed because the scheme did not afford the landowner an opportunity to present Spill Act claims in an adversarial proceeding with the right to present evidence, cross-examine witnesses or to have its case adjudicated by an independent fact-finder in violation of constitutional due process. The Appellate Division disagreed and affirmed the DEP denial to revoke the NFA. It held that the DEP’s ruling did not preclude the landowner from pursuing its legal or equitable remedies, including for relief that could be available under the Spill Act as referenced in the NFA, and that any DEP findings would not be binding in any pursued court action. The Court did not find the DEP’s proposal to use expert reports to resolve the contamination dispute or the DEP’s finding of insufficient evidence existed to support an off-site contamination claim to be arbitrary or capricious.

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