Real Property & Environmental Law Alert

Real Property & Environmental Law Alert

Transactional Real Estate, Development/Redevelopment & Environmental Law

District of New Jersey Decision Highlights Procedural and Evidentiary Complexities Unique to the State’s Environmental Litigants

Posted in Environmental & Green Issues

In Leese v. Lockheed Martin Corp., one of the New Jersey’s foremost environmental jurists, the Honorable Jerome B. Simandle, Chief Judge of the United States District Court for the District of New Jersey, authored a comprehensive opinion explaining why several plaintiffs who alleged harm caused by contamination on their properties were without recourse under a number of state and federal environmental laws. In so doing, the Chief Judge highlighted the procedural and evidentiary complexities unique to environmental litigants.

In Leese, plaintiffs claimed that the volatile organic compounds (“VOCs”) trichloroethylene (“TCE”) and perchloroethylene (“PCE”), i.e., hazardous chemicals, migrated onto their residential properties from Defendant Lockheed Martin’s adjacent lot, in violation of the Resource Conservation & Recovery Act (“RCRA”), the Comprehensive Environmental Response, Compensation & Liability Act (“CERCLA”), the New Jersey Spill Compensation & Control Act (“Spill Act”), and the New Jersey Water Pollution Control Act (“WPCA”). Importantly, plaintiffs’ Spill Act and WPCA claims were brought under the New Jersey Environmental Rights Act (“ERA”), which provides the basis for private actors to bring these – as well as a number of other – environmental enforcement claims. After considering the parties’ respective summary judgment motions, Judge Simandle dismissed each of these claims in turn.

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New Jersey Supreme Court Adopts O’Brien Factors For Determining When Real Estate Transactions Constitute an Equitable Mortgage

Posted in Transactional Real Estate & Leasing

Equitable Mortgages and the Eight Factor Test

Founded on the principle that equity looks to substance over form, courts will find an equitable mortgage to exist when a deed or contract, while lacking the characteristics of a typical mortgage, is used to pledge an interest in real property as security for a debt with the intention of acting as a mortgage. On September 9, 2014 in Zaman v. Felton, the New Jersey Supreme Court decided that when determining whether a particular transaction gives rise to an equitable mortgage, a trial court must utilize the eight factor test set forth by the Bankruptcy Court for the District of New Jersey in O’Brien v. Cleveland. The eight factors set out in O’Brien for evaluating whether an equitable mortgage exists are:

  1. Statements by the homeowner or representations by the purchaser indicating an intention that the homeowner continue ownership;
  2. A substantial disparity between the value received by the homeowner and the actual value of the property;
  3. Existence of an option to repurchase;
  4. The homeowner’s continued possession of the property;
  5. The homeowner’s continuing duty to bear ownership responsibilities, such as paying real estate taxes or performing property maintenance;
  6. Disparity in bargaining power and sophistication, including the homeowner’s lack of representation by counsel;
  7. Evidence showing an irregular purchase process, including the fact that the property was not listed for sale or that the parties did not conduct an appraisal or investigate title; and
  8. Financial distress of the homeowner, including the imminence of foreclosure and prior unsuccessful attempts to obtain loans.

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NJDEP Document Review Process Curtailed: More Autonomy for LSRPs

Posted in Development/Redevelopment, Environmental & Green Issues

Unable to keep up with submittals from Licensed Site Remediation Professionals (LSRP) and with the resulting increase in review times, the New Jersey Department of Environmental Protection (NJDEP) has recently decided to defer the review of non-Response Action Outcome (RAO) documents until an RAO is submitted. This announcement comes four years into the LSRP program, which as designed, has begun to eliminate the backlog of contaminated sites awaiting attention. However, the very success of the LSRP program has created its own backlog as NJDEP finds itself falling behind in review of submittals.

Under the statute, the NJDEP is required to “inspect all documents and information submitted by a licensed site remediation professional concerning a remediation upon receipt[,]” N.J.S.A. 58:10C-21. However, the NJDEP has stated that the review of non-RAO submissions upon receipt is not necessary or an efficient use of NJDEP personnel. The one important exception noted by the NJDEP is the review of submissions related to receptors, for example, a Receptor Evaluation Form. Protection of receptors continues to be a high priority of the department. Nonetheless, the deferral of review may have unanticipated results.

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Supreme Court Limits EPA’s Authority to Regulate Carbon Emissions from Stationary Sources

Posted in Environmental & Green Issues

Since the Supreme Court’s 2007 decision in Massachusetts v. EPA, it has been clear that the U.S. Environmental Protection Agency (“EPA”) has the authority under the Clean Air Act (“CAA”) to regulate emissions of greenhouse gases (“GHGs”) from mobile sources because GHGs fall within the CAA’s definition of an “air pollutant.” When EPA sought to regulate GHG emissions from stationary sources (mainly power plants and factories), however, the Court sang a slightly different tune. In Utility Air Regulatory Group v. Environmental Protection Agency (“UARG”), the Court rejected EPA’s attempt to regulate GHG emissions from stationary sources under two regulatory programs based solely on those emissions, while affirming the agency’s ability to regulate such emissions from so-called “anyway” sources that are already undergoing regulatory review because of emissions of other pollutants.

EPA has set limits on allowable concentrations in the air, called National Ambient Air Quality Standards (“NAAQS”), for six “criteria” pollutants — sulfur dioxide, particulates, nitrogen dioxide, carbon monoxide, ozone and lead. Under several EPA programs, whether a given area is in compliance (or “attainment”) of the NAAQS can determine whether a given stationary source will have to undergo special review when it is built or modified. Under the Prevention of Significant Deterioration (“PSD”) preconstruction permit program, certain stationary sources must use the best available control technology (“BACT”). Under the Title V operating permit program, certain stationary sources must obtain a CAA-compliant operating permit. EPA has not established an NAAQS for carbon dioxide, methane, or any other GHG.

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Potential Change Coming to NJ’s Economic Opportunity Act

Posted in Development/Redevelopment

The “New Jersey Economic Opportunity Act of 2013” overhauled New Jersey’s economic development programs. The Act retooled and substantially enhanced the State’s job creation and retention program known as the Grow NJ Assistance Program (Grow NJ), as well as the Economic Redevelopment Growth (ERG) Grant Program, the incentive program that provides gap financing to developers. As we wrote in Commerce magazine, Grow NJ and ERG improve New Jersey’s economic competitiveness with our neighboring states and may be game-changers for businesses and developers. After seeing the programs in action for under a year, the Legislature has revisited the programs to make technical changes and to further enhance NJ’s economic development arsenal.

In June 2014, the State Legislature approved legislation (Senate Bill 1551/Assembly Bill 3213) with strong bipartisan support in both chambers to amend various portions of the Grow NJ and ERG programs. The bill is currently being considered by Governor Christie and must be acted on by September 8, 2014. The key provisions include:

  • Making the transfer of tax credit more widely available by reducing the minimum amount of the credits that may be transferred from $100,000 to $25,000.
  • Clarifying a provision of the Grow NJ program concerning the standard of service generally accepted by custom or practice as full-time employment in a supermarket, grocery, or other similar retail industry, in order to encourage food purveyors to locate within Camden and Atlantic City.
  • Adding a new Grow NJ bonus credit of $1,000 for using a vacant space of 1,000,000 square feet of office or laboratory space available for occupancy for a period of over one year.
  • Adding a new Grow NJ provision that deems a project a “mega project” if it is in a southern county that is also in an area in need of redevelopment and invests $20 million and creates or retains 150 jobs.
  • Modifying the Grow NJ “net benefit test” to require a business to demonstrate that a capital investment would benefit both the State and the municipality in which the capital investment will be made;
  • Encouraging nonprofit development corporations to undertake development projects in the four designated “Garden State Growth Zones.”
  • Allowing the allocation of tax credits to the shareholders of New Jersey S corporations and New Jersey Qualified Subchapter S Subsidiaries that undertake projects in the Camden-Garden State Growth Zone.
  • Creating an incentive for the donation of substantial public infrastructure as part of certain redevelopment projects
  • Making technical changes and correcting the date from July 28, 2015 to July 28, 2018, by which the developer of a qualified residential project seeking an award of tax credits under the ERG program towards the funding of an incentive grant must submit a temporary certificate of occupancy for the project.

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Sixth Circuit Becomes Latest Federal Appeals Court to Rule That CERCLA’s Contribution and Cost Recovery Provisions Provide Mutually Exclusive Remedies to PRPs

Posted in Environmental & Green Issues

The United States Court of Appeals for the Sixth Circuit became the latest federal court of appeals to weigh in on the dichotomous nature of Superfund claims made under Sections 107 and 113 in the wake of the United States Supreme Court’s decision in United States v. Atlantic Research Corp., 551 U.S. 128 (2007). In Hobart Corp. v. Waste Management of Ohio, Inc., the Sixth Circuit held that Sections 107(a)(4)(B) and 113(f) of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601-9675, “provide mutually exclusive remedies,” an issue left open in Atlantic Research.

Generally speaking, whereas Section 107 allows a potentially responsible party (“PRP”) who has funded remediation of a contaminated site to file a cost recovery action against other PRPs within six years, Section 113 allows a PRP who has at least partially resolved its liability to the United States only three years to file a contribution action against non-settling PRPs. The court in Hobart found that a PRP must proceed under Section 113 if it meets one of that section’s statutory triggers, e.g., entering into an administrative settlement that at least partially resolves that PRP’s CERCLA liability to the United States.

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New Jersey Supreme Court Finds Neither Plan Approval Nor Complete Remediation are Prerequisites to a Spill Act Contribution Action

Posted in Environmental & Green Issues

In Magic Petroleum Corporation v. Exxon Mobil Corporation, the New Jersey Supreme Court held that a party funding remediation of a contaminated site may bring a contribution claim against other potentially responsible parties (“PRPs”) before completing remediation and prior to receiving the New Jersey Department of Environmental Protection’s (“DEP’s”) written approval of the remediation plan. In so doing, the Court has provided certainty, to a degree, to the environmental remediation process in New Jersey.

In Magic Petroleum, the DEP required Magic Petroleum Corporation (“Magic”) to remediate a contaminated site pursuant to the Spill Compensation and Control Act, (“Spill Act”) N.J.S.A. 58:10-23.11 to -23.24. While that remediation was ongoing, Magic sued PRP Exxon Mobil for contribution. The trial court dismissed Magic’s contribution claim after ruling that such a claim could only be filed following complete remediation of the site. The Appellate Division agreed, finding that because the DEP — and not the trial court — has jurisdiction to identify contamination, analyze the extent of discharge, and devise a cleanup strategy, and those findings are a prerequisite to a court’s allocation of liability among multiple responsible parties, dismissal of Magic’s contribution claim was proper.

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Gibbons Director Installed as Secretary of the Land Use Section of the New Jersey State Bar Association

Posted in Development/Redevelopment

Howard D. Geneslaw, a Director in the Gibbons Real Property & Environmental Department, was installed as Secretary of the Land Use Section of the New Jersey State Bar Association (NJSBA) at the section’s annual meeting, held during the NJSBA’s Annual Meeting and Convention in Atlantic City in mid-May. This position places Mr. Geneslaw in line to become Vice Chair of the section next year, and Chair of the section the following year.

The NJSBA’s Land Use Section reviews developments in land use law, including local and state development land use approval and denial processes, and attempts to reduce or eliminate costs and delays associated with these processes.

Mr. Geneslaw has served on the Board of Directors of the Land Use Section of the New Jersey State Bar Association since 2009, and, prior to becoming an attorney, was a planning consultant to municipal planning boards and developers. He is a licensed Professional Planner in New Jersey and a member of the American Institute of Certified Planners (AICP). His law practice focuses on real estate development, redevelopment and related issues, including litigation, as well as on alcoholic beverage and liquor licensing matters, in New Jersey and New York.

David J. Freeman to Chair Panel on Brownfield Reform at New York State Bar Association Environmental Law Section Fall Meeting

Posted in Development/Redevelopment, Environmental & Green Issues

David J. Freeman, a Director at Gibbons P.C., will chair a panel on reform of New York State’s Brownfield Cleanup Program at the Fall Meeting of the Environmental Law Section of the New York State Bar Association.

The panel will discuss the Governor’s and Legislature’s actions this year―passage of an extension of the tax credit aspects of the Program, without enacting underlying reforms―and what is likely to happen next year. It will feature such prominent experts as Edward McTiernan, General Counsel of the New York State Department of Environmental Conservation; Christopher Goeken, Director of Public Policy and Governmental Relations of the New York League of Conservation Voters; Darren Suarez, Director of Governmental Affairs of the New York State Business Counsel; Jody Kass, Executive Director of New Partners for Community Revitalization; Philip Bousquet, Partner at Bousquet Holstein; and Linda Shaw, Partner at Knauf Shaw.

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New York Court of Appeals Upholds Municipal Authority to Ban Fracking

Posted in Environmental & Green Issues

New York’s highest court dealt a blow to the hydrofracking industry on June 30 when it upheld, in a consolidated opinion in Matter of Wallach v. Town of Dryden and Cooperstown Holstein Corp. v. Town of Middlefield, the authority of municipalities to use their zoning powers to ban hydrofracking. The Court of Appeals held that provisions on the towns’ zoning ordinances that prohibited hydrofracking anywhere within their borders were not preempted by the “supersession clause” of the state’s Oil, Gas and Solution Mining Law (OGSML). That clause, said the Court, prevents municipalities from regulating the “how” of hydrofracking but does not bar them from limiting “where” it can take place.

Hydrofracking – or, more properly, hydraulic fracturing — uses pressurized fluids injected into wells to fracture underground rock formations and liberate natural gas trapped within the rock. The Marcellus Shale formation, which extends over a number of states including New York, contains significant amounts of gas, and therefore has attracted intense interest from energy companies. At the same time, concerns have been raised about hydrofracking’s environmental impacts, especially those related to chemicals in the pressurized fluids. Those types of concerns led the Town of Dryden, a rural community in Tompkins County, and the Town of Middlefield, which includes part of the Village of Cooperstown in Otsego County, to amend their zoning plans to ban hydrofracking. (Both towns argued that their zoning plans already banned hydrofracking because they did not list it as a permitted use.) The appellants, companies with interests in leases that would have permitted exploring and developing natural gas through hydrofracking, challenged the ordinances, arguing that they were preempted by the OGSML’s supersession clause. They failed in the trial court and the intermediate appellate court, and then presented their arguments to the Court of Appeals.

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