In Rare Application of Waiver Doctrine, Federal Court Holds That New Jersey Gave Up Right to Seek Natural Resource Damages at Contaminated Site

It is difficult for a defendant to avoid a claim by invoking the doctrine of waiver, which requires proof of a clear, unequivocal act showing that the plaintiff deliberately intended to relinquish a known legal right. It is doubly difficult when the plaintiff is the State of New Jersey, against which the application of the doctrine is, in the words of a leading Supreme Court case, to be “most strictly limited.” But thanks to not just one, but two documents clearly showing such an intent — including one from the deputy attorney general on the case — a federal district judge recently held that the State had waived its right to seek natural resource damages at a site in Franklin Township.

It Never Hurts to Ask

In New Jersey Department of Environmental Protection v. FMC Corporation, Civ. No. 01-0476 (D.N.J. Sept. 29,. 2010), District Judge Dennis M. Cavanaugh granted summary judgment in favor of FMC Corporation on a claim for natural resource damages (NRDs) asserted by the New Jersey Department of Environmental Protection (NJDEP) and the Administrator of the State’s Spill Compensation Fund. The site in question has been the subject of investigations, cleanup, lawsuits, and settlement negotiations going back to the 1980s. During one set of those settlement negotiations, FMC, which had already spent more than $6 million in cleanup costs, contacted the Attorney General’s office in an attempt to determine the full extent of its potential exposure at the site. The news from the State’s lawyers was good: according to a memorandum from the assessment coordinator at NJDEP’s Office of Natural Resource Restoration, NJDEP would not assess injuries to natural resources at the site because groundwater contamination did not extend beyond the site’s boundaries, and NJDEP policy then in effect was to exclude such groundwater contamination from NRD assessments.

As settlement negotiations continued, FMC in 2003 sought more information from the Attorney General’s office, including a copy of the NJDEP memorandum. In reply, the deputy attorney general provided the memorandum, which she described as “explaining why no natural resource damages are being assessed at this site. In the meantime, a new administration had taken office at the beginning of 2003. Under the new McGreevey administration, NJDEP policy changed, such that on-site groundwater contamination was no longer excluded from NRD assessments, at least in the context of settlement negotiations. That new policy was later memorialized in a September 2003 policy directive.

Waive Them Goodbye

FMC sought summary judgment on the State’s NRD claim, arguing that the NJDEP memorandum and the deputy attorney general’s letter amounted to a waiver of that claim. The State, which argued that the two documents did not constitute a waiver and that even if they did, the doctrine of waiver should not be applied, because a government agency should have the ability “to change its policies for the benefit of the public without creating rights in parties who claim to have relied on the old policy.”

Judge Cavanaugh agreed with FMC. While waiver usually raises fact-sensitive questions of intent that should not be decided on a motion for summary judgment, the two documents “could not have been more explicit” as to the State’s intent to waive its right to NRDs. And the subsequent policy shift did nothing to undermine the intent expressed in those documents. Indeed, Judge Cavanaugh pointed out, the deputy attorney general’s letter came after the new administration took office, so there was “no reason to believe that the administration change . . . in and of itself would have undermined the intent expressed” in the two government documents. In the end, it was the clear, unqualified language in both documents that doomed the State’s NRD claim; the State never even hinted that its decision to not assess NRDs was dependent upon changeable agency policy. “[W]hat the State cannot do,” Judge Cavanaugh concluded, “is expressly waive its right to assess natural resource damages twice over the span of two years and then about face years later. To allow such a result would completely alter the calculus of the litigation and undermine settlement negotiations that parties engage in with the State.”

Get it in Writing

The lesson for practitioners is clear: any promises from an agency or the Attorney General’s office should be in writing. In complex environmental cases, multiple lawsuits and associated negotiations involving the same site can stretch over many years. “Handshake agreements” are quickly forgotten or altered by conflicting accounts. Especially with doctrines such as waiver and estoppel, where the State enjoys special protection, the only reliable representation is one that’s in writing — preferably more than once.