Real Property & Environmental Law Alert : New Jersey, New York, Pennsylvania & Delaware Lawyers & Attorneys for Real Estate Development & Environmental Law

The sole dissent was Justice Scalia who focused on the notion of depletion rather than diversion since that was the word used in the Compact. He noted that “beneficial use” in the Compact was defined as one “by which the water supply of a drainage basin is depleted when usefully employed by the activities of man.” He argued that the majority had essentially written the word out of the Compact. There was no question that Wyoming farmers depleted the river by their better irrigation techniques.

As the world faces depletion of fresh water resources by declining glaciation, increased drought in drought-prone regions, and increases in population, the common law adage of “first in time, first in right” may cause real problems for downstream users who may face increased salinity and reduced water volume.

John H. Klock is a Director in the Gibbons Real Property & Environmental Department.

Prior to 1991, New Jersey courts followed the old doctrine of nullum tempus occurrit regi (roughly “time does not run against the king”), under which statutes of limitation did not run against the State. When the Supreme Court abandoned that doctrine in 1991, the Legislature enacted the general ten-year statute of limitations for civil actions brought by the State.

Ten years later, the Legislature exempted various environmental claims from the ten-year statute, and passed the extension statute, one provision of which established a four-year (later changed to 5½-year) limitations period for civil actions to recover NRDs “commenced by the State pursuant to the State’s environmental laws.” Moreover, the extension statute provided that such a cause of action could not accrue before January 1, 2002. (It now sets the accrual date as the later of January 1, 2002 or the completion of the remedial action.) Under the general statute, then, DEP would have had to commence its action by 2001; under the extension statute, its 2004 actions would be timely.

The Appellate Division was thus called on to decide the scope of “the State’s environmental laws,” which the extension statute defines as any one of nine different statutes “or any other law or regulation by which the State may compel a person to perform remediation activities on contaminated property.” In both of its rulings, the trial court had read “the State’s environmental laws” in context, noting that it came between a list of nine statutes and a reference to a “regulation,” which would be promulgated pursuant to a statute.

The Appellate Division took an entirely different tack, subtly transforming the statutory reference to “the State’s environmental laws” to mean “the State’s environmental law,” in the sense of a body of law. Noting that the statutory definition referred to “any other law” rather than using the definite article “a” -- but neglecting to explain the distinction between “another law” and “any other law” -- the Court first found the statute to be ambiguous. This conclusion allowed it to search elsewhere for clues about the Legislature’s intent.

The clues that the Appellate Division chose to consider ranged from minute textual details (the omission from the statute of a word of limitation such as “only”) to statements from legislative history. For example, there was no evidence that the Legislature had the intent of “curtailing the scope of DEP’s regulatory authority” or meant “to foreclose common law causes of action.” One might easily draw a distinction, however, between statutes that “curtail” or “foreclose” causes of action, and those that merely set time limits. Similarly, the Appellate Division accepted DEP’s argument -- which cited provisions of CERCLA, the federal remediation statute -- that it would not make sense to require the State to assert claims for natural resource damages before the underlying cleanup is completed. But even if strict liability claims were found to be outside the scope of the extension statute, the State would still have numerous statutory causes of action to recover NRDs. Indeed, the Court’s references to CERCLA would seem to help make the point that the statutory provisions, whether state or federal, apply to statutory causes of action.

The Appellate Division’s holding was limited to strict liability claims; DEP chose not to appeal from the trial court’s rulings that its trespass and nuisance claims were time-barred. Nor did the Appellate Division explicitly address other types of common law claims. For now, however, “time does not run against the State” when it seeks to assert a strict liability claim for NRDs -- at least until the cleanup is done.

Paul M. Hauge is an Associate in the Gibbons Real Property & Environmental Department.

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.

Paul M. Hauge is an Associate in the Gibbons Real Property and Environmental Department.

Arranger Liability Broadened

The Court, mindful of Burlington Northern’s holding that an entity may qualify as an arranger when it takes intentional steps to dispose of a hazardous substance, broadly interpreted arranger liability under §107(a)(3) of CERCLA to conclude that WSDOT arranged for the disposal of hazardous substances because:

1. WSDOT designed the drainage system at issue with the specific purpose of discharging highway runoff into the environment;
2. WSDOT had knowledge that the runoff contained hazardous substances;
3. there was an actual release of hazardous substances into the environment;
4. WSDOT had control over how the runoff was disposed of because not only did it design the drainage system but it also had the ability to redirect, contain or treat its contaminated runoff.

Whereas most courts examining the issue of arranger liability post-Burlington Northern have narrowed the scope of liability, Judge Bryan took the opposite approach. However, he also concluded that issues of fact precluded him from determining whether WSDOT could properly assert the “federally permitted release” exemption under §107(j) of CERCLA, or whether it could establish the third party defense to liability under §107(b).

Facility Definition Narrowed

In the other opinion, the Court focused on the meaning of “facility” under §107(a)(1) (imposing liability on an owner and operator of a facility) and §107(a)(2), (imposing liability on a person, who at the time of disposal of hazardous substances, owned or operated a facility at which such hazardous substances were disposed). The United States argued that the entire Commencement Bay Site was a facility and that WSDOT was an owner of property within the borders of the Site. WSDOT claimed that the waterways were the facility, which it did not own.

Relying upon U.S. v. Township of Brighton, 153 F.3d 307, 313 (6th Cir. 1998), the Court determined that the bounds of a facility should be defined by the bounds of the contamination. It concluded that the United States’ definition was too broad because it would impose liability on persons not related to the contamination. The Court’s analysis focused upon the following:

1. facility is defined in §101(a) of CERCLA as an “area where a hazardous substance has been deposited, stored, disposed of, or placed, or otherwise come to be located;”
2. the Commencement Bay Site included properties owned by different parties, with no common purpose among the different owners;
3. in order to be a liable party under CERCLA Section 107(a)(1), WSDOT must be “the owner or operator of the facility in which the United States incurred a response cost.” (Slip Opin. At 5).

WSDOT was not the owner or operator of the waterways and although it owned the Tacoma Spur Property, no response costs were incurred on that property, so WSDOT was not found to be a liable party under Section 107(a)(1).

Significantly, Judge Bryan also noted that if the party was only connected factually to a portion of the property, that distinction should be drawn in its divisibility analysis. Slip Opin. at 4.

As to liability under Section 107(a)(2), the Court found that there was a genuine issue of material fact as to whether the hazardous substance, coal tar, was disposed of through the drainage systems on the Tacoma Spur Property.

These rulings are likely to have widespread ramifications in the many river and harbor sites which are pending throughout the United States. And whereas Judge Bryan extended arranger liability under CERCLA to public entities that designed and managed stormwater systems, he narrowly defined a “facility” under CERCLA, and thus, limited the scope of owner/operator liability in such cases. These issues will most definitely be the subject of future litigation.

Irvin M. Freilich is a Director in the Gibbons Real Property & Environmental Department.