Opinion
39248.
Decided July 3, 2006.
YOUNG, SOMMER, WARD, RITZENBERG, BAKER MOORE, LLC By:Lawrence R. Schillinger, Esq. Attorneys for Petitioner-Plaintiff. Albany, New York.
ELIOT SPITZER, Attorney General of the State of New York By: Judith S. Karpen, Esq. Attorneys for Respondents-Defendants Albany, New York.
In this CPLR article 78 proceeding, petitioner seeks review of certain actions taken by respondent in connection with the clean up of petroleum-contaminated soils at a salvage yard in the Town of Cortlandville (hereinafter the Knight property), commencing in November 2004. After the owner of the property was convicted of illegally operating a junkyard in violation of the Town zoning law, he hired Northern Car Crushers (a "division" of petitioner, George Moore Truck Equipment Corp.) to crush and remove junk cars from the premises. Between June and November 2004, petitioner crushed several hundred junk cars, trucks, and other scrap, using a loader (to move the vehicles), a draining rack (to drain gasoline and other fluids from them), and a crusher.
On November 16, 2004, a representative of respondent Department of Environmental Conservation (DEC) visited the Knight property, and observed signs of petroleum contamination around the areas where petitioner's drain rack and crusher were located. Petitioner initially undertook to clean up the spills in those areas and to take measurements of soil contamination, ultimately hiring (at DEC's urging) Op Tech Environmental Services, Inc. to carry out those tasks (Affidavit of Russell Moore, dated March 22, 2006, ¶ 15), but within a few days DEC had taken over control of the clean up operation, ostensibly at the request of the property owner (R. Moore Affidavit, ¶ 20; Affidavit of Christine Rossi, dated January 26, 2006, ¶ 22). Op Tech (now retained by DEC) continued to conduct excavation and clean up activities on the site until at least January 2006, at which time DEC's project manager, Christine Rossi, averred that its work was "nearing completion" (Rossi Affidavit, ¶ 27).
In January 2005, DEC sent petitioner's principals a letter, informing them that they (or petitioner — the letter is not clear) were responsible for remediation of contamination caused by "the discharge of petroleum * * * from practices [petitioner] executed while carrying out car crushing activities" at the Knight property, and that they would be "billed for the actual costs incurred by the State" for the clean up (Amended Verified Petition, Exhibit 11 [Letter of January 13, 2005]). They were also informed of their right to take over the remediation efforts, by hiring a "capable" contractor, of their right to pursue claims against other parties, and of their right — provided they were not deemed "responsible parties" — to file a claim against the State Environmental Protection and Spill Compensation Fund ( id.).
Believing the actions undertaken by Op Tech, under respondent's direction, were unreasonable in several respects, and that DEC was erroneously holding petitioner responsible for the cost of cleaning areas of petroleum contamination that were not caused by its car-crushing activities, petitioner commenced this CPLR article 78 proceeding in May 2005. Several extensions and adjournments were agreed to by the parties, and petitioner served and filed an Amended Petition in December 2005. Respondent answered the Amended Petition, arguing, inter alia, that the proceeding must be dismissed as premature or on the ground that petitioner has another available remedy, to wit, the opportunity to raise its concerns in defense of a plenary action brought by the State to recover under the Navigation Law.
A careful reading of the petition, as augmented by the affidavits tendered by petitioner, reveals that several distinct legal arguments have been raised as grounds for the relief sought (namely, a declaration that petitioner is not liable for paying the entire cost of the remediation efforts undertaken at the Knight property). Because a CPLR article 78 proceeding does not lie where there is another legal remedy available ( see, Matter of Art-Tex Petroleum, Inc. v. New York State Dep't. of Audit and Control, 93 NY2d 830, 832), and there is such a remedy with respect to any claim that may be adjudicated within the scope of an action brought pursuant to the Navigation Law ( see, id.), the court shall first consider whether some of petitioner's claims must fail for this reason.
Insofar as petitioner contends that it should not be held liable for clean up costs because it is not a "discharger" — as that term as defined by the Navigation Law — of the petroleum that was spilled and ultimately cleaned up, that is one of the core issues that must be determined in a plenary action to recover clean up costs under Navigation Law § 181. Whether petitioner's activities actually resulted in any spillage of petroleum products at all; whether such spillage, if any, combined with prior spills such that its effects cannot be separated for purposes of assigning responsibility for the "direct and indirect damages" caused by each; and whether, under such circumstances, an entity that released petroleum into one area, which combined with one or more other spills that affected a larger area, may be deemed a "discharger" with respect to the entire contaminated area, are all issues that may be raised and adjudicated in a Navigation Law action. Accordingly, those issues, which go essentially to the fundamental question of whether, and to what extent, an entity can be held liable for payment of cleanup costs (regardless of the amount of those costs), are not the proper subject of a CPLR article 78 proceeding. Thus, insofar as petitioner's claims herein are focused on such questions, they must be dismissed.
Although those claims may be couched in terms of whether the DEC acted "arbitrarily or capriciously" in deeming petitioner liable, the same could be true whenever it is alleged that an agency has ruled in a manner contrary to the governing law. The critical inquiry must therefore focus on whether the matter may be properly adjudicated, and the desired relief provided, in the context of any other type of legal proceeding.
The Court of Appeals has held, however, that the reasonableness of the actual expenditures made by DEC to clean up a spill may not be raised in an action brought pursuant to the Navigation Law, to recover those costs ( see, State of New York v. Speonk Fuel, 3 NY3d 720, 724; cf., State of New York v. Dennin, 17 AD3d 744, 745-746). Thus, petitioner's allegations that respondent, or those operating under its direction and control, acted in an arbitrary and capricious manner in carrying out the actual clean up operation, and in so doing, incurred unreasonable and unnecessary costs (regardless of who may or may not be responsible for payment of those costs), are not subject to dismissal on the ground that another legal remedy is available. In this regard, as respondent emphasizes, the agency may not be penalized for mere negligence or errors in judgment ( see, Navigation Law § 176[b]); rather, its actions will be reviewed under the more deferential "arbitrary and capricious" standard ( Speonk Fuel, at 724).
Similarly, respondent's alleged failure to comply with the National Oil and Hazardous Substances Pollution Contingency Plan cannot provide a basis for petitioner to obtain relief, in the absence of any showing that such non-compliance was arbitrary, capricious or entirely without rational basis.
Afforded the benefit of every favorable inference (as they must be at this juncture), the allegations of the amended petition, as elucidated by the affidavits of experts and factual witnesses tendered by petitioner, are sufficient to state a claim for breach of that standard ( see, e.g., Amended Verified Petition, ¶¶ 1, 53-72, 86, 88; Affidavit of Erik Sandblom, P.E., dated May 16, 2005, ¶¶ 5-10, 12-13, 15-16; Affidavit of Erik Sandblom, P.E., dated March 22, 2006, ¶¶ 34, 37, 39). The conflicting proof submitted by respondent merely raises factual questions which cannot be resolved in summary fashion.
While there may have been some merit to respondent's contention that this proceeding was premature when it was commenced, inasmuch as no final determination had been made (or at least communicated to petitioner) as to the amount expended in the clean up (the only issue that is properly contested herein), a letter sent to petitioner on or about January 24, 2006 (R. Moore Affidavit, Exhibit 2) expressly and unequivocally states that respondent "has determined that you are liable * * * for $604,077.71 for cleanup and removal costs," as well as a penalty of $500,000, and demands payment of those amounts (reflecting "costs incurred to date") by February 24, 2006. This letter plainly reflects and communicates a "final determination" of the agency as to the amount spent on the clean up prior to the date of the letter, as well as petitioner's liability for that amount. Were no action taken within four months (CPLR 217) of petitioner's receipt of that letter, respondent could reasonably argue that the time for contesting the reasonableness of the amounts set forth therein had passed. Thus, no purpose would be served by dismissing this proceeding on grounds of ripeness or finality, as petitioner would merely re-commence it immediately, pursuant to CPLR 205 (a) ( cf., Matter of Mahoney v. Board of Educ. of Mahopac Cent. School Dist., 113 AD2d 942, 943; Matter of Day Surgicals, Inc. v. State Tax Comm'n, 97 AD2d 865, 866). Judicial economy will be best served in this instance by allowing this proceeding to continue, as if it had been brought after issuance of the January 2006 letter determination.
Arguably, a "determination" as to the cost of the cleanup was made by the agency each time it made a payment or approved a bill for a portion of that cost. Petitioner could not claim to be aggrieved by that determination, however, until the agency decided that petitioner was liable to pay the costs.
Although it was suggested in Matter of Frumoff v. Wing ( 239 AD2d 216 [1997]) that the ripeness of a matter must be assessed at the time that it is commenced, without regard to later events that may have cured a problem that then existed, there the petitioner's failure to exhaust administrative remedies was not cured until after Supreme Court issued its decision (indeed, the final agency determination was not issued until after the appeal was argued). Thus, the Appellate Division (which must consider the propriety of the lower court's decision, at the time it is made) properly held that the trial court erred in addressing the merits of the petition, because it did so at a time when there had not yet been a final determination that could be reviewed. In this case, however, the final determination was made before the petition was even returnable before Supreme Court. Thus, there is no logical reason for the court to elevate form over substance by dismissing this proceeding when petitioner could simply commence another, identical one, immediately.
Lastly, with regard to petitioner's claim for an "offset" against its ultimate liability (if any), to the extent that respondent's allegedly unlawful and negligent acts caused it harm, that claim must also be dismissed. The recovery of such damages is not "incidental to" petitioner's contention that respondent acted in an arbitrary or capricious manner, as that term is defined by CPLR 7806. The damages sought by petitioner could not be recovered, in an action in Supreme Court, on the "same set of facts" necessary to prove that respondent acted arbitrarily or capriciously; nor does the recovery of damages flow automatically or necessarily from the reversal of the challenged action ( compare, Matter of Gross v. Perales, 72 NY2d 231, 236). Damages could, theoretically, be recovered on the grounds listed in Navigation Law § 176 even if there were no "arbitrary or capricious" action to be reversed, and they might not be available even if there were such action. The standards to be applied, and questions to be answered, in determining whether damages may be recovered (e.g., did respondent act unlawfully, willfully or maliciously, or cause a "discharge of petroleum" in violation of Navigation law § 173) are entirely different from those applicable in this proceeding. Moreover, inasmuch as there will be no determination of liability in this proceeding, there will be nothing against which to "offset" any recovery to which petitioner might be entitled.
Accordingly, the third cause of action set forth in the Amended Petition is dismissed in its entirety, and the remaining causes of action are dismissed insofar as they seek a determination as to whether petitioner is liable, pursuant to Navigation Law § 181, for all or part of the costs incurred in cleaning up the environmental contamination on the Knight property. The remaining claims raise factual questions that cannot be resolved without an evidentiary hearing. It is, however, most reasonable, under the circumstances, to defer consideration of such matters until there has been a final determination as to whether petitioner is, in fact, liable for all or part of such costs, or at least until an action has been brought to determine its liability (at which time it may be appropriate to consolidate the two matters, or try them together). Accordingly, this matter shall be held in abeyance, and marked off the trial calendar, pending the commencement of further proceedings by either party.
This decision shall constitute the order of the court.