Opinion
DOCKET NO. A-0413-12T3
05-16-2013
R&K ASSOCIATES, LLC, Appellant, v. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, and DES CHAMPS LABORATORIES, INC., Respondents.
John M. Scagnelli argued the cause for appellant (Scarinci & Hollenbeck, LLC, attorneys; Mr. Scagnelli and William A. Baker, on the brief). Kimberly A. Hahn, Deputy Attorney General, argued the cause for respondent New Jersey Department of Environmental Protection (Jeffrey S. Chiesa, Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Ms. Hahn, on the brief). Daniel L. Schmutter argued the cause for respondent Des Champs Laboratories, Inc. (Greenbaum, Rowe, Smith & Davis, LLP, attorneys; Mr. Schmutter, Jack Fersko, and Jay A. Jaffe, on the brief).
NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
Before Judges Sabatino, Fasciale and Maven.
On appeal from the New Jersey Department of Environmental Protection, ISRA Case No. E96510.
John M. Scagnelli argued the cause for appellant (Scarinci & Hollenbeck, LLC, attorneys; Mr. Scagnelli and William A. Baker, on the brief).
Kimberly A. Hahn, Deputy Attorney General, argued the cause for respondent New Jersey Department of Environmental Protection (Jeffrey S. Chiesa, Attorney General, attorney; Lewis A. Scheindlin, Assistant Attorney General, of counsel; Ms. Hahn, on the brief).
Daniel L. Schmutter argued the cause for respondent Des Champs Laboratories, Inc. (Greenbaum, Rowe, Smith & Davis, LLP, attorneys; Mr. Schmutter, Jack Fersko, and Jay A. Jaffe, on the brief). PER CURIAM
R&K Associates, LLC ("R&K"), the current owner of industrial property in Livingston, appeals an August 8, 2012 final agency decision of the Department of Environmental Protection ("the DEP" or "the Department"). The DEP's decision granted to the property's former owner, Des Champs Laboratories, Inc. ("Des Champs"), a de minimis quantity exemption ("DQE") relieving Des Champs of certain environmental obligations under the Industrial Site Recovery Act ("ISRA"), N.J.S.A. 13:1K-6 to - 35.
For the reasons that pertain to this procedurally unique setting, we reverse the Department's grant of a DQE to Des Champs without prejudice, and remand this matter once again to the Department to enable R&K to participate in the agency's decision-making process as to the requested DQE.
I.
The genesis of this administrative matter has been described at length in our published opinion dated July 6, 2012. See Des Champs Labs., Inc. v. Martin ("Des Champs I"), 427 N.J. Super. 84, 88-93, 105-07 (App. Div. 2012), in which we remanded the matter to the Department for further consideration. We now summarize portions of that background, and also recount certain events that have occurred following the issuance of our 2012 opinion.
Between 1982 and 1996, Des Champs operated an industrial establishment at the site at issue. Des Champs I, supra, 427 N.J. Super. at 88-89. In November 1996, in anticipation of Des Champs's transfer of that property, Des Champs's environmental consultant submitted to the DEP a General Information Notice and a Preliminary Assessment Report. Id. at 89. Des Champs also submitted a "negative declaration" affidavit in January 1997, in which Nicholas Des Champs, then the co-owner of the property and the President of Des Champs, certified that "there [had] been no discharge(s) of hazardous substances or hazardous wastes from the industrial establishment[.]" Ibid.; see also N.J.S.A. 13:1K-8 (defining a "negative declaration" as "a written declaration . . . to the department, certifying that there has been no discharge of hazardous substances or hazardous wastes on the site, or that any such discharge on the site or discharge that has migrated or is migrating from the site has been remediated").
A General Information Notice is required when an owner of an industrial establishment plans to sell the property. N.J.A.C. 7:26B-3.2(a)(3). A Preliminary Assessment Report is used to determine whether contaminants are present at a site, and thus whether remedial steps need to be taken. N.J.A.C. 7:26E-3.1(a).
Thereafter, on January 22, 1997, the DEP issued a "no further action" letter, authorizing the cessation of operations on the property. Des Champs I, supra, 427 N.J. Super. at 89-90. Later that same year, R&K purchased the property, and remains the current owner. Id. at 90. At oral argument before us, R&K's counsel represented that the property is occupied and is regularly used in its business.
Pursuant to N.J.A.C. 7:26B-1.4, a "no further action letter" is a written determination by the DEP, after any investigation or action the DEP deems necessary, that there are "no discharged hazardous substances or hazardous wastes present" at the industrial establishment or other areas of concern, or that any hazardous substances or wastes have been remediated under applicable remediation regulations.
In October 2005, the DEP began investigating groundwater contamination in Livingston. Ibid. That investigation revealed that the former Des Champs site seemed to be the source of the contamination. Consequently, the DEP rescinded its January 22, 1997 "no further action" letter on November 10, 2008, and informed Des Champs that it "no longer ha[d] the required authorization that allowed the sale of property to occur in 1997." Ibid.
On March 23, 2009, Des Champs submitted to the DEP a DQE affidavit, pursuant to N.J.S.A. 13:1K-9.7 and former N.J.A.C. 7:26B-2.3 (now codified at N.J.A.C. 7:26B-5.9). Des Champs I, supra, 427 N.J. Super. at 91. The DEP initially denied Des Champs's application for a DQE on April 21, 2009, and declined Des Champs's subsequent requests for reconsideration. Id. at 91-92.
The owner of an industrial establishment may transfer ownership of the establishment notwithstanding ISRA's restrictions if the amount of hazardous materials at the establishment never exceed certain thresholds. N.J.S.A. 13:1K-9.7.
In September 2010, the DEP instructed Des Champs and R&K to effect a remediation of the contamination at the property in accordance with the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 to -23.11z. Id. at 92. On January 21, 2011, the DEP issued a final agency decision denying Des Champs's request for a DQE, and instructing Des Champs to comply with certain cleanup requirements in order to regain compliance with the applicable regulatory scheme. Ibid.
Des Champs appealed the January 2011 final agency decision denying a DQE to this court in 2011. Ibid. R&K intervened in that appeal with this court's permission. Ibid. Des Champs argued in the appeal that the DQE application should have been granted because, it claimed, ISRA does not require a site to be free of contamination as a condition of obtaining a DQE. Id. at 92-93. Des Champs further argued that the DEP's attempts to impose such a condition administratively were ultra vires and therefore invalid. Id. at 93. The DEP and R&K countered that ISRA and other applicable statutes impliedly imposed upon DQE applicants certain investigatory and remedial obligations to ensure that the property was free of contamination. Ibid.
In our July 6, 2012 opinion, we concluded that the DEP was not authorized, as a matter of law, to require a DQE applicant to ensure that a property is free of contamination. Id. at 105-07. We therefore reversed the DEP's denial of a DQE to Des Champs and remanded the matter to the agency for further consideration. Id. at 108. At the end of our opinion, we stated in a footnote:
In light of our disposition, we need not address the other issues raised by the parties, including [R&K's] contention that [Des Champs], as a former owner of the property, lacks standing to obtain a DQE. Additionally, we do not address [R&K's] separate unadjudicated claims of waiver, estoppel and laches, and instead defer those discrete issues for resolution in the first instance by the [DEP]. See Nieder v. Royal Indemn. Ins. Co., 62 N.J. 229, 234 (1973) (stating that "appellate courts will decline to consider questions or issues not properly presented to the trial court when an opportunity for such a presentation is available").
[Id. at 108 n.15.]
On August 8, 2012, a supervisor in the Bureau of Case Assignment & Initial Notice of the DEP wrote a two-page letter to Nicholas Des Champs, informing him that, after further consideration, the DQE was granted. In its only substantive paragraph, the letter stated:
Upon reconsideration of your application for a de minimis quantity exemption from ISRA consistent with the ruling of the Appellate Division, and based upon the sworn statements set forth in your affidavit, the Department finds that as the owner and operator of this industrial establishment you are exempt from the remediation provisions of ISRA. Any inaccuracies in the affidavit or subsequent changes in the facts as stated therein could alter the Department's decision.This letter comprises the only memorialization in the appellate record of the Department's post-remand final agency decision. Notably, the letter did not address the various open issues that were specifically deferred to the Department in footnote 15 of this court's July 2012 opinion. Id. at 108 n.15.
On September 4, 2012, R&K's counsel wrote to an Assistant Commissioner of the Department to object to the issuance of the DQE. In that letter, R&K's counsel asked the Department to reopen and reconsider its August 8, 2012 decision, hold an evidentiary hearing on the matter, and allow R&K to participate in the reopened proceeding. R&K then filed the present appeal on September 21, 2012. In response, the Assistant Commissioner informed R&K's counsel that the requests in its September 4, 2012 letter were moot, and that the DEP would instead address the post-remand DQE approval in the context of this appeal.
II.
The dispute in this present appeal is entirely procedural. In essence, R&K contends that the Department deprived it of a fair opportunity to participate in the post-remand administrative decision concerning Des Champs's application for a DQE. The Department and Des Champs counter that R&K had no right whatsoever to take part in that post-remand process and to have its input considered. Given the distinctive circumstances of this remanded matter, we agree with R&K that the Department acted too abruptly here in granting Des Champs a DQE after our remand without affording R&K a fair opportunity to be heard.
There is no real doubt that R&K, as the purchaser of the Livingston property from Des Champs and its current owner, has a clear and significant financial stake in whether Des Champs is granted or denied a DQE. For one thing, pursuant to Section 1K-13 of ISRA:
Failure of the transferor [of industrial property] to perform a remediation and obtain department approval thereof as required pursuant to the provisions of this act is grounds for voiding the sale or transfer of an industrial establishment or any real property utilized in connection therewith by the transferee, entitles the transferee to recover damages from the transferor, and renders the owner orSee also In re N.J.A.C. 7:62B, 128 N.J. 442, 449 (1992) ("Failure to comply with ECRA can result in the invalidation of the sale or transfer of the industrial establishment and in the imposition of liability for all cleanup and removal costs, including damages resulting from the failure to provide a cleanup plan."); Navillus Grp. v. Accutherm Inc., 422 N.J. Super. 169, 182 (App. Div. 2011) (recognizing the ongoing relevance of N.J.S.A. 13:1K-13 to ISRA violations), certif. denied, 201 N.J. 232 (2012). The thrust of this provision is that if, hypothetically, Des Champs were denied a DQE and thus made subject to ISRA, R&K would be able to seek damages from Des Champs before undertaking a cleanup of the property, thereby avoiding paying the expenses of a cleanup itself. Moreover, R&K potentially could seek to void its purchase of the property from Des Champs under N.J.S.A. 13:1K-13.
operator of the industrial establishment strictly liable, without regard to fault, for all remediation costs and for all direct and indirect damages resulting from the failure to implement the remedial action workplan. . . . A transferee may bring an action in Superior Court to void the sale or transfer of an industrial establishment or any real property or to recover damages from the transferor, pursuant to this section.
[N.J.S.A. 13:1K-13 (emphasis added).
ECRA refers to the Environmental Cleanup Responsibility Act, a precursor to ISRA. Des Champs I, supra, 427 N.J. Super. at 96.
We express no advisory opinion on whether such an effort by R&K to void the transaction more than fifteen years later would be successful.
Additionally, pursuant to N.J.S.A. 13:1K-13.1, if Des Champs were not issued a DQE and were found to have violated ISRA, the Commissioner of the DEP could order Des Champs under ISRA to abate the violation and seek an injunction in the Superior Court to the same effect. Ibid. Conversely, if a DQE were issued, Des Champs would not be subject to action by R&K or the Commissioner under ISRA, and so R&K's attempts to hold Des Champs responsible for contamination would potentially be made more difficult. N.J.S.A. 13:1K-9.7; see also Des Champs I, supra, 427 N.J. Super. at 94-97; but see N.J.S.A. 58:10-23.11f(a)(2)(a) (providing a cause of action for contribution against other dischargers of a hazardous substance by a party that has already cleaned up the substance).
As already noted, pursuant to the Spill Compensation and Control Act ("the Spill Act"), N.J.S.A. 58:10-23.11 to -23.11z, the DEP issued a directive to both R&K and Des Champs on September 30, 2010 to remediate the contamination on the property. Des Champs I, supra, 427 N.J. Super. at 92.
Moreover, R&K is not merely a nearby property owner, but is instead the current owner of the very property that is at issue in this administrative matter. As such, R&K has claimed a "particularized property right" justifying its participation in this remanded administrative matter. Cf. Spalt v. N.J. Dep't of Envtl. Prot., 237 N.J. Super. 206, 208-09 (App. Div. 1989) (by contrast, rejecting intervention in an administrative matter by property-owning shell-fishers who had opposed the DEP's issuance of permits authorizing the construction of a residence and boat marina on nearby property), certif. denied, 122 N.J. 140 (1990). The outcome of this regulatory dispute over the DQE is likely to affect the means by which R&K can attempt to have Des Champs bear the costs of cleaning the property. As we have already noted, R&K also might invoke its statutory right under ISRA to void its purchase of the property.
Given these particular circumstances, R&K's factual nexus to this matter and its affected economic interests are far stronger than those of the shell-fishers in Spalt. Moreover, R&K's private interests as the successor in title to the subject, and a party that faces, jointly with its predecessor Des Champs, a DEP cleanup directive, are substantial. R&K's interests are not unlike those successfully invoked by the appellant insurance company in Gill v. New Jersey Department of Banking & Insurance, 404 N.J. Super. 1, 13 (App. Div. 2008), a principal case relied upon by R&K in its present appeal.
The Department and Des Champs contend that allowing R&K to participate in the DQE review process in this case will open the proverbial floodgates to other would-be intervenors in DQE applications submitted to the DEP, and thereby thwart the policy objectives of ISRA that seek to promote expeditious governmental review of such requests. This argument is exaggerated. More importantly, it overlooks the unique procedural setting of this case.
We are certainly mindful, as we noted in our first opinion, that the Legislature enacted ISRA, among other things, to streamline the regulatory process concerning the cleanup of contaminated sites and to minimize governmental involvement. Des Champs I, supra, 427 N.J. Super. at 104. Those objectives are not immutable, however, and must yield in the present case to the values of procedural fairness and informed regulatory decision-making.
We need not address R&K's due process arguments in seeking a remand for an opportunity to participate in the agency's reconsideration of the DQE request. Our decision solely rests on non-constitutional grounds.
This idiosyncratic case is markedly distinct from a garden-variety situation, in which a private party objects to the DEP's issuance of a permit or some other kind of authorization, in that R&K has already participated in this litigated dispute, with judicial approval, as the result of its intervention in the first appeal in Des Champs I. As such an intervenor, and having been adversely affected by this court's July 2012 reversal of the DEP's prior denial of a DQE to Des Champs, R&K had every right to expect that it would be allowed to continue to participate in the ongoing dispute in a meaningful fashion upon remand.
Although not directly on point, similar recognized expectations apply to a party that is judicially granted intervenor status and where subsequent judicial proceedings thereafter occur. In such subsequent proceedings, the intervenor ordinarily continues to have a right to participate in the matter, unless the court directs otherwise. See, e.g., R. 4:33-2 (regarding judicially-granted permissive intervention); see also Williams v. State, 375 N.J. Super. 485, 530-32 (App. Div. 2005) (observing that a party that has been judicially granted intervenor status generally is treated thereafter in the matter as an additional party), aff'd sub nom. In re P.L. 2001, Chapter 362, 186 N.J. 368 (2006). Indeed, our July 2012 opinion envisioned that R&K would continue to have an ongoing role in this matter. This is reflected, for example, by our direction that "the Department and [the] intervenor may wish to seek further review of our determination" in the Supreme Court. Des Champs I, supra, 427 N.J. Super. at 108 (emphasis added).
The Department's reliance upon Witt v. Shannon Outboard Motor Sales, Inc., 166 N.J. Super. 319, 323-24 (App. Div.), certif. denied, 81 N.J. 328 (1979) is misplaced. That case involved a request by an employee to intervene in an administrative case before the workers' compensation division. Ibid. Witt did not involve, as here, an unappealed judicial order approving a party's intervention in the matter and a subsequent appellate remand back to an administrative agency.
For these many reasons, we conclude that the Department acted arbitrarily and capriciously by shutting out R&K from the remand process. R&K contends that it has bona fide grounds to contest Des Champs's certification that it only used or stored de minimis quantities of hazardous materials on the premises during the latter's period of ownership. In that vein, it points to the significant lapse in time of over a decade for Des Champs to assert to the Department for the first time that its handling of such substances on the premises was only de minimis. Additionally, R&K asserts that the Department's present acceptance of Des Champs's assertion of inconsequential usage and storage of such materials during its time of ownership is difficult to reconcile with the Department's assertion in a November 2008 letter to Des Champs that the agency's "investigation into the current owner and operator of the site [i.e., R&K] determined that the contaminants in [the] ground water have never been used in their [R&K's] operations[,] suggesting that the discharge occurred during or before the ownership of the site by Des Champs Laboratories, Inc." These concerns merit deeper exploration by the Department, this time on a second remand.
We also note in this regard that the Department's August 8, 2012 letter granting Des Champs a DQE is qualified by the provisos that such approval was "based upon the sworn statements set forth in [Mr. Des Champs's] affidavit," and that "[a]ny inaccuracies in the affidavit or subsequent changes in the facts as stated therein could alter the Department's decision."
Beyond this, another important reason warrants a second remand. Despite the instructions in our prior opinion, the Department gave no explicit consideration in its August 2012 final agency decision of R&K's "separate unadjudicated claims of waiver, estoppel and laches," which we explicitly deferred "for resolution in the first instance by the Department." Id. at 108 n.15. Some of those issues may well prove to be fact-dependent, yet no factual record was developed by the agency on remand to facilitate our review of them. The Deputy Attorney General representing DEP argues that those issues were implicitly deemed unmeritorious by her client, yet their conspicuous omission from the agency's final decision on remand fails to confirm that fact. Nor does the decision provide us with any reasoned basis for why the agency found R&K's contentions unpersuasive. Although we recognize that these open issues have certain legal aspects, the Department should nevertheless give them explicit consideration on a second remand, with reference to pertinent facts as determined by the agency.
We lastly turn to the form of the proceeding that should be pursued in a second remand. R&K maintains that the Department is unalterably biased against its position, and urges that the dispute now be referred to the Office of Administrative Law ("OAL") for a plenary hearing before an Administrative Law Judge ("ALJ"). R&K further insists that it has a right to discovery from Des Champs. The DEP and Des Champs both oppose these requests, perceiving no legal or practical reason to refer this matter to the OAL. Respondents also express concern that such a referral will only slow down the process before a final outcome is achieved.
Having considered these competing arguments, we find it premature to prescribe at this time whether an OAL hearing is necessary or appropriate on the second remand. That process question largely turns on whether this protracted controversy amounts to a "contested case" under the Administrative Procedure Act ("APA"), N.J.S.A. 52:14B-1 to -15.
The APA defines a "contested case" as:
a proceeding, including any licensing proceeding, in which the legal rights, duties, obligations, privileges, benefits or other legal relations of specific parties are required by constitutional right or by statute to be determined by an agency by decisions, determinations, or orders, addressed to them or disposing of their interests, after opportunity for an agency hearing, but shall not include any proceeding in the Division of Taxation, Department of the Treasury, which is reviewable de novo by the Tax Court.In construing these concepts, our courts have instructed that a plenary hearing before the OAL is required only if "'contested material issues of fact'" exist that require a hearing. In re Final Agency Decision of Bd. of Examiners of Elec. Contractors, 356 N.J. Super. 42, 49 (App. Div. 2002) (quoting Sloan ex rel. Sloan v. Klagholtz, 342 N.J. Super. 385, 392 (App. Div. 2001)), certif. denied, 176 N.J. 72 (2003). When there are no contested material issues of fact, the matter is not considered a "contested case." Sloan, supra, 342 N.J. Super. at 392; Elec. Contractors, supra, 356 N.J. Super. at 49. This assessment requires a preliminary evaluation of the nature of the disputed issues by the agency itself.
[N. J.S.A. 52:14B-2.]
N.J.A.C. 1:1-4.1(a) further instructs that the classification of a matter as a "contested case" be performed expeditiously:
After an agency proceeding has commenced, the agency head shall promptly determine whether the matter is a contested case. If any party petitions the agency head to decide whether the matter is contested, the agency shall make such a determination within 30 days from receipt of the petition and inform all parties of its determination.
[Emphasis added.]
The presence or absence of contested factual issues here concerning Des Champs's request for a DQE may hinge upon what R&K may proffer factually to the agency in opposition to the DQE request. "[B]ald allegations or naked conclusions . . . are insufficient to require an agency head to transmit [a] matter to [the] OAL as a contested case." J.D. ex rel. D.D.H. v. N.J. Div. of Developmental Disabilities, 329 N.J. Super. 516, 525 (App. Div. 2000). In D.D.H., we ruled that it was not "arbitrary, capricious nor unreasonable" for the Director of the State agency to require a proffer of evidence from a party seeking an OAL hearing, because "[b]ald conclusions . . . should not necessitate an automatic transmittal to [the] OAL." Id. at 527-28.
Although R&K has already provided some indicia of its factual disagreements with Des Champs's assertion of de minimis usage and storage of hazardous substances, it has not yet been provided with an opportunity to present a formal proffer outlining those alleged factual disputes to the agency itself. The DEP should now provide that opportunity. In this regard, we recognize that critical facts may exclusively be in the possession of Des Champs, and the agency should take that circumstance into account when evaluating the sufficiency of R&K's proffer.
The agency should also expressly consider the significance of its November 2008 letter expressing that its own investigation, at least at that time, "determined that the contaminants in [the] ground water have never been used in [R&K's] operations[,] suggesting that the discharge occurred during or before the ownership of the site by Des Champs." These unresolved questions must be explored, either in a contested case hearing before the OAL or, if appropriate, through documentary submissions by Des Champs and R&K to the agency.
The first step in the remand process must be a formal proffer from R&K, which it shall tender to the DEP, with a copy to Des Champs's counsel, within thirty days from the date of this opinion. After reviewing the proffer, the DEP shall then determine within thirty days if the matter rises to the level of a contested case for referral to the OAL. If not, then the DEP shall so advise R&K and Des Champs accordingly, and thereafter provide them with a fair opportunity to submit other information and their respective positions, in writing, before a final agency decision on the second remand is issued.
Reversed and remanded for the DEP's further consideration of Des Champs's application for a DQE, in a manner consistent with this opinion. We do not retain jurisdiction.
I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION