Environmental Case Summaries- 2012

The following are summaries of selected environmental decisions from 2012 focusingon New Jersey decisions, with some cases addressing other issues on a federal level.

New Jersey Spill Act

In NJDEP v. Dimant, 212 N.J. 153 (2012) the New Jersey Supreme Court ruled that in order for there to be Spill Act liability, there must be a nexus between a discharge of contaminants, the discharger,and the contamination to be remediated at a particular site.

The decision from the Appellate Division was previously reported in our blog on July 5, 2011. In the case, the defendants included succession of owners and operators of a dry cleaning establishment. The contamination in the groundwater included the well-known dry cleaning chemical, PCE, as well as the byproducts of its degradation: TCE and DCE. There was evidence that the PCE was related to the dry cleaning operations. All but one of the direct defendants settled with the State. The remaining defendant went to trial. The trial judge found that although there were discharges or releases of PCE during the stewardship of the remaining defendant, there was no proof that those discharges went through the asphalt and contaminated the environment.

The Court began its analysis by noting that, under the Spill Act, a discharge occurs pursuant to N.J.S.A. 58:10-23.11b when a hazardous substance is spilled or leaked, or otherwise released, “into the waters or onto the lands of the State, or into waters outside the jurisdiction of the State when damage may result to the lands, waters or natural resources within the . . . State.” There was some dispute between the parties as to whether the “damage may result” language applies to releases of hazardous substances “into the waters or onto the lands of the State,” or only to releases outside the State. The Court concluded based on the grammatical construction of the sentence, that the better interpretation of this provision would include mere release of hazardous substances, irrespective of whether “damage may result,” should qualify as a “discharge” for the purposes of the Spill Act. Accordingly, the fact that Sue’s “operated a business where, on at least one occasion, an exterior building pipe emitted an uncontrolled drip of fluid with a high concentration of PCE onto the ground” was sufficient to qualify as a “discharge,” whether or not that PCE ever made it to the now-contaminated groundwater.

However, the Legislature’s stated purpose in passing the Spill Act was “to provide liability for damage sustained within this State as a result of any discharge of said substances.” Accordingly, one who is “in any way responsible for any hazardous substance” is strictly liable, upon its discharge, for “all cleanup and removal costs no matter by whom incurred.” The Court pointed out that the phrase “in any way responsible” necessarily requires some connection between the discharge complained of and the alleged discharger, noting that “[t]hat nexus is what ties the discharger to the discharge that is alleged to be the, or a, culprit in the environmental contamination in issue.” Such a nexus must be demonstrated also to exist between the discharge for which one is “in any way responsible” and the contaminated site for which cleanup and other related authorized costs are incurred. In fact, the statute itself states that “cleanup and removal costs” are costs “associated with a discharge.”

In analyzing the particular level of causation which should be required under the Spill Act, the Court turned to the Act’s legislative history. Specifically, this analysis led the Court to note that despite the lack of express direction from the Legislature as to the requisite connection between liability and all forms of relief, there is no basis to apply a proximate-cause analysis in assessing the bases for relief, as this would thwart the public purpose of the statute. Rather, because the Spill Act provides for a range of forms of relief, including injunctive relief and recovery of damages and costs, the causation standard to be applied must accommodate these varying forms of available relief, “as the request for relief is framed.” Therefore, “while a plaintiff need not trace the cause of the response costs to each defendant in a multi-defendant case involving a contaminated site, it is not enough for a plaintiff to simply prove that a defendant produced a hazardous substance and that the substance was found at the contaminated site and ask the trier of fact to supply the link.” Accordingly, the Court concluded that “in an action to obtain damages, authorized costs and other similar relief under the Act there must be shown a reasonable link between the discharge, the putative discharger, and the contamination at the specifically damaged site.”

Applying this standard to the case at bar, the fact that DEP representatives had detected impermissibly high levels of PCE emanating from a pipe connected to Sue’s business, without any record of cracks in the pavement below or any other potential mechanism by which this alleged PCE might have made its way to the now-contaminated groundwater, was insufficient. “There was no basis – on the state of these proofs as found by the trial court – to shift to Sue’s liability for compensatory damages for cleanup of the wells that were tainted, or even for the investigatory expenses associated with remediation of the natural-resource damage, because the DEP never made the requisite connection showing how the dripping PCE at Sue’s reasonably could have made its way into the groundwater.”

In “two-site” cases (wherein a release of contaminants at one site results in contamination somewhere else), “in order to make out a prima facie case, the plaintiff must establish a causal connection between the defendant’s release of hazardous substances and the plaintiff’s response costs incurred in cleaning them up.” The Court explained that the plaintiffs here could have satisfied their burden of production by (1) identifying the hazardous substance at their site; (2) identifying the same hazardous substance at defendant’s site; and (3) providing evidence of a plausible migration pathway by which the contaminant could have traveled from the defendant’s facility to the plaintiff’s site. However, in the absence of a “plausible migration pathway,” there is no basis on which to hold the defendant liable.

With respect to the DEP’s claim that Sue’s should be required to investigate its contamination and determine a remedy for its own discharge, the Court held that “it would be fundamentally unfair to saddle Sue’s with such an investigatory obligation, on a joint and several liability basis, at this time, considerable more than a decade after the DEP discovered the dripping pipe during Sue’s operation.”

In Dalton v. Shanna Lynn Corp., an unreported decision from the New Jersey Appellate Division, the court ruled that in order for a party to seek contribution under the Spill Act, a party must first remediated the property.

The case arose from the failure and leaking of an underground oil tank on the plaintiffs’ property, which they purchased from the defendants years prior. After a fire destroyed the motel on the premises and the plaintiffs began rebuilding, an excavator informed them that the ground was contaminated with fuel oil.

Ultimately the court held that it would not force the defendants to contribute toward paying the expenses for remediating the contamination until the work was completed. In so holding, the court pointed to the language of the Spill Act, which says that “whenever one or more dischargers or persons cleans up and removes a discharge of a hazardous substance, those dischargers and persons shall have a right of contribution against all other dischargers and persons in any way responsible for a discharged hazardous substance . . . .” N.J.S.A. 58:10-23.11f(a)(2)(a). In other words, “one must first cleanup and remove the discharge in order to recover for discharge of a hazardous substance.”

Because the plaintiffs had not even begun remediating the property at the time they filed this suit, they had no way of knowing “the extent of the spill much less the nature of the work to remediate the site and its cost.” Accordingly, until this work was completed and the costs associated with it were certain, the plaintiffs were unable to recover from the other responsible parties.

In State Farm Fire & Casualty Co. v. Shea, an unreported decision from the N.J. Appellate Division, the Court held that the innocent purchaser defense requires the purchaser to have taken basic measures with regard to potential for environmental problems.

This case arose from a dispute regarding who should bear responsibility for soil and groundwater contamination emanating from two residential USTs. Rossi’s property contained a fuel oil UST buried under the driveway of her residence, which she removed as a condition of sale of the house prior to closing, and she further agreed to be held responsible for subsequent cleanup of contamination on the property.

Shea’s property was separated from Rossi’s by a driveway. Upon his purchase of the home, Shea did not conduct a home or environmental inspection, and despite admittedly noticing a vent pipe in the back yard, he did not inquire about the purpose of that pipe at any point before or after the purchase.

During the course of the litigation a significant factual dispute arose between the experts for each party which was highly fact-specific; there were two different plumes of contamination with a “clean zone” in between, as well as significant variability in the concentration of contaminants within each plume, which was argued to bring into question the trial judge’s finding that one plume each emanated from the Shea and Rossi properties. This argument was ultimately rejected.

Shea further advanced the argument that the trial judge inappropriately imposed on him an affirmative duty to conduct a pre-purchase environmental investigation, that equitable factors should have been considered in fashioning the remedy, and that it was never addressed whether the contamination occurred during his ownership of the property. After a discussion of the text of the Spill Act, particularly with respect to the “innocent purchaser” exemption, the court explained the significance of Shea’s failure to inquire about the pipes in the back yard which he admitted that he noticed prior to purchase.

“The issue . . . is not whether every buyer of a home must conduct an environmental assessment prior to purchase but whether, having observed a pipe protruding from the ground, Shea had a duty, at a minimum, to inquire.” It was significant that “[h]is ignorance [was] solely associated with his failure to ask a basic question about something most people do not expect to encounter in the backyard of their home,” and so “[i]t is not unreasonable to require him to ask questions under these circumstances to identify the pipe and then take whatever measures are warranted by the response to those questions.” Accordingly, the “innocent purchaser” exemption from liability was inapplicable here.

In an unreported decision, NJDEP v. The Pole Tavern Mobil Site, et al., the Appellate Division rejected defendants efforts to avoid the obligations it assumed under an ACO with the NJDEP for site remediation.

Defendant Harmeet Kohli purchased the “Pole Tavern Mobil Site” in Upper Pittsgrove in 2002, and Nanak Auto Fuel, Inc. operates a gas station on the property which contains a UST system. The NJDEP issued a AONOCAPA with respect to the property, which ultimately led to an ACO between Kohli and the DEP. Pursuant to the ACO, Kohli was required to conduct a remedial investigation of the property, submit a remedial action work plan, and implement the plan pursuant to DEP approval.

Central to the present dispute is the requirement in the ACO that Kohli establish and maintain a “remediation funding source,” the initial amount of which was required to be $50,000. Kohli submitted a “line of credit agreement” between Nanak and Sun National Bank establishing a line of credit for “remediation of the site pursuant to [the ACO],” expiring on December 28 of that year. The following January 31, the DEP requested evidence of the continuation of this line of credit, but Kohli and Nanak failed to provide any.

Consequently, the DEP issued a notice of violation, but stated it would not assess a penalty if Nanak paid the surcharge and offered the required evidence within 30 days. Nanak paid the surcharge but asked the department to waive the line of credit requirement because “Nanak has already spent $25,000 to $35,000 in remediation work” on the property – however, this request was rejected. Later that month, Sun National Bank informed the DEP that Kohli and Nanak had “set aside $25,000 for the purpose of remediation,” but forwarded no documentation to support this.

The DEP issued an AONOCAPA ordering compliance with the ACO’s funding requirement and assessing a $5,000 penalty. Kohli and Nanak requested a hearing, at which they asserted that they could not afford to establish the required $50,000 line of credit and that $25,000 was “sufficient.” However, the ALJ issued a decision, finding that merely because the costs of remediation exceeded expectations, “that is not a defense under the consent order.” The DEP Commissioner issued a final agency decision adopting the ALJ decision in its entirety.

On appeal, the court held that nothing in the record suggested that the DEP Commissioner acted arbitrarily, unreasonably or capriciously, or that the decision was unsupported by evidence in the record. “Where the parties have agreed to the terms of a settlement, second thoughts are entitled to absolutely no weight as against our policy in favor of settlement.” Accordingly the decision of the NJDEP Commissioner was affirmed.

Spill Act and Common Law Trespass

In an unreported decision of the U.S. District Court in N.J. Woodcliff, Inc. v. Jersey Constr., Inc., the trial judge addressed a summary judgment motion by the New Jersey Department of Transportation (“NJDOT”) on the basis of an exemption from liability for certain activities by governmental entities, and because trespass is an inappropriate means of asserting environmental claims under these circumstances. Ultimately the motion was granted in part and denied in part.

Plaintiff Woodcliff, Inc. (“Woodcliff”) was owner/developer of a residential community in Hamilton, New Jersey. During the course of Woodcliff’s development activities, Jersey Construction, Inc. (“JCI”) was performing road construction work elsewhere, which required removal 8,000 cubic yards of soil. JCI offered this excess soil to Woodcliff for use in its development activities, and Woodcliff accepted. The soil originated from a JCI roadwork project which NJDOT required in connection with the development of a shopping center by Stanberry Hamilton LLC (“Stanberry”) in order to alleviate the increased traffic caused by the shopping center. However, a year after Woodcliff’s acceptance of the soil, it was discovered that it was contaminated with arsenic. Accordingly, Woodcliff filed suit against JCI and NJDOT asserting claims under the Spill Act and for common-law trespass. NJDOT moved for summary judgment.

The court first addressed NJDOT’s argument that certain Spill Act exceptions from liability for governmental entities should apply. NJDOT had argued that N.J.S.A. 58:10-23.11f, which states that a “governmental entity which acquires ownership of real property through . . . any circumstance in which the governmental entity involuntarily acquires title by virtue of its function as sovereign, or where the governmental entity acquires the property by any means for the purpose of promoting the redevelopment of that property, shall not be liable . . . to the State or to any other person for any discharge which occurred or began prior to that ownership,” should preclude liability here. Specifically, NJDOT argued that the redevelopment exception was applicable, as well as the “involuntary” acquisition of title by way of the developer agreement with Stanberry which required the work at issue.

The court, however, rejected this argument on the basis that the record was insufficient to establish that there was no genuine issue of material fact. The record was composed solely of a short affidavit from a NJDOT employee and a copy of the Developer Agreement between NJDOT and Stanberry. These were insufficient to resolve the remaining questions as to where the contaminated soil originated, how that property was acquired, and for what purpose it was acquired. Accordingly, summary judgment was held to be improper at this stage of the litigation, before any significant discovery had taken place.

As to the plaintiff’s trespass claim, the court noted that “[t]respass is a cause of action for one’s unauthorized entry (usually of tangible matter) onto the property of another.” The basis of this claim was that although the plaintiff consented to the delivery of soil to its property, it did not consent to the arsenic being discharged there. However, the court was quick to point out that “use of trespass liability [under such circumstances] has been held to be an inappropriate theory of liability and an endeavor to torture old remedies to fit factual patterns not contemplated when those remedies were fashioned.” Accordingly, liability for trespass under these facts was not available, and summary judgment as to this claim was granted.

Eminent Domain: Valuation of Contaminated Property

In Borough of Paulsboro v. Essex Chem. Corp., 427 N.J. Super 123 (App. Div., 2012) cert. denied, 56 A. 3d 395 (21012) the Court clarified the manner in which to value contaminated property in eminent domain proceedings, ruling that sites that have completed an approved remediation are not subject to special procedures for property valuation.

The Borough of Paulsboro, New Jersey sought to acquire through its power of eminent domain from Essex Chemical Corporation a sixty-seven-acre riverfront tract of land containing a DEP-approved seventeen-acre closed landfill. In Hous. Auth. of the City of New Brunswick v. Suydam Investors, LLC, 177 N.J. 2 (2003), the New Jersey Supreme Court established that contaminated property acquired through eminent domain must be valued as if the contamination had been remediated, and that the portion of the condemnation award required to pay the costs of remediation should be deposited into a trust-escrow account. In this case, the Appellate Division addressed whether that special methodology for valuing contaminated property applies in an eminent domain action for acquisition of property containing a landfill that has been closed with the approval of the DEP.

At trial, it was determined that the fair market value of the property was approximately $1.5 million, based on a per-acre value of $22,500 applied uniformly to the entire sixty-seven-acre tract, including the seventeen acres of closed landfill. On appeal, Paulsboro argued that the trial court improperly failed to follow the principles set forth in Suydam by valuing the property as if the landfill had been removed but denying its motion to escrow the condemnation award to pay the costs of that removal.

However, the Appellate Division rejected this argument. The court explained that “the prerequisite for use of the special valuation methodology established in Suydam, under which the subject property is valued as if remediated and the estimated cost of remediation is deposited into a trust-escrow account, is the reality of a condemnee’s liability for the costs of remediation under the Spill Act and like statutory initiatives.” On the other hand, “[i]f a site has been remediated with the DEP’s approval and the condemnee is not subject to any additional liability for remediation, the condemnee is no longer exposed to what the court in Suydam described as ‘double liability,’ and therefore, the special valuation methodology established in that case does not apply.”

Put more succinctly, the Suydam framework was inappropriate here because Essex was not subject to any additional obligation for remediation of the site – despite the continued presence of the landfill, the “remediation” pursuant to the relevant environmental statutes had already occurred, as evidenced by the DEP’s approval of the landfill closing. The court illustrated that “[a]lthough the removal of the landfill undoubtedly would increase the property’s value, the removal is not required under any environmental statute, and is not what the court in Suydam meant by remediation of environmental contamination.” Though the presence of the landfill could be considered in assigning a fair market value to the property under normal valuation techniques, there was no “contamination” on the property to justify application of the framework established in Suydam.

New Jersey Industrial Site Recovery Act (ISRA)

In Des Champs Laboratories, Inc. v. Martin, 472 N.J. Super 84(App. Div., 2012) the Court rejected requirements for applicability of the de minimis quantity exemption under the Industrial Site Recovery Act of 1993 (“ISRA”), N.J.S.A. 13:1K-6 et seq., the Site Remediation Reform Act of 2009 (“SRRA”), N.J.S.A. 58:10C-1 et seq., or any other statute authorizes the DEP to impose certain obligations on owners or operators of industrial establishments that stored or handled small amounts of hazardous materials as a condition of obtaining a “de minimis quantity exemption” (“DQE”) from ISRA requirements. Specifically, the court examined the validity of certain recently-amended regulations requiring an applicant for a DQE to certify that the property where the de minimis quantities had been present was now below DEP-established acceptable levels, and other regulations requiring applicants to remediate the property if the DEP disapproved their application.

Des Champs Laboratories, Inc., (“Des Champs”) operated an industrial facility in Livingston, New Jersey for approximately 14 years, manufacturing heat recovery ventilators. In anticipation of ceasing operations at the facility, Des Champs’ environmental consultant submitted required documentation to the DEP pursuant to the ISRA certifying that there had been no discharges of hazardous substances. After the DEP issued a no further action letter, they sold the premises to intervenor R&K Associates, LLC. Then, eight years later, the DEP determined that unreported groundwater contamination in the area originated from the Des Champs property, causing it to rescind its prior NFA letter and require submission of a variety of remediation documentation.

Instead of complying with DEP’s requirements, Des Champs submitted a DQE affidavit pursuant to ISRA, and certified that it had handled a de minimis quantity of hazardous substances, thereby exempting it from ISRA. However, the DEP denied its DQE request. Des Champs twice requested that the DEP reconsider this decision, but to no avail –the DEP issued a final determination that to regain compliance, Des Champs was required to hire an LSRP to investigate the source of the groundwater and undertake to remediate it. It then filed this appeal, and R&K Associates intervened with the court’s permission.

On appeal, Des Champs contended that ISRA was enacted to alleviate the harsh requirements of its predecessor statute, the Environmental Cleanup Responsibility Act of 1983 (“ECRA”), N.J.S.A. 13K-6 et seq., by codifying a de minimis exemption which allowed such de minimis users of hazardous substances to avoid bearing just this sort of investigation and cleanup costs. It further argued that the DEP’s attempts to impose such obligations through administrative regulations was ultra vires, and that those regulations should be deemed invalid.

After examining the legislative history of these enactments, the court went on to determine that the DEP had acted beyond its legislatively-delegated powers in enacting the challenged regulations by “injecting into the DQE process a requirement that the governing statutes do not authorize, i.e., forcing an applicant that has only handled or stored de minimis quantities of hazardous materials to provide a certification that the property is free of contamination before its operations can be closed or title to its property transferred.” The court pointed out that nothing in the legislative history of ISRA suggests that the statutory DQE provisions were intended to impose such onerous conditions, and in fact such conditions run counter to the stated objectives of ISRA and SRRA to “streamline the regulatory process” and “minimize governmental involvement in certain business transactions” for private parties who have handled only de minimis amounts of hazardous substances.

Accordingly, the regulations adopted in May 2012, N.J.A.C. 7:26B-5.9(e)(1) (slightly lessening the requirements so that a DQE applicant must certify only that the property is not contaminated “to the best of [its] knowledge”) were ultra vires and therefore constituted an invalid exercise of regulatory rulemaking because the certifying owner or operator would be ineligible for the DQE exemption if it knew of a prior owner’s discharge, even if the applicant had complied with the de minimis requirements provided by the statute. The court found “no basis in the statute to saddle such a hypothetical innocent owner or operator with such obligations in order to obtain the DQE exemption it otherwise is entitled to under the law.”

However, the court made clear that it would not “preclude the [DEP] from pursuing appropriate enforcement action against appellant and other DQE applicants under the Spill Act or other legislatively-authorized regulations, where the facts support such enforcement action,” and further that it would not preclude anyone “from invoking their contractual or other legal rights to compel DQE applicants to investigate and to remediate industrial sites.” The opinion was narrowly aimed at the ultra vires nature of the DEP’s rulemaking with regard to the DQE exemption requirements under ISRA and SRRA.

Penalties for construction in floodways

In Asdal Builders v. Dep’t of Envt’l Protection, 425 N.J. Super 564 (App. Div. 2012) cert. denied, 55 A.3d 727 (2012) the court considered an appeal from a final decision of the New Jersey Department of Environmental Protection (“DEP”) imposing penalties related to the renovation and construction of structures located within a floodway and rejected the imposition of penalties. The project at issue involved the restoration of historic civil war-era structures located in the flood hazard area near the South Branch of the Raritan River into a zero-energy bed and breakfast inn. The renovations maintained the structures’ historic character while incorporating modern “green technology,” but the DEP had determined that Asdal’s failure to obtain a stream encroachment permit (“SEP”) prior to undertaking these renovations warranted various penalties against Asdal Builders and personal penalties against its principals, and that a retroactive SEP was inappropriate under the circumstances. Finding that the Commissioner of the DEP had improperly rejected the prior findings of the administrative law judge assigned to the case and that its actions were grounded on improper interpretation and application of the law, the Appellate Division largely vacated the DEP’s penalty assessments.

Asdal had purchased the tract in a state of neglect and disrepair, ultimately removing “1,200 yards of debris, 4,000 yards of wood debris, and another 100 yards of garbage, including 14 tons of tires,” and then “engaged a farmer to re-establish the farm lands as historically operated.” Additionally, the pre-existing historical structures were renovated, although a garage was razed and a new one built in a different location. Further, Asdal sought a Stream Encroachment Jurisdiction Decision regarding the replacement of the septic system, which resulted in a determination that an SEP was not required because the drawings submitted to the DEP showed that “[t]he proposed system will not require the placement of any fill above the existing grades.” Once Asdal obtained township building permits, the work began.

Responding to a complaint of “development in the floodway,” the DEP investigated and ultimately issued a series of notices of violation (“NOVs”) asserting violations of the Flood Hazard Area Control Act (“FHACA”) for the garage construction, mowing and replanting of vegetation, and constructing the septic system “nine inches higher than grade.” The builder’s application for an after-the-fact SEP was denied, civil penalties were imposed on the corporation and its principal individually, and he was ordered to remediate the area. Asdal’s challenge to these determinations was heard by an administrative law judge, who determined that the total fill impact resulting from the activities on the property was “insignificant,” and that the DEP’s denial of the SEP to renovate and expand an existing use was arbitrary and capricious. However, the Commissioner declined to adopt these findings, instead going forward with the penalty assessments as originally determined by the DEP.

On appeal, the court first noted that the Commissioner’s determination that “responsible corporate officer” liability under the FHACA and FWPA was not available prior to recent amendments to those Acts in 2008 and 2006 respectively, at which point the definition of “person” was expanded to include “responsible corporate officers.” Because the actions which were the basis for these penalties, and the issuance of the relevant NOVs, took place between 2003-2005, individual liability for Asdal himself was not appropriate. Further, the Environmental Enforcement Enhancement Act (“EEEA”), which increased penalties for environmental violations and allowed for direct enforcement by the DEP without requiring court involvement, was not enacted until 2007, after which enhanced penalties were applied retroactively to Asdal’s alleged violations. The court rejected the DEP’s position that these penalties were permissible on account of “ongoing violations,” noting that “[u]nlike ongoing pollution violations, the violations claimed here are because the renovated structures remain on the property,” and the EEEA’s enhanced penalty provisions could not be imposed for pre-existing conditions. Additionally, because Asdal’s violations were clearly not “knowing” violations, the highest penalties were inappropriate under the circumstances.


Pre-enforcement review

In Sackett v. Environmental Protection Agency, 132 s. Ct. 1367 (2012), the United States Supreme Court held that the factual and legal conclusions on which an EPA compliance order is based may be challenged in court pursuant to the Administrative Procedures Act, even before the EPA initiates an action to enforce that order.

The EPA had issued a compliance order to the Sacketts when they filled in part of their lot with dirt and rock in preparation for construction on the property. The lot was located just north of Priest Lake in Idaho, but was separated from the lake by several other lots with permanent structures on them. In the compliance order, the EPA stated that the Sacketts’ property “contains wetlands within the meaning of 33 C.F.R. §328.4(8)(b)”; was “adjacent to Priest lake within the meaning of 33 C.F.R. § 328.4(8)(c)”; and that they “discharged fill material into wetlands” on their property. The Sacketts, however, did not believe that their property was subject to the act, and sought to challenge these conclusions by filing suit under Chapter 7 of the Administrative Procedures Act (“APA”), which allows individuals to challenge “final agency action” in the federal courts.

Whereas the trial court and the Ninth Circuit Court of Appeals had held that the APA “preclude[s] pre-enforcement judicial review of compliance orders,” in this case the Supreme Court disagreed, overturning the lower courts’ decisions, and allowing for easier access to the courts for challenges to EPA compliance orders.

In discussing whether the issuance of a compliance order constitutes “final agency action” such that the APA would provide for judicial review, the Court pointed out that it has “all of the hallmarks of APA finality” according to Supreme Court precedent. Specifically, through the order, the EPA had “determined” “rights or obligations,” resulting in a legal obligation to restore the property and to give the EPA access to the property and “records and documents related to” the property. Additionally, the order “expose[d] the Sacketts to double penalties in a future enforcement proceeding,” and limited their ability to obtain a permit for their fill from the Army Corps of Engineers.

Moreover, according to the Court, the order marked “the consummation of the agency’s decisionmaking process,” as the “findings and conclusions” contained in the order were not genuinely reviewable. Though there was a portion of the order inviting the Sacketts to “engage in informal discussion of the terms and requirements” of the order, the Court was unsatisfied with the “mere possibility that an agency might reconsider” in light of such discussions. This did not constitute an entitlement to further agency review for the purposes of the APA’s finality requirement.

Further, the requirement under the APA that there be “no other adequate remedy in a court” was satisfied, because while judicial review was possible, the Sacketts could not initiate that process – they had to wait for EPA to engage in an enforcement action, all while incurring up to $75,000 per day in potential liability.

Finally, the Court held that the fact that Congress gave the EPA a choice between judicial proceedings and administrative action does not express an intent to allow judicial review of only the former. The Court was untroubled by the assertion that while compliance orders “provid[e] a means of notifying recipients of potential violations and quickly resolving the issues through voluntary compliance,” the EPA is “less likely to use the orders if they are subject to judicial review.” Specifically, “APA’s presumption of judicial review is a repudiation of the principle that efficiency of regulation conquers all,” and “[i]t is entirely consistent with this function to allow judicial review when the recipient does not choose voluntary compliance.”

CERCLA – contracts

In United States v. ARG Corp., 2011 U.S. Dist. LEXIS 86423, 41 ELR 20271 (N.D. Ind. Aug. 4, 2011), the court addressed how contractual language influences CERCLA liability for environmental cleanup costs.

The City of South Bend, Indiana, had purchased a tract of land from ARG Corporation, but days after the closing determined that there may have been hazardous substances on the property posing a danger to public health and safety. When the City reported this to the EPA, an investigation ensued and ultimately ARG was ordered to clean up the site. When ARG refused, the government went forward with a $841,000 cleanup project to remove the hazardous substances. Ultimately the government filed suit under CERCLA seeking reimbursement from ARG. Contending that it was not responsible for such costs, but that South Bend had assumed responsibility for any such cleanup, ARG filed a third-party complaint against the City.

The court began its analysis by examining the language of the contract of sale between the parties. That contract stated that “the seller shall remain solely financially responsible for the remediation activities arising from the seller’s ownership, use or operation of the property prior to the closing date,” and “the purchaser shall be solely financially responsible for the remediation activities arising from the purchaser’s ownership, use or operation of the property after the closing date.” The court found this to unambiguously state that ARG is solely responsible for remediation occasioned by its use of the property. Further, contractual language that South Bend agreed “not to execute against any of [ARG’s] assets to satisfy [ARG’s] financial responsibilities for remediation of pre-closing environmental damage” was interpreted to mean only that if South Bend believed ARG to be responsible for a cleanup, it would only seek recovery from ARG’s insurance policies – not that South Bend agreed to indemnify ARG for such costs. Evidence of pre-closing negotiations which allegedly demonstrated that South Bend had agreed to assume responsibility for any cleanup were irrelevant, as the contract was unambiguous on its face.

ARG’s argument that hazardous substances were “disposed of” during South Bend’s ownership was held to be without merit. The court noted that CERCLA holds liable “any person who at the time of disposal of any hazardous substances owned or operated any facility at which such hazardous substances were disposed of,” and that “disposal” is defined for purposes of that Act as “discharge, deposit, injection, dumping, spilling, leaking or placing” of hazardous waste into the land or water. The remediation process by which contaminants were removed from the ground did not constitute “disposal” under CERCLA.

Summing up, the court held that “just because the clean-up occurred when South Bend owned the property does not mean the hazardous substances arose from South Bend’s ownership, use or operation of the property.”

Global Warming – Nuisance, Clean Air Act

In American Electrical Power Co. v. Connecticut, 131 S.Ct. 2527 (2012) the United States Supreme Court rejected plaintiffs public nuisance claims based on federal common law for the nuisance of global warming. In this case, eight states and the City of New York, as well as three nonprofit land trusts, brought suit against four carbon-dioxide emitters based on public nuisance under federal common law. The plaintiffs alleged that by contributing to global warming, the defendants emissions created a “substantial and unreasonable interference with public rights” in violation of federal common law of interstate nuisance and/or state tort law. They sought injunctive relief in the form of an immediate cap on carbon dioxide emissions and a gradual lowering of that cap over time.

The Court began its analysis by noting that the Clean Air Act (“CAA”)authorizes federal regulation of carbon dioxide, among other greenhouse gases. The EPA subsequently issued rules in collaboration with the Department of Transportation regulating emissions from various forms of vehicles. At the same time, it began phasing in requirements that certain greenhouse gas emitting facilities utilize the “best available control technology” and began rulemaking as to emissions from fossil fuel fired power plants.

It was ultimately held that “the Clean Air Act and the EPA actions it authorizes displace any federal common law right to seek abatement of carbon-dioxide emissions from fossil-fuel fired power plants.” Despite the fact that EPA had not yet implemented any regulation as to the type of emissions involved in this case, the Court pointed out that “[e]ach standard of performance EPA sets must take into account the cost of achieving emissions reduction and any nonair quality health and environmental impact and energy requirements,” and the CAA “entrusts such complex balancing to EPA in the first instance.”

Furthermore, “[i]t is altogether fitting that Congress designated an expert agency . . . as best suited to serve as primary regulator of greenhouse gas emissions. The expert agency is surely better equipped to do the job than individual district judges, issuing ad hoc, case-by-case injunctions.” Such a scheme would be unmanageable and unjust, but more importantly it “cannot be reconciled with the decisionmaking scheme Congress enacted.

DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum, PC (www.dbnjlaw.com ) is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and defense of toxic exposure matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contact Steven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department.

The information contained in this blog is intended solely for informational purposes; it is a advertising publication of DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum P.C.This publication is intended to alert recipients of developments in the law and is not intended to provide legal counsel, advice or opinion on any specific facts or circumstances. The contents are intended as general information only. You are urged to consult a member of this firm or your own attorney concerning your particular situation and any specific legal questions you might have.


DiFrancesco, Bateman, Kunzman, Davis, Lehrer & Flaum PC (http://www.dbnjlawblog.com) is a full service law firm in New Jersey which provides a broad range of legal services. For additional information about the matters in this bulletin or in the firm’s Employment Practice, please contact Richard P. Flaum, Esq.

The information contained in this blog is intended solely for informational purposes; it is a advertising publication of DiFrancesco, Bateman, Kunzman, Davis, Lehrer & Flaum P.C.This publication is intended to alert recipients of developments in the law and is not intended to provide legal counsel, advice or opinion on any specific facts or circumstances. The contents are intended as general information only. You are urged to consult a member of this firm or your own attorney concerning your particular situation and any specific legal questions you might have.