R&K ASSOCIATES, LLC VS. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION (DEPARTMENT OF ENVIRONMENTAL PROTECTION)

• Court: New Jersey Superior Court Appellate Division
• Decided: November 19, 2019
• Docket: A-1475-18T1
• Status: Unpublished

Opinion

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.

SUPERIOR COURT OF NEW JERSEY APPELLATE DIVISION DOCKET NO. A-1475-18T1

R&K ASSOCIATES, LLC,

Petitioner-Respondent,

v.

NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, SITE REMEDIATION COMPLIANCE AND ENFORCEMENT,

Respondent-Respondent,

and

DES CHAMPS LABORATORIES, INC.,

Intervenor-Appellant. __________________________________

Argued November 4, 2019 - Decided November 19, 2019

Before Judges Sabatino, Geiger and Natali.

On appeal from the New Jersey Department of Environmental Protection, Docket No. LSR12000- G000042626. Daniel L. Schmutter argued the cause for appellant (Hartman & Winnicki, PC and Greenbaum, Rowe, Smith & Davis, LLP, attorneys; Daniel L. Schmutter and Jack Fersko, of counsel and on the briefs; Irene Hsieh, on the briefs).

John M. Scagnelli argued the cause for respondent R&K Associates, LLC (Scarinci & Hollenbeck, LLC, attorneys; John M. Scagnelli, of counsel and on the brief; William A. Baker, on the brief).

Richard F. Engel, Deputy Attorney General, argued the cause for respondent New Jersey Department of Environmental Protection (Gurbir S. Grewal, Attorney General, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel; Bethanne Sonne Prugh, Deputy Attorney General, on the brief).

PER CURIAM

This case has been before our court on three previous occasions. In each

instance, we reversed a final agency decision of the New Jersey Department of

Environmental Protection ("DEP") either granting or denying Des Champs

Laboratories, Inc. ("Des Champs") what is known as a de minimis quantity

exemption ("DQE") under the Industrial Site Recovery Act ("ISRA"), N.J.S.A.

13:1K-9.7, and the associated ISRA regulations, N.J.A.C. 7:26B-5.9 to -8.1.

Des Champs presently appeals the October 28, 2018 final agency decision

of DEP Commissioner Catherine McCabe denying it a DQE, after the

completion of the most recent remand directed by our court. Adopting the post-

A-1475-18T1 2 remand findings of an Administrative Law Judge ("ALJ"), the Commissioner

concluded that Des Champs failed to prove by a preponderance of the evidence

at the administrative hearings that it meets the criteria for a DQE. For the

reasons that follow, we affirm.

I.

We incorporate by reference and assume the reader's familiarity with the

facts and procedural history reached in our three previous opinions. We

summarize that lengthy background as follows.

From 1982 to 1996 Des Champs occupied an industrial facility on Okner

Parkway in Livingston where it assembled heat recovery ventilators. In early

1990, Des Champs moved a majority of its manufacturing operations to a new

facility in Virginia, but several employees remained at the Okner site. In 1996

Des Champs decided to cease its operations at Okner altogether. Before

terminating its operations on the site, Des Champs submitted to the DEP a

preliminary assessment report, in which the company's owner certified that the

only hazardous substances it used at the site were five gallons of gasoline and

several tanks of propane gas.

In January 1997, Des Champs submitted to the DEP what is known as a

"negative declaration" certifying that there had been no discharge of hazardous

A-1475-18T1 3 substances from the property. Based on that information, the DEP issued a no

further action ("NFA") letter in January 1997 authorizing Des Champs to cease

operations at the Okner location.

In September 1997, R&K Associates, LLC ("R&K") bought the property

from Des Champs. R&K remains the property's current owner.

In 2005, the DEP began to investigate groundwater contamination in the

Township of Livingston. The contamination was traced to the Okner property

formerly occupied by Des Champs. As a result, in November 2008, the DEP

rescinded its January 1997 NFA letter and directed Des Champs to investigate

the groundwater contamination and submit a site investigation report in

compliance with the ISRA.1

In January 2009, Des Champs applied for a DQE pursuant to N.J.S.A.

13:1K-9.7, seeking an exemption from the strict liability remediation

requirements of ISRA. To support that application, Des Champs's owner

submitted an affidavit contending that the Okner site had, at maximum, only the

following: five gallons of gasoline, ten gallons of hydraulic oil, five gallons of

1 According to the DEP's counsel at oral argument on the appeal, the site investigation has yet to be completed. A-1475-18T1 4 motor oil, fifteen spray cans of paint, three cartridges of copy machine toner ,

and ten gallons of oil-based paints.

On January 21, 2011, the DEP denied Des Champs' DQE application

because the company had failed to certify that the property was free of

contamination. The first appeal ensued.

In our published decision, Des Champs Labs. Inc., v. Martin, 427 N.J.

Super. 84 (App. Div. 2012), we vacated the DEP's denial of a DQE to Des

Champs. We did so because we found that ISRA did not authorize the DEP to

require a DQE applicant to certify that the property is free of contamination.

We remanded the matter for further consideration by the DEP, this time without

regard to the improper condition.

On remand in August 2012, the DEP granted Des Champs the DQE. This

time, R&K, which opposed Des Champs' receipt of a DQE, appealed.

On May 16, 2013, in the second appeal, we reversed the grant of the DQE

because R&K had not been provided with a chance to participate in the remand

proceedings. R&K Assocs., LLC v. N.J. Dep't of Envtl. Prot., No. A-0413-12

(App. Div. May 16, 2013) ("Des Champs II").

By this point the DEP determined that the contested factual issues should

be heard before an ALJ. Consequently, an ALJ held a three-day Office of

A-1475-18T1 5 Administrative Law ("OAL") hearing in June and August 2014, at which seven

witnesses testified. Because of the long passage of time, the witnesses had

difficulty recalling the operative facts from eighteen years earlier. The ALJ

recognized this impediment in her initial decision, finding that "99% of the

testimony was not based on present day recollection of past events but rather

was based on each witness' genuine belief that he would have most likely done

x, y or z back then, or it was recollection refreshed through historic documents."

Following the administrative hearings, the ALJ recommended the denial

of the DQE. The ALJ determined that, as a matter of law, a DQE cannot be

obtained by a former owner of the property such as Des Champs. However, the

ALJ did note in her decision that, had this apparent legal requirement not

existed, she would have recommended issuance of the DQE because she found

that R&K had the burden of proof in the matter and had not sustained that

burden.2

DEP Commissioner Bob Martin adopted the ALJ's determination, with

certain modifications, in a decision dated April 6, 2015. Among other things,

2 The ALJ's initial decision did contain a caveat with a factual finding that Des Champs had provided its consultant with "selective information" about its activities on site. The ALJ identified this non-disclosure as an "alternative basis" for denying Des Champs a DQE. We discus that caveat, infra, in Part II. A-1475-18T1 6 in the course of his decision Commissioner Martin criticized Des Champs for

not retaining necessary records that would help substantiate what activities

actually had occurred at the site.

The third appeal then ensued, in which Des Champs successfully argued

to this court that a former owner of a property such as itself can be eligible to

obtain a DQE. R&K Assocs., LLC v. N.J. Dep't of Envtl. Prot., A-4177-14

(App. Div. Apr. 10, 2017) ("Des Champs III"). Nonetheless, we found in our

opinion that the burden of proof properly should not rest on the objector (here,

R&K) but rather should rest on the applicant (here, Des Champs), by a

preponderance of the evidence. Id., slip op. at 22.

Based on these determinations, we remanded the case yet another time

back to the DEP. In our unpublished opinion, we provided very detailed

instructions to the DEP and the ALJ, explaining:

Improvidently shifting the burden at the hearing to R&K, the ALJ concluded from the rather scant and stale proofs tendered by Des Champs' witnesses that the evidence was sufficient to justify the issuance of a DQE, but for the legal impediments we have already discussed. We do not know from the ALJ's decision whether, if the burden had appropriately remained with Des Champs, she would have reached the same conclusions about the strength of the record.

In light of this fundamental error of burden allocation, we are constrained to remand the matter so

A-1475-18T1 7 that the ALJ now can consider the proofs in a manner that appropriately requires Des Champs to show its entitlement to a DQE by a preponderance of the evidence. We accordingly remand the matter to the DEP to make such a referral to the ALJ. The ALJ shall have the discretion to reopen the record as she may see fit in order to address more fully the pertinent issues. Counsel promptly shall provide courtesy copies of their appellate briefs and appendices to assist her in that endeavor. Following the remand, any aggrieved party(ies) may seek further review by the Commissioner, and, beyond that, through an appeal in this court.

[Des Champs III, slip op. at 23].

The matter was then remanded back again to the ALJ. All parties

stipulated that the existing administrative record developed from 2014 did not

need to be further amplified.

Based on that record, the ALJ reconsidered her previous determination,

and found that the evidence did not justify Des Champs receiving a DQE. The

ALJ noted there were numerous discrepancies in Des Champs' various

submissions to the DEP, that Des Champs failed to identify in its application at

least two of the operations at the Okner facility, and that there was a troublesome

lack of documentation regarding the company's actual usage of hazardous

substances. As the ALJ summarized it:

I must CONCLUDE that Des Champs has failed to prove that it is factually entitled to a DQE on the

A-1475-18T1 8 Property because records have been lost; the agency has been handicapped in its review role; and there are simply too many open-ended questions about the operations' use of hazardous materials during its heyday.

Commissioner McCabe adopted the ALJ's decision in a final agency

decision in October 2018. The present appeal by De Champs, which is opposed

by both the DEP and R&K, ensued.

Des Champs contends that the ALJ should have adhered to her original

assessment of the record and found the company is entitled to a DQE. Des

Champs argues that the DEP and R&K have mischaracterized the record and

that Des Champs did not mislead the Department concerning its actual on-site

activities. The company maintains the record shows that it only used de minimis

quantities of hazardous substances at the site and is therefore entitled to a DQE.

Des Champs also contends the ALJ was obligated to adhere to her factual

and credibility findings from her 2014 decision, and that she arbitrarily

reconsidered her original assessment of the record without justification.

II.

Our scope of appellate review of Commissioner's McCabe's October 28,

2018 final administrative agency decision is limited. As the Supreme Court has

instructed:

A-1475-18T1 9 The appellate court ordinarily should not disturb an administrative agency's determinations or findings unless there is a clear showing that (1) the agency did not follow the law; (2) the decision was arbitrary, capricious, or unreasonable; or (3) the decision was not supported by substantial evidence.

[In re Virtua-West Jersey Hosp. Voorhees for a Certificate of Need, 194 N.J. 413, 422 (2008)].

Des Champs has failed to demonstrate on the present appeal any of these three

limited exceptions to overcome the general policy of judicial deference to the

administrative agency's expertise. The Commissioner's decision: (1) followed

the law; (2) is not demonstrably arbitrary, capricious or unreasonable; and (3) is

adequately supported by substantial evidence in the administrative record.

We acknowledge that this court overturned three previous administrative

decisions of the DEP in this litigation. In each of those instances, however, the

agency had made an unfortunate legal or procedural error. Those errors included

misinterpreting the pertinent statute to require the property to be free of

contamination; denying R&K its legal right as property owner to participate in

the case as an intervenor; and in misconstruing the law to disallow a former

property owner to receive a DQE. Notably for the present appeal, in Des

Champs III we also corrected the agency's misapprehension about the legally

appropriate allocation of the burden of proof. All of those legal issues were

A-1475-18T1 10 suitable for this court's de novo review and intervention. Mayflower Sec. Co.

v. Bureau of Sec. in Div. of Consumer Affairs of Dep't of Law & Public Safety,

64 N.J. 85, 93 (1973) (noting that appellate courts are not bound by an

administrative agency's disposition of a legal issue).

The present appeal is markedly different from the three previous ones

because it does not hinge upon a legal issue but instead concerns the strength of

the factual evidence in the record. On remand, the ALJ duly reconsidered her

original decision, and concluded that Des Champs had "failed to prove it is

factually entitled to a DQE." The DEP Commissioner upheld that factual

determination, and so do we.

Des Champs contends, in essence, that the ALJ was stuck with findings

she made in her 2014 original decision, and that this court's remand did not

permit her to change her mind after reflecting further upon the proofs. This

argument misreads our 2017 remand too narrowly and rigidly, and also

misconceives the decisional authority of a judicial officer such as an ALJ.

As the Supreme Court reaffirmed in Lombardi v. Masso, 207 N.J. 517

(2011), it is "well established" that a jurist "'has the inherent power to exercise

in [his or her] sound discretion, to review, revise, reconsider and modify . . .

interlocutory orders at any time prior to the entry of final judgment.'" Id. at 534

A-1475-18T1 11 (quoting Johnson v. Cyklop Strapping Corp., 220 N.J. Super. 250, 257 (App.

Div. 1987)) (emphasis added). This power of a judge to reconsider is "rooted in

the common law." Ibid. It is a long-recognized power to grant relief from error

which can be "'exercised in justice and good conscience.'" Id. at 535 (quoting

United States v. Jerry, 487 F.2d 600, 604 (3rd Cir. 1973)). Administrative

tribunals likewise have such "an inherent power, parallel to that of the courts, to

reopen [their] own judgments on equitable grounds in the interests of justice."

Lee v. W.S. Steel Warehousing, 205 N.J. Super. 153, 156 (App. Div. 1985).

As the result of our 2017 opinion vacating the final agency decision on

discrete grounds not at issue here, this administrative case, once again, became

non-final. We made quite clear in our opinion that the ALJ should take a fresh

look at the case, this time placing the burden of persuasion upon Des Champs,

and decide whether "she would have reached the same conclusions about the

strength of the record." Des Champs III, slip op. at 23. The ALJ was explicitly

authorized to weigh the evidence anew. The ALJ did so, this time viewing the

case through a different prism of burden allocation, and she reached a different

outcome. It was not arbitrary or capricious for her to do so.

Des Champs portrays the ALJ's original 2014 decision as if it had

consistently credited the evidence as being in Des Champs' favor. That is not

A-1475-18T1 12 so. Indeed, the ALJ in her original decision several times expressed misgivings

and concerns about the relative paucity of evidence and about information that

Des Champs omitted concerning its operations.

Several paragraphs of the 2014 decision focused upon these informational

shortcomings, with respect to what had not been conveyed to Des Champs'

environmental consultant Joseph Pilewski concerning the company's so-called

"paint spray booth" activities and the company's use of a fireproof storage

cabinet. The ALJ also highlighted testimony from Livingston Township Fire

Department witnesses, who described safety concerns regarding the spray booth

and other aspects of the site.

Significantly, in footnote 8 of her 2014 decision, the ALJ made these

adverse factual findings concerning Des Champs' conduct in providing

"selective information" to its consultant about its on-site operations:

Separate and apart from the equitable argument on waiver of the DQE option, I would CONCLUDE that the testimony of Des Champs' environmental consultant is persuasive on the factual point that the company more likely than not was not eligible for a DQE exemption initially, and thus an NFA was sought. There is no reason to doubt the testimony of Pilewski that the normal decision-tree is to first explore ISRA exemptions. To the extent that Pilewski was not aware of potential areas of concerns such as the spray paint booth or hazardous storage cabinet, I must CONCLUDE that same was the result of selective

A-1475-18T1 13 information produced by Des Champs, the party who was the only one that could have provided information not obvious to any third-party observer. Because of the legal conclusion reached below, I need not rely upon these conclusions to reach my Initial Decision, but they are set forth herein as alternative bases for my ruling.

Although this finding is not completely dispositive of the issues, the ALJ saw

fit to reiterate them in full in her post-remand 2018 decision. As the ALJ

explained, her original concerns about "the failure of Des Champs to fully

inform Pilewski of its past manufacturing operations and use of potentially

hazardous materials" are failings that "fall at its [Des Champs'] feet," now that

it bears the burden of proof. The ALJ's explanation is eminently reasonable.

Moreover, Des Champs had an opportunity to attempt to expand the record

and strengthen its proofs on remand. It elected – perhaps for strategic reasons

– not to do so. Accordingly, Des Champs bears responsibility for its lack of

success in surmounting the preponderance standard of proof.

Des Champs further argues that the ALJ was irrevocably bound in 2018

by her 2014 determination that Des Camps' witnesses were credible. It is readily

apparent from an objective reading of the ALJ's 2018 decision that she

reconsidered her original pronouncement in this regard, and, on further

reflection, implicitly found certain aspects of that testimony to be insufficiently

credible to satisfy Des Champs' reallocated burden of proof. To be sure, it would

A-1475-18T1 14 have been preferable if the ALJ had been more explicit and detailed about

findings from her 2014 decision that she was now reconsidering. But the gist of

the ALJ's ultimate assessment of the evidence is clear and transparent.

Finally, it bears noting that the ALJ did not stray from her original "bottom

line." The ALJ concluded in 2014 that Des Champs should be denied a DQE.

She reached the same conclusion in 2018, albeit based upon different grounds.

Commissioner McCabe's final agency decision is consequently affirmed.

The matter is now concluded.

Affirmed.

A-1475-18T1 15