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Appeals court upholds Industrial park requirements to undertake environmental cleanup but rejects DEP’s demands for penalties

A New Jersey appeals court has affirmed the decision of a New Jersey trial court requiring an industrial establishment to conduct a full environmental remediation at its property. This occurred in the case of Dorine Industrial Park Partnership versus NJ DEP, at al, which was decided on March 6, 2023.

At issue was a business park purchased by Dorine in 1979. Dorine condoized the project and attempted to sell the last four industrial units in the early 1980s. This triggered the cleanup responsibilities under a statute entitled ISRA. ISRA is a transactionally triggered statue that requires environmental assessments and cleanups of property when industrial properties are sold to others. There are some other triggers that implement the requirements of ISRA as well.

In this particular case because the units were sold as condos ISRA was triggered. Around the same time, the municipality determined that it had a significant groundwater contamination problem that extended well beyond this particular industrial establishment. The New Jersey Department of Environmental Protection was aware of both issues and was monitoring both issues.

Dorine was issued a Directive by the New Jersey Department of Environmental Protection requiring it to conduct a cleanup. As a result, a consultant was retained and it was determined that a septic system on site was the primary source of contaminants.

A settlement agreement was reached between the New Jersey Department of Environmental Protection and Dorine in 2002, which required Dorine to address all contaminants from the site. It specifically included the following, perhaps, haunting language “DEP may require additional remediation at the site. “
From that point on, many challenges were asserted whereby Dorine maintained that it had completed its obligations and fully complied with the settlement agreement. DEP took issue with the assertion by Dorine that it had undertaken a complete cleanup.

Predictably, this resulted in a lawsuit called a declaratory judgment action. A declaratory judgment action is a type of lawsuit allowing a party to obtain a judicial determination of rights and responsibilities. Dorine sought a declaratory judgment that it had satisfied all of its environmental cleanup obligations and that New Jersey Department of Environmental Protection’s positions were unfair and factually incorrect.

The trial court held five days of testimony and found that all of the witnesses were credible, with the exception of the owner of the business park. The trial court found that the owner was not credible.

The court found that the clean up obligations by Dorine had in fact not been satisfied and it required that it complete clean up within a specified time. In addition, the court rejected the DEP’s cross motion that penalties be assessed. The court found that the DEP did not comply with the procedural requirements for assessing penalties and therefore denied the cross motion for penalties.

There are a few important points to learn from this case. First, this cleanup had been going on for decades. The longer a cleanup goes on, the greater the likelihood is that some other issue will be detected which will make the clean up even more difficult and more extensive. While many people seem to believe that a long term approach to a cleanup is in the best interest of the entity required to do the cleanup, very often the result is the exact opposite. This seems to be just one example.

Another important lesson from this decision is that settlement agreements must be abundantly clear and as tightly drafted as possible. An agreement with the State that specifically allows the State to require additional site remediation almost guarantees a problem down the road. Maybe that is the best available settlement, but it comes with risk. Let the settling parties beware: open-ended terms are very dangerous.

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