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Environmental & Energy Law Monitor

News & Updates on Environmental & Energy Law in the Mid-Atlantic Region and Throughout the United States

WE ARE JUST GETTING STARTED: EPA Issues Much Anticipated Cleanup Plan for the Lower 8.3 Miles of the Lower Passaic River

Posted in CERCLA

The United States Environmental Protection Agency (“EPA”) recently issued the Record of Decision (“ROD”) for the lower 8.3 miles of the Lower Passaic River, which sets forth EPA’s $1.38 billion remedy. Potentially Responsible Parties (“PRPs”) will be interested to know that the $1.38 billion price tag only addresses one of the operable units that comprise the Diamond Alkali Superfund Site, which includes the 17-mile tidal stretch of the Lower Passaic River.

Sediment Mega Sites

In recent years, EPA has increasingly shifted more of its focus towards contaminated waterways, as opposed to the traditional single site Superfund site.  Of all the Superfund sites throughout the United States, “sediment mega sites” like the Gowanus Canal, Fox River, Portland Harbor and the Hudson River (just to name a few) are among the most complex to investigate, the largest in areal extent, and the most challenging and expensive to remediate.

Remediating sediment mega sites is a massive undertaking because of the persistent nature of the contaminants, the hundreds of potential sources and the migration and mixing of the contamination from tidal influences. It comes as no surprise that the remediation costs for these sediment mega sites can exceed $1 billion.

As is common for these waterways, the sediments in the Passaic River consist of a chemical soup of hazardous substances, including dioxin, PCBs, mercury, pesticides (including DDT) and heavy metals, created from generations of industrial operations along the waterways.  According to EPA, the remedy released in this ROD is the final action for the sediments in the lower 8.3 miles and an interim action for the water column in this section of the river.  Meanwhile, EPA and some of the PRPs are still studying the sediments in the upper 9 miles, the water column of the entire 17 miles of the river and the entire Newark Bay Study Area. The scope and cost of those remedies are unknown. We have a long road ahead of us.

The Proposed Remedy

The scope of the proposed remedy is extensive.  It includes:

  • Bank to bank dredging of approximately 3.5 million cubic yards of sediments;
  • Installing an engineered cap over the river bottom for the entire 8.3 miles;
  • Transporting the dredged materials to be dewatered, treated and disposed;
  • Long-term monitoring and maintenance of the engineered cap; and
  • Long-term monitoring of fish, crabs and sediment.

What’s Next?

If EPA is following its Superfund playbook for traditional sites, its next move is to issue “Special Notice Letters” to some or all of the PRPs inviting them to perform or fund the proposed remedy. Given the complexity of sediment mega sites, however, EPA has reserved the right to depart from the playbook.  EPA may therefore take a different approach enforcing this ROD, which is certainly possible in light of the overwhelming number of PRPs involved.  The next step is to see if EPA issues any Special Notice Letters, or takes an alternative approach.

Also, keep in mind the $1.38 billion remedy does not address natural resource damages (“NRDs”). The Natural Resource Trustees (which have jurisdiction over NRDs) have yet to publish an NRD Assessment.

Stay tuned to the Cole Schotz blog as we continue to monitor this landmark cleanup.

“Better Late Than Never” Doesn’t Work for Claims Made Policies

Posted in Environmental Insurance

The New Jersey Supreme Court recently held that an insurance company was not required to show it was prejudiced by an insured’s late notice in order to deny coverage under a claims made policy.  In Templo Fuente de Vida Corp. v. National Union Fire Insurance Company, Templo Fuente de Vida Corp. (“Templo”) engaged Morris Mortgage Inc. (“MMI”) to find a funding source for Templo’s purchase of real estate.  MMI identified Merl Financial Group, Inc. (“Merl”) as a possible funding source.  However, Merl was unable to fund the loan to allow Templo to purchase the property.  Templo’s seller terminated the purchase agreement and, as a result, Templo sustained losses.

Templo sued Merl.  Merl, which was restructured and renamed to First Independent Financial Group (“First Independent”), had a $1 million Directors and Officers liability insurance policy from National Union Fire Insurance Company of Pittsburgh (“National Union”) that was a claims made policy.  The policy required the insured to provide notice of a claim to National Union during the policy period and as soon as practicable.

First Independent provided notice to National Union during the policy period but more than six months after the first complaint was filed against it by Templo.  First Independent subsequently settled with Templo and, as part of that settlement, First Independent assigned its rights in the National Union policy to Templo.

Templo subsequently sued National Union seeking coverage.  National Union moved for summary judgment and the trial court dismissed Templo’s complaint, finding that Templo failed to provide notice of the claim “as soon as practicable” as required by the policy.  The trial court, relying on Zuckerman v. National Union Fire Ins. Co., 100 N.J. 304 (1985), held that National Union was not required to show prejudice to avoid coverage.  The Appellate Division affirmed the trial court’s holding and the Supreme Court granted Templo’s petition for certification.

Templo argued that the issue of whether a claim was reported as soon as practicable is a fact-sensitive determination.  Templo urged the court to consider the circumstances and the length of delay in providing notice to National Union.  The court, however, noted that Templo failed to provide any facts as to “why the delay occurred.”  Accordingly, the court held that the “six month delay did not satisfy the policy’s notice requirement.”  The court further noted that its decision was not a bright line test for determining compliance with the “as soon as practicable” notice provision under a claims made policy.

The court next addressed whether National Union had to show prejudice in order to deny coverage.  Templo argued that the court should distinguish Zuckerman and extend the holding of Cooper v. Government Employees Ins. Co., 51 N.J. 86 (1968) to claims made policies.  The New Jersey Supreme Court in Cooper requires an insurer under an occurrence policy to show appreciable prejudice to deny coverage for late notice.  The New Jersey Supreme Court in Zuckerman ruled that an insurer does not have to show prejudice where an insured reports a claim outside the policy period.  In this case, Templo argued that because notice was given during the policy period, the insurer must show prejudice to deny coverage.

In addressing this issue, the court noted the difference between occurrence based policies and claims made policies, and explained why it required appreciable prejudice under an occurrence based policy for an insurer to deny coverage for late notice.  Next, the court observed that unlike occurrence based policies, claims made policies are typically negotiated and involve sophisticated policy holders that use a broker in securing coverage.  As such, the concerns articulated by the court in imposing an appreciable prejudice standard on occurrence based policies do not exist with claims made policies.  Thus, the court concluded that it could enforce the provisions and terms of the claims made policy in the same fashion as it would for any other type of contract.  The court held that First Independent failed to provide timely notice, and that National Union did not have to show it was prejudiced to deny coverage.

The take away from this recent case is that if an insured knows of a claim against it, the insured should not delay in providing notice to its insurer.  To do otherwise risks having the insurance company deny coverage for failing to provide timely notice.

JOIN THE CLUB: EPA Sizing Up Hackensack River for Superfund Listing

Posted in Remediation Oversight

The Hackensack River may be joining the likes of the Passaic River, the Hudson River, Gowanus Canal, Newtown Creek, Fox River, the Eighteen Mile Creek, and other waterways that have been placed on the Superfund National Priorities List (NPL) by the United States Environmental Protection Agency (EPA) because of extensive contamination resulting from decades of industrial operations along their banks and tributaries.  EPA recently announced that it will begin sampling the Hackensack River’s sediment in 2016 to determine if it is also polluted enough to be placed on the NPL.

In February of this year, the Hackensack Riverkeeper, a non-profit advocacy and conservation group, petitioned the EPA to study the river for inclusion on the NPL.  In an uncharacteristically quick response, EPA agreed to and then commenced a Preliminary Assessment (PA) of the Lower Hackensack River, which is the 17-mile stretch of the river between the Oradell Dam and the mouth of the river in Newark Bay.  This section runs through Bergen and Hudson counties in New Jersey and has several tributaries.

The PA was released earlier this fall.  It comes as no surprise that contaminants including cadmium, lead, mercury, dioxin, benzo(a)pyrene, dibenzo(a,h)anthracene,  PCBs and dieldrin were identified at unacceptable concentrations.  Furthermore, because the tidal influence on the sediments causes both upstream and downstream migration of contaminants, it also comes as no surprise that EPA identified hundreds of facilities and sites as possible sources of the contamination, many of which could become potentially responsible parties (PRPs) as the investigation of the river unfolds.  Most significantly though, EPA assigned a preliminary Hazard Ranking System score of 50, well above the minimum score of 28.5 needed to get on the NPL.  EPA plans to sample the sediment next year as a next step in the process of determining whether to list the river on the NPL.

Given the long history of industrial activities on and near the Hackensack River, it is fully expected that the sediment sampling results will warrant listing on the NPL.  And, given EPA’s increasing attention on surface water and sediments, it is fully expected that EPA will move forward with the listing.  This would be just the start of years of studying the river to identify the most contaminated sections, develop remediation plans and, of course, identify the likely sources of the contamination and pursue claims against them as PRPs.

Licensed to Fill: NJDEP Makes Virgin Material More Attractive for SRP Sites

Posted in Land Development & Sustainable Building, Managing Environmental Risk in Transactions, Remediation Oversight

The New Jersey Department of Environmental Protection (NJDEP) recently renamed and revised its clean fill guidance, which now makes it clear that fill material obtained from a licensed quarry or mine may be used for site remediation without any sampling requirement.

NJDEP’s Technical Requirements for Site Remediation define “clean fill” as material—soil or non-soil—to be used in a remedial action that meets all soil remediation standards and has no debris, solid waste, or free liquids.  Under NJDEP’s December 2011 Alternative and Clean Fill Guidance, offsite material that was proposed for use as clean fill at a Site Remediation Program (SRP) site was required to undergo an evaluation of the historical and current uses of the material, a review of the conditions at the site from which it originated, and sampling to certify that the fill was clean.  While the 2011 guidance made certain exceptions for fill material obtained from a quarry or mine, a minimum of at least one sample was required to be analyzed.

The new “Fill Material Guidance for SRP Sites” addresses concerns raised by redevelopers and LSRPs regarding the burdensome sampling requirements and unnecessary paperwork associated with the use of fill material on SRP sites from a licensed quarry or mine.  Under the new guidance, fill material obtained from a licensed quarry or mine (defined as a facility permitted or authorized to operate under the New Jersey Mine Safety Act or other similar state statutes) may be used at a SRP site without any sampling as long as the quarry or mine operator certifies that the material is from a licensed quarry or mine facility and that the material has not been subject to a discharged hazardous substance at any time.  In the absence of such certification, proposed fill would need to meet the sampling and analysis requirements for clean fill.  This change is significant as it relieves suppliers and users of quarry or mine material of burdensome sampling and certification requirements and eases the process of closing out cleanups and site redevelopment.

It’s Not Their Fault: New Jersey Supreme Court Upholds Dismissal of Nuisance and Trespass Claims in Environmental Context

Posted in Environmental Insurance, Environmental Litigation

The New Jersey Supreme Court recently clarified the elements needed to sustain a claim for nuisance and trespass in the environmental context.  Generally, plaintiffs assert claims under common law such as nuisance and trespass to recover non-cleanup costs associated with environmental contamination.  In Ross v. Lowitz, the defendant homeowners tested an underground storage tank (“UST”) on their property and discovered that the UST leaked.  They subsequently notified their insurance companies.  The contamination on the defendant homeowners’ property migrated to the plaintiffs’ adjacent property.  The insurance companies funded the cleanup and the New Jersey Department of Environmental Protection eventually issued a No Further Action Letter for the cleanup.  However, as a result of the contamination, a prospective purchaser of the plaintiffs’ house cancelled the contract of sale.

The plaintiffs filed suit against defendant homeowners and asserted among other claims, nuisance and trespass.  The plaintiffs also sued the defendant homeowners’ insurance companies asserting that they were a third party beneficiary under the insurance policies.  The plaintiffs sought damages for alleged loss of use of their home and diminution in the value of their property.  The defendants moved for summary judgment and the trial court dismissed the claims against the insurance company and plaintiffs’ claims under the theories of nuisance and trespass.  The appellate division affirmed the trial court’s determination.

The New Jersey Supreme Court in affirming the lower court’s decision, clarified the necessary elements to maintain a cause of action under common law nuisance and trespass.  The Court reviewed the Restatement (Second) of Torts to determine the validity of plaintiffs’ nuisance and trespass claims.  In addressing the nuisance claim, the Court noted that under Section 822 of the Restatement, the plaintiffs must show that the discharge of contaminants from the homeowners’ UST was either negligent or the result of an abnormally dangerous activity.  The Court noted that the storage of home heating oil in a UST is not an abnormally dangerous activity.  The Court further found no fault on behalf of the defendant homeowners that would support a claim for nuisance.

The Court made a similar determination regarding plaintiffs’ trespass cause of action.  Again relying on the Restatements, the Court concluded that to maintain a cause of action under trespass, the plaintiffs must show that defendant homeowners were at fault.  Because the homeowners acted in a reasonable manner in having the UST tested and then contacting their insurance companies upon finding that the UST leaked, the Court affirmed the dismissal of the plaintiffs’ trespass and nuisance claims.

In addressing plaintiffs’ claim against the homeowners’ insurance company, the Court noted that in order for a third party to be found a beneficiary to a contract, the contracting parties must have expressed an intent to have the third party a beneficiary of the contract when they entered into their agreement.  The Court found that there was no evidence that the parties intended the plaintiffs to be third-party beneficiaries to the insurance policy.  The Court ruled that the trial court properly dismissed plaintiffs’ claims against the insurance companies.

The take away from this case is that the mere discharge of contamination that impacts the property of another is insufficient to support claims under common law nuisance and trespass.  There must also be a showing that the persons responsible for the discharge of contaminants were at fault in allowing the discharge to occur.

It’s All Good – New Jersey Judge Approves NJDEP’s Controversial $225 Million Settlement with ExxonMobil

Posted in Environmental Litigation

After months of controversy, public comments, response to public comments, motions to intervene, amicus briefs, oral arguments, editorials and a sustained flurry of activity in social media, the decision we have been waiting for is here – Judge Michael J. Hogan granted NJDEP’s motion to approve the consent judgement with ExxonMobil that settles out for $225 million the State’s original $8.9 billion claimed for natural resource damages.

Based on initial reports on the ruling, the court found that the settlement amount was a reasonable compromise in light of the risks still attached to the complex and costly litigation that has lasted more than a decade, including the risk of a number of appeals preserved by ExxonMobil through the years. Initial reports also indicate that the court found that NJDEP’s damages estimate was rational and the settlement was consistent with the Spill Act and with the public interest.

It can be fully expected that the coalition of environmental groups and State Senator Raymond Lesniak, who have been leading the charge in challenging the settlement as a dirty deal and woefully inadequate, will strongly disagree with the ruling and take steps to overturn it.

Foes of the NJDEP $225 Million Settlement with Exxon Mobil Must File “Friend of the Court” Briefs Today

Posted in Environmental Litigation

Amicus Curiae Briefs Due Today; Oral Argument on Motion to Approve Settlement Rescheduled

After denying their motions to intervene last week (see our coverage here), Judge Hogan issued a Scheduling Order that sets today as the deadline for the eight environmental organizations and State Senator Lesniak (D-Union) to file their amicus curiae briefs.  NJDEP and Exxon Mobil must file their response briefs by the end of the week at noon on Friday, July 24, 2015.

Oral argument on the motion to approve the proposed settlement, which was previously scheduled for tomorrow, will now be held Thursday, July 30, 2015.  Judge Hogan is allowing the amici to participate in the oral argument if they choose to, which we should all expect at this point.

An amicus curiae, a Latin term that literally means ‘friend of the court,’ is an entity that is not a party to a case, but has an interest in the outcome and files a brief to provide information and arguments to the court and otherwise weigh in on the case.  As a non-party, an amicus curiae does not have a right to appeal the final outcome of a case, which is what the eight environmental groups and Senator Lesniak were ultimately seeking when they filed their motions to intervene.  So, these amicus curiae briefs and next week’s oral argument are their very last opportunity to voice their opposition to the settlement before the judge decides whether to approve it (unless they appeal the denial of the motions to intervene; no word so far on whether they will file an appeal).  Senator Lesniak vowed to file such a brief after his motion to intervene was denied, so we expect to see plenty of activity this week.

Stay tuned for discussions on NJDEP’s response to the more than 16,000 public comments on the settlement, which the judge will likely consider in his evaluation of the proposed settlement, as well as a closer look at natural resource damages and what they actually mean.  And continuing updates on the case’s docket.

UPDATE: After the posting of this blog, the Sierra Club of New Jersey posted a press release announcing that it made the amici filings, along with other environmental groups, earlier today.

Too Little, Too Late: Judge Denies Environmental Groups’ Motion to Intervene in Chris Christie’s Exxon Mobil Settlement

Posted in Environmental Litigation

A New Jersey state judge ruled on Monday that eight environmental groups and a New Jersey state senator cannot intervene to challenge the $225 million settlement with Exxon Mobil proposed by the New Jersey Department of Environmental Protection (NJDEP) to end litigation lasting more than a decade and originally alleging more than $8 billion in natural resource damages.

The environmental groups and New Jersey Senator Ray Lesniak (D-Union) sought to urge the court to reject the “sweetheart deal” between Exxon Mobil and Christie’s administration and, if the court approved the settlement, to appeal the approval as a party to the litigation. However, Burlington County Superior Court Judge Michael J. Hogan denied the motions to intervene, ruling that they did not demonstrate the adversity of interest, collusion or nonfeasance necessary to justify their intervention. Instead, the court found that NJDEP adequately represents their interests and that the public comment period provided an adequate forum to voice their objections to the settlement. Judge Hogan also ruled that the motions failed on the timeliness factor, pointing out that the intervenors were aware of the lawsuit since it was filed in 2004 and “have known of their interests in its outcome for eleven years.”

The proposed settlement has been subject to extensive criticism and outcry since NJDEP released the draft consent judgement on April 6, 2015. New Jersey’s environmental statute commonly known as the Spill Act requires a public comment period for at least thirty days for proposed settlements under the statute. Given the controversy and overwhelming public attention, NJDEP doubled the public comment period and collected comments for sixty days. NJDEP received approximately 16,000 public comments – most in opposition to the settlement – by the time the comment period ended on June 5, 2015. The court may also consider the comments in determining if the settlement is fair, reasonable and in the public interest.

Keep in mind that the court has not yet passed judgement on the fairness or reasonableness of the proposed settlement – the hearing for that decision is currently scheduled for Tuesday, July 21, 2015. That is, unless, the intervenors file an appeal of Judge Hogan’s decision on their motions to intervene in the next few days and the hearing is delayed pending that appeal.

Back to the Drawing Board: Supreme Court Sets Aside EPA Regulations on Mercury Emissions from Power Plants

Posted in Environmental Litigation, Regulatory Counseling

The Supreme Court on Monday dealt a setback to the Environmental Protection Agency’s regulation limiting mercury and other toxic emissions from power plants – the “mercury rule.” In Michigan v. Environmental Protection Agency, the Court held that EPA acted unreasonably by making its initial decision to regulate plant emissions without considering the cost of regulation. Although the ruling interrupted the Court’s much-publicized string of “liberal” rulings, in the end the decision may have more impact on the way EPA makes regulations than on whether EPA ultimately regulates emission of mercury and other pollutants from power plants.

The Clean Air Act directs EPA to study and decide whether it is “appropriate and necessary” to regulate power plant emissions. In 2000, EPA concluded that mercury and other toxic emissions from power plants pose a danger to human health and the environment and that regulation of power plants was therefore “appropriate and necessary.” In 2012, after years of further study, rule-making, and litigation, EPA issued its mercury rule. EPA considered costs of compliance in developing the regulations but not in deciding whether to regulate in the first place.

The Supreme Court disagreed with this process. In a 5-to-4 decision, Justice Scalia’s opinion for the majority interpreted the statutory term “appropriate” to require EPA to consider all pertinent factors, including the cost of regulation, in deciding whether to regulate at all. In the Court’s view, EPA’s consideration of cost in fashioning the regulations came too late in the process. The Court therefore held that the power plant regulations were improperly issued.

Justice Kagan’s opinion for the four dissenters agreed with the majority that EPA had to consider cost of any proposed regulations at some time in its rule-making process. But she disagreed that EPA had to do so in deciding whether to regulate power plant emissions in the first place. She argued that EPA reasonably determined that regulation was appropriate based on the finding that exposure to airborne mercury causes extensive health concerns and that EPA could properly consider costs in determining how to regulate, rather than whether to regulate.

The decision in Michigan v. EPA was a loss for environmental advocacy groups that supported the regulation, but it is a narrow ruling, hinging on the meaning of “appropriate.” EPA will have to re-review its decision to regulate emissions from plants and take costs into account, but the Court’s decision does not suggest that cost considerations will ultimately scuttle the mercury rule itself. In fact, industry had already begun to plan operations and investments based on the mercury rule. It remains to be seen how industry and the courts will treat the mercury rule while EPA’s re-review is pending – and what impact, if any, the ruling may have on the Obama EPA’s climate change agenda and other initiatives.

Even if You Lose You May Win (Attorneys’ Fees That Is)

Posted in Environmental Insurance, Environmental Litigation

In New Jersey, if a policyholder is required to sue its insurance company for coverage, Court Rule R.4:42-9 allows a policyholder to recover attorneys’ fees if it is successful in obtaining coverage.  The purpose of this rule is to discourage insurance companies from attempting to avoid their contractual obligation and force their insured to expend counsel fees to establish coverage for which they already paid premiums.  In Occhifinto v. Olivo Construction Company, the New Jersey Supreme Court recently addressed whether a party who was successful in obtaining a declaratory judgment requiring an insurance company to provide coverage in the underlying lawsuit would be able to recoup legal fees even though it did not prevail in the underlying lawsuit.

In Occhifinto, Robert Occhifinto brought a lawsuit against Robert Klepper Mason Contractors, LLC (“Klepper”) and others for defective construction of an addition to a warehouse. Klepper was defended by its insurance company, Mercer Mutual Insurance Company (“Mercer Mutual”). Mercer Mutual subsequently filed a declaratory judgment action challenging its obligation to provide coverage to Klepper in the underlying lawsuit. Occhifinto, on Klepper’s behalf, opposed the insurance company’s action, arguing that Mercer Mutual was required to provide coverage to Klepper. The trial court ruled that Mercer Mutual was required to indemnify Klepper for any covered damages assessed in the underlying lawsuit.

The underlying lawsuit proceeded to trial and the jury found that Klepper was not liable for any damages incurred by Occhifinto as a result of the defective construction. Occhifinto subsequently sought to collect counsel fees it incurred in opposing, on behalf of Klepper, Mercer Mutual’ s lawsuit to deny coverage to Klepper. Occhifinto sought recovery of counsel fees pursuant to the court rule, R.4:42-9(a)(6), which provides that a court may award counsel fees in “an action upon liability or indemnity policy for insurance in favor of a successful claimant.” The trial court denied Occhifinto’s motion and the Appellate Division affirmed. The New Jersey Supreme Court granted certification to determine the issue of whether Occhifinto was entitled to counsel fees under the Court Rules.

Occhifinto contended that he was a successful claimant because the trial court required Mercer Mutual to defend and, if necessary, indemnify Klepper.  Mercer Mutual contended that to be a successful claimant, Occhifinto was required to prevail in the underlying lawsuit against Klepper.

The Supreme Court noted that the case hinged on the definition of a “successful claimant.”  In previewing prior cases interpreting this definition, the Court noted in the case Schmidt v. Smith, 294 N.J. Super. 569 (App. Div. 1996), aff’d, 155 N.J. 44 (1998), the Appellate Division ruled that an insured who obtained defense coverage was entitled to attorneys’  fees under the rule, even if it was later determined that the insured was not entitled to indemnification.  The Court noted that the trial court determined that the insurance company, Mercer Mutual, was obligated to indemnify Klepper if damages were assessed.  Consequently, the Court concluded that Occhifinto did obtain a favorable ruling on the coverage question.  Therefore, Occhifinto was a “successful claimant” entitled to recover attorneys’ fees in opposing,   on behalf of Klepper, the lawsuit filed by Mercer Mutual to deny coverage to Klepper.

The Court Rules provide an insured with leverage in negotiating with insurance companies to obtain coverage.  With the decision in Occhifinto, insurance companies are now faced with the prospect of facing additional and perhaps more vigorous and costly challenges to their decision to deny coverage.  Third parties who are not covered by a policy, but stand to benefit if an insured is provided coverage under a policy of insurance, may now step in and litigate against the insurance company to obtain coverage and recover legal fees even if the third party does not ultimately prevail in the underlying lawsuit.