Wade Clark Mulcahy LLP

<p style="text-align: justify;">The State of New Jersey, and its courts, are still reeling from the aftermath of Hurricane Sandy. In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2019/09/US-Masters-Residential-Property-USA-Fund-v.-New-Jersey-Department-of-Environmental-Protection-1.pdf">US Masters Residential Property USA Fund v. New Jersey Department of Environmental Protection</a>, </em>the New Jersey Supreme Court was tasked with reviewing an arbitrator’s decision in connection with allegedly contaminated flood waters in the storm’s wake. The Court’s decision, and the legal road it took to reach its destination, provide important lessons that impact other environmental cases throughout the state.</p>
<p style="text-align: justify;">The claimant owned five adjoining residential properties located near the waterfront in Bayonne, New Jersey. During the aftermath of Hurricane Sandy, petroleum-based contaminants were allegedly discharged onto the five properties, rendering them inaccessible and uninhabitable. The claimant filed a timely claim seeking reimbursement based on an expert’s personal observations and laboratory analyses. The New Jersey Department of Environmental Protection (“NJDEP”) investigated and rejected the claim on the grounds that the source of the contamination was a historic fill rather than oil.</p>
<p style="text-align: justify;">After a two-year delay in the NJDEP’s scheduling of Spill Act arbitration, the parties arbitrated the dispute. On the eve of arbitration, the NJDEP served a rebuttal expert report supporting the historic fill explanation but also suggesting that diffuse anthropogenic pollution (DAP) was also a likely source of contamination. At arbitration, the administrative law judge rejected the historic fill theory but nonetheless concluded that the claimant failed to satisfy its burden to show the damage was caused by a post-Spill Act discharge and dismissed the claim. The claimant appealed.</p>
<p style="text-align: justify;">The New Jersey Supreme Court reviewed the NJDEP’s regulations for Spill Fund arbitrations, which require a clear showing of arbitrary, capricious, or unreasonable result to overturn the arbitrator’s ruling. Despite that high bar, the Supreme Court ruled the administrative law judge erred in his discovery rulings (i.e., permitting the NJDEP’s late expert report but barring the claimant’s response) and misperceived critical facts in the record in connection with the NJDEP expert’s conclusions. The arbitrator’s rejection of the claimant’s supplemental expert report and the misperception of critical facts required a remand.</p>
<p style="text-align: justify;">The importance of the result is not so much in the reasoning as it is in the process; the court’s opinion is rife with discussions of the NJDEP’s conduct and fundamental issues of fairness. This suggests that claimant, rather than highlighting the intricate technical facts of the case, instead likely focused on the significance of Superstorm Sandy and the fundamental unfairness of the NJDEP’s handling of the claim at the administrative level. By relying on these fundamental fairness and due process grounds, the claimant made a compelling case that otherwise would have been bogged down in technical jargon and administrative regulations.</p>
<p style="text-align: justify;">Thanks to Brent Bouma for his contribution to this post. Please email <a href="mailto:VPinto@wcmlaw.com">Vito A. Pinto</a> with any questions.</p>