Cumberland Farms, Inc. v. N.J. Dep't of Envtl. Prot.

• Decision Date: 02 November 2016
• Citation: 447 N.J.Super. 423,148 A.3d 767
• Parties: Cumberland Farms, Inc., Plaintiff-Appellant/Cross-Respondent, v. New Jersey Department of Environmental Protection and The Administrator of the New Jersey Spill Compensation Fund, Defendants-Respondents/Cross-Appellants.
• Court: New Jersey Superior Court — Appellate Division

447 N.J.Super. 423

148 A.3d 767

Cumberland Farms, Inc., Plaintiff-Appellant/Cross-Respondent,

v.New Jersey Department of Environmental Protection and The Administrator of the New Jersey Spill Compensation Fund, Defendants-Respondents/Cross-Appellants.

Superior Court of New Jersey, Appellate Division.

Argued October 17, 2016

Decided November 2, 2016

Mark E. Tully (Goodwin Procter, LLP) of the Massachusetts bar, admitted pro hac vice, argued the cause for appellant/cross-respondent (Archer & Greiner, Mr. Tullyand Chad W. Higgins (Goodwin Procter, LLP) of the Massachusetts bar, admitted pro hac vice, attorneys; Mr. Tully, Mr. Higgins, and Nicholas J. Lochetta, II, on the briefs).

Leonard Z. Kaufmann argued the cause for respondents/cross-appellants (Christopher S. Porrino, Attorney General, and Cohn Lifland Pearlman Herrmann & Knopf, LLP,attorneys; Mr. Kaufmann, Barry A. Knopf, and Gwen Farley, Deputy Attorney General, on the briefs).

Before Judges Sabatino, Haas and Currier.

The opinion of the court was delivered by

HAAS, J.A.D.

Plaintiff Cumberland Farms, Inc. (“CFI”) appeals from the Law Division's April 15, 2015 order dismissing its complaint seeking to enforce an alleged settlement with defendants New Jersey Department of Environmental Protection and the Administrator of the New Jersey Spill Compensation Fund (collectively “the DEP”) that purportedly resolved natural resource damage claims the DEP had asserted under the New Jersey Spill and Compensation Act, N.J.S.A. 58:10–23.11 to -23.50 (“the Spill Act”). The DEP has filed a cross-appeal from a provision in the same order granting judgment to CFI on its breach of the implied covenant of good faith and fair dealing claim, and ordering CFI and DEP to continue settlement negotiations.

Having reviewed the parties' contentions in light of the record and applicable law, we affirm the trial court's dismissal of CFI's breach of contract, specific performance, promissory estoppel, and declaratory judgment claims. However, on the DEP's cross-appeal, we reverse the trial court's decision granting judgment to CFI on its breach of the implied covenant of good faith and fair dealing claim.

I.

We derive the following facts and procedural history from the record developed during the two-day bench trial. Under the Spill Act, the DEP may seek damages against a responsible party for the loss of use of natural resources adversely affected by the party's discharge of hazardous substances. N.J. Dep't of Envtl. Prot. v. Exxon Mobil Corp. , 393 N.J.Super. 388, 399–400, 923 A .2d 345 (App. Div. 2007) (citing N.J.S.A. 58:10–23.11f(a)(1) and –23.11q). In an attempt to encourage responsible parties to voluntarily settle their potential natural resource damages (“NRD”) liability, the DEP published Policy Directive 2003-07 (“the Directive”) in September 2003. Id. at 395, 923 A .2d 345. The Directive, which by its terms created “no enforceable rights, legal or equitable, for any person,” laid out the DEP's procedures and formulae for resolving NRD claims. In order to take advantage of the settlement process, responsible parties had to notify the DEP prior to January 2, 2004 of their intention to settle any potential NRD claims.

CFI owns numerous convenience stores and service stations in New Jersey. On December 31, 2003, CFI's attorney sent a letter to the Commissioner of the DEP advising that “CFI would like to voluntarily enter into good faith discussions with the [DEP] concerning any potential NRD claims at this time. ...” In May 2004, CFI identified twenty-three of its sites as candidates for settlement. CFI later notified the DEP of another fifty-five potential sites where it faced potential NRD liability.

At trial, CFI called the Administrator of the DEP's Office of Natural Resource Restoration (“ONRR”), John Sacco, as a witness. Sacco testified that he and his staff member, Vicky Galofre, did not have the authority to approve NRD settlements. Instead, Sacco stated that he and Galofre only had the “authority to take part in negotiation, [and] come to an understanding of terms” with the responsible party. Once Sacco knew the terms of a proposed settlement, he had to “go to [his] respective management teams and make a recommendation or start a discussion and then ... at that point get the authority to finalize a document for settlement.”

According to Sacco, proposed settlements proceeded through “a very iterative process. It goes back and forth quite often.” There were repeating rounds of analysis between the ONRR, the DEP's management teams, and the New Jersey Division of Law, which provided legal advice to the DEP. The attorneys for potential responsible parties engaged in a similar process with their clients and experts. During this process, which normally took months to complete, the parties exchanged numerous drafts of the proposed settlement agreement, correspondence, and other documents before any enforceable agreement could be struck.

Sacco also testified about the public notice requirement the DEP and responsible parties had to follow before any settlement could be finalized. On January 12, 2006, the Legislature enacted L. 2005, c. 348. This law, which became effective on April 12, 2006, amended N.J.S.A. 58:10–23.11f(b) to provide that a responsible party that had resolved its NRD liability with the DEP “shall not be liable for claims for contribution [from any non-settling responsible parties] regarding matters addressed in the settlement. ...”

Chapter 348 also added a new provision, N.J.S.A. 58:10–23.11e2, which stated:

At least 30 days^{[1 ]}prior to its agreement to any administrative or judicially approved settlement ... the [DEP] shall publish in the New Jersey Register and on the [DEP's] website the name of the case, the names of the parties to the settlement ..., the location of the property on which the discharge occurred, and a summary of the terms of the settlement ... , including the amount of any monetary payments made or to be made. The [DEP] shall also provide written notice of the settlement ... , which shall include the information listed above, to all other parties in the case and to any other potentially responsible parties of whom the [DEP] has notice at the time of the publication.

Thus, under this new provision, the DEP and a responsible party could not agree to a final settlement of a NRD claim until after public notice of the possible settlement had been provided.

Even prior to the enactment of N.J.S.A. 58:10–23.11e2, however, the settlement agreements negotiated between the DEP and responsible parties included provisions requiring the publication of public notice in the New Jersey Register of a settlement agreement, even if it was already signed. For example, the first settlement agreement the DEP negotiated with CFI involved a site in Ridgefield. This agreement provided that the DEP reserved the right to withdraw from the settlement if the public comments received following the notice “indicate[d] to the [DEP] in its sole discretion, that the [s]ettlement [a]greement is inappropriate, improper, or inadequate.” Thus, the DEP retained the right to withdraw from the agreement based upon its review of any comments received from the public or other interested parties.

Prior to the April 12, 2006 effective date of the thirty-day advance public notice requirement established by N.J.S.A. 58:10–23.11e2, the DEP and CFI entered into a written settlement agreement for the remaining twenty-two sites CFI had originally identified as candidates for potential settlement. As was the case with the Ridgefield settlement, the parties exchanged multiple draft agreements and correspondence before an agreement covering all twenty-two sites was executed. Like the Ridgefield settlement, this agreement required public notice of the settlement, and granted the DEP the right to withdraw from the agreement if, after reviewing any public comments, it determined the agreement was “inappropriate, improper, or inadequate.”

At that point, there were fifty-five CFI sites remaining for consideration under the settlement program. The DEP had already initiated litigation to recover NRD damages from CFI for one of these sites, which was located in Berkeley Township. Settlement negotiations involving sites that were already in litigation were handled in the first instance by the DEP's outside litigation counsel, rather than by Sacco or Galofre. CFI's attorney testified that she wanted to keep the other fifty-four sites out of litigation. The DEP agreed with this approach. Therefore, the parties dealt with the Berkeley site separately. Indeed, CFI's attorney testified that none of the correspondence CFI subsequently exchanged with DEP's litigation counsel concerning the Berkley property mentioned the remaining fifty-four sites.

After going through a mediation process, CFI and the DEP's litigation counsel negotiated a settlement of the Berkeley site litigation. On April 12, 2007, DEP's litigation counsel advised CFI's attorney that CFI's “proposed settlement has been approved and accept[ed] by the State.” The parties then began a year-long exchange of documents and correspondence until they agreed upon the terms of the agreement. At that point, and in accordance with N.J.S.A. 58:10–23.11e2, the parties arranged for public notice of the unsigned agreement. The DEP “received no comments that disclosed facts or considerations that indicated to the [DEP], in its sole discretion, that the [s]ettlement [a]greement was inappropriate, improper, or inadequate[,]” and the parties consummated the agreement on April 14, 2008, when the final required signature was affixed to the document.

The DEP did not issue a release to CFI concerning the NRD claims relating to the Berkeley site until 2013. At trial, Sacco speculated that the release for that site may have “fell through the cracks.”

As part of its settlement of the Berkeley site litigation, CFI agreed to fund the purchase of forty-three acres of land in Cumberland...