N.J. Dep't of Envtl. Prot. v. Exxon Mobil Corp.

• Citation: 181 A.3d 257,453 N.J.Super. 272
• Decision Date: 12 February 2018
• Docket Number: DOCKET NO. A–0668–15T1 A–0810–15T1
• Parties: NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, Plaintiff–Respondent, v. EXXON MOBIL CORPORATION, Defendant–Respondent.
• Court: New Jersey Superior Court – Appellate Division

453 N.J.Super. 272

181 A.3d 257

NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, Plaintiff–Respondent,

v.EXXON MOBIL CORPORATION, Defendant–Respondent.

DOCKET NO. A–0668–15T1 A–0810–15T1

Superior Court of New Jersey, Appellate Division.

Argued September 11, 2017

Decided February 12, 2018

Raymond J. Lesniak, amicus curiae-appellant, argued the cause pro se, individually and as New Jersey State Senator in A–0668–15 (Richard L. Rudin and Julia O. Donohue, on the briefs).

Edward Lloyd (Columbia Environmental Law Clinic, Morningside Heights Legal Services, Inc.) argued the cause for amicus curiae-appellants New Jersey Sierra Club, Clean Water Action, Environment New Jersey, and Delaware Riverkeeper Network in A–0810–15 (Edward Lloyd, attorney; Edward Lloyd and Susan J. Kraham, on the briefs).

Theodore V. Wells, Jr. (Paul, Weiss, Rifkind, Wharton & Garrison, LLP) of the New York bar, admitted pro hac vice, argued the cause for respondent Exxon Mobil Corporation (Archer & Greiner, and Theodore V. Wells, Jr., attorneys; Marc A. Rollo, Arthur H. Jones, Jr., Theodore V. Wells, Jr., John F. Baughman (Paul, Weiss, Rifkind, Wharton & Garrison, LLP) of the New York bar, admitted pro hac vice, Daniel J. Toal (Paul, Weiss, Rifkind, Wharton & Garrison, LLP) of the New York bar, admitted pro hac vice, and Jaren Janghorbani (Paul, Weiss, Rifkind, Wharton & Garrison, LLP) of the New York bar, admitted pro hac vice, on the brief).

Allan Kanner (Kanner & Whiteley, LLC) of the Louisiana bar, admitted pro hac vice, argued the cause for respondent New Jersey Department of Environmental Protection (Christopher S. Porrino, Attorney General, and Allan Kanner, attorneys; Richard F. Engel, Deputy Attorney General, Jeffrey Jacobson, Chief Counsel, David Apy, Assistant Attorney General, Elizabeth B. Petersen (Kanner & Whiteley, LLC) of the Louisiana bar, admitted pro hac vice, Allison M. Shipp (Kanner & Whiteley, LLC) of the Louisiana bar, admitted pro hac vice, and Allan Kanner, of counsel and on the brief).

Before Judges Messano, O'Connor, and Vernoia.

The opinion of the court was delivered by

MESSANO, P.J.A.D.

In 1991, the New Jersey Department of Environmental Protection (DEP) and Exxon Mobil Corporation (Exxon) entered into two administrative consent orders (ACOs), requiring Exxon to remediate polluted sites it owned and operated at the Bayway Refinery in Linden (Bayway) and the Bayonne Facility (Bayonne). In addition to requiring Exxon to pay a civil penalty, the ACOs required the company to: undertake remedial investigations; prepare work plans and feasibility studies; undertake all additional investigations and actions necessary to remediate the sites under DEP's supervision; submit quarterly progress reports; and reimburse DEP for all oversight costs and costs incurred in investigating and responding to Exxon's discharges. See N.J. Dep't of Envtl. Prot. v. Exxon Mobil Corp., 393 N.J. Super. 388, 391–93, 923 A.2d 345 (App. Div. 2007) ( Exxon I ) (providing historical background regarding operation of these two sites and the ACOs).

Under the ACOs, the State of New Jersey reserved its right to recover additional "natural resource damages" (NRD), i.e., compensation for the injury and destruction of natural resources and the public's loss of the use and enjoyment of those resources. In August 2004, DEP filed two complaints against Exxon seeking NRD at Bayway and Bayonne, and asserting claims under the Spill Compensation and Control Act, N.J.S.A. 58:10–23.11 to –23.24 (Spill Act), and common law theories of public nuisance and trespass.

We need not discuss in detail pretrial rulings and controversies, except to note that in 2006, the trial court granted DEP summary judgment holding Exxon was strictly liable for NRD and restoration costs under the Spill Act. It also dismissed DEP's NRD claim for "loss of use damages." We granted DEP leave to appeal—Exxon did not seek interlocutory review—and, in Exxon I, 393 N.J. Super. at 410, 923 A.2d 345, we reversed and restored DEP's claim for "loss of use" NRD damages. In New Jersey Department of Environmental Protection v. Exxon Mobil Corp., 420 N.J. Super. 395, 397–98, 22 A.3d 1 (App. Div. 2011) ( Exxon II ), we reversed the trial court's dismissal of DEP's strict liability claim, which was added in an amended complaint, on statute of limitations grounds. In 2014, Judge Michael J. Hogan presided over a sixty-six day bench trial.

Both DEP and Exxon moved pre-trial to bar the testimony of all or most of their adversaries' experts. Rather than conduct pre-trial hearings to determine admissibility, see N.J.R.E. 104(a), with the judge's approval, all experts testified while the parties preserved their objections. Utilizing a complex, mathematical methodology known as "Habitat Equivalency Analysis" (HEA), DEP's experts estimated that NRD damages at both sites totaled $8.9 billion. Exxon's experts challenged the admissibility of any opinions based on HEA in the first instance, although, as Judge Hogan noted in his written decision, Exxon's experts, utilizing HEA, estimated NRD damages to be between $1.4 and $3 million.¹

After two days of summations and the submission of written closing arguments, Judge Hogan set about to render a written decision on the reserved N.J.R.E. 104(a) motions and the case in chief. Before he did, however, the parties advised they had reached a settlement.

Under the terms of the proposed consent judgment, Exxon agreed to pay $225 million to the state treasurer, and the State agreed to place that money in a segregated account within the Hazardous Discharge Site Cleanup Fund, where the monies "shall earn interest and may not be used for any purpose" until the consent judgment "becomes final and non-appealable." The State also agreed to: release Exxon from all NRD claims based on the discharge of contaminants onto the soil and sediments of Bayway and Bayonne; dismiss surface water NRD claims without prejudice to raising them, under certain conditions, in a future action; release Exxon with prejudice and covenants not to sue for all NRD claims relating to more than one thousand Exxon retail gas stations in New Jersey, excluding those where methyl tertiary butyl ether (MTBE)² had been discharged; release Exxon with prejudice from all NRD claims relating to sixteen other statewide facilities (designated as Attachment C facilities), including the former Paulsboro Terminal, which had been the subject of ongoing litigation since 2007, but excluding those facilities where MTBE had been discharged; and defer the final remedy determination and remediation of Morses Creek near Bayway until Exxon ceased refining operations at the site.

The parties further agreed that: the consent judgment would not alter, suspend, or otherwise impact Exxon's obligations under any ACO, except for the Morses Creek deferral; the State would retain full authority and sole discretion to require Exxon to take any action to "address an immediate environmental concern, an imminent and substantial endangerment to public health, welfare or the environment, or an emergency response arising from or related to" Bayway, Bayonne, the gas stations and Attachment C facilities; and, the court would retain continued jurisdiction and enforcement of the consent judgment's terms. Lastly, the consent judgment declared that nothing contained therein "shall be considered an admission by [Exxon]," and it granted Exxon contribution protection "to the fullest extent possible" pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601 – 675, the Spill Act, and any other statute, regulation, or common law principle that allowed contribution rights against Exxon.³

DEP provided notice of the proposed consent judgment in accordance with N.J.S.A. 58:10–23.11e2. See Cumberland Farms, Inc. v. N.J. Dep't of Envtl. Prot., 447 N.J. Super. 423, 441, 148 A.3d 767 (App. Div. 2016) ("[U]nder N.J.S.A. 58:10–23.11e2, the DEP and a potentially responsible party may not agree to a settlement of NRD liability until after the DEP has published notice of the terms of the settlement."), certif. denied, 229 N.J. 149, 160 A.3d 701 (2017). DEP received 16,013 public comments, mostly objections, including comments from Raymond J. Lesniak, a resident of the Bayway section of Elizabeth and State Senator for the 20th Legislative District, (appellant in A–0668–15), and the New Jersey Sierra Club, Clean Water Action, Environment New Jersey, and Delaware Riverkeeper Network (collectively, the Environmental Groups) (appellants in A–0810–15).

Before DEP responded to the comments and indicated whether it intended to seek approval of the consent judgment or not, Lesniak and the Environmental Groups moved to intervene in the lawsuit. In a written opinion, Judge Hogan denied those motions without prejudice.

The same day, DEP issued its response to the public comments, portions of which we summarize. DEP stated the proposed judgment was the second largest NRD settlement with a single corporate defendant in United States' history, and the largest NRD settlement in New Jersey's history. DEP asserted that Exxon had already spent more than $130 million remediating Bayway and more than $120 million remediating Bayonne, and that the proposed consent judgment would not change or cap Exxon's continued obligation to "spend whatever amount of money is necessary to fully remediate all of its contaminated sites in accordance with DEP's regulatory standards."

DEP also noted "numerous and significant" legal and evidentiary issues in the lawsuit were still unresolved, with no assurance DEP would ultimately succeed. For example, early pretrial decisions in the State's favor as to liability could be subject to appeal and ultimately reversed. Additionally, Judge Hogan had not yet ruled on the admissibility of DEP's experts' opinions, or determined the amount of NRD, if any, actually proven by the State. Under the proposed settlement, Exxon gave up its...