U.S. Gypsum v. Office Environmental Affairs

• Decision Date: 04 June 2007
• Docket Number: No. 06-P-169.,06-P-169.
• Citation: 69 Mass. App. Ct. 243,867 N.E.2d 764
• Parties: UNITED STATES GYPSUM COMPANY & others<SMALL><SUP>1</SUP></SMALL> v. EXECUTIVE OFFICE OF ENVIRONMENTAL AFFAIRS & others.<SMALL><SUP>2</SUP></SMALL>
• Court: Appeals Court of Massachusetts

867 N.E.2d 764

69 Mass. App. Ct. 243

UNITED STATES GYPSUM COMPANY & others¹ v. EXECUTIVE OFFICE OF ENVIRONMENTAL AFFAIRS & others.²

No. 06-P-169.

Appeals Court of Massachusetts, Suffolk.

Argued December 4, 2006.

Decided June 4, 2007.

Susan E. Stenger, Boston, for United States Gypsum Company.

Edward T. Patten for LaFarge North America, Inc.

Benjamin J. Ericson, Assistant Attorney General, for Executive Office of Environmental Affairs & others.

Daniel P. Dain for John J. Flatley & another.

Gerald J. Caruso, Boston, for Donato Pizzuti.

Present: PERRETTA, LAURENCE, &

GRASSO, JJ.³

LAURENCE, J.

Background. To promote the appropriate uses of scarce coastal resources consistently with the Federal Coastal Zone Management Act (16 U.S.C. §§ 1451 et seq.),⁴ the Massachusetts Office of Coastal Zone Management (OCZM)⁵ has since 1978 promulgated designated port area regulations governing the primary working waterfronts within Massachusetts's developed coastal harbors. The declared purpose of such designations is "the promotion of . . . water-dependent industrial uses," pursuant to the following objectives set forth in 301 Code Mass. Regs. § 25.01(2) (1994):

"[W]hat remains of the industrialized coast should be preserved to the maximum extent practicable in order to meet the long term, cumulative space needs of the water-dependent industries which these areas are so well-suited to accommodate. As a matter of state policy, it is not desirable to allow these scarce and non-renewable resources of the marine economy to be irretrievably committed to, or otherwise significantly impaired by, non-industrial or nonwater-dependent types of development which enjoy a far greater range of locational options.

"Accordingly, within [designated port areas] it is the intent of the CZM Program to encourage water-dependent industrial use and to prohibit, on tidelands subject to the jurisdiction of [G.L.] c. 91, other uses except for compatible public access and certain industrial, commercial, and transportation activities that can occur on an interim basis without significant detriment to the capacity of [designated port areas] to accommodate water-dependent industrial use in the future."

Administrative proceedings. The present controversy involves the Mystic River designated port area in Charlestown (the DPA), whose boundaries were designated in 1978. It arises from the petitions of the owners of five properties in the DPA⁶ (all seeking to develop their properties for nonwater-dependent uses, notably residential condominium complexes), who requested that OCZM conduct what is known as a "boundary review" to determine whether their lands should remain within the DPA or be removed therefrom.⁷ After completing the requested boundary review, OCZM issued its decision in a boundary review dated October 9, 2002, which concluded that the Schrafft Center at 529 Main Street should no longer continue to be included within the DPA⁸; that the other four properties all met the designation standards set forth in the regulations for remaining in the DPA; that two of those properties, 425 Medford Street and the Charlestown Commerce Center (the CCC) at 30-50 Terminal Street, should remain in the DPA; but that 465 Medford Street and the Nancy Sales property at 261-287 Medford Street should be excluded from the DPA upon the owners' satisfactory compliance with certain specified conditions.⁹ On December 16, 2002, the director of OCZM (director) (charged under the regulations with making the final determination) effectively adopted the conclusions and recommendations of the boundary review as his designation decision.

Proceedings below. That decision triggered three separate suits that were consolidated in Superior Court. United States Gypsum Company (Gypsum), owner of 200 Terminal Street,¹⁰ and LaFarge North America, Inc. (LaFarge), owner of 285 Medford Street (both located within the DPA), brought essentially identical complaints seeking reversal of the conditional exclusion from the DPA of 465 Medford Street and the Nancy Sales property, on the grounds that the director exceeded his authority in excluding those properties and that his decision was not supported by substantial evidence.¹¹ The complaint of Donato Pizzuti, as trustee of the realty trust that owned the CCC, demanded the same relief as the other plaintiffs but also sought a boundary review leading to exclusion of the CCC from the DPA; challenged, as a deprivation of due process, the denial of an exclusion for the CCC in the proceedings under review; and asserted that the CCC's continued inclusion in the DPA constituted a regulatory taking.

In a lengthy decision (on review under G.L. c. 30A), a Superior Court judge specially assigned to hear the consolidated actions denied Gypsum's and LaFarge's respective motions for summary judgment and Pizzuti's motion for judgment on the pleadings,¹² and allowed the defendants' cross-motions for judgment on the pleadings and summary judgment. Concluding that the director of OCZM had discretion so to act, the judge rejected the plaintiffs' arguments that the director exceeded his authority in excluding 465 Medford Street and the Nancy Sales property from the DPA; that the designation decision was not supported by substantial evidence¹³; and that it should be reversed to the extent that it excluded those properties once the conditions imposed by the director were met.¹⁴

On appeal, Gypsum presses its contention that the director had no discretion and no authority to exclude the two properties from the DPA and that the decision to do so lacked substantial evidence.

LaFarge, focusing only on the Nancy Sales property (contiguous to its own), argues that the decision to exclude it was unsupported by substantial evidence. Intervener Conservation Law Foundation maintains that the director lacked any discretion to remove or exclude properties from the DPA, and that his decision subverts the purpose of the OCZM regulations. Pizzuti has pressed all of his arguments, including denial of due process and regulatory taking.¹⁵

We agree with the plaintiffs that the exclusion of 465 Medford Street and the Nancy Sales property from the DPA was in excess of the director's discretionary authority under the regulations and was unsupported by substantial evidence, but we affirm the director's decision as to all claims raised regarding the CCC.

Discussion. 1. The director's authority. We acknowledge the familiar, frequently applied standard governing judicial review of an agency's interpretation of the regulations it administers: the agency's reasonable interpretation of its own rule is entitled to great weight, and "we must apply all rational presumptions in favor of the validity of the administrative action" being challenged. Zoning Bd. of Appeals of Wellesley v. Housing Appeals Comm., 385 Mass. 651, 654-655, 433 N.E.2d 873 (1982), quoting from Colella v. State Racing Commn., 360 Mass. 152, 156-157, 274 N.E.2d 331 (1971). Nonetheless, despite an appropriate judicial attitude of deference, "[o]nce an agency has seen fit to promulgate regulations, it must comply with those regulations," Royce v. Commissioner of Correction, 390 Mass. 425, 427, 456 N.E.2d 1127 (1983), and the "courts will not hesitate to overrule agency interpretations of rules when those interpretations are arbitrary, unreasonable, or inconsistent with the plain terms of the rule itself." Manor v. Superintendent, Mass. Correctional Inst., Cedar Junction, 416 Mass. 820, 824, 626 N.E.2d 614 (1994), quoting from Finkelstein v. Board of Registration in Optometry, 370 Mass. 476, 478, 349 N.E.2d 346 (1976).¹⁶ An agency's "considerable leeway in interpreting a statute [or regulation] it is charged with enforcing" disappears if "a statute [or regulation] unambiguously bars the agency's approach." Goldberg v. Board of Health of Granby, 444 Mass. 627, 633, 830 N.E.2d 207 (2005), quoting from Berrios v. Department of Pub. Welfare, 411 Mass. 587, 595-596, 583 N.E.2d 856 (1992). The "rationale for judicial deference ceases to apply where . . . the agency has failed to adhere to its own . . . regulatory framework . . . [or] [made] a decision without sufficient evidentiary support." Cobble v. Commissioner of the Dept. of Social Servs., 430 Mass. 385, 395, 719 N.E.2d 500 (1999). That is the situation before us.

The DPA designation regulations clearly state that "[a]n area of land reviewed under [the regulations] shall be included or remain in a DPA . . . if CZM finds that the area is in substantial conformance with the . . . criteria governing suitability to accommodate water-dependent industrial use, as appropriate to the harbor in question" (emphasis added). 301 Code Mass. Regs. § 25.04(2) (1994). It is undisputed that 465 Medford Street, the Nancy Sales property, and the CCC were found by OCZM to "meet the designation standards [set forth] at 301 CMR 24.04(2)," which "establish[ed] the suitability of the subject properties . . . to remain in the DPA."¹⁷ Moreover, 301 Code Mass. Regs. § 25.03(5) (1994) similarly provides that:

"Within 60 days after the close of the public comment [on the boundary review], the Director shall issue a final written designation decision stating whether the area(s) under review shall be included within a DPA, in accordance with the designation standards set forth at 301 CMR 25.04" (emphasis added).

Taken together in their plain meaning (and construing "shall" in its common obligatory rather than permissive sense, see Johnson v. District Atty. for the N. Dist., 342 Mass. 212, 215, 172 N.E.2d 703 [1961] ), these regulations mandate the inclusion of a property in the DPA when it meets the designation standards. They do not even hint that the director has any discretion to exclude an area that otherwise falls within designation criteria. That plain meaning is reinforced by the admonition in § 25.05(2) authorizing the OCZM to "make minor adjustments of an existing DPA boundary . . . [bu...