The New Rule forAlternative DisputeResolution in Site

Remediation

THE ENACTMENT OF THE SITE REMEDIATION Reform Act (SRRA) last year dramatically alteredthe decision-making process for the investigation

and remediation of contaminated properties in NewJersey. While the SRRA promises to eliminate the delaysin the New Jersey Department of EnvironmentalProtection’s (NJDEP’s) review and approval of each stepof the site remediation process, the new paradigm cre-ates additional tension among the involved parties. Asthose tensions escalate into disputes, it will becomeapparent that the timing and expenses of traditional lit-igation is ill-suited to satisfactory resolution. Ultimately,arbitration and mediation, or other forms of AlternateDispute Resolution (ADR) may be considered as an effi-cient, prompt and cost-effective method of resolvingthese disputes.

SRRA and the LSRP ProgramThe party conducting a remediation is typically an

owner of property but in some circumstances is a ten-ant, former owner, former tenant, or a non-owner/non-tenant discharger. That party, hereinafter referred to asRemediating Party, would in the past hire contractors,consultants or engineers to prepare submissions foreach step of the investigation and remediation process.These reports were submitted to the NJDEP for reviewand approval, with the ultimate goal of obtaining a NoFurther Action (NFA) letter. Under SRRA, the responsibil-ity for approval of each step of the investigation andremediation process is that of Licensed Site Remedia-tion Professionals (LSRPs). Upon satisfactory comple-tion of all work, the LSRP will issue a Response ActionOutcome (RAO), the equivalent of NJDEP’s NFA.

Those scientists and engineers that satisfy specific edu-cational and experience criteria can be licensed by theNJDEP as LSRPs. The LSRP is paid by the RemediatingParty, but their highest priority in the performance ofprofessional services is the protection of public health

and safety and the environ-ment. Moreover, they rely ontheir professional judgment inareas not mandated by law orregulation. As such, LSRPs havethe independent obligation to

report so-called Immediate Environmental Concerns andmaintain certain documents, as well as to report to theNJDEP their retention and their termination by theRemediating Party. LSRPs can be held personally liablefor fines and penalties under the SRRA. The tensioninherent in this dual loyalty has the potential to aggra-vate the relationship between the Remediating Party andits LSRP, causing potential conflicts requiring resolution.

Typically, not only is the Remediation Party relyingupon the LSRP, but so is a purchaser in a concurrent realproperty or corporate transaction. Indeed, the motiva-tion for most Remediating Parties is a transaction. Inmany cases, their obligations are mandated by theIndustrial Site Remediation Act (ISRA); in others theobligations arise from contract obligations. Even if thereis no concurrent transaction (note, SRRA provides thatall “parties responsible” have an obligation to remediate,transaction or not) there will be some future owner ortenant that will be relying on the LSRP’s determination.

It is important to recognize that for the past 25 yearsthe NJDEP has been the ultimate authority that provid-ed the disinterested, objective determination of the ade-quacy of investigative and remedial work. On rare occa-sions, the NJDEP did rescind its NFA determinations butit had an obvious institutional bias not to question itsown decisions. Under the SRRA, the NJDEP is mandatedto audit 10 percent of all documents submitted annual-ly by the LSRPs and has up to three years to audit RAOs,once they are filed by the LSRP. One can only expectthat more RAOs will be overturned than NFAs were.

In the past, blame for such “remedy failures” might becast at the NJDEP staff but any recourse was unavailablebecause of the Sovereign Immunity which the NJDEP

72 COMMERCE • www.cianj.org

continued on page 74

BY HON. JACK L. LINTNER, P.J.A.D. (RET.) AND EDWARD A. HOGAN, ESQ.NORRIS MCLAUGHLIN & MARCUS, P.A.

The SRRA introduces newdynamics to the site remediation process.

While most remediations are anticipated to benefit

from a more rapid conclusion,there will also be more dis-putes among the parties. ADRcan provide a prompt andcost-efficient alternative to

traditional litigation.

ENVIRONMENTAL LAW

74 COMMERCE • www.cianj.org

enjoys. Now, however, blame will focus upon the LSRP, a party without the benefit of Sovereign Immunity butpossessing insurance, and perhaps even a “deep pocket.”

The Role of ADRUnder the SRRA, several potential areas of dispute

involving the LSRP might arise resulting in needed legalinvolvement and resolution. These areas of dispute withthe LSRP may involve: (1) the costs of remediationwhere the Remediating Party or its insurer believes theLSRP is taking an overly conservative approach; (2)other interested parties, such as current property own-ers or neighboring property owners, who feel the LSRPis not doing enough to adequately remediate the prop-erty; (3) the NJDEP, respecting the LSRP’s mandatedrecordkeeping and reporting obligations; and (4) reme-diation failures.

These disputes can best be resolved by ADR, ratherthan court action. Many disputes will arise during theremediation process, thus requiring an efficient resolu-tion to ensure that remediation does not stall. ADR provides a quick and less costly manner for resolvingthese disputes. ADR includes both arbitration and medi-ation. Mediation provides for a non-binding confidentialproceeding in which the third-party neutral providesan independent perspective and attempts to bring the parties together to reach a negotiated, agreed-uponresult.

Today, courts often encourage mediation, especially inareas requiring specialized knowledge, suggesting thatparties engage in consent mediation prior to setting atrial date. In arbitration, the parties submit the dispute toa third-party neutral, typically a retired judge, experi-enced lawyer or senior technical expert, for either abinding or non-binding determination. The specific pro-cedures for both types of ADR are generally establishedby contract between/among the parties or, in theabsence of a contractual provision, at the time the dis-pute arises. Contracts or agreement by the parties mayprovide for both, mandating that mediation take placeprior to arbitration. Binding arbitration decisions areenforced as final judgments by the courts. Our courtsare required under statute to permit parties to engage inbinding arbitration, if they so choose, after suit has beeninstituted and prior to trial.

ADR has long played a role in the resolution of environmental disputes. The first cleanups under theNew Jersey Spill Compensation and Control Act and the federal Comprehensive Environmental ResponseCompensation and Liability Act (a/k/a Superfund)involved large industrial waste landfills. The enormity ofthe costs and the vast number of responsible partydefendants regularly led them to conclude that thepotential transactional costs were so large that non-judi-cial mediation was essential to achieve an equitable allocation.

In the last 25 years, the landfills were remediated, andboth federal and state remedial programs turned tooperating (or formerly operating), manufacturing, andcommercial facilities either by their same enforcementauthorities or through the ISRA and the UndergroundStorage Tank programs. During this same period, the reg-ulated community recognized the liabilities associatedwith the mere ownership of contaminated real proper-ty and negotiated cleanup obligations into contracts forthe sale of real property or business.

Experience has shown that the most frequent privateparty claims have been brought by (a) RemediatingParties against prior owners and operators and (b) pur-chasers, some time after purchase, against formerRemediating Parties for failed remediations, whetherassociated with a rescinded NFA or discovery of a flawin the original remedial work. In the latter cases, boththe original sellers and their remedial contractors arenamed as defendants.

With the advent of SRRA, we can expect several addi-tional or expanded litigation scenarios: disputes betweenRemediating Parties and their LSRPs; complaints con-cerning the scope of remedial work brought by pur-chasers against Remediating Parties and their LSRPs; andmore frequent and complex failed remediations.

In the first situation, any dispute is likely to occur atthe most inopportune time—in the middle of the sub-stantive environmental work. Given the transactionaldynamics and the critical role of the LSRP, a RemediatingParty will not want to delay the LSRP’s work because ofa dispute over commercial issues. An arbitration clausein the retention contract could provide a mechanism fora prompt and final result which would not encumberthe remediation.

In the past, purchasers have questioned whetherRemediating Parties have been thorough in their efforts.Now, however, they will no longer be relying upon a dis-interested civil servant as the ultimate decision-maker

continued on page 80

continued from page 72

ENVIRONMENTAL LAW

Instead of seeking NJDEP intervention in the midst of a project(which the NJDEP will likely refuse)

or resorting to the courts, the parties can establish an arbitration procedure in their contract to address

disagreements involving the scope of an LSRP’s work.

80 COMMERCE • www.cianj.org

but, rather, an LSRP hired by the Remediating Party(whose judgment the purchaser may question).Purchasers might want the LSRP to investigate morefully or remediate more extensively. Instead of either thetime-consuming effort of seeking NJDEP intervention inthe midst of a project (which the NJDEP will likelyrefuse) or resorting to the courts, the Remediating Partyand the purchaser can establish in their contract an arbi-tration procedure to address disagreements involvingthe scope of the LSRP’s work.

As discussed previously, the NJDEP audits of theLSRP’s work can result in the rescission of RAOs. Claimsfor additional work and for business interruption claimswill be directed to both former Remediating Parties andtheir LSRPs. In these more frequent failed remediationsuits, purchasers will have a stronger argument that theyreasonably relied upon LSRPs.

On complex sites, Remediating Parties and their pur-chasers might want to anticipate the handling of claimsin the event the remediation fails. Arbitration could pro-vide a cost-effective alternative to traditional litigation,especially in these matters which will be heavilydependent upon technical facts and issues. LSRPs alsomay want to become a party to the agreement betweenthe Remediating Party and the purchaser, at least to theextent of ensuring that failed remediation claims arehandled in the most cost-efficient manner.

The SRRA introduces new dynamics to the site reme-diation process. While most remediations are anticipat-ed to benefit from a more rapid conclusion, there willalso be more disputes among the parties. ADR can pro-vide a prompt and cost-efficient alternative to tradition-al litigation. n

Judge Jack L. Lintner, a member of the firm, focuses hispractice on alternative dispute resolution, insurancecoverage issues and appellate advocacy consultation.Edward A. Hogan is a member of the firm and Co-Chair of the Environmental Law Group. For moreinformation on Norris McLaughlin & Marcus, P.A.,visit www.nmmlaw.com.

continued from page 74

ENVIRONMENTAL LAW

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