SLOWINSKI ATKINS, LLP PREVAILS AT TRIAL AND ON APPEAL

Slowinski Atkins, LLP successfully defended a judgment on appeal before the New Jersey Superior Court, Appellate Division, compelling a property owner to execute a deed notice and permit implementation of a remedial plan using engineering controls without the owner’s consent.  The court held that the property owner was bound by a prior owner’s agreement to a restricted use cleanup despite language in Section 13 of the Brownfield and Contaminated Site Remediation Act, N.J.S.A. 58:10B-1 et seq. (“Brownfield Act”) that requires the responsible party to implement a cleanup that meets residential standards if the owner does not consent, N.J.S.A. 58:10B-13(b).

Plaintiff, Cozzoli Machine Company had used property in Plainfield, New Jersey for industrial purposes for most of the twentieth century.  Cozzoli sold the property in March 2003 to RTN, which triggered ISRA and cleanup obligations which were retained by Cozzoli.  RTN had agreed that Cozzoli could use a deed notice and engineering controls as part of the cleanup, which had also been approved by the NJDEP, but no deed notice or other writing had been recorded in the chain of title by Cozzoli’s prior counsel.  In 2010 RTN defaulted on a mortgage loan it obtained through Crown Bank to purchase the property, and after Crown acquired title through foreclosure it transferred the property to Sumo Property Management, LLC, a developer.  Sumo obtained planning board approval to construct a large residential development on the property conditioned upon an unrestricted use cleanup to residential standards.  When Cozzoli sought access to implement the cap, Sumo denied access and would not consent to any engineering controls or a deed notice as not permitted by the approvals for the residential development, citing Section 13(b) which requires the consent of the owner.  Faced with a substantially more expensive cleanup to residential standards that would have required excavation and removal of large quantities of soil, Cozzoli retained Slowinski Atkins to file suit seeking an injunction compelling Sumo to grant access to implement the cap, and requiring Sumo to execute a deed notice.

Sumo argued that without their consent, Section 13 of the Brownfield Act required Cozzoli to conduct a remedial that meets the residential soil remediation standard.  N.J.S.A. 58:10B-13(b).   Sumo claimed that it should not be bound by the prior owner’s agreement and that it had no notice of the agreement which had also not been recorded.  The Appellate Division rejected Sumo’s argument, holding that Cozzoli had no control over the property once it was sold and that requiring consent of future owners “would hold a good-faith remediator, who had essentially obtained DEP’s approval of its plan and the consent of the current owner to the filing of a deed notice, hostage to the demands and whims of the property’s successors-in-interest” which would be inconsistent with the Legislative purpose of the Brownfield Act to implement cost-effective, timely and efficient cleanups, citing  N.J.S.A. 58:10B-1.2.

The Appellate Division buttressed its decision with reference to DEP’s regulations which provide for a “rebuttable presumption” that historic fill contamination could be remediated through use of engineering and institutional controls, and no one had challenged DEP’s determination regarding the nature of the contamination. N.J.A.C. 7:26E-5.4(a).  Sumo’s claim that it had no notice because the consent had not been recorded was likewise rejected since the remedial plan was on file with the municipal clerk and health officer and thus Sumo was on inquiry notice and charged with knowledge of the anticipated cap and deed notice.

This decision reinforces the need to conduct thorough due diligence prior to acquisition of property since agreements reached by prior owners regarding the remediation plan may be imputed to subsequent owners who knew or should have known about the planned remedial action.  In this case, a developer who obtained approval from the planning board to build a large residential development was effectively precluded from pursuing that plan unless it incurred significantly more costs to excavate and remove contaminated soils.  From the seller’s perspective, the decision provides some protection against claims by subsequent purchasers who seek to undo the remedial strategy and demand a more expansive cleanup when property is sold and the seller remains responsible for ISRA obligations.