No Valid Settlement With DEP Absent Signature and Public Notice of Proposed Settlement

Cumberland Farms, Inc. v. New Jersey Dep’t of Environmental Protection, ___ N.J. Super. ___ (App. Div. 2016).  Plaintiff (“CFI”) operates convenience stores and gas stations in many locations in New Jersey.  Hazardous substances are discharged at some of those locations.  Defendant (“DEP”) offers a settlement process under which parties responsible for potential damage to natural resources as a result of hazardous substance discharges can resolve potential damage claims without litigation.  CFI sought to take advantage of that process.

Today’s opinion by Judge Haas lays out a lengthy factual history that surrounded the negotiations between CFI and DEP.  That process resulted only in a draft agreement that the Law Division noted “had a number of blanks, redlines, and strikeouts.”  The document was never signed by either CFI or DEP.  Nonetheless, six years after the transmission of that draft agreement, CFI filed suit seeking to enforce a settlement with DEP, asserting that DEP had breached that settlement by including certain CFI sites in subsequent natural resources damage litigation.

After a two-day bench trial, the Law Division found that the draft document did not constitute a valid settlement agreement.  CFI’s own attorney testified that the settlement process was “an iterative process” that went back and forth until all issues were resolved.  In that light, the incomplete and unsigned draft was not an agreement.  Moreover, the Law Division ruled, there had been no compliance with N.J.S.A. 58:10-23.11e2, which requires that DEP publish in the New Jersey Register “[a]t least 30 days prior to [DEP’s] agreement to any administrative or judicially approved settlement” the terms of that settlement, for public comment.  The Law Division rejected a promissory estoppel argument made by CFI, but also entered summary judgment for CFI on a breach of duty of good faith and fair dealing claim, requiring DEP to resume settlement negotiations.

CFI appealed and DEP cross-appealed.  Today, the Appellate Division ruled for DEP on all issues.

Applying a deferential standard of review to the Law Division’s findings at the bench trial, and de novo review to questions of law and mixed questions of law and fact, Judge Haas agreed with the Law Division that no settlement agreement had been reached.  Thus, there was no settlement to enforce and, for the same reason, no basis for CFI’s promissory estoppel claim.  On DEP’s cross-appeal, DEP prevailed because, there being no contract between the parties, a good faith and fair dealing claim could not be made.

Most likely, none of those rulings would have led to the publication of this opinion.  But Judge Haas’s discussion of the public notice and comment issue probably tipped the scale in favor of publication.

Judge Haas noted that it was not necessary to address that issue, since the panel had concluded that there was no settlement agreement about which to solicit public comment as the statute would require.  But CFI had argued that if the parties had agreed on settlement terms, the settlement would be “binding” and DEP could not have withdrawn from it even if there were negative comments from the public.

Judge Haas emphatically disagreed.  There was “no principled basis” for the Legislature to have mandated public notice and comment before DEP could consummate a settlement if the Legislature “did not intend for the DEP to be able to consider the public comments received during that period and make a determination whether to consummate, withdraw from, or modify the settlement.”  Such a view would vitiate the statute.  Judge Haas also observed that DEP had included provision for the notice and comment in its draft settlement agreements, here and in prior agreements, so for that reason too there were no grounds for CFI’s position about the effect of the public notice and comment.

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