E.P.A., 599 F. Supp. 69, 73-74 (C.D. Cal. 1984).
The mandatory nature of treble damages under the Spill Act does not alone cause the statute to violate due process. Mandatory treble damages is a common enforcement mechanism. See, e.g., Cantor v. Detroit Edison Co., 428 U.S. 579, 599 n.39, 49 L. Ed. 2d 1141, 96 S. Ct. 3110 (1976) (Sherman Antitrust Act).
5. Lack of Pre-Enforcement Review
The Spill Act does not permit judicial review of DEP cleanup directives prior to enforcement of such orders or the initiation of a cost recovery action by DEP. Ordinarily, due process requires some kind of a hearing prior to deprivation of a significant property interest. Parratt v. Taylor, 451 U.S. 527, 540, 68 L. Ed. 2d 420, 101 S. Ct. 1908 (1981). Nevertheless, "due process is flexible and calls for such procedural protections as the situation demands." Morrissey v. Brewer, 408 U.S. 471, 481, 33 L. Ed. 2d 484, 92 S. Ct. 2593 (1972). Accordingly, summary adjudications are justified in appropriate circumstances involving emergency situations or serious danger to public safety. Hodel v. Virginia Surface Mining & Reclamation Association, 452 U.S. 264, 299-300, 69 L. Ed. 2d 1, 101 S. Ct. 2352 (1981). For instance, postponement of notice and a hearing has been found to be consistent with due process when necessary to protect the public from the drug trade, Calero-Toledo v. Pearson Yacht Leasing Co., 416 U.S. 663, 40 L. Ed. 2d 452, 94 S. Ct. 2080 (1974), bank failures, Coffin Bros. & Co. v. Bennett, 277 U.S. 29, 72 L. Ed. 768, 48 S. Ct. 422 (1928), or the delinquent submission of tax returns, Phillips v. Commissioner, 283 U.S. 589, 75 L. Ed. 1289, 51 S. Ct. 608 (1931). Several recent decisions in this district have sustained provisions of CERCLA which deny judicial review of EPA cleanup orders prior to the initiation of a cost recovery action. See, e.g., Wheaton v. EPA, 23 ERC (BNA) 1134, 15 ELR 20959, Civ. No. 84-4330, slip op. (D.N.J. July 11, 1985); Lone Pine Steering Committee v. EPA, 600 F. Supp. 1487 (D.N.J. 1985); Earthline Co. v. Kin-Buc, In., Civ. No. 83-4226, slip op. (D.N.J. July 23, 1984). But cf. Industrial Park Development Corp. v. EPA, 604 F. Supp. 1136, 22 ERC 1593, 1598 (E.D. Pa. 1985) (Criticizing lack of pre-enforcement review of various administrative orders under CERCLA). Pre-enforcement review of certain administrative orders is also unavailable under other federal environmental statutes. See, e.g., Hodel v. Virginia Surface Mining & Reclamation Administration, supra.
Plaintiffs do not object to the Spill Act's denial of pre-enforcement review of DEP directives per se. Rather, plaintiffs contend that the combined effect of the absence of pre-enforcement review, the lack of an alternative means of contesting alleged responsibility for discharges and the threat of treble damages for noncompliance with DEP orders constitutes unconstitutional coercion. The court will now proceed to examine defendants' claim that plaintiffs have an alternative remedy available which allows them to avoid the risk of treble damages.
6. The Spill Fund
The Spill Act provides for the establishment of the New Jersey Spill Compensation Fund ("Spill Fund"). Among other things, the Spill Fund is intended to reimburse parties injured by unlawful discharges. N.J.S.A. 58:10-23.11i. The Spill Fund is financed by a tax on the shipment of petroleum and chemical products within the state. N.J.S.A. 58:10-23.11h. Claims must be filed by an injured party "not later than one year after the date of discovery of damage." N.J.S.A. 58:10-23.11k.
Spill Fund claimants are encouraged to seek reimbursement from the party responsible for the discharge, N.J.S.A. 58:10-23.11l; however, if such efforts prove unsuccessful, parties may apply to the Spill Fund for compensation. The Administrator of the Spill Fund is authorized to settle all claims against the Spill Fund, N.J.S.A. 58:10-23.11m, and to convene boards of arbitration to resolve disputes over reimbursement. N.J.S.A. 58:10-23-11n. Decisions of the Board are final, and judicial review of such decisions is available before the Appellate Division of the Superior Court. N.J.S.A. 58:10-23.11n(g).
Defendants contend that under the Spill Act, plaintiffs can avoid treble damages for cleanup costs by (a) complying with the Directives, and (b) filing a claim against the Spill Fund pursuant to N.J.S.A. 58:10-23.11g(a) and 58:10-23.11k, and then (c) contesting liability before an arbitration board. If necessary, plaintiffs may seek judicial review of an adverse result. Defendants' Brief at 21-22.
Plaintiffs respond that defendants "ignore the reality that under the facts in this case plaintiffs are precluded from bringing a claim against the Spill Fund for reimbursement." Plaintiffs' Reply Brief at 4. According to plaintiffs, several aspects of the Spill Fund scheme render it useless to them as a means to challenge the DEP's Directives.
First, plaintiffs originally asserted that they were barred from receiving any compensation from the Spill Fund because the RI/FS could be funded by the EPA using Superfund monies, pursuant to CERCLA § 221(c)(1), 42 U.S.C. § 9631(c)(1). Spill Fund monies cannot be utilized to pay for remedial costs at a discharge site unless the Spill Fund Administrator has determined "that adequate funds from another source are not or will not be available." N.J.S.A. 58:10-23.11f(d). As the Woodland sites are included on the National Priority List, CERCLA provides for Superfund monies for remedial actions at these sites. Such funds are no longer available because the DEP withdrew its Superfund request, in order to insure its continued control over the RI/FS process. Furthermore, if plaintiffs comply with the DEP Directives pursuant to the Spill Act, they have no claim for reimbursement under CERCLA. Consequently, CERCLA does not constitute a barrier to plaintiffs' recovery of Spill Fund monies.
The DEP's decision to fund the RI/FS at the Woodland sites with funds provided through the Governor's Contingency Fund also does not bar plaintiffs' recovery from the Spill Fund. The Spill Act simply states that "the fund shall be strictly liable, without regard to fault, for all cleanup and removal costs. . . ." N.J.S.A. 58:10-23.11g(a). If plaintiffs comply with the Directives, they will pay a substantial amount into the Spill Fund; if they are subsequently found free of responsibility for any discharges, they are entitled to reimbursement of the contributions to the fund.
Second, plaintiffs contend that the Spill Act bars recovery of Spill Fund monies requested over six years from the date of the incident which caused the damage. This provision was repealed by the legislature effective September 6, 1984. L.1984, c. 142, § 3. As the DEP invoked the Spill Act in its directives to plaintiffs on March 5, 1985, the court finds this provision inapplicable to this case, despite plaintiffs' arguments to the contrary.
Third, plaintiffs argue that they are statutorily barred from asserting a claim against the Spill Fund by the one year statute of limitations. N.J.S.A. 58:10-23.11k. The DEP officially issued its Directives informing the plaintiffs of their potential liability on March 5, 1985. Nearly two years earlier, the DEP had unofficially informed plaintiffs of their alleged discharges at the Woodland sites. The question arises as to the proper starting point for application of the one year statute of limitations. If the correct date is the date the DEP unofficially informed plaintiffs of the possibility of contamination at the Woodland sites, then the statute of limitations has long since expired. The court does not approve of this method. Rather, the court finds that the correct date for the starting of the one year statute of limitations should be set at the date when plaintiffs were officially notified that the DEP would seek monies from them to fund the RI/FS. Defendants apparently agree with this interpretation, as they contend that plaintiffs are not barred from applying to the Spill Fund by the statute of limitations contained in N.J.S.A. 58:10-23.11k. Furthermore, defendants note that,
the administrative directives provided for in N.J.S.A. 58:10-23.11f(a) functions to provide a potentially responsible party with notice of its possible liability and the opportunity to mitigate damages. In the context of the Spill Act, this notice is important because generators of hazardous waste can be responsible parties and may have no knowledge of the discharge of hazardous substances that they have generated but no longer control.
Defendants' Brief at 18.
Although the plaintiffs in this case surely had constructive notice of their potential liability prior to March, 1985, they were not officially assured that any claim would be filed against them until the issuance of the Directives. Accordingly, the court finds that the one year statute of limitations should not begin to run until the issuance of the Directives, on March 5, 1985. This means that as of this date, plaintiffs are not statutorily barred from seeking indemnity from the Spill Fund for their expenses incurred in complying with the Directives by N.J.S.A. 58:10-23.11k.
Finally, plaintiffs may not recover their expenditures if they are actually responsible for the discharges. N.J.S.A. 58:10-23.11g(c). See DEP v. Ventron Corp., 182 N.J. Super. 210, 228, 440 A.2d 455 (App. Div. 1981), modified on other grounds, 94 N.J. 473, 468 A.2d 150 (1983). Plaintiffs assert that because the DEP considers them to be responsible parties, they lack standing to make a claim against the Spill Fund. There is no merit to this argument. As plaintiffs deny responsibility for the wastes at the Woodland sites, they are free to apply for such indemnification from the Spill Fund. Plaintiffs will only be denied compensation if the DEP can substantiate its position that plaintiffs are responsible parties.
The Spill Fund provisions of the Spill Act provide an alternative remedy for parties wishing to challenge the validity of DEP directives. Accordingly, plaintiffs are not forced to seek vindication of their alleged lack of responsibility for hazardous discharges only in a subsequent cost recovery action.
B. Constitutionality of the Statutory Scheme
The foregoing discussion has shown that none of the individual components of the Spill Act enforcement framework violates plaintiffs' due process rights. The question remains as to whether the elements together constitute an impermissibly coercive scheme, or whether, as defendants claim, the Act creates a lawful incentive structure, reasonably necessary to induce compliance with DEP Directives related to hazardous waste cleanup efforts.
Plaintiffs assert that the Spill Act effectively denies them an opportunity to seek judicial review of DEP's Directives concerning the Woodland sites. It is axiomatic that "some form of hearing is required before an individual is finally deprived of a property interest." Mathews v. Eldridge, 424 U.S. 319, 333, 47 L. Ed. 2d 18, 96 S. Ct. 893 (1975); Wolff v. McDonnell, 418 U.S. 539, 557-58, 41 L. Ed. 2d 935, 94 S. Ct. 2963 (1974). Furthermore, the essential feature of due process is the opportunity to be heard "at a meaningful time and in a meaningful manner." Armstrong v. Manzo, 380 U.S. 545, 552, 14 L. Ed. 2d 62, 85 S. Ct. 1187 (1965). See Grannis v. Ordean, 234 U.S. 385, 394, 58 L. Ed. 1363, 34 S. Ct. 779 (1914).
Plaintiffs rely on a line of cases, derived from Ex Parte Young, 209 U.S. 123, 52 L. Ed. 714, 28 S. Ct. 441 (1908), which stand for the proposition that anyone subject to an administrative order has "a due process right to contest the validity of [the] order . . . without necessarily having to face ruinous penalties if the suit is lost." Brown & Williamson Tobacco Corp. v. Engman, 527 F.2d 1115, 1119 (2nd Cir. 1975). Under Ex Parte Young, supra, a law may not impose such severe conditions on the right to judicial review that a party wishing to challenge the validity of administrative action will be intimidated into abandoning its rights; "such a result is the same as if the law [expressly] prohibited the [party] from seeking judicial construction of laws which deeply affect its rights." 209 U.S. at 147. Accord Oklahoma Operating Company v. Love, 252 U.S. 331, 336, 64 L. Ed. 596, 40 S. Ct. 338 (1920); Wadley Southern Railway Co. v. Georgia, 235 U.S. 651, 661, 59 L. Ed. 405, 35 S. Ct. 214 (1915) ("[The] right [to judicial review] is merely nominal and illusory if the party affected can appeal to the courts only at the risk of having to pay penalties so great that it is better to yield to orders of uncertain legality rather than to the protection of the law.").
According to plaintiffs, they are permitted to challenge DEP's Directives only at the risk of each incurring treble damages for the full cost of a RI/FS at the Woodland sites, an amount roughly equal to $5.3 million. Plaintiffs maintain that such penalties are so great as to "deter even the boldest and most confident" prospective litigant. Plaintiffs' Brief at 22-23, quoting Oklahoma Operating Co. v. Love, supra, 252 U.S. at 336. In support of their allegations of coercion, plaintiffs submit affidavits from their corporate officers which indicate that the threat of treble damages will "coerce" them into compliance with DEP's Directives unless the court grants the relief requested.
Mandatory sanctions which are unlawfully coercive cease to infringe due process rights if it is possible to assert good faith defenses to their application. In other words, the requirement of due process is satisfied when a statute provides that a party refusing to submit to an administrative order may avoid penalties for noncompliance by demonstrating reasonable grounds for such disobedience in a subsequent agency enforcement action. Reisman v. Caplin, 375 U.S. 440, 447, 11 L. Ed. 2d 459, 84 S. Ct. 508 (1964); Oklahoma Operating Co. v. Love, supra, 252 U.S. at 336-38.
Plaintiffs contend that the mandatory nature of the Spill Act's treble damages provision, N.J.S.A. 58:10-23.11f(a), renders it unconstitutional in light of the unavailability of a right to challenge DEP cleanup Directives prior to an agency cost recovery action. To prove their point, plaintiffs refer the court to several recent decisions concerning Section 107(c)(3) of CERCLA, which provides treble damages for failure to comply, "without sufficient cause," with various EPA orders including a cleanup order under Section 106 of CERCLA. 42 U.S.C. §§ 9607 (c) (3), 9606. CERCLA does not permit judicial review of a cleanup order under Section 106(a) prior to a cost recovery action by EPA to remedy a party's noncompliance. The availability of a good faith defense to imposition of treble damages for such refusal has been held to sustain the application of Section 107 (c) (3) to a cleanup order under Section 106(a) of CERCLA. United States v. Reilly Tar & Chemical Corp., 606 F. Supp. 412, 419-22 (D. Minn. 1985) (Construing "without sufficient cause" to permit a good faith defense to imposition of treble damages; also upholding the constitutionality of Minn. Stat. § 115B.18(1) (1985), a similar penalty provision in "MERLA," a Minnesota toxic waste control statute, because of the availability of good faith defenses); Wagner Electric Corp. v. Thomas, 612 F. Supp. 736 (D. Kan. 1985) (following United States v. Reilly Tar & Chemical Corp., supra). Another federal trial court has enjoined imposition of treble damages or daily penalties for noncompliance with a CERCLA cleanup order based on a finding that the statute provides neither pre-enforcement review of, nor assertion of good faith defenses to, such sanctions. Aminoil, Inc. v. United States Environmental Protection Agency, 599 F. Supp. 69, 72-73 (C.D. Cal. 1984) (reaching more restrictive interpretation of "without sufficient cause" language in Section 107(c) (3) of CERCLA).
This case is fundamentally different from the situation posed in Ex Parte Young, supra, and Aminoil, Inc. v. USEPA, supra, because of the opportunity, under the Spill Act, to seek reimbursement from the Spill Fund for monies paid to DEP in accordance with Directives issued pursuant to N.J.S.A. 58:10-23.11f(a). The doctrine of Ex Parte Young and Oklahoma Operating Co. v. Love, supra, is based on the absence of any means to challenge administrative action free of the threat of punitive damages. In Wadley Southern Railway Co. v. Georgia, supra, the Court upheld penalty provisions in a state railroad rate regulation statute, similar to those in Ex Parte Young and Oklahoma Operating Co. v. Love, precisely because Georgia law also allowed those affected by rate orders to bring "proceedings . . . against the [State railroad] commission to test the validity of its orders." 235 U.S. at 668-69. In Ex Parte Young and Oklahoma Operating Co. v. Love, however, the only available recourse for the affected railroad companies to challenge rate orders they considered confiscatory was in contempt proceedings brought by the State to enforce compliance with rate orders of the State railroad commission. 209 U.S. at 145-46; 252 U.S. at 334-35. Similarly, the analysis of the availability of good faith defenses in Aminoil, Inc. v. USEPA, supra, United States v. Reilly Tar & Chemical Corp., supra, and Wagner Electric v. Thomas, supra, is premised on the fact that CERCLA provides no means to challenge EPA cleanup orders prior to commencement of a cost recovery action. 599 F. Supp. at 75; 606 F. Supp. at 416; slip op. at 23-24. In Wagner Electric v. Thomas, supra, the court noted that the doctrine of Ex Parte Young condemns penalties which effectively "close up all approaches to the courts." at 746, citing 209 U.S. at 147-48 (emphasis added). The court in Aminoil, Inc., supra, took particular notice of the fact that under CERCLA "no clear right exists for these alleged responsible parties to comply with the administrative order and then challenge its validity and seek reimbursement from the government." 599 F. Supp. at 75. The Spill Act, on the other hand, appears to provide just such a remedy.
In Wadley Southern Railway Co. v. Georgia, supra, the Court set forth a rule which provides the focus for this court's inquiry:
there is no room to doubt the power of the state to impose a punishment heavy enough to secure obedience to [administrative] orders after they have been found to be lawful; nor to impose a penalty for acts of disobedience, committed after the [party subject to the order] had ample opportunity to test the validity of [such] orders and failed to do so.
235 U.S. at 667. The Court stated further that threatened imposition of penalties for noncompliance with an administrative order do not violate due process,
where, . . . after reasonable notice of the making of the order, the [party subject to the order] failed to resort to the safe, adequate, and available remedy by which it could test in the courts its validity, and preferred to make its defense by attacking the validity of the order when sued for the penalty when that defense, . . . proved to be unsuccessful.