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Woodland Private Study Group v. State

Decided: November 16, 1987.


On certification to the Superior Court, Appellate Division, whose opinion is reported at 209 N.J. Super. 261 (1986).

For affirmance -- Chief Justice Wilentz and Justices Clifford, Handler, Pollock and Garibaldi. For reversal -- Justices O'Hern and Stein. The opinion of the Court was delivered by Clifford, Justice. O'Hern, J., dissenting. Justice Stein concurs in this opinion.


Plaintiffs, Minnesota Mining and Manufacturing Company and Rohm and Haas Company, known collectively as Woodland Private Study Group, challenge an Administrative Order, AO-69, issued by the Commissioner of the Department of Environmental Protection. Annexed to the order is a "policy statement" regarding "Participation of Responsible Parties in the Development of Remedial Investigations and Feasibility Studies." Plaintiffs are "Responsible Parties" within the meaning of that policy statement. They contend that AO-69 amounts to rulemaking and hence is subject to the procedural requirements of notice and hearing, whereas the Commissioner views his Order as no more than an intra-agency statement for which no such procedures are required.

The Appellate Division upheld plaintiffs' challenge to the Commissioner's Order. On the strength of Metromedia, Inc. v. Director, Division of Taxation, 97 N.J. 313 (1984), the court declared the order invalid, Woodland Private Study Group v. State of New Jersey, 209 N.J. Super. 261 (1986), inasmuch as it was "a rule subject to the procedural requirements for adoption

stated in the Administrative Procedure Act," N.J.S.A. 52:14B-1 to -15, id., at 264 which requirements concededly had not been met by the agency. We granted certification on the State's petition, 104 N.J. 472 (1986), and now affirm.


The underlying dispute between plaintiffs and the Department of Environmental Protection (DEP), well summarized in Woodland Private Study Group v. State of New Jersey, 616 F. Supp. 794, 796-98 (D.N.J.1985), has been brewing for some time. As the federal district court pointed out, during the 1950s and 1960s the Industrial Trucking Service Corporation allegedly deposited at two dump sites in Woodland Township, Burlington County, wastes generated by several manufacturing concerns, including these plaintiffs. Id. at 797. Sampling conducted by the DEP revealed the presence of volatile organics and pesticides at both sites and of ground water contamination at one of them. The hazardous nature of these sites made them priority targets of cleanup efforts by the DEP under the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 to -23.11z (Spill Act). Ibid.

On August 4, 1983, Industrial Trucking notified the DEP of possibly hazardous discharges at the Woodland sites. Following that notification, appellants and DEP entered into extensive negotiations over the scope of a Remedial Investigation/Feasibility Study (RI/FS) for the sites. Ibid. The RI/FS phase of the cleanup process involves the delineation and analysis of the pollution problems at a site, and makes recommendations for the implementation of various cleanup plans and technologies to remedy the hazardous conditions.

Plaintiffs sought primary responsibility for preparing the RI/FS, with the DEP to exercise an oversight role. Ibid. Initially, DEP appeared ready to accept such an arrangement. However, by letter dated February 17, 1984, DEP informed plaintiffs that a change in agency policy would bar them from

controlling the selection of a contractor to perform the RI/FS. DEP also announced that it would require plaintiffs to deposit into a trust fund the full cost of the DEP's proposed RI/FS for the Woodland sites, plus a twenty percent contingency fee. Plaintiffs refused to comply with DEP's request. Ibid.

On June 29, 1984, DEP issued AO-69. The Order forbids "responsible parties" (parties alleged to have contributed to or caused contamination at a site) from conducting an RI/FS. The Order further states in part:

In order to insure that a remedial investigation and feasibility study (RI/FS) of a site which is scheduled for a publicly funded RI/FS will be properly and reliably performed and to insure the maximum degree of public confidence in the results of the RI/FS, the * * * [DEP] will conduct all such RI/FS work.

AO-69 does permit private parties to "participate" in the development of an RI/FS under certain specified conditions. The private party must agree: (1) to the scope of work developed by the DEP; (2) that the State will hire the contractor to perform the RI/FS; (3) to pay in advance all the costs of the RI/FS, including the administrative costs of DEP; and (4) to comply with all applicable community relation requirements. Moreover, the agreement between DEP and the responsible party must be reduced to an administrative or judicial consent order.

Private party involvement under AO-69 is limited to minority membership on a committee chaired by a DEP representative. The committee is responsible for selecting the contractor to perform the work, approving the contractor's work plan, and overseeing the development of the RI/FS.

DEP concedes that AO-69 was not adopted in "substantial compliance" with the rulemaking prodedures of the Administrative Procedure Act (APA) as required by N.J.S.A. 52:14B-4(d). An "administrative rule" can be promulgated only on notice and in compliance with N.J.S.A. 52:14B-4. The APA, in N.J.S.A. 52:14B-2(e), defines an "administrative rule" as

each agency statement of general applicability and continuing effect that implements or interprets law or policy, or describes the organization, procedure, or practice requirements of any agency. The term includes the amendment or repeal of any rule, but does not include: (1) statements concerning the internal

management or discipline of any agency; (2) intra-agency and interagency statements; and (3) agency decisions and findings in contested cases.

Thus the latter three categories of administrative actions need not satisfy the notice and hearing requirements of N.J.S.A. 52:14B-4. Agency decisions in "contested cases," however, are subject to the notice and hearing requirements of N.J.S.A. 52:14B-9. Internal management, intra-agency, and interagency statements need not be preceded by notice and hearing.

The Appellate Division, faced with plaintiffs' challenge to AO-69 solely on the ground of procedural noncompliance with the requirements of the APA, concluded that the proper characterization of the order was controlled by this Court's recent opinion in Metromedia, Inc. v. Director, Division of Taxation, supra, 97 N.J. 313. There, the Court established six factors for determining that agency action constitutes an administrative rule, namely, when the determination

(1) is intended to have wide coverage encompassing a large segment of the regulated or general public, rather than an individual or a narrow select group; (2) is intended to be applied generally and uniformly to all similarly situated persons; (3) is designed to operate only in future cases, that is, prospectively; (4) prescribes a legal standard or directive that is not otherwise expressly provided by or clearly and obviously inferable from the enabling statutory authorization; (5) reflects an administrative policy that (i) was not previously expressed in any official and explicit agency determination, adjudication or rule, or (ii) constitutes a material and significant change from a clear, past agency position on the identical subject matter; and (6) reflects a decision on administrative regulatory policy in the nature of the interpretation of law or general policy. [ Id. at 331-32.]

The Court emphasized that not all of these factors need be present in order for agency action to constitute a rule. Rather, the various factors can be balanced even if some are present and others are not. Id. at 332. The Appellate Division concluded that because AO-69 satisfied all six of the Metromedia factors, the Order was invalid for its failure to comply with the prescribed rulemaking procedures.


As is by now apparent, the starting point for analysis of this appeal is our opinion in Metromedia. The threshold question is whether Metromedia controls the outcome here. We think not.

In Metromedia the Director of the Division of Taxation determined that Metromedia's corporate income tax would be calculated under the "audience share" method, a method never theretofore applied by the Director. Metromedia isolated a number of factors that "either singly or in combination, determine in a given case whether the essential agency action must be rendered through rulemaking or adjudication." 97 N.J. at 332. Appellants argue that this case does not implicate the rulemaking-adjudication distinction addressed in Metromedia because AO-69 falls within the intra-agency exception of N.J.S.A. 52:14B-2(e)(2).

Metromedia provides standards for determining whether rulemaking requirements apply to or govern an agency decision or particular agency action. Metromedia itself was concerned with whether an agency determination was subject to the criteria of either rulemaking or adjudication, 97 N.J. at 328, 332, 333, although the proceedings attendant to the Director's determination in that case were also held not to satisfy the "contested case" exception to rulemaking found in N.J.S.A. 52:14B-2(e)(3). Id. at 336. However, the application of the Metromedia criteria is not limited to the determination of whether a particular agency action is either rulemaking or adjudication. The criteria have been applied to determine whether other types of agency actions or determinations should be subject to rulemaking procedures.

In In the Matter of the Request For Solid Waste Utility Customer Lists, 106 N.J. 508 (1987), for example, the Metromedia criteria were applied to determine whether an agency order directing solid waste utilities to provide the agency with customer lists was a regulation. Id. at 517-18 (also concluding, id. at 521, that the absence of a factual dispute rendered adjudication inappropriate). In Board of Education, City of Plainfield v. Cooperman, 209 N.J. Super. 174 (App.Div.1986), aff'd, 105 N.J. 587 (1987), the Court applied the Metromedia ...

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