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In re SMB Associates

Decided: April 23, 1993.


On appeal from Final Administrative Decision of the Coastal Area Review Board.

Long, D'Annunzio and Keefe. The opinion of the court was delivered by D'Annunzio, J.A.D.


At issue is the power of a government agency to waive its regulations.

This appeal involves a mixed-use real estate development proposed by respondent SMB Associates (hereinafter SMB) in Egg Harbor Township in Atlantic County. Specifically, appellants, American Littoral Society, D.W. Bennett and Richard Crema, appeal from a decision of the Coastal Area Review Board (hereinafter CARB), rendered on April 10, 1991, granting "SMB Associates request for a waiver of the Bay Island Corridor Policy" and directing issuance of a permit for the project. The decision shielded the project from the impact of certain regulations adopted by the Department of Environmental Protection to implement

the Coastal Area Facility Review Act (hereinafter CAFRA), N.J.S.A. 13:19-1 to -21.

CAFRA prohibits construction of "a facility in the coastal area" without a permit. N.J.S.A. 13:19-5. SMB's project is within the "coastal area," N.J.S.A. 13:19-4, and constitutes a "facility" subject to CAFRA. N.J.S.A. 13:19-3. The Commissioner of the Department of Environmental Protection*fn1 (Commissioner) may not issue a permit unless he finds that the statutory standards have been met. N.J.S.A. 13:19-10. See generally State, Dep't of Envtl. Protection v. Stavola, 103 N.J. 425, 511 A.2d 622 (1986); Crema v. N.J. Dep't of Envtl. Protection, 94 N.J. 286, 463 A.2d 910 (1983); Matter of Egg Harbor Associates, 94 N.J. 358, 464 A.2d 1115 (1983); Matter of Cape May County Mun. Util. Auth., 242 N.J. Super. 509, 577 A.2d 840 (App.Div.1990). The statute authorizes the DEP "to adopt, amend and repeal rules and regulations to effectuate the purposes of this act." N.J.S.A. 13:19-17. Pursuant to its statutory authority, the DEP adopted extensive and detailed regulations implementing CAFRA, N.J.A.C. 7:7-1 et seq. and N.J.A.C. 7:7E-1.1 et seq., including the regulations establishing the bay island corridor policy, N.J.A.C. 7:7E-3.24,*fn2 and the general land area policy, N.J.A.C. 7:7E-5.1 et seq.

SMB's site consists of 133 acres, much of it wetlands. Its project is to be constructed on 17 upland acres and includes a 200 slip marina, a 200 room motel, a restaurant, retail shops, 69 townhouses, 120 condominium units, and parking for hundreds of automobiles. Access to the project from existing Route 152 would be provided by an elevated roadway to be built across wetlands on 165 pilings. The roadway would be 600 feet long and 25 feet wide. The project's total impervious surface coverage would be 5.63 acres, constituting approximately 33% of the 17 acre uplands tract,

unless a porous surface is used, in which event the total impervious coverage will be 14.5%.

In 1985 and 1986, the Commissioner denied a permit for the project. SMB appealed from the Commissioner's decision, and the matter was referred to the Office of Administrative Law as a contested case. After a hearing, the Administrative Law Judge (ALJ) concluded "that the Commissioner can . . . generally find that the project as proposed will meet" the CAFRA standards, with the imposition of certain conditions.

In a Final Decision, dated January 8, 1988, the Commissioner rejected the ALJ's Initial Decision. The Commissioner denied the permit because he was "unable to make the necessary positive findings as required by [CAFRA] and as embodied in the rules on Coastal Resources and Development." The Commissioner advanced seven specific reasons for his denial of the permit. He determined that the site is a "bay island corridor" and that the regulations implementing the bay island corridor policy prohibited the project. He also determined that the project violated regulations implementing the general land area policy.

SMB appealed to this court, and in an unpublished opinion another panel affirmed "the decision to deny SMB the permits based on the Commissioner's rationale concerning the bay island corridor policy and the general land areas policy." We reversed the Commissioner's determination that the project violated other regulations and policies such as the protection of productive shellfish beds, loss of navigability of a channel which is part of the Intracoastal Waterway, violation of wetlands regulations through construction of the elevated access roadway, inadequacy of the proposed 50 foot wetlands buffer, and absence of an approvable storm water runoff plan. SMB Associates v. N.J. Dep't of Envtl. Protection, No. A-2175-87 (App.Div. March 23, 1989), certif. denied, 117 N.J. 154, 564 A.2d 874 (1989). At the Conclusion of the opinion this court stated:

However, as previously indicated, we anticipate that SMB may elect to submit a revised plan together with requests for a waiver which may meet with DEP's approval. If so, the DEP might want to reassess its denial justified only by the

bay island corridor policy and the general land areas policy. That is, with all other policies in compliance, the agency might want to evaluate the impact of any revised proposal. For example, the regulations provide only that coastal development which does not conform to the acceptable intensity of development is discouraged, not prohibited. N.J.A.C. 7:7E-5.2(c)*fn3 While we will not speculate further, we do note that it is possible that, if intensity of development were the only factor standing in the way of SMB's project, a plan modification in that respect might result in DEP approval.

[Slip op. at 27-28 (emphasis added) (footnote added).]

After the opinion was filed, SMB's counsel requested "a waiver of the 5% maximum lot coverage requirement of the Bay Island Corridor Policy and General Land Area Policy so as to permit issuance of a CAFRA permit for the project as proposed." SMB did not file a modified or revised plan. The DEP denied the waiver. SMB appealed to CARB which is authorized "to hear appeals from decisions of the commissioner" granting or denying a permit. N.J.S.A. 13:19-13. CARB has three voting members: the Commissioner of DEP; the Commissioner of Commerce and Economic Development; and the Commissioner of Community Affairs. CARB granted the waiver, over the DEP Commissioner's objection, by a decision dated November 27, 1990. The DEP moved for reconsideration by CARB. CARB did reconsider but granted "a waiver of the Bay Island Corridor Policy" and directed the issuance of a permit, again over the DEP commissioner's objection.

Despite its vigorous opposition to the granting of a waiver, the DEP did not appeal from CARB's decision. However, appellants did file a notice of appeal, though they had not previously participated in the administrative proceedings or in this court on the occasion of SMB's appeal.

The issues are whether appellants have standing to appeal CARB's decision; whether a "waiver" of DEP regulations implementing CAFRA may be granted in the absence of a rule authorizing

waiver and establishing standards for the exercise of the power to waive;*fn4 whether the doctrine of "law of the case" applies so as to vest waiver authority in the agency below; and whether, assuming the power to waive, CARB properly exercised it.


SMB contends that appellants lack standing to appeal CARB's action because appellants did not participate below and were not parties in any of the proceedings below.

Appellant D.W. Bennett is the Executive Director of the American Littoral Society (ALS). According to a certification filed by Bennett, ALS is a non-profit organization whose goal is to encourage the study and conservation of marine life and its habitat, especially in the coastal zone. ALS has approximately 9,000 members, half of whom reside in New Jersey. The organization has offices at Sandy Hook and monitors coastal development in New Jersey, including all permits for dredging and filling and all CAFRA permits. The organization has officially commented on permits at public hearings, submitted written testimony and participated as a party in appeals to the Appellate Division with regard to the issuance of CAFRA permits. Bennett stated in his certification that he personally uses the coastal waters of New Jersey for recreation, including surf and bay fishing.

Richard Crema also filed a certification. Crema described himself as a full time commercial shell fisherman who works primarily in the back bays of Atlantic County, including the area involved in the present case. Crema maintains that the issuance of a CAFRA permit to SMB will jeopardize the waters in which he earns his living.

Appellants contend that they "have a sufficient interest to represent the public interest" to challenge CARB's decision. They further argue that they have standing because the Attorney

General, "a likely challenger and advocate for those views expressed 0 by the ALS and the other appellants," represents the two departments whose commissioners voted in favor of the decision, and also represents the DEP. In their reply brief, appellants assert that "[t]here was no adjoining landowner involved to contest the permit because the land involved here is an island," and that "[t]here might have been a public interest group that had the resources to contest this matter from its inception or perhaps at another level but that simply was not the case." They also contend that "it is well established that the ALS did not have the right to request or participate in an administrative law hearing regarding the factual determinations that really make up the justification for the decision in this matter."

SMB maintains that because appellants deliberately chose not to participate in the CARB proceedings, they failed to exhaust the available administrative remedies and, therefore, lack standing to appeal. SMB points to a certification filed by Bennett in opposition to SMB's motion to dismiss the appeal in which he stated that he has been monitoring SMB's permit application for several years on behalf of ALS but that due to limited funds and staff "we 1 do not intervene or seek to take part directly in any matter in which we believe the interest of the public is properly being considered and weighed by the appropriate governmental authorities." SMB also contends that appellants' appeal is barred because it presents issues which were not raised below and may not be considered here for the first time. Finally, SMB argues that appellants are guilty of laches and that "fundamental fairness" and "administrative due process" require dismissal of the appeal because of appellants' delay in intervening in this matter.

SMB's contention that the doctrine of exhaustion of administrative remedies deprives appellants of standing is without merit. R. 2:2-3(a)(2) precludes appeals from final decisions of administrative agencies to the Appellate Division "so long as there is available a right of review before any administrative agency or officer." The exhaustion of remedies doctrine serves three primary

goals: (1) ensuring that claims will be heard initially by a body with expertise in the area; (2) allowing the parties to create a factual record necessary for meaningful appellate review; and (3) allowing an opportunity for the agency 2 decision to satisfy the parties and thus obviate the need for unnecessary adjudication. Atlantic City v. Laezza, 80 N.J. 255, 265, 403 A.2d 465 (1979). Thus, the doctrine clearly operates to prevent a party from prematurely resorting to the appellate process. The doctrine has no application here, as there is no allegation that appellants may obtain review at the administrative level.

Our courts have held that a "slight private interest, added to and harmonizing with the public interest," is sufficient to give standing to seek judicial review of official action. Elizabeth Federal S & L Ass'n v. Howell, 24 N.J. 488, 499, 132 A.2d 779 (1957) (quoting Hudson Bergen, etc. Ass'n v. Bd. of Comm'rs of City of Hoboken, 135 N.J.L. 502, 510, 52 A.2d 668 (E. & A. 1947)). Moreover, the right to seek judicial review of administrative decisions "inheres not only in those who are direct parties to the initial proceedings before an administrative agency . . . but also belongs to all persons who are directly affected by and aggrieved 3 as a result of the particular action sought to be brought before the courts for review." Id., 24 N.J. at 499-500, 132 A.2d 779.

In re Waterfront Dev. Permit, 244 N.J. Super. 426, 582 A.2d 1018 (App.Div.1990), certif. denied, 126 N.J. 320, 598 A.2d 880 (1991), supports appellants' contention that they have standing. In that case, this court held that the DEP Commissioner violated his own regulations by intervening and ordering the issuance of a waterfront development permit while the permit application was still pending before the Division of Coastal Resources. The permit allowed construction of two 160-foot high commercial towers as part of a mixed-use office, retail, hotel and residential complex along the Hudson River in Weehawken. The buildings would impair the view of the Hudson River shoreline enjoyed daily by thousands of bus and car passengers from the Lincoln Tunnel Helix. ALS, an appellant in the present matter, requested and was denied a review hearing of the Commissioner's determination

pursuant to 4 N.J.A.C. 7:7-5.1. Thereafter, ALS filed an appeal in the ...

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