claims, and to avoid the expense and time of having teams of appraisers assess ultimate home values on a case by case basis." Pl. Br. at 21.
Neither expense nor expediency may justify abandoning standards of substantive due process. As the Citizens for Equity court noted, "the statutory requirement for 'prompt' compensation [does not] require the agency to forego necessary but time consuming steps to satisfy itself of the validity of claims." Citizens Equity, 252 N.J. Super. 62 at 72, 599 A.2d 516. Nor does a sense of urgency exist where, as here, the majority of claimants never moved from their homes.
Simply assuming that a diminution in value occurred in some fixed amount of unknown origin, without any meaningful investigation into a claimant's individual circumstances, and without regard to any actual market data arising from a sale or attempted sale of the home, is an arbitrary and wasteful methodology. While the agency enjoyed a broad legislative mandate, this does not excuse it from acting outside the confines of rationality. Ultimately, as the NJDEPE knew, defendants would be held responsible for any claims reasonably paid by the Fund. The procedure implemented by NJDEPE was, both facially and practically, unreasonable. In fact, the NJDEPE itself admitted as much,
as discussed above.
Under NJDEPE's compensatory scheme, claimants who had suffered no actual damage recovered substantial amounts of money from the Fund. The Fund paid claims for diminution in value where the properly was never sold or offered for sale. The NJDEPE adopted an automatic market deflation factor of 25% without rational explanation. Such a windfall-creating procedure was arbitrary and capricious, and thus fatally flawed. Furthermore, this court finds that this administrative claim procedure also violated the agency's own regulations which required, as noted above, that the department "will consider only those damages for which the claimant can produce substantial evidence." N.J.A.C. 7:1I-1.7(a). Accordingly, the court grants summary judgment dismissing NJDEPE's cause of action for all diminution in value claims paid under the pre-1988 procedure.
2. Valuation of Diminution of Value Claims Under NJDEPE Regulations On and After July 18, 1988.
The Operators also have challenged the amended mechanism for paying diminution of value claims promulgated in July of 1988, 20 N.J.R. 1732-1743 (July 18, 1988), codified at N.J.A.C. 7:1I-1.1, et seq. Under the 1988 amendments, the NJDEPE has tightened the eligibility criteria for diminution of value claims to require the sale of the property
or an inability to sell after one year of continuous good faith attempts to do so, measured from the date of listing with a multiple listing service licensed real estate broker.
Detailed regulations were enacted in 1988 to reasonably assure a true fair market value determination under the criteria of N.J.A.C. 7:1I-3.3, including notification procedures for persons who filed property value diminution claims before March 7, 1988, instructing claimants about the new procedures and giving each claimant an option of requesting that the claim be suspended for up to two years, or withdrawn, pursuant to N.J.A.C. 7:1I-3.3(c).
The 1988 mechanism was upheld as a reasonable limitation upon recovery for diminution of value claims, in a suit by pre-1988 claimants who alleged that the new restrictions upon proofs were unfair and allegedly inconsistent with the statutory requirement for "prompt and adequate compensation," pursuant to N.J.S.A. 13:1E-101, supra. Citizens for Equity v. New Jersey Dept. of Environmental Protection, 252 N.J. Super. 62, 70-71, 599 A.2d 516 (App. Div. 1990), aff'd, 126 N.J. 391, 599 A.2d 507 (1991). The provision of the 1988 amendments in N.J.A.C. 7:1I-3.3(a) that restricted certain diminution of value claims, not involving physical intrusion, to locations within one-half mile of the landfill was struck down by the Appellate Division. Id., 252 N.J. Super. at 71-74, aff'd, 126 N.J. 391, 599 A.2d 507, as discussed below in Part II.D.
The Operator defendants have not shown in this motion how the post-1988 market-based compensation system is arbitrary or capricious. The NJDEPE's 1988 amendments established "objective, neutral standards by which the fact and extent of value diminution damage [is] to be determined," as the Citizens for Equity court found, 252 N.J. Super. at 71, and as this court now finds. The movants have not met their burden of proving that the administrative regulation amendments in July 1988 resulted in a compensation scheme that was arbitrary, capricious or otherwise unreasonable. Long, 75 N.J. at 561. The new scheme indeed takes the relevant economic factors of the particular property into account in measuring diminution of value, and it properly restricts compensation to properties that were actually sold or held out for sale in good faith through a multiple listing broker for one year. The reconstructed market value for such unsold homes is computed not by a generalized diminution factor but instead from actual market loss data, namely, "the average diminution percentage determined for the area," N.J.A.C. 7:1I-4.2(b), supra. Although this court expresses no opinion regarding the manner in which the post-1988 regulations have actually been applied in any individual claim (because no examples of post-1988 claim processing have been included in the record),
it is clear that the regulatory mechanism itself suffers from no impairment in its approach to diminution of fair market value determinations. Therefore, the motion for summary judgment will be denied with respect to the facial validity of the July, 1988 regulations
for compensating diminution of value claims.
D Geographical Limitations On Diminution In Value Claims
Defendants also seek to limit diminution in value claims to land contiguous to the landfill. A similar limitation has already been considered and rejected by the New Jersey state courts. See Citizens for Equity v. New Jersey Dept. of Environmental Protection, 252 N.J. Super. 62, 599 A.2d 516 (App. Div. 1990), aff'd, 126 N.J. 391, 599 A.2d 507 (1991).
In amending its appraisal procedure in 1988, NJDEPE had also sought to limit awards for diminution in value to property located within a half-mile radius of a landfill. Claimants outside that limit would be required to show both physical intrusion and diminution in value to receive compensation. While the revised claims procedure successfully withstood a legal challenge by disgruntled claimants, the geographic limitation was struck down as ultra vires.
As the Appellate Division stated:
[NJDEPE] does not have authority to limit the scope of the statutory liability by fashioning territorial requirements for recovery. Nor can the territorial restriction be justified as an administrative determination that, in the absence of any physical intrusion, a landfill could not proximately cause diminution of value beyond one-half mile. . . . Since the Fund liability at issue here is for diminution of value without physical intrusion, the absence of physical intrusion cannot alone establish the absence of value diminution.