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K. Hovnanian Companies of North Central Jersey, Inc. v. New Jersey Dep't of Environmental Protection

July 1, 2005


On appeal from the Superior Court of New Jersey, Law Division, Hunterdon County, Docket Number L-452-03.

The opinion of the court was delivered by: Hoens, J.A.D.



Argued on May 9, 2005

Before Judges Cuff, Weissbard*fn1 and Hoens.

Plaintiff K. Hovnanian Companies of North Central Jersey, Inc. (Hovnanian) appeals from the order of the Law Division dismissing its Mount Laurel*fn2 complaint on grounds of ripeness and failure to exhaust administrative remedies. We affirm.

Although the factual and procedural history that led to the entry of the order on appeal is lengthy and complex, we need only recite the following abbreviated summary thereof. In 1988, Hovnanian contracted to purchase a tract of land located in Union Township and known as Milligan Farm. The property had previously been identified by the Council on Affordable Housing (COAH) and the township as an appropriate location for construction of Mount Laurel housing. In or about 1990, Hovnanian entered into discussions with the New Jersey Department of Environmental Protection (NJDEP) in an effort to secure approvals for construction of a wastewater treatment facility and related permits to support construction of 292 units of housing on the property, of which twenty-nine were to be Mount Laurel units. Eventually, in the mid-1990s, Hovnanian, in concert with NJDEP, determined that the appropriate method of wastewater treatment for the project would require an on-site wastewater treatment facility. The treated effluent would be discharged to the surface water of the Sidney Brook, a stream that runs along the edge of the property. At about the same time, Hovnanian sought municipal site plan approval for the project.

On March 8, 1999, NJDEP granted Hovnanian an approval pursuant to the New Jersey Water Quality Planning Act, N.J.S.A. 58:11A-1 to -16, for an amendment to the Wastewater Management Plan (WMP) to allow for the proposed wastewater treatment facility. The amendment was noticed and adopted in 1999. At the same time, Hovnanian pursued other approvals with respect to flood hazards and wetlands encroachment. As a part of that review process, the United States Fish and Wildlife Service determined that no federal approval was needed because it had concluded that there would be no detriment to any federally protected species or habitat.

In March 1999, NJDEP issued a final New Jersey Pollutant Discharge Elimination System (NJPDES) permit for the surface water discharge of the highly treated wastewater from the project. In September 1999, NJDEP also issued a freshwater wetlands and stream encroachment permit for the project. In November 1999, defendants-intervenors Wendy Kelman Neu and John L. Neu, who own property adjacent to the Sidney Brook, appealed this permit, asserting that the planned development posed a risk to bog and wood turtles in the area. Hovnanian, with the support of NJDEP, resisted that appeal and ultimately prevailed. See In re Stream Encroachment & Freshwater Wetlands Permits, Nos. A-1440-99T5, A-3495-99T5 (App. Div. May 30, 2001), certif. denied, 170 N.J. 88 (2001).

Although they had not initially appealed the March 1999 NJPDES discharge permit, in August 1999, the Neus filed a petition with NJDEP requesting that the March 1999 permit be revoked. They raised a number of grounds as support for the petition, including their concerns about the turtle habitat. In May 2000, NJDEP, while rejecting the contentions raised by the Neus about the turtle habitat, requested that Hovnanian perform an anti-degradation analysis of the Sidney Brook. Hovnanian, asserting that this analysis was both unfair and unprecedented, nevertheless agreed to prepare the anti-degradation analysis. Hovnanian first requested input from NJDEP about the nature and scope of the requested analysis and then submitted its response to the request by September 2000.

According to Hovnanian, its analysis demonstrated that the discharge of highly treated wastewater as allowed in the March 1999 NJPDES permit would result in slight, if any, change in water quality. That is, although for some parameters there would be a slight change in water quality, in all others, there would be no measurable in-stream change as a result of the discharge of the treated wastewater. In addition, according to Hovnanian, water quality would be in compliance with previously set water quality standards. See N.J.A.C. 7:9B-1.1.

Hovnanian's analysis concluded that certain parameters could be refined consistent with "best achievable" technology, but it would not be technologically practical or economically feasible to achieve a discharge that would result in no change in water quality of the Sidney Brook. Hovnanian asserted in the report that the benefits to be gained by providing the proposed Mount Laurel units and the location of the property in the State Plan's Planning Area 2 justified the relatively minor level of degradation in the water quality of the Sidney Brook. In October 2001, NJDEP requested further information from Hovnanian, which it provided the following month. In September 2002, NJDEP issued a draft revised NJPDES permit that would further strengthen the previously imposed limitations contained in the March 1999 NJPDES permit.

In November 2002, NJDEP proposed changing the Sidney Brook from a Category 2 (C-2) to a Category 1 (C-1) stream. See 34 N.J.R. 3889(a) (Nov. 18, 2002). The effect of that proposed change would be to prohibit any discharge at all into the Sidney Brook if it would measurably affect the water quality. Rather than address the previously proposed draft revised NJPDES permit, on May 19, 2003, NJDEP published a notice of adoption of the change in the classification of the Sidney Brook from C-2 to C-1, effectively nullifying the earlier permit as a means for Hovnanian to develop the property. NJDEP based its reclassification of the Sidney Brook to C-1 status on the recommendation of the NJDEP Commissioner. See 35 N.J.R 2264(b) (May 19, 2003).

In July 2003, NJDEP gave Hovnanian notice that it would act to revoke the March 1999 NJPDES permit. In response, Hovnanian filed its complaint in the Law Division*fn3 seeking relief. The amended complaint, which named only NJDEP as a defendant, includes a Mount Laurel and Fair Housing Act, N.J.S.A. 52:27D-301 to -329, count, a count denominated "violation of right to housing choice," an estoppel count, a count asserting entitlement to relief pursuant to the time of decision rule, counts based on the federal and state constitutions asserting violations of the takings clause, deprivation of equal protection and due process rights and a count asserting that the New Jersey Water Pollution Control Act, N.J.S.A. 58:10A-1 to -60, contravenes the Mount Laurel doctrine and is therefore unconstitutional. The Neus, along with Concerned Citizens of Union Township, were granted leave to intervene in November 2003. Thereafter, defendant NJDEP and the intervenors moved to dismiss the complaint on grounds of ripeness, failure to exhaust ...

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