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Shieldalloy Metallurgical Corp. v. State of New Jersey Dep't of Environmental Protection

October 14, 2010

SHIELDALLOY METALLURGICAL CORPORATION, PLAINTIFF,
v.
STATE OF NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, ET AL., DEFENDANTS.



The opinion of the court was delivered by: Irenas, Senior District Judge

OPINION

This dispute involves the decommissioning of a low-level radioactive waste site in Newfield, New Jersey ("the Newfield Site"), owned by Plaintiff Shieldalloy Metallurgical Corporation. Shieldalloy has taken steps toward permanently containing, at the Newfield Site, hazardous by-products of its manufacturing operations.*fn1 Defendant, the New Jersey Department of Environmental Protection ("NJ DEP")*fn2 has informed Shieldalloy that it intends to order Shieldalloy to remove the waste from the Newfield Site and transport it for off-site disposal. (Senior Cert. Ex. S, T)

Shieldalloy asserts that NJ DEP's actions violate a Settlement Agreement the parties entered into during Shieldalloy's prior bankruptcy case. According to Shieldalloy, NJ DEP knew all along about Shieldalloy's plans to contain the waste on-site, and never voiced an objection until the United States Nuclear Regulatory Commission ("NRC") took steps toward approving on-site containment.*fn3 Only after that, in 2009, did NJ DEP assume regulatory authority over decommissioning of the Newfield Site, whereupon it notified Shieldalloy of its intent to force Shieldalloy to remove the waste, rather than contain it on-site.

Shieldalloy asserts that it cannot afford the costs associated with off-site disposal. The Complaint primarily seeks declaratory and injunctive relief, asserting various state law contract claims, and a public nuisance claim.

NJ DEP moves to dismiss, asserting, among other things, that the Court lacks subject matter jurisdiction over this suit. The Court agrees that it lacks subject matter jurisdiction, therefore the Motion will be granted.

I.

In November, 1992, Shieldalloy created a "decommissioning plan" which would allegedly "provide for safe and permanent on-site capping of [radioactive waste] on an approximately 12-acre portion of the 68-acre Newfield site." (Compl. ¶ 12) Since approximately 2000, Shieldalloy has been working to obtain NRC approval of the final decommissioning plan, which also contemplates capping the waste on-site.

In 2009, the State of New Jersey assumed from the NRC regulatory authority for Shieldalloy's source material license, meaning that the decommissioning plan must now be approved by the State of New Jersey, not the NRC. (Senior Cert. Ex. T) New Jersey contends that on-site containment does not comply with NJ DEP regulations, and has asked Shieldalloy to submit a revised decommissioning plan. (Id.)

In September, 1993, Shieldalloy and its parent company, Metallurg, Inc., filed voluntary chapter 11 petitions in the United States Bankruptcy Court for the Southern District of New York.*fn4 The State of New Jersey, on behalf of NJ DEP, filed a proof of claim, totaling $11.26 million, "for all cleanup and removal costs incurred by [NJ DEP] in connection with the [Newfield] Site, including oversight costs, penalties, costs of response actions and natural resource damage claims." (Proof of Claim, Ex. B to Defs' Reply Brief)

New Jersey's proof of claim was not a surprise to Shieldalloy; as early as 1988 Shieldalloy had been cooperating with New Jersey under an Administrative Consent Order ("ACO") which "require[d] the cleanup and/or remediation of hazardous substances and pollutants known or subsequently discovered at the Newfield site." (Compl. Ex. A)*fn5

The United States Environmental Protection Agency (EPA) and the Department of the Interior, as well as the NRC, also filed proofs of claim alleging liability in connection with the Newfield Site. (Compl. ¶ 19)

In December, 1996, while Shieldalloy and Metallurg were still in bankruptcy, they entered into a "Settlement Agreement of Environmental Claims and Issues by and Between the Debtors and the United States of America and the State of New Jersey" ("the Settlement Agreement") (Compl. Ex. A). The Settlement Agreement provides, in relevant part,

7. With respect to the treatment of . . . the New Jersey Proofs of Claim, under the Debtors' Plan of Reorganization[,] the Debtors and . . . New Jersey agree as follows:

B. Allowance of New Jersey Claims

i. New Jersey shall have an Allowed General Unsecured Claim against Shieldalloy in the amount of $638,508.20 for prepetition response costs incurred by NJDEP;

j. New Jersey shall have an Allowed General Unsecured Claim against Shieldalloy in the amount of $1,196,982.84 for prepetition New Spill Fund Authorization;

k. New Jersey shall have an Allowed Administrative Claim against Shieldalloy in an amount of not less than $262,912.12, but not more than $270,242.69 . . .

l. Within six months after substantial consummation of the Plan of Reorganization . . . Shieldalloy shall commence the enhancement, restoration and creation of certain wetlands in and around the Newfield site. . . . In compensation for the claim for natural resource damages for interim lost use of groundwater, New Jersey shall have an allowed general unsecured claim against Shieldalloy in the amount of $1,311,000 . . . . The completion of these actions shall constitute full satisfaction of New Jersey's pre-petition claims for damages to wetlands, and for interim lost use of groundwater.

38. Except for those claims specifically settled pursuant to paragraphs 7, 8, and 9 of this Settlement Agreement, Shieldalloy's environmental liabilities at the Newfield site, including its liability to the United States and New Jersey, shall be excepted from discharge and shall pass through Shieldalloy's Chapter 11 case unaffected. The Plan of Confirmation [sic] or other Order confirming the Plan shall contain a provision identical to this paragraph 38. The parties agree that post-confirmation date response costs claims of the United States and New Jersey against Shieldalloy are not being settled under this Settlement Agreement.

(Compl. Ex. A)

Shieldalloy's and Metallurg's Joint Plan of Reorganization was confirmed by the bankruptcy court on February 26, 1997. (Metallurg, Inc. Form 10-Q(1) for the quarterly period ended October 31, 1997*fn6 ) "Transactions contemplated by the Plan were consummated on April 14, 1997." (Id.)

II.

There are two types of challenges to a district court's subject matter jurisdiction*fn7 facial attacks and factual attacks. Common Cause v. Pennsylvania, 558 F.3d 249, 257 (3d Cir. 2009). "Facial attacks . . . contest the sufficiency of the pleadings, and the trial court must accept the complaint's allegations as true." Id.

Factual challenges are different. Such challenges have "three important procedural consequences." CNA v. United States, 535 F.3d 132, 139 (3d Cir. 2008). First, the complaint's allegations are not presumed to be true. Id. Second, the burden of proving, by a preponderance of the evidence, the existence of subject matter jurisdiction, rests with the plaintiff. Id. Third, this Court may "make factual findings which are decisive to the issue." Id. (internal citation and quotation omitted).

The instant motion raises one facial challenge (sovereign immunity*fn8 ) and one factual challenge (statutory subject matter jurisdiction).

III.

NJ DEP moves to dismiss asserting that (1) Shieldalloy's suit is barred by the Eleventh Amendment to the United States Constitution and, (2) there is no statutory basis for this Court's subject matter jurisdiction. The Court addresses each issue in turn.

A.

Constitutional principles of sovereign immunity embodied in the Eleventh Amendment, and elsewhere in our "constitutional framework"*fn9, bar this suit in its entirety.

The Court's analysis begins with the basic premise that NJ DEP and Acting Commissioner Mauriello, sued in his official capacity only, are immune from private suit because "[s]tate governments and their subsidiary units are immune from suit in federal court under the Eleventh Amendment," and "'official-capacity suits generally represent only another way of pleading an action' against the state." Betts v. New Castle Youth Dev. Ctr., ...


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