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Morgan Stanley Services Company, Inc v. New Jersey Department of Environmental Protection

January 26, 2011


On appeal from the Department of Environmental Protection, PI#009027.

Per curiam.


Submitted December 14, 2010 - Decided Before Judges Parrillo, Yannotti and Skillman.

Morgan Stanley Services Company, Inc. (Morgan Stanley) appeals from the June 8, 2009 action of the Department of Environmental Protection (DEP) rescinding its May 19, 1998 No Further Action (NFA) letter granted to Morgan Stanley's predecessors in interest, Levolor Corporation (Levolor) and Dean Witter Services Company Inc. (Dean Witter), following years of environmental investigation and remediation on its former industrial facility in Hoboken. The DEP's rescission was based on Morgan Stanley's alleged failure to adequately investigate and remediate given the discovery, eleven years later, of levels of contamination in excess of those originally reported. On appeal, Morgan Stanley maintains that the DEP failed to make specific findings of fact supported by the record and to explain the basis for its conclusions. For the following reasons, we reverse and remand.

The Environmental Cleanup and Responsibility Act (ECRA), N.J.S.A. 13:1K-6 to -13.1, now known as the Industrial Site Recovery Act (ISRA), "requires owners and operators of industrial sites, as a condition precedent to closing, sale or transfer, either to develop a cleanup plan for real property contaminated by hazardous waste or to certify in a 'negative declaration' that remediation is unnecessary." In re Cadgene Family P'ship, 286 N.J. Super. 270, 273 (App. Div. 1995), certif. denied, 143 N.J. 330 (1996); N.J.S.A. 13:1K-7; see also In re R.R. Realty Assocs., 313 N.J. Super. 225, 228 (App. Div. 1998). Under a procedure adopted by the DEP, an owner or operator may seek an administrative consent order (ACO) allowing a transfer to take place before full compliance with ISRA and obligating the applicant to complete the site investigation and any required remediation at a future time. N.J.A.C. 7:26B-4.3. Non-compliance with ISRA may result in voiding the sale of an industrial site and may make the owner or operator strictly liable, without regard to fault, for all remediation costs.

N.J.S.A. 13:1K-13; In re Adoption of N.J.A.C. 7:26B, 128 N.J. 442, 449 (1992).

Underlying the present controversy is the question whether Morgan Stanley complied with this statutory mandate when and after it sold the site in question to Colpro, Inc. (Colpro) in 1990. By way of background, in 1951, Levolor's predecessors began operating a vinyl blind manufacturing facility on Monroe Street in Hoboken (the site). Through a merger in 1988, Dean Witter acquired Levolor as its wholly-owned subsidiary and Morgan Stanley subsequently became the successor to Dean Witter and Levolor.

The cessation of industrial operations at the site simultaneous with the merger transaction in 1988 triggered Levolor's remedial obligation under ISRA. Accordingly, on August 3, 1988, Levolor and the DEP entered into an ACO whereby Levolor agreed to clean up contamination at the site. Levolor eventually sold the property to Colpro, an entity owned by Dilawez Hoda and Gerard Saddel, thereby necessitating an amended ACO requiring Levolor to complete the ISRA cleanup.

Between 1988 and 1998, Levolor conducted a remedial investigation and cleanup at the site pursuant to ISRA, and submitted documentation to the DEP detailing the remediation effort. Levolor's investigation disclosed the presence of petroleum hydrocarbons (PHCs) and volatile organic compounds (VOCs), including trichloroethylene (TCE), in the soil and groundwater at the site, in addition to historic fill. Early remediation efforts included the removal of two underground storage tanks (USTs) containing No. 6 heating oil as well as the removal of petroleum-impacted soil.

To delineate the residual PHC contamination in the area, test pits were installed and additional sampling conducted, with results exhibiting concentrations that were generally well below the DEP's then residential soil cleanup criterion for total organic compounds. However, in one particular area where Levolor had stored drums containing TCE, which were destroyed in a fire in 1985, testing uncovered the presence of VOC concentrations in excess of ISRA guidelines and PHC contamination above residential soil cleanup criterion for total organics, which Levolor attributed to fuel contamination and not related to the TCE drums. Additional sampling in April 1989 discovered PHC contamination in both shallow and deep soil samples, some of which exceeded criterion, and trace levels of VOCs that were all below ISRA standards. No further TCE contamination was reported in the drum storage area.

On October 7, 1996, the DEP directed Levolor to take additional samples in a broader area to delineate the residual PHC contamination, and required Levolor to install two monitoring wells within the area where the USTs were removed. The resultant samples revealed the presence of PHCs, but because the contamination did not appear to be extensive in that area, the DEP determined that no further action was required.

Additionally, two groundwater monitoring wells were installed in the same area but Levolor reported to the DEP that "[t]he analyses of groundwater samples collected from monitoring wells MW-13 and MW-14 confirmed that local groundwater quality has not been adversely affected by the slightly elevated PHC concentrations identified in the shallow soils in this area." Subsequently, the DEP required no additional groundwater sampling and approved the closure of MW-13 and MW-14.

During the ISRA investigation, the only groundwater contaminants that were consistently identified by Levolor above DEP standards were VOCs, primarily consisting of chlorinated solvents, including TCE and its decomposition products. In fact, Dean Witter reported that the only significant occurrence of these contaminants had been in monitoring well MW-2. Specifically, a November 1996 groundwater sampling event indicated TCE, cis-1,2-dichloroethylene (DCE), and vinyl chloride (VC) in MW-2 at concentrations above DEP standards. The report further stated that in all of the remaining wells, contamination only "slightly exceeded" DEP standards, and in many cases, was "consistent with regional background quality for the region."

In accordance with the cleanup plan conditionally approved by the DEP on December 11, 1992, Levolor did not remove all of the PHC and VOC contamination on the site. Instead, to address the residual soil and groundwater contamination in the area, Levolor proposed a multi-pronged remedy including the installation of a bituminous asphalt cap over the site for containment; execution of a Declaration of Environmental Restrictions (DER), restricting the site to non-residential use;*fn1 and the establishment of a Classification Exception Area (CEA), restricting the use of groundwater under the site because of chlorinated solvent contamination remaining ...

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