April 23, 2012
STATE OF NEW JERSEY, DEPARTMENT OF ENVIRONMENTAL PROTECTION, PLAINTIFF-APPELLANT,
T. FIORE DEMOLITION COMPANY, T. FIORE RECYCLING CORPORATION AND THEODORE FIORE, DEFENDANTS-RESPONDENTS.
On appeal from Superior Court of New Jersey, Chancery Division, Essex County, Docket No. C-257-09.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Submitted March 7, 2012
Before Judges J. N. Harris and Koblitz.
The New Jersey Department of Environmental Protection (DEP) appeals from the May 27, 2011 order denying its second motion in aid of litigant's rights seeking to compel compliance with the parties' October 29, 2009 judicial consent order (JCO). After reviewing the record in light of the contentions advanced on appeal, we reverse and remand for a plenary hearing to determine whether defendants are able to comply with the JCO.
Theodore Fiore owns, operates, and is the sole principal of both defendants T. Fiore Demolition (Fiore Demolition) and T. Fiore Recycling Corporation (Fiore Recycling). On November 21, 2001, the DEP approved Fiore Recycling to operate a Class B Recycling Center on Site A*fn1 in Newark, permitting it to accept no more than 1,865 tons per day (tpd) of recyclable materials, and to store up to 30,314 cubic yards (cy) of unprocessed Class B recyclables and approximately 38,381 cy of processed Class B recyclables. Unprocessed recyclables include materials such as concrete, asphalt, cinder block, brick, wood, street sweepings, creosote wood and roofing shingles. Fiore Recycling processes these materials and sells them for use as fill for roads and other construction projects.
Adjacent to Site A is twenty-six acres of land (Site B) owned by the Newark Housing Authority (NHA). Although Fiore Recycling obtained approval from the DEP to operate the recycling center on Site A only, Fiore individually entered into a lease agreement with the NHA to use Site B to store concrete debris.*fn2 This act led the DEP to issue a notice of violation to Fiore Recycling on November 9, 2006. Fiore Recycling responded, on Fiore Demolition letterhead, with a proposed schedule to remove the "off-site pile" by the end of 2008.*fn3
On December 20, 2007, the DEP entered an administrative order requiring Fiore Demolition, Fiore Recycling, and Fiore individually and in his official capacity as president of the businesses to "[i]mmediately cease all acceptance of materials" until the materials on Site B are "removed and [the recycling facility] is operating in conformance with the approved site plan." In February 2008, Fiore reported that the recycling center had stopped accepting materials and had addressed the side slope of concrete debris stored illegally on Site B.
The DEP advised Fiore that he could resume operation at his recycling center subject to certain conditions, including the removal of three truckloads of processed material for every truckload of incoming unprocessed material. On August 15, 2008, Fiore Demolition and Fiore Recycling submitted a revised removal schedule that proposed complete compliance by the end of 2010.
The New Jersey Turnpike Authority (NJTA) visited Site B on October 15, 2008. By that time, the stockpile had doubled in height to approximately 100 feet. The NJTA expressed "significant concerns relative to this stockpile" and "requested that [Fiore] be required to take all appropriate actions to alleviate these concerns immediately."
On October 25, 2009, the DEP filed a verified complaint against defendants for violations of the Solid Waste Management Act (SWMA), N.J.S.A. 13:1E-1 to -48, that created a public nuisance. On October 29, 2009, the judge entered a judicial consent order (JCO), agreed to by the parties, to complete the removal of almost 500,000 cy of unauthorized concrete material by October 29, 2014. Fiore executed the JCO as president and sole shareholder of Fiore Recycling and Fiore Demolition.
The JCO required defendants to completely remediate Site B within the five-year period by removing approximately one-half million cy of waste illegally stored approximately fifty feet from the New Jersey Turnpike in Newark. It also obligated defendants to operate in compliance with the recycling center approval by periodically submitting progress reports, engineering reports, and surveys.
The negotiated JCO provided compliance flexibility. It allowed Fiore and his companies to decrease their removal rate during the winter months to account for seasonal effects and to average their removal rate to account for fluctuations in business. Despite this flexibility, defendants were in violation of the agreed-upon limits within eight months. The amount of unprocessed concrete and other debris at the recycling center became so excessive that defendants continued to store processed material on Site B.
In May 2010, defendants conducted an inspection of Site B to complete a required engineering report. The consulting engineer noted "some erosion . . . along the slope at the south side and the southeast corner along the New Jersey Turnpike." Fiore's consultant planned to install the required vertical markers by June 30, 2010, so that the DEP could objectively measure removal progress, but the markers were never installed. Defendants also failed to sample and analyze the material illegally stored on Site B, to complete their engineer inspection/survey obligations, to obtain a permit for storm water discharge, and to control for slope failure, dust storms, and erosion on Site B. The DEP issued defendants a notice of violations.
Defendants contended that the poor economic climate and its effect on the rate and regularity of construction projects harmed their business operations and, accordingly, their ability to comply with the JCO.*fn4 Defendants note that in their efforts to comply with the JCO, they have given away much of the valuable processed material and have incurred over $300,000 in costs transporting the material away from the site to comply with the removal schedule. Fiore also noted that he currently pays approximately $36,000 per month in rent to the NHA to store the excess materials on Site B.
On July 28, 2010, the DEP filed a motion in aid of litigant's rights to enforce the JCO. The DEP alleged that defendants failed to comply with the JCO by failing to (1) meet the monthly removal requirements, (2) install vertical markers, and (3) provide progress reports, engineering reports, and an aerial survey by May 1, 2010. Defendants argued that they "were diligently removing material as much as they possibly could," but that the economy had hindered their efforts.
The court denied the motion, noting defendants' removal efforts during the first two months following entry of the JCO and took "judicial notice . . . of the horrendous economic conditions that affected all levels of business." In light of those findings, the court concluded that it was "unwarranted for [her] to assess some three quarters of a million dollars against Fiore[*fn5 ] and to give relief which would shut them down" because that would not "help anyone." The court further concluded that it would be much better for [defendants] to have a strong message that if there is not a continuation of good faith effort to have compliance with this order that the [c]court will be compelled to grant relief in the near future even if it means the loss of substantial business and their right to use the property.
Subsequent to the court's denial of the DEP's motion, defendants continued to violate the JCO by storing excessive unprocessed materials and ignoring the agreed-upon removal schedule. Defendants again failed to complete and provide the required engineering reports and aerial surveys, to install vertical markers, or obtain storm water discharge permits. The DEP filed a second motion in aid of litigant's rights on January 13, 2011, once again seeking an order to compel defendants' compliance with the JCO.
The court noted that the materials accumulated at the recycling center amounted to more than 20,000 cy over the approved limit and the removal rate was less than seventy percent of what the JCO required. To determine whether the noncompliance was willful, the court ordered defendants to submit "an account" of Fiore Demolition's and Fiore Recycling's generated revenue since it last appeared in November 2010 in order to assess: whether or not there truly is this need to continue accepting material for processing on Site [A], what the income is that is coming in and what [the] expenses [are] that are going out to determine whether or not - this is a real fear that if I grant this relief, is this man and all of his employees going to be out of work, and that's very important to this [c]court of equity.
The court denied the DEP's request that Fiore produce his personal financial records, observing:
These are corporations. These are corporate entities. The corporation has the permit.
The corporation has the material. His personal finances there, I think that's really abusive. That's what I am trying to find out, whether that is feasible to do or whether that's going to put the man - forget it - the business out of business, not him personally.
In early May 2011, defendants produced a statement of income and expenses from April 2010 to April 2011 for both Fiore Demolition and Fiore Recycling. The unaudited statements revealed that the companies had sustained a combined net loss of $159,815 without taking into account unpaid bills in the amount of $2,957,472. The statements did not include sums paid to Fiore Demolition and Fiore Recycling for incoming loads of unprocessed material. On May 16, 2011, the DEP filed a response to defendants' submissions asserting that defendants had not provided the court with adequate information from which to evaluate defendants' asserted inability to pay. The DEP noted that the submissions were not audited. It also noted that an accountant did not compile the submissions, that the financial statements made claims of expenses without attached evidence and omitted net worth figures.
The court, however, rejected the DEP's argument that the statements should be audited or certified and that Fiore was individually liable under the JCO. It declined to compel Fiore to provide personal financial information to establish defendants' inability to comply. The court further concluded that the financial statements provided by Fiore were sufficient and declined to appoint an independent accountant. It determined that defendants evidenced a "good faith effort" considering their individualized circumstances, and accordingly denied the DEP's motion. It did not address the missing survey report, defendants' failure to install vertical markers, and the lack of a storm water discharge permit.
The DEP contends on appeal that the court abused its discretion in denying the DEP's second motion in aid of litigant's rights. The DEP maintains that the court should have held a plenary hearing, required Fiore to submit his personal financial information and ordered an independent financial evaluation of Fiore and his two companies.
We review the trial court's ruling on a motion in aid of litigant's rights pursuant to an abuse of discretion standard. Saltzman v. Saltzman, 290 N.J. Super. 117 (App. Div. 1996). The decision should be reversed only if it "was not premised upon consideration of all relevant factors,  was based upon consideration of irrelevant or inappropriate factors,  or amount[s] to a clear error of judgment." Flagg v. Essex Cnty. Prosecutor, 171 N.J. 561, 571 (2002).
The SWMA articulates that "the collection, disposal, and utilization of solid waste is a matter of grave concern to all citizens and is an activity thoroughly affected with the public interest . . . ." N.J.S.A. 13:1E-2a. The DEP has the power to regulate the solid waste industry. N.J.S.A. 13:1E-2b(6). The DEP established a comprehensive solid waste permitting and planning system, N.J.A.C. 7:26-1.1 to -1.13, including rules for recycling pursuant to N.J.A.C. 7:26A-1.1 -12.3. A recycling center operating without DEP approval is classified as an unlicensed solid waste facility and the operator is subject to penalties. N.J.A.C. 7:26A-3.1(b).
Prior to granting a motion in aid of litigant's rights pursuant to Rule 1:10-3, the motion court must find that the defendants: (1) "failed to comply with the order," New Jersey Department of Environmental Protection. v. Mazza and Sons, Inc., 406 N.J. Super. 13, 29 (App. Div. 2009), (2) "that the court's assistance is necessary to secure compliance," ibid., (3) that defendants had the ability to comply with the order and thus their noncompliance was willful, Greer v. New Jersey Bureau of Securities, 288 N.J. Super. 69, 86 (App. Div. 1996), and (4) a sanction is "sufficient to sting and force compliance, but . . . not . . . excessive as to constitute a ruinous punishment," East Brunswick Board of Education v. East Brunswick Education Association, 235 N.J. Super. 417, 422 (App. Div. 1989).
The first factor is not in dispute. Defendants concede that they have not complied with the JCO. Defendants contend, however, that their efforts to comply with the JCO have been stymied by external economic forces and, therefore, their actions did not constitute willful non-compliance.
The DEP asserts that the court abused its discretion in failing to insist on a palpable showing of inability to comply by all defendants pursuant to DEG, LLC v. Township of Fairfield, 198 N.J. 242, 260-61 (2009). Where a contested issue of fact regarding a defendant's' ability to comply remains, "the trial court must conduct an evidentiary hearing to resolve the factual dispute." N.J. Dep't of Envtl. Prot. v. Mazza and Sons, Inc., supra, 406 N.J. Super. at 29. Although the DEP did not seek an evidentiary hearing, a court has a responsibility to conduct such a hearing if material facts are in dispute. Ibid. The submissions reviewed by the court did not adequately reveal an unequivocal inability to comply, particularly because the court failed to consider Fiore's individual financial situation. See Abbott v. Burke, 206 N.J. 332, 492 (2011) (explaining that "[b]efore issuing an order in aid of litigant's rights, the court must find . . . that the party has [failed to comply with a court order] although fully capable of complying with the order in question").
The JCO, like all settlement agreements memorialized by a consent order, reflects the parties "desire and expect[ation]" that it will "be enforceable as a judicial decree that is subject to the rules generally applicable to other judgments and decrees." DEG, LLC, supra, 198 N.J. at 261 (internal quotations omitted). To excuse non-compliance, defendants must demonstrate that "absent relief . . . [they would suffer] extreme and unexpected hardship . . . ." Id. at 268; see also Anyanwu v. Anyanwu, 333 N.J. Super. 345, 352 (App. Div. 2000), certif. denied, 170 N.J. 388 (2001). We agree with the DEP that this record does not substantiate defendants' purported inability to comply with the agreed-upon terms of the JCO.
The DEP's complaint alleged that Fiore was personally liable for the violations committed by his two corporations pursuant to the responsible corporate officer (RCO) doctrine. We agree. In New Jersey Department of Environmental Protection v. Standard Tank Cleaning Corporation, 284 N.J. Super. 381, 402-03 (App. Div. 1995), we determined that the RCO doctrine could be used to impose personal liability on responsible corporate officers for violations of state environmental regulations. RCO liability may be imposed where the corporate officer has "actual responsibility for the condition resulting in the violation or was in a position to prevent the occurrence of the violation but failed to do so." Ibid.
The verified complaint noticed Fiore as "the president and sole shareholder of defendants Fiore Recycling and Fiore Demolition," as well as "a responsible corporate officer who had the knowledge, power, and wherewithal to avoid and stop the solid waste violations alleged . . ." The JCO also named Fiore as an individual defendant. He voluntarily agreed that the JCO would be "binding, jointly and severally, on the [d]efendants, the [d]efendants respective agents, assignees and any trustee in bankruptcy or receiver appointed pursuant to a proceeding in law or in equity." Moreover, Fiore's certification in opposition to the DEP's motion in aid of litigant's rights represents that he has "done everything in [his] personal and professional power to comply with the provisions of the JCO, and to reduce the amount of material at [Sites A and B]. Any non-compliance was not willful or intentional, but rather, an unintended result of the difficulties with the market for these materials." Fiore indicates that he has a "vested financial interest in the removal of the materials[.]" Thus, Fiore admits knowledge of the ongoing violations and his responsibility and intention to rectify the DEP's grievances.
Reversed and remanded for proceedings consistent with this opinion. We do not retain jurisdiction.