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In re Hazardous Discharge Site Remediation Fund Innocent Party Grant Application Cliflake Associates, LLC.

Superior Court of New Jersey, Appellate Division

May 22, 2013

IN THE MATTER OF HAZARDOUS DISCHARGE SITE REMEDIATION FUND INNOCENT PARTY GRANT APPLICATION CLIFLAKE ASSOCIATES, LLC.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued January 29, 2013

On appeal from the New Jersey Department of Environmental Protection.

George J. Tyler argued the cause for appellant Cliflake Associates, LLC (Tyler & Carmeli, P.C., attorneys; Mr. Tyler, of counsel and on the briefs; James Aversano III and Matthew J. Krantz, on the briefs).

Kimberly A. Hahn, Deputy Attorney General, argued the cause for respondent New Jersey Department of Environmental Protection (Jeffrey S. Chiesa, Attorney General, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel; Ms. Hahn, on the brief).

Before Judges Alvarez and Waugh.

PER CURIAM

Cliflake Associates LLC (Cliflake or LLC) appeals the final administrative action of the New Jersey Department of Environmental Protection (DEP) denying its application for a Hazardous Discharge Site Remediation Fund Innocent Party Grant (innocent party grant) pursuant to the Brownfield and Contaminated Site Remediation Act (Brownfield Act), N.J.S.A. 58:10B-1 to -31. We reverse and remand for further consideration of Cliflake's application.

I.

We discern the following facts and procedural history from the record on appeal.

Cliflake owns an industrial and commercial property in Clifton. The property is in need of remediation of soil and groundwater contamination. It was previously owned by Cliflake Associates, LP (Cliflake LP or LP), which acquired it in June 1972. In 1999, the partners in the LP formed the LLC, becoming members of the latter entity, and the LLC acquired the assets of the LP. The deed transferring title to the property from the LP to the LLC was executed in July 1999.

Cliflake began remediating the property under a memorandum of agreement with DEP in October 1999. In 2010,

[a] remedial investigation of the Property . . . identified contamination caused by operations at the Property that occurred prior to Cliflake LP's acquisition of the property in 1972. Specifically, chlorinated volatile organic compound contamination was identified in soil and groundwater at the former warehouse area on the Property. Moreover, a vapor intrusion issue of Immediate Environmental Concern ("IEC") was identified at the Property.

The projected cost of remediating those conditions exceeds two million dollars.

Cliflake applied for the innocent party grant in January 2011. N.J.S.A. 58:10B-6(a)(4) establishes the following qualifications for the grant:

A person qualifies for an innocent party grant if that person acquired the property prior to December 31, 1983 and continues to own the property until such time as the authority approves the grant, the hazardous substance or hazardous waste that was discharged at the property was not used by the person at that site, and that person certifies that he did not discharge any hazardous substance or hazardous waste at an area where a discharge is discovered.

In March, the Director of DEP's Division of Responsible Party Site Remediation informed Cliflake that DEP's tentative decision was to deny the application because Cliflake did not own the property at issue prior to December 31, 1983.

Cliflake requested reconsideration of the preliminary denial on grounds that the LLC was essentially the same entity as the LP. In support of its position, Cliflake cited a section of the Industrial Site Recovery Act (ISRA), N.J.S.A. 13:1K-6 to -13, providing that "corporate reorganization not substantially affecting the ownership of the industrial establishment" does not constitute a "change in ownership." N.J.S.A. 13:1K-8. Cliflake represented that

[e]ach partner of Cliflake Associates, LP at the time of the change in the form of business entity became a member of Cliflake Associates, LLC and each individual retained the same ownership interest in Cliflake Associates, LLC with one exception not relevant here [one of the former partners divided her share amongst three children]. All of the assets held by Cliflake Associates, LP were transferred to Cliflake Associates, LLC. Therefore, the ability to remediate the Property was not hindered by the 1999 reorganization which did not affect ownership or control.

Based on those facts, it argued that the 1999 transaction between the LLC and LP "effectively altered only the name and business form of the [p]roperty owner."

DEP responded to the request for reconsideration in May, reiterating its intention to deny the application. DEP noted that the ISRA regulations supported its determination because the regulatory definition of "change in ownership" under ISRA includes "reorganization of a . . . limited partnership into a . . . limited liability company." N.J.A.C. 7:26B-1.4. It also asserted that, in any event, the definitions were not controlling for purposes of eligibility for innocent party grants because the two acts, the Brownfield Act and ISRA, are distinct.

DEP rejected Cliflake's contention that it stood in the shoes of the LP. Characterizing the "restructuring of Cliflake LP into Cliflake LLC" as "the exchange of one business form ...


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