Title: Lacey Municipal Utilities Authority v. New Jersey Department of Environmental Protection
Citation: N/A
Docket Number: a-54-98
State: new-jersey
Issuer: new-jersey Supreme Court
Date: October 28, 1999

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized). VERNIERO, J., writing for a unanimous Court. This appeal involves the one-year statute of limitations for filing a reimbursement claim against the fund established by the New Jersey Spill Compensation and Control Act (the Spill Fund), the central purpose of which is to finance the prevention and cleanup of hazardous-waste discharges and to compensate persons damaged by such pollution. The specific question is whether the Lacey Municipal Utilities Authority (Lacey or the Authority) may proceed with claims against the Spill Fund for reimbursement of costs expended by Lacey for certain extensions of its water system. Lacey extended the municipal water system into two areas, one known as Zone 10 and the other as Zone 12, after discovering that wells for residential drinking water located within those zones contained various hazardous substances in excess of the level established as safe for drinking purposes. The initial discoveries of well contamination in Zone 12 occurred in 1986 and 1987. Lacey's preliminary engineering work began in 1988, the contract for the water transmission work was awarded in December 1989, actual construction began in February 1990, and the first payment under the contract was approved by Lacey on April 4, 1990. On February 28, 1991, Lacey filed its claim in the amount of $746,540 against the Spill Fund, seeking compensation for costs incurred in connection with the expansion project for Zone 12. Lacey's expansion of its system into Zone 10 proceeded in a similar manner, with the construction contract awarded on January 23, 1991, work begun on May 2, 1991, and the first payment approved on June 26, 1991. Lacey filed its claim for reimbursement for Zone 10 costs in the amount of $181,834 with the Spill Fund on June 22, 1992. The New Jersey Department of Environmental Protection (DEP), which administers the Spill Fund, denied both claims as barred by the statute of limitations established by N.J.S.A. 58:10-23.11k, which provides that [c]laims shall be filed with the administrator not later than one year after the date of discovery of damage. Lacey exercised its right to arbitration under the statute and the matter was transferred to the Office of Administrative Law. The administrative law judge who sat as arbitrator and conducted a hearing issued a final decision barring Lacey's claims. The arbitrator concluded that the claims were untimely because they were filed more than one year after the date Lacey entered into the construction contracts. In addition, the arbitrator found there to be no basis for Lacey to have reasonably concluded that the DEP would waive or relax its strict adherence to the one-year statute of limitations. Lacey appealed to the Appellate Division, which reversed, reasoning that because a local entity is barred by statute from paying claims not properly approved by a governing body, Lacey did not actually incur damage until it authorized payment for the two construction projects. The Supreme Court granted the petition for certification filed by the DEP. HELD: The one-year period within which a public entity must file a claim with the Spill Fund begins on the date on which the entity commits itself through official act to incurring damages compensable by the Spill Fund. Because there were no clear regulations defining when damage is discovered when Lacey made its claims, Lacey's claims should proceed. 1. The statute that created the Spill Fund does not define the phrase discovery of damage, and when Lacey filed its claims, there were no regulations that made clear how that phrase would apply to a public-entity claimant whose claims arose from contamination of a residential water supply. Such regulations were not adopted by the DEP until 1999. (pp.6-8) 2. To establish the date on which there was a discovery of damage in the case of a public-entity claimant, the relevant inquiry is when the public entity knew or had reason to know that a claim against the Spill Fund would have to be made. The regulation adopted in 1999 in response to the Appellate Division ruling in this case declares that the date of discovery of damages is when the government entity makes a binding commitment to restore, repair or replace the contaminated drinking wells. The one-year period for making a claim begins at the point the entity makes that binding commitment through the appropriate governmental action. This regulation provides a sound basis for determining when a public entity knows that a claim will have to be made against the Spill Fund and effectuates the policies underlying creation of the Spill Fund. (pp.9-12) 3. Because of the absence of clear regulations when Lacey filed its claims, as a matter of fairness, Lacey should be permitted to proceed with its claims against the Spill Fund. With a clear regulation now in effect there should not be disputes precisely of this sort in the future and the DEP is encouraged to adopt similarly clear regulations to apply to other types of claimant. The Court agrees with the arbitrator that the DEP did not waive the one-year statute of limitations in this case and stresses the need for the DEP to preserve the integrity and resources of the Spill Fund by adhering to the limitations provision in the statute. (pp. 13-16) The judgment of the Appellate Division is AFFIRMED as MODIFIED. CHIEF JUSTICE PORITZ and JUSTICES O'HERN, GARIBALDI, STEIN, COLEMAN and LONG join in JUSTICE VERNIERO's opinion. LACEY MUNICIPAL UTILITIES AUTHORITY, Appellant-Respondent, v. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, ENVIRONMENTAL CLAIMS ADMINISTRATION, SPILL COMPENSATION FUND, Respondent-Appellant. Argued September 13, 1999 -- Decided October 28, 1999 On certification to the Superior Court, Appellate Division, whose opinion is reported at 312 N.J. Super. 298 (1998). Mark D. Oshinskie, Deputy Attorney General, argued the cause for appellant (John J. Farmer, Jr., Attorney General of New Jersey, attorney; Mary C. Jacobson, Assistant Attorney General, of counsel; Mr. Oshinskie and Eric Broadway, Deputy Attorney General, on the briefs). Jerry J. Dasti argued the cause for respondent (Dasti, Murphy &amp; Wellerson, attorneys). The opinion of the Court was delivered by VERNIERO, J. NO. A-54 LACEY MUNICIPAL UTILITIES AUTHORITY, Appellant-Respondent, v. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, ENVIRONMENTAL CLAIMS ADMINISTRATION, SPILL COMPENSATION FUND, Respondent-Appellant. DECIDED