In In Re Appeal of the New Jersey Department of Environmental Protection’s September 6, 2022 Denial of Request for Adjudicatory Hearing (A-42-23/089182) (Decided April 7, 2025), the New Jersey Supreme Court held that the Department of Environmental Protection’s (DEP) grant of a waiver suspending certain environmental remediation obligations does not create a constitutionally protected property interest in that waiver.
Facts of the Case
The Industrial Site Recovery Act (ISRA) prohibits the owner of an industrial establishment from transferring ownership until certain conditions are met, unless the owner pursues one of the alternatives that ISRA provides. As relevant here, one of the listed exceptions, N.J.S.A. 13:1K-11.5, provides for an “[a]pplication for closing [or] transfer when remediation is already in progress.” Under that provision, an entity may apply to the DEP for a Remediation in Progress Waiver (RIP Waiver), which allows that entity to proceed with a triggering event (i.e., sale or cessation of operations) without the typical attendant ISRA requirements “if the industrial establishment is already in the process of a remediation.” To receive a RIP Waiver, an entity must submit evidence “that the property…is being remediated by a prior owner or operator” and that a compliant “remediation funding source” (RFS) has been created.
In 2006, the corporate predecessor of Clarios, LLC, purchased an industrial site (“the Site”), for which the seller had executed a remediation plan under ISRA and placed funds in trust for future remediation (“the RFS Trust”). In 2007, Clarios ceased operations, triggering its ISRA responsibilities. Clarios, therefore, sought a RIP Waiver. In March 2007, the DEP granted Clarios’s RIP Waiver but expressly reserved the right to enforce Clarios’s ISRA obligations in the future, informing Clarios that the DEP “continues to reserve all rights to pursue appropriate enforcement actions allowable under the law for violations of ISRA.”
In August 2011, Clarios sold the Site. In 2016, the purchaser of the Site filed for bankruptcy. In July 2021, the purchaser certified that the estimated cost to complete remediation was $563,000 but that the RFS Trust was fully depleted. The purchaser thereafter also missed its February 2022 deadline for completing remediation of the Site. In April 2022, the DEP rescinded Clarios’s RIP Waiver because remediation of the Site was no longer in progress, the RFS Trust was depleted, and the Site was out of compliance.
Clarios requested an adjudicatory hearing before the DEP, arguing that the DEP’s rescission of the RIP Waiver without notice or an opportunity to be heard violated its due process rights. The DEP denied the request, stating that rescission of a RIP Waiver does not entitle Clarios to request an adjudicatory hearing pursuant to N.J.A.C. 7:26C-9.10(a) and that rescission does not constitute a contested case requiring a hearing under the Administrative Procedure Act. Clarios appealed that decision. The Appellate Division ruled in favor of the DEP, holding that Clarios did not have a protected property interest in the RIP Waiver.
NJ Supreme Court’s Decision
The New Jersey Supreme Court affirmed. “We hold that the DEP’s initial grant of the waiver did not create a property interest in the continued suspension of Clarios’s remediation obligations,” Justice Hoffman wrote. “Neither the controlling statutes and regulations nor a mutually explicit understanding between the parties provided an entitlement to the indefinite continuance of the waiver; to the contrary, the governing laws and agency materials all anticipate the DEP’s ability to enforce remediation obligations in the future.”
In reaching its decision, the New Jersey Supreme Court first emphasized that the “chief ingredient” in a property interest protected by the due process clause is a legitimate claim of entitlement. It further noted that an express statutory or regulatory grant is the clearest and strongest proof of an entitlement, which may be shown through imitations placed on
agency decision-making with respect to an alleged benefit. The Court also acknowledged that an entitlement may be derived from mutually explicit understandings. However, for an “understanding” to give rise to a property interest, the party asserting an entitlement must establish that both parties mutually recognized the existence of an entitlement. Conversely, when an agency has broad discretion to grant, deny, or remove a purported benefit,
there is also not likely to be a mutually explicit understanding of an entitlement, the Court explained.
The New Jersey Supreme Court next addressed whether Clarios had an entitlement to the RIP Waiver. It first found no indication of an express statutory grant of entitlement in the indefinite continuation of the RIP Waiver at the time of rescission, noting that ISRA provides no guidance on how the DEP should exercise its discretion in enforcing remediation obligations once a property falls out of compliance. The Court also found no indication of such an entitlement in ISRA’s implementing regulations. “To the contrary, ISRA’s implementing regulations expressly state that the DEP retains discretionary authority to rescind a RIP Waiver,” Justice Hoffman wrote.
The New Jersey Supreme Court also found that Clarios also failed to demonstrate that an extra-statutory or extra-regulatory understanding existed that would support its claim of entitlement. “[W]hen site remediation is no longer in progress, the DEP’s discretion regarding RIP Waiver rescission is unfettered, countering any argument that a lack of discretion created a mutually explicit understanding that Clarios was entitled to the continuation of the RIP Waiver when the Site was no longer compliant with ISRA,” Justice Hoffman explained. The Court also rejected Clarios’ argument that the DEP’s silence during the fifteen years that the DEP did not enforce Clarios’s residual remediation obligations amounted to a mutual understanding. According to Justice Hoffman, any silence by the DEP did not rise to the level of a “mutually explicit” understanding.
Finally, the New Jersey Supreme Court held that because Clarios had no protected property interest in the indefinite continuation of the RIP Waiver, rescission of the RIP Waiver without a hearing was not a deprivation of its due process rights.