CSG Law Alert: Mutual Mistake Not Enough to Void Settlement with State or Fed Agency, Court Rules

A mutual mistake of fact isn’t enough to scuttle a settlement agreement with a state or federal agency, according to a recent ruling by the U.S. District Court for the District of New Jersey.

Earlier this month, the U.S. District Court for the District of New Jersey refused to modify or void an Administrative Consent Order entered into by plaintiffs with the New Jersey Department of Environmental Protection (“NJDEP”) and subsequent non-judicial settlement agreement between the plaintiffs and the U.S. Army Corps of Engineers (Corps) based on mutual mistake. D’Andrea v. U.S Army Corps of Engineers, 2023 WL 4103929 (June 20, 2023)

In 2011, the NJDEP investigated the property, which the plaintiffs purchased in 2002, and found violations of New Jersey environmental regulations based upon the unauthorized filling of wetlands that existed on the property and later issued a notice of violation in 2012. The Corps found it had jurisdiction and issued a cease-and-desist letter in 2014. Also, during its investigation, the Corps found Chlordane (a banned insecticide) contamination at the property.

The plaintiffs denied improper filling of the wetlands and argued that the Chlordane was from an off-site source. The plaintiffs, however, settled with the NJDEP via an administrative consent order (ACO) and later entered into a non-judicial settlement agreement with the Corps. As a result, the plaintiffs spent $400,000 to comply with the settlement agreement but they did not complete the wetlands restoration or Chlordane remediation as required under the ACO or settlement agreement.

In 2019, the plaintiffs retained an environmental consulting firm that concluded that the entire regulatory process prompted by enforcement actions by the Corps and NJDEP was based upon a fundamental error about the timing of the filling, which was alleged to have taken place on the property and that the property was “uplands” not “wetlands.” The plaintiffs argued that the settlement agreement with the Corps was void based on mutual mistake.

Based on the above, plaintiffs requested the NJDEP and the Corps modify the Administrative Consent Order and Settlement Agreement but both agencies refused. As a result, plaintiffs asserted various claims, including claims under the Federal Administrative Procedure Act, a claim for mutual mistake of fact and/or duress, a claim under the NJ Civil Rights Act, claims for declaratory relief under federal and New Jersey law, violations of the 5th and 14th Amendments of the U.S. Constitution including a “taking” of the property under the 5th Amendment to the U.S. Constitution and finally that it is inequitable to enforce the agreements. Thereafter, defendants filed motions to dismiss plaintiffs’ amended complaint.

The Court granted defendants’ motion and dismissed plaintiffs’ amended complaint finding the Federal Administrative Procedure Act was applicable to state agencies. The Court also held that the plaintiffs failed to state a claim for mutual mistake of fact and duress or a claim under the NJ Civil Rights Act, and that the plaintiffs lacked standing to bring the action.

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