“It Ain’t Over ‘Til It’s Over” … and Emails and Drafts are not Settlements with the NJDEP

There was no greater, and more thrilling, example of Yogi Berra’s wisdom than this year’s historic Game 7 of the World Series. The Chicago Cubs, with a three-run lead over the Cleveland Indians, thought that they had the game in hand when they brought in their tired flamethrower reliever in the eighth inning, who promptly gave up three runs to tie the game. Yogi’s sage wisdom once again was evident during the 10th inning when it appeared that it was only a matter of time before the Indians would outlast the now depleted Cubs bullpen, and the “billy goat” would once again rip the hearts of Cubs faithful. But alas, the Cubs, after a rain delay, were able to score, and notwithstanding the curse (and the rain), were able to hold off the Cleveland Indians to win their first World Series in 108 years. Yogi was right about baseball … “It ain’t over ‘til it’s over!”

Unfortunately, the New Jersey Appellate Division just reminded us that Yogi’s timeless adage also applies to settlements with the NJDEP. In addition to the Cubs ending their century long drought, on November 2, 2016, the Appellate Division issued an opinion which affirmed a lower court’s decision that a draft settlement agreement, along with emails communicating settlement terms between an attorney representing a party and the NJDEP, were not enough to bind the NJDEP to those terms until the settlement was final. In Cumberland Farms, Inc. v. NJDEP, Cumberland Farms, Inc. (CFI) previously settled a natural resources damage (NRD) claim, and had anticipated settling claims for 54 other sites in New Jersey. Over the course of several months in late 2006 and 2007, NJDEP staff and the attorney for CFI discussed orally and by email settling NRD claims by the State which resulted in NJDEP emailing a draft settlement agreement to CFI’s attorney. NJDEP inquired with CFI’s attorney on the status of the agreement, but received no substantive response.

Several years later, NJDEP added CFI to a complaint seeking to recover compensation for contamination caused by 5,000 sites for Methyl Tertiary Butyl Ether. CFI later filed a complaint seeking to enforce the draft settlement agreement, claiming that CFI had settled with the NJDEP for its 54 sites based upon the terms of the draft agreement. The Appellate Division ruled for NJDEP, agreeing with the trial court that the NJDEP had “never agreed to do anything more than attempt to negotiate a final settlement agreement through the iterative process, and that CFI never responded to DEP’s overtures.” The drafts of the agreement, and overtures of settlement were not acceptance of CFI’s “offer” to settle. The Court noted based upon its past settlement negotiations that CFI was aware NJDEP staff could not approve a settlement, but only flesh out the terms of a settlement and then forward it to their management teams for approval.

Further, at the time the draft settlement was negotiated, and pursuant to the Spill Act, notice had to be published in the New Jersey Register and on the NJDEP website at least 30 days prior to NJDEP’s agreement to a settlement. N.J.S.A. 58:10-23.11e2. The draft agreement, as with prior draft agreements, contained language that permitted NJDEP to withdraw from the settlement agreement in its sole discretion after the department considered the public comments. As the Court noted, in December 2015, legislation was approved increasing the notice period from 30 to 60 days. Finally, the Appellate Division reversed the trial court’s ruling that the NJDEP violated the implied covenant of good faith and fair dealing because there was simply no contract.

The Appellate Division’s opinion highlights important considerations when undergoing negotiations with NJDEP on enforcement settlements. First, negotiations with NJDEP staff, even if by email and advancing a draft settlement agreement, may not be sufficient to claim a settlement with NJDEP. Even if terms are finally negotiated, Spill Act settlements will require 60-day public notice, and will permit NJDEP to withdraw a settlement based upon public comments. Even if the alleged violation does not involve the Spill Act, NJDEP has included similar public comment periods within other enforcement settlement agreements. You and your attorney must focus on the finality of the settlement process and the potential ramifications of the statutorily-required public process as you proceed through a settlement process with NJDEP. “It ain’t over ‘til it’s over!”

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