This year’s docket included two rulings that concerned environmental law. One involved environmental insurance and the other open space issues. The number of pertinent rulings will increase next term as certification has already been granted in two matters of significant interest to environmental practitioners.

In Sensient Colors Inc. v. Allstate Ins. Co. 193 N.J. 373 (2008), an environmental insurance dispute, the Court applied the first-filed doctrine. The result was in sync with the well-established trend that favors insureds remediating sites in New Jersey.

The case arose after suits were filed against Sensient Colors, the owner and former operator of a manufacturing facility. One was an action by a neighbor claiming contamination of its property and the other was initiated by the U.S. Environmental Protection Agency to recover remediation costs.

One of Sensient’s insurers brought a declaratory judgment in New York, a jurisdiction known to be favorably inclined toward carriers. Some weeks later, the insured filed suit in New Jersey against its insurers and the New Jersey Property-Liability Insurance Guaranty Association (PLIGA).

An insurer moved to dismiss the New Jersey action based on its earlier filing. Sensient argued that New York lacked jurisdiction over PLIGA, that New York did not recognize a claim for insurers’ breach of the implied covenant of good faith and fair dealing, that the contamination had occurred in New Jersey and remediation was ongoing, that the evidence and witnesses were in New Jersey and its lawsuit had advanced further along.

The Appellate Division disagreed with the trial Court’s ruling in favor of New York jurisdiction based on three comity-stay standards: the existence of a first-filed action in another state; that both cases involved substantially the same parties, claims, and legal issues; and that the plaintiff [in the second-filed action] would be afforded adequate relief in the prior jurisdiction. But even where those concerns had been satisfied, the stay could be denied upon a finding of special equities.

The appeals Court found that the insurer failed to establish a substantial identity of the causes of action because PLIGA could not be sued in the New York courts. Moreover, there had been no showing that Sensient’s common-law claim for breach of duty of good faith and fair dealing was available in New York.

It also reasoned that special equities weighed heavily in favor of allowing the dispute to proceed in New Jersey. These included this state’s strong public policy in assuring the remediation of contaminated sites. For that to be realized, sufficient financial resources, including insurance contract proceeds, needed to be available.

In the Court the insurers argued that the Appellate Division misapplied the first-filed principle of comity. Their arguments included that the New York and New Jersey actions were substantially the same; involved substantially similar parties and identical legal claims; New York law permitted bad-faith claims; the special equities exception had not been satisfied; and the appeals court had mistakenly accorded too much weight to the site’s location.

The Court recognized the presumption in favor of the first-filed action. But special equities permitted a departure where one of the parties engaged in jurisdiction shopping, filed in bad faith for tactical advantage, and adherence to the rule contravened the public or judicial policy of the forum state. Traditional forum non conveniens factors may also be relevant to this analysis.

The Court provided the rules for a comity stay or dismissal case. The moving party has the burden to establish that the first-filed action involves substantially, but not necessarily exactly, the same parties, the same claims and the same legal issues. The burden then shifts to the proponent of the second-filed action to demonstrate special equities – that is, that adequate relief would not be available in the first-filed jurisdiction.

The opinion’s special equities discussion noted that the carrier did not immediately deny coverage advising that it would defend subject to reservation of rights. Having lulled the insured, the carrier then engaged in a pre-emptive first-strike maneuver by filing in New York.

Predictably, the special equities analysis focused on the strong public policy favoring remediation and availability of insurance proceeds. The Court also noted that this case extended beyond cleanup to health and safety issues since some residents had been exposed to toxic substances.

Short shrift was accorded to the insurer’s argument that the case was limited to a contractual dispute concerning damages. The governmental agencies and the neighboring property owner held the contrary view that additional environmental remediation was required. The Court acknowledged the state’s interest was in having the cleanup promptly performed and fully funded.

The opinion also discussed choice of law since the two states held different views concerning the standard pollution-exclusion clause. New Jersey has construed that provision in a manner highly favorable to insureds, while New York has been more inclined to the insurers’ position. There would be no uncertainty as to the applicable law and ultimately the availability of insurance proceeds if the matter was heard in New Jersey.

The Sensient Court clarified the tests for a comity stay or dismissal. While the first-filed action usually takes precedence, that is not always the case, particularly where one of the parties engaged in gamesmanship. The ruling also served to underscore New Jersey’s strong policy in favor of assuring that insurance proceeds would be available to assist with environmental remediation costs.

In Twp. of Middletown v. Simon,193 N.J. 228 (2008), the Court clarified the law concerning dedication. It found that a lot created in a 1929 subdivision and designated for park purposes could be accepted by a municipality 75 years later. ( See Robert Alter, Tax Law, 193 N.J.L.J.694) for a complete statement of facts.

The trial court was not convinced of the original intention to dedicate the park lot. During the pendency of that proceeding, the township communicated with Simon and advised that it viewed the property as limited to park use and was interested in resolving the situation. Final judgment of foreclosure was entered and no appeal ensued. Having obtained title to the property, Simon proceeded to contract to sell the lake-front lot to a home builder.

The township then commenced a declaratory judgment action to have the lot declared a dedicated park.

The Appellate Division reversed the lower court’s decision in favor of the property owner. It rejected Simon’s collateral estoppel, insufficient intention to dedicate, estoppel and laches arguments. The matter was remanded for the entry of a judgment declaring that the lot was dedicated to public use as a park.

The Court agreed with the appeals court’s analysis regarding the substantive issues but differed in respect of the remedy.

Whether property had been dedicated depended on the intention reflected by the dedicator’s contemporaneous acts or conduct. The park lot’s depiction on the subdivision map and the conveyances with reference to the map evinced an intention to dedicate. Once the offer of dedication was made, it was complete and irrevocable. All that remained was for the municipality to either accept or reject it by ordinance.

The Court addressed what would be the appropriate remedy. Simon argued that it would be inequitable for the township to wait 70-plus years before accepting the dedication and still retain the funds paid for the liens and subsequent taxes. The Court agreed, noting the tax sale certificate holders were unaware that the lot had been dedicated; that the township had not assessed the lot as if it had been dedicated; and that the parties were innocent and had acted in good faith.

The Court found that the township would be unjustly enriched if the dedication was recognized and it was permitted to retain the extra tax revenue. The municipality had been aware of this inequity in its complaint and requested that the amount of reimbursement be established. The appeal court’s dedication finding was upheld, but the matter was remanded to determine the amounts due to the tax certificate holders.

Next Term

The court has already agreed to hear two significant environmental cases in its next term. In OFP, L.L.C. v. State of New Jersey, 395 N.J. Super. 571 (App. Div.), certif. granted 193 N.J. 277 (2007), the court will consider whether a landowner, who challenged limitations on its property by the Highlands Water Protection and Planning Act, had failed to exhaust administrative remedies and whether there had been an unconstitutional taking. The case is being closely followed by landowners and governmental entities in the 800,000-acre Highlands Region. For additional discussion, see L. Goldshore and M. Wolf, Constitutionality of Highlands Act Upheld, 189 N.J.L.J. 1054 (Sept. 17, 2007).

The other case, New Jersey Shore Builders Association v. Township of Jackson, 2007 WL 2005258 (App. Div. 2007), certif. granted 193 N.J. 586 (2008), has implications for developers and municipalities throughout the state. It will address the question of whether municipal tree removal ordinances may require property owners either to replace any tree that is removed or to make a payment into an escrow fund for the replanting of trees.

Goldshore is a partner at Goldshore, Cash & Kalac of Lawrenceville. His practice is devoted to environmental, land use and municipal law. Goldshore is co-author of “New Jersey Environmental Law” (ICLE 2003), and Goldshore is a co-author of “New Jersey Brownfields Law,” published by New Jersey Law Journal Law Books. His column appears regularly in the Law Journal.