New Jersey Transit Corporation v. Eugene E. Mori , 435 N.J. Super. 425 ( 2014 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-0122-12T4
NEW JERSEY TRANSIT CORPORATION,
an instrumentality of the APPROVED FOR PUBLICATION
State of New Jersey,
May 6, 2014
Plaintiff-Appellant,
APPELLATE DIVISION
v.
EUGENE E. MORI,
Defendant-Respondent,
and
PNC WEALTH MANAGEMENT and
TOWNSHIP OF NORTH BERGEN,
in the County of Hudson,
a municipal corporation of
the State of New Jersey,
Defendants.
_______________________________
Argued September 11, 2013 – Decided May 6, 2014
Before Judges Fuentes, Simonelli and
Fasciale.
On appeal from the Superior Court of New
Jersey, Law Division, Hudson County, Docket
No. L-1616-09.
Ryan P. Kennedy argued the cause for
appellant (Hill Wallack LLP, attorneys; Mr.
Kennedy, of counsel and on the briefs).
William J. Ward argued the cause for
respondent (Carlin & Ward, P.C., attorneys;
Mr. Ward and James M. Turteltaub, of counsel
and on the brief; Scott A. Heiart, on the
brief).
The opinion of the court was delivered by
SIMONELLI, J.A.D.
This matter involves the valuation of approximately one
acre of vacant land in the Township of North Bergen owned by
defendant Eugene E. Mori and acquired by plaintiff New Jersey
Transit Corporation (NJ Transit) through condemnation
proceedings (the taking area).1 There is no dispute the taking
area contains navigable waters of the United States under the
exclusive jurisdiction of the United States Army Corps of
Engineers (ACOE).
NJ Transit claimed the taking area was wetlands, as
determined by the ACOE, and valued it at $61,000. NJ Transit
also argued there was no reasonable probability the ACOE would
have granted a private developer the right to construct a two-
story self-storage facility by obtaining a regulatory exemption
known as a Section 404 permit.2 According to Mori's expert on
land value, a two-story self-storage facility represented the
1
The taking area also included a small slope easement and a
temporary construction easement.
2
Section 404 of the Clean Water Act requires a permit prior to
the placement or discharge of dredged and/or fill material into
waters of the United States, including wetlands. 33 U.S.C.A. §
1344(a).
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property's best and highest use. Mori countered that the taking
area was uplands valued at $858,000, and if wetlands, valued at
$666,000 because there was a reasonable probability the ACOE
would have granted a Section 404 permit for the proposed private
development. The jury awarded Mori $425,000 plus interest
without indicating whether it valued the taking area as wetlands
or uplands.
NJ Transit appeals from the August 2, 2012 order of
judgment, and from the denial of its motion in limine to bar
Mori's land value expert from testifying that the taking area
was not wetlands, or if wetlands, there was a reasonable
probability the ACOE would issue a Section 404 permit for the
proposed development. As a threshold issue, we conclude the
ACOE has exclusive jurisdiction to determine whether the taking
area falls under the category of wetlands. The trial court thus
erred in submitting this issue to the jury for its
determination.
We also conclude it was error for the trial court to submit
to the jury the question of whether the ACOE would have granted
a Section 404 permit to a private developer without the court
first conducting the gate-keeping function the Court ordered in
Borough of Saddle River v. 66 East Allendale, LLC, 216 N.J. 115,
119 (2013). Under these circumstances, the trial court was
3 A-0122-12T4
obligated to conduct an N.J.R.E. 104 pre-trial hearing to
determine whether there existed sufficient evidence of a
reasonable probability the ACOE would have granted a permit for
the proposed private development. Accordingly, we reverse the
jury verdict, vacate the judgment, and remand for such further
proceedings as may be warranted consistent with the legal
principles we discuss herein.
The facts are straightforward. Mori owned approximately
fourteen acres of vacant land in the Township of North Bergen
adjacent to West Side Avenue and 69th Street. On March 31,
2009, the date of the taking, this property was zoned for
industrial and other related development under the local
municipal Intermodel A Zone. NJ Transit took approximately one
acre of the property for the purpose of constructing a bridge
over 69th Street. This was generally known as the 69th Street
Bridge Grade Separation Project. The project included the
correction of a dangerous at-grade railroad crossing at 69th
Street, replacement of the crossing with a bridge spanning the
existing railroad tracks, and road and drainage improvements to
West Side Avenue, 69th Street and the surrounding area.
On August 15, 1996, the ACOE issued a jurisdictional
determination that areas of the property, including the taking
area, were wetlands subject to its jurisdiction (the 1996 JD).
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The 1996 JD found there were thirty-nine non-assumable waters of
the United States/wetland areas located within the proposed
project site. Approximately twenty-six wetlands were determined
to be above the headwaters, and thirteen, including the taking
area, were determined to be below the headwaters. Because NJ
Transit's proposed activities on the site involved the discharge
of dredged or fill material into the wetland areas, the 1996 JD
required NJ transit to obtain a Section 404 permit. The 1996 JD
noted the extent of the discharge or fill would determine the
level of authorization that would be required. Although the
1996 JD specified it was valid for a period of five years, a
jurisdictional determination associated with an issued Section
404 permit is valid until the permit's expiration.3
NJ Transit applied for a Section 404 permit for its work in
the taking area. On November 22, 2000, the ACOE granted the
permit, which imposed several conditions, including that NJ
Transit must purchase 2.24 acres of wetland mitigation credits
to compensate for the wetlands in the taking area that would be
filled during the project's construction. Because NJ Transit
3
See U.S. Army Corps of Eng'rs, Regulatory Guidance Letter, No.
05-02, "Expiration of Geographic Jurisdictional Determinations
of Waters of the United States" (five year rule), (June 14,
2005) available at
http://www.usace.army.mil/Portals/2/docs/civilworks/RGLA/rg105-
02.pdf.
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was a public entity, it was entitled to a discounted 2.3 to 1
ratio of filled wetlands to mitigation credits. A private
developer, such as Mori, would have paid a higher ratio. NJ
Transit paid $336,000 for the mitigation credits.
In October 2006, Mori asked the ACOE to verify that
approximately eleven acres of the property, including the taking
area, were not wetlands subject to federal jurisdiction based on
Rapanos v. United States, 547 U.S. 715, 126 S. Ct. 2208, 165 L.
Ed. 2d 159 (2006). In a March 10, 2008 jurisdictional
determination, the ACOE found that Rapanos did not apply, and
reverified there were waters of the United States and wetlands
on the property that remained subject to its jurisdiction (the
2008 JD). The 2008 JD specified it was valid for a period of
five years.
Mori administratively appealed the 2008 JD. On December 1,
2008, the ACOE upheld the 2008 JD and advised Mori he could
apply for a Section 404 permit for any proposed work in the
jurisdictional area.4 Mori never applied for a permit.
A "jurisdictional determination" is defined as follows, in
pertinent part:
4
On December 8, 2008, the ACOE issued a revised jurisdictional
determination that did not affect the 2008 JD's reverification
of wetlands located on the property that were subject to federal
jurisdiction and regulation.
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[A] written [ACOE] determination that a
wetland . . . is subject to regulatory
jurisdiction under Section 404 of the Clean
Water Act [33 U.S.C.A. § 1344] or a written
determination that a waterbody is subject to
regulatory jurisdiction under Section 9 or
10 of the Rivers and Harbors Act of 1899 [33
U.S.C.A. § 401-426p]. Additionally, the
term includes a written reverification of
expired JDs and a written reverification of
JDs where new information has become
available that may affect the previously
written determination.
[33 C.F.R. § 331.2 (2014).]
A jurisdictional determination "represent[s] the [ACOE's]
definitive administrative position that [] property contain[s]
wetlands." See Fairbanks N. Star Borough v. U.S. Army Corps of
Eng'rs, 543 F.3d 586, 591 (9th Cir. 2008), cert. denied, 557
U.S. 919, 129 S. Ct. 2825, 174 L. Ed. 2d 552 (2009). "An
approved jurisdictional determination upheld on administrative
appeal is [the ACOE's] 'last word'" on whether the property is
wetlands subject to the federal regulatory jurisdiction. Id. at
593 (quoting Sierra Club v. U.S. Nuclear Regulatory Comm'n, 825
F.2d 1356, 1362 (9th Cir. 1987)). However, absent an
enforcement action, a jurisdictional determination does not
constitute a final agency action under the federal
Administrative Procedure Act (APA), 5 U.S.C.A. § 704, for
purposes of judicial review, Fairbanks, supra, 543 F.3d at 591,
597, and must be appealed pursuant to the administrative
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procedures set forth in 33 C.F.R. § 331 (2014). If the
jurisdictional determination is upheld on appeal, then the
aggrieved party must apply for a Section 404 permit in order to
proceed further. Fairbanks, supra, 543 F.3d at 594, 597. The
ACOE's decision on a permit application must be appealed
pursuant to the administrative procedures set forth in 33 C.F.R.
§ 331.10 (2014). A final ACOE permit decision is reviewable
only in federal court, not state court. 33 C.F.R. §331.6-.10
(2014). As we have acknowledged,
[O]ur federal system contemplates a policy
which generally permits federal
administrative agencies to execute their
duties free from interference by the state
judiciary. . . . Vital among these
considerations is the concept of comity,
that is, a proper and mutual respect between
the federal and state governments.
Interference by the state judiciary with
respect to a responsibility conferred upon a
federal agency with presumed expertise in
its assigned field would be inherently
abrasive and would tend to erode the mutual
respect between governmental entities which
is so necessary to the effective operation
of our federal system.
[In re Application for a Rental Increase at
Zion Towers Apts. (HMFA #2), 344 N.J. Super.
530, 537 (App. Div. 2001) (alteration in
original) (citation omitted) (denying review
of HUD decision in state court).]
Here, the ACOE twice determined that the taking area was
wetlands under its exclusive jurisdiction. The ACOE's
determination was dispositive and not reviewable by a federal
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court, let alone a state court. Accordingly, it was error for
the jury to determine whether the taking area was wetlands or
uplands.
Because the taking area was wetlands, it should have been
valued as such. The issue, therefore, was whether there was a
reasonable probability at the time of the taking that the ACOE
would have granted a Section 404 permit for the proposed private
development. As noted earlier, our Supreme Court has held that
the trial court must determine the issue of reasonable
probability prior to the commencement of the trial. See Saddle
River, supra, 216 N.J. at 119, 138 (citing State by Comm'r of
Transport. v. Caoili, 135 N.J. 252, 265 (1994)).
In Saddle River, the dispute concerned whether there was a
reasonable probability that a bulk variance would be granted to
permit the defendant's proposed development of the subject
property. Id. at 120. Plaintiff Borough of Saddle River filed
a motion in limine for an order striking the reports of
defendant's expert witnesses as inadmissible net opinion because
their opinions on the reasonable probability of a zoning change
lacked a proper foundation. Id. at 123. In the alternative,
the Borough asked the court to perform its gatekeeping function
and conduct a pre-trial N.J.R.E. 104 hearing "to assess whether
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there was a reasonable probability of a zoning change for the
property." Ibid.
The trial court denied the motion in limine, concluding it
could not resolve the issue on the evidence proffered in support
of the reasonable probability of a zoning change, and deferring
its decision until after presentation of the experts' testimony
at trial. Id. at 123-24. The court also denied an N.J.R.E. 104
hearing, concluding it was too time-consuming and Caoili did not
require it as gatekeeper to conduct an expansive pre-trial
hearing to fully vet the issue. Id. at 124. The court
explained it could perform its gatekeeping function during
trial. Ibid. At various times during the experts' trial
testimony, the court conducted N.J.R.E. 104 hearings and ruled
they could continue testifying. Id. at 127-29. Prior to jury
deliberations, the court denied the Borough's motion to strike
the experts' testimony, and ruled the jury would determine
whether there was a reasonable probability of a zoning change
for the property that would impact its value. Id. at 132. The
jury returned a verdict for the defendant for just compensation.
Id. at 133.
Our Supreme Court held that where the issue cannot be
resolved on motion based on the evidence proffered in support of
the reasonable probability of a zoning change, the court must
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conduct a pre-trial N.J.R.E. 104 hearing and "render its
determination that there exists the reasonable probability of a
zoning change based on the standard that would govern the
particular zoning change under consideration." Id. at 142-43.
In this case, because the competing expert reports did not
engage in the required analysis completely, the court should
have conducted a pre-trial N.J.R.E. 104 hearing and rendered a
determination that there existed the reasonable probability the
ACOE would have granted a Section 404 permit as of the taking
date for the proposed private development. We, thus, reverse
and remand for a hearing and, if necessary, a new trial. On
remand, the court's determination must be based on the statutes,
regulations, and ACOE standards and criteria that would govern a
Section 404 permit as of the taking date for the proposed
private development. Id. at 143, 146. The court must place on
the record the basis for its findings. Id. at 142-43, 146.
Reversed and remanded for further proceedings consistent
with this opinion.
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