Opinion
DOCKET NO. A-5897-13T4
03-03-2016
MAROLDA FARMS, INC., RIGI HOLDINGS, LLC, SHERRY MAROLDA and RICHARD MAROLDA, SR., Plaintiffs-Appellants, v. MARYLAND CASUALTY INSURANCE CO., INSURANCE COMPANY OF THE STATE OF PENNSYLVANIA, ZURICH AMERICAN INSURANCE CO., NORTH RIVER INSURANCE CO., CONTINENTAL INSURANCE CO., Defendants-Respondents.
Louis Giansante argued the cause for appellants (Giansante & Assoc., LLC, attorneys; Mr. Giansante, of counsel and on the brief). Michael Hrinewski argued the cause for respondents Maryland Casualty Company, Zurich American Insurance Company and Continental Insurance Company (Coughlin Duffy, LLP, attorneys; Suzanne C. Midlige, on the joint brief). Gregory T. Dennison argued the cause for respondent Insurance Company of the State of Pennsylvania (Saiber, LLC, attorneys; Michael H. Cohen, on the joint brief). John S. Favate argued the cause for respondent North River Insurance Company (Hardin, Kundla, McKeon & Poletto, P.A., attorneys; Mr. Fayate, on the joint brief).
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION Before Judges Messano and Simonelli. On appeal from the Superior Court of New Jersey, Law Division, Atlantic County, Docket No. L-861-11. Louis Giansante argued the cause for appellants (Giansante & Assoc., LLC, attorneys; Mr. Giansante, of counsel and on the brief). Michael Hrinewski argued the cause for respondents Maryland Casualty Company, Zurich American Insurance Company and Continental Insurance Company (Coughlin Duffy, LLP, attorneys; Suzanne C. Midlige, on the joint brief). Gregory T. Dennison argued the cause for respondent Insurance Company of the State of Pennsylvania (Saiber, LLC, attorneys; Michael H. Cohen, on the joint brief). John S. Favate argued the cause for respondent North River Insurance Company (Hardin, Kundla, McKeon & Poletto, P.A., attorneys; Mr. Fayate, on the joint brief). PER CURIAM
This matter is before us a second time. We provided the factual background in our prior decision.
Although citing an unpublished opinion is generally forbidden, we do so here to provide a full understanding of the issues presented and pursuant to the exception in Rule 1:36-3 that permits citation "to the extent required by res judicata, collateral estoppel, the single controversy doctrine or any other similar principle of law." See Badiali v. N.J. Mfrs. Ins. Grp., 429 N.J. Super. 121, 126 n.4 (App. Div. 2012), aff'd, 220 N.J. 544 (2015).
South Jersey Clothing Company (SJCC) is a New Jersey partnership that had been located for many years in Atlantic County. During the course of its operations, it allegedly released hazardous substances onto its property. Garden State Cleaners (GSC) is a New Jersey partnership that was situated adjacent to the SJCC property and it, too, allegedly released hazardous substances onto its property.
In the early 1980s, the State of New Jersey, Department of Environmental Protection (DEP), began administrative proceedings against both SJCC and GSC arising from their release of the hazardous substances. In 1988, the United States Environmental Protection Agency (EPA)
notified SJCC and GSC that they were potentially liable for the release of proscribed hazardous substances.
In 1991, SJCC filed a complaint in the Law Division against Continental Insurance Company and "others" seeking a declaration that SJCC had insurance coverage for the environmental claims asserted against it. Thereafter, in 1996, the EPA filed a complaint against SJCC in the United States District Court for the District of New Jersey seeking reimbursement of its costs incurred and to be incurred in responding to the release of hazardous substances. SJCC filed a third party complaint against GSC and its owners for contribution and indemnity.
In 1997, GSC and its owners filed a complaint in the Law Division against the "C.N.A. Insurance Companies" and others for insurance coverage for the environmental claims. Then, in 2001, the DEP filed suit in the United States District Court for the District of New Jersey against SJCC and GSC to recover its past and future response costs.
. . . [O]n September 5, 2002, Jerome B. Simandle, U.S.D.J., executed a lengthy "Consent Decree" that had been signed by the EPA, the DEP, SJCC, GSC, Maryland Casualty Insurance Co. (Maryland), the Insurance Company of the State of Pennsylvania (ISOP), Zurich American Insurance Co. (as the successor to Zurich Insurance Co.) (Zurich), North River Insurance Co. (North River), and Continental Insurance Co. (Continental).
The insurance companies paid, in total, $4,150,440, with respect to the claims asserted by the EPA and the DEP. In turn, the insurance companies received covenants not to sue from both the United States and the State of New Jersey "with respect to
known or unknown environmental claims, existing now or arising in the future, relating to the" properties. SJCC also released Maryland, ISOP, Zurich, and North River from "all obligations whatsoever arising under any and all [p]olicies with respect to Environmental Claims at or arising from the SJCC site, whether past, present or future, known or unknown, or asserted or unasserted[.]" The releases noted that the insurance companies disputed coverage and that the agreements represented "a compromise and settlement" achieved through "arms-length negotiations." Also, the release required SJCC to dismiss the coverage action with prejudice. GSC similarly released Continental. The various releases were expressly incorporated into the consent decree.
The consent decree signed by . . . Judge Simandle contained an explicit representation that the court "finds that this consent decree has been negotiated by the parties in good faith, and that this consent decree is fair, reasonable, and in the public interest." Further, the decree provided that the court "shall retain jurisdiction of this matter for the purpose of enforcing the terms of this consent decree." The decree was "lodged" with the court for thirty days for "public notice and comment."
. . . .
Plaintiffs are owners of a farm, a stable and two homes in Atlantic County. On May 12, 2006, plaintiffs filed a complaint in Atlantic County against SJCC, GSC, and the DEP. The complaint alleged that SJCC and GSC had discharged pollutants onto their properties, and that these pollutants migrated to and damaged plaintiffs' properties. Plaintiffs asserted various common law and statutory causes of action
against SJCC and GSC, and asserted a claim against the DEP under 42 U.S.C.A. § 1983 for its denial of a well permit and its limitation of another well permit on their properties.The trial judge granted defendants' motion to dismiss the complaint, reasoning it was precluded by the consent decree. Id. at 7. We affirmed on comity grounds, concluding that plaintiffs' claims should first be directed to the district court. Id. at 15. We held that "[i]n the event the [district court] determines that it lacks jurisdiction or declines to exercise jurisdiction over plaintiffs' claims, plaintiffs are not foreclosed from reinstituting their cause of action in the Law Division." Id. at 15.
On May 9, 2008, the court entered final judgment by default against SJCC and GSC, jointly and severally, for $9,170,600. The record provided to us does not disclose the disposition of plaintiffs' claim against the DEP.
On February 7, 2011, plaintiffs filed an action in Atlantic County against Maryland, ISOP, Zurich, North River, Continental . . . . The complaint alleged that Continental had issued liability insurance policies to GSC during its relevant "operating period" and that the other insurance company defendants had issued such policies to SJCC during its relevant "operating period."
[Marolda Farms, Inc. v. Md. Cas. Ins. Co., No. A-1299-11 (App. Div. Nov. 29, 2012) (slip op. at 2-6).]
Plaintiffs returned to federal court seeking relief from the consent decree. Citing N.J.S.A. 17:28-2, Judge Simandle found there was a strong public policy in favor of "protecting injured third parties from insolvent tortfeasors." S. Jersey Clothing, supra, 975 F. Supp. 2d at 587. He also determined that "whether [plaintiffs] had a protected property interest in the insurance policies . . . and, if so, when their property interest arose[,]" were matters of state law to be determined by the state court. Id. at 588. The judge wrote:
United States v. S. Jersey Clothing Co., 976 F. Supp. 2d 577 (D.N.J. 2013)
[I]f [plaintiffs] had a protected property interest in the insurance policies under N.J.S.A. 17:28-2 prior to approval of the Consent Decree in 2002, they were not granted due process, consisting of actual or constructive notice and an opportunity to be heard, before that vested interest could be eliminated. It is fundamental that the property of an absent party cannot be taken without observing due process.Judge Simandle specifically made clear, however, that he "[wa]s not deciding . . . when [plaintiffs] were injured, whether the insurance policies were in effect at this time, or whether [plaintiffs] have a protected [property] interest under [precedential New Jersey case law], and N.J.S.A. 17:28-2." Id. at 597-98. The district court's order of September 30, 2013, provided:
The same result does not obtain, however, if [plaintiffs'] interest as of 2002 was not a protected property interest. Again, the Superior Court must determine this issue.
[Id. at 596.]
[Plaintiffs] will be permitted to proceed in the Superior Court to obtain a determination whether [they] had a protected property interest in the policies of insurance of [SJCC and GSC] recognized by state law under N.J.S.A. 17:28-2 and existing prior to September 25, 2002, in which case the Consent Decree of September 25, 2002 will not bar the [plaintiffs'] direct claims against the [defendant insurance companies] for off-site property damage allegedly caused by the insolvent insureds.
Plaintiffs' complaint was reinstated in the Law Division in December 2013. One month later, they filed an amended complaint seeking a declaratory judgment that defendants' policies were available to satisfy their judgment against SJCC and GSC. In a second count, plaintiffs sought to equitably estop defendants from asserting exhaustion of their policy limits.
Defendants moved to dismiss the complaint for failure to state a claim, pursuant to Rule 4:6-2(e). In a written opinion, the judge rejected defendants' argument that plaintiffs "failed to plead any facts to support a claim that [they] suffered property damage within the applicable policy periods[,]" i.e., from 1970 through 1985, concluding instead that "[p]laintiffs' allegation that the contamination occurred prior to the signing of the 2002 Consent Decree states a potential claim upon which relief may be granted." The judge reasoned that Judge Simandle's decision "seems to leave open the issue of the timing and sources of original contamination." The May 9, 2014 order dismissed the second count of the amended complaint without prejudice, but otherwise denied defendants' motion.
Defendants sought reconsideration. They argued that plaintiffs' complaint failed to allege an injury to their properties between 1970 and 1985, the applicable policy periods. Defendants also argued that plaintiffs' default judgment against SJCC and GSC was premised upon a loss of development rights, tied to limits upon plaintiffs' water use, and that did not happen until 2006, well after defendants' policies had expired.
After considering oral argument, the judge issued a short written opinion concluding the complaint failed to allege that plaintiffs' "property was damaged between 1970 and 1985 as to possibly bring count one within the scope of coverage afforded by the [d]efendants' policies." The judge rejected plaintiffs' interpretation of the seminal case of Owens-Illinois, Inc. v. United Insurance Company, 138 N.J. 437 (1994), noting that damage to groundwater under the SJCC and GSC properties during the policy periods was insufficient. He reasoned that "[t]o state a viable claim for relief, the [p]laintiffs must allege that their property was damaged during the policy periods." The judge entered an order on June 6, 2014, dismissing plaintiffs' complaint.
Notably, the order did not say the complaint was dismissed with prejudice. On June 27, 2014, plaintiffs filed a second amended complaint that made specific factual allegations regarding operations at the SJCC and GSC sites during the policy periods and attached exhibits demonstrating administrative actions that had been taken against the polluters during those years. Plaintiffs alleged that their properties were damaged during those policy years, even though manifestation of the pollution was not discovered until 2003. On July 10, however, the court's civil case management office notified plaintiffs that their second amended complaint was "non-conforming" because "the case ha[d] been closed as of [June 6, 2014]."
Plaintiffs moved for reconsideration of the June 6, 2014 order. The motion was heard before a different judge due to the prior judge's retirement. Plaintiffs argued that the prior judge misconstrued Owens-Illinois and the "continuous trigger doctrine." Citing Quincy Mutual Fire Insurance Co. v. Bellmawr, 172 N.J. 409 (2002), plaintiffs contended that coverage was triggered at the time of the initial discharge of pollutants or at the time of first exposure which ultimately resulted in damages, not when the damages were actually manifest. The judge denied the motion, concluding plaintiffs had not "made the requisite showing pursuant to" Rule 4:49-2. He entered a conforming order on August 8, 2014, and this appeal followed.
The motion papers are not part of the record, and, it appears there was no oral argument. We therefore use the judge's written decision to recount the argument plaintiffs made in support of reconsideration.
During argument before us, we questioned whether plaintiffs had formally moved for relief after entry of the June 6, 2014 order and rejection of their "non-conforming" second amended complaint. As a result of our questioning, plaintiffs moved to supplement the appellate record with their reply brief filed in conjunction with their motion for reconsideration. It suffices to say that the final two sentences of the brief contain plaintiffs' request to file another amended complaint, claiming their attempts to do so "in conjunction with [] prior motions, remain[ed] unresolved."
Defendants have opposed the motion to supplement the record. They argue plaintiffs never moved to file an amended complaint in the trial court and never sought to do so in conjunction with their motion for reconsideration. Defendants argue plaintiffs requested the opportunity to amend their complaint only in the reply brief requesting reconsideration of the dismissal.
We agree that the motion to supplement the record should be denied. Plaintiffs did not affirmatively move to file an amended complaint, seeking instead to have the judge reconsider the June 6, 2014 order and reinstate the dismissed pleading. We therefore deny the motion to supplement the record on appeal.
Plaintiffs argue that defendants' motion for reconsideration should have been denied because Judge Simandle concluded their claims predated the 2002 consent decree, and therefore, defendants were "collaterally estopped" from asserting that plaintiffs suffered no property damage until 2006. Plaintiffs also argue that the judge misconstrued precedent by concluding allegations of damage to groundwater under their surface properties was insufficient, and by misapplying the "continuous trigger doctrine" set out in Owens-Illinois and Quincy Mutual Fire. Plaintiffs further contend that the judge premised his reconsideration upon factually inaccurate arguments of defense counsel, rather than evidence in the record. Lastly, plaintiffs argue that they should have been permitted to file an amended complaint because the dismissal was without prejudice.
We have considered plaintiffs' arguments in light of the record and applicable legal standards. For the following reasons, we affirm the order under review, but we agree that the dismissal of plaintiffs' amended complaint was without prejudice. We therefore remand the matter to the Law Division to permit plaintiffs to file a second amended complaint.
Defendants contended on reconsideration that in denying their motion to dismiss, the judge wrongly concluded that Judge Simandle found that plaintiffs had in fact suffered property damage during the applicable policy period. As already noted, Judge Simandle made no such finding. Defendants' reconsideration motion was therefore premised, in part, upon a simple argument, i.e., plaintiffs' amended complaint did not claim property damage occurred during the applicable policy periods.
Reconsideration is to be utilized narrowly, and reserved for situations where the court relied "'on plainly incorrect reasoning,'" where the court failed to consider probative, competent evidence, or where "'there is good reason for [the court] to reconsider new'" evidence. Town of Phillipsburg v. Block 1508, Lot 12, 380 N.J. Super. 159, 175 (App. Div. 2005) (emphasis omitted) (quoting Pressler, Current N.J. Court Rules, comment on R. 4:49-2 (2005)). "Reconsideration cannot be used to expand the record and reargue a motion," Capital Finance Company of Delaware Valley, Inc. v. Asterbadi, 398 N.J. Super. 299, 310 (App. Div.), certif. denied, 195 N.J. 521 (2008), or provide information that could have been provided at the time of the original motion, but was not. Cummings v. Bahr, 295 N.J. Super. 374, 384 (App. Div. 1996) (quoting D'Atria v. D'Atria, 242 N.J. Super. 392, 401 (Ch. Div. 1990)). Motions for reconsideration are addressed to "'the sound discretion of the Court, to be exercised in the interest of justice.'" Ibid. (quoting D'Atria, supra, 242 N.J. Super. at 401); see also Casino Reinvestment Dev. Auth. v. Teller, 384 N.J. Super. 408, 413 (App. Div. 2006) (reconsideration should be exercised "'in the service of the ultimate goal of substantial justice'") (quoting Johnson v. Cyklop Strapping Corp., 220 N.J. Super. 250, 264 (App. Div. 1987), certif. denied, 110 N.J. 196 (1988)).
We cannot conclude that the judge mistakenly exercised his discretion in reconsidering his May 9, 2014 order. The judge agreed with defendants that he had misunderstood Judge Simandle's opinion, and that misunderstanding led to an improper result. Having properly exercised his discretion, the question becomes whether the judge correctly dismissed plaintiffs' first amended complaint.
"The standard a trial court must apply when considering a Rule 4:6-2(e) motion to dismiss a complaint for failure to state a claim upon which relief can be granted is 'whether a cause of action is "suggested" by the facts.'" Teamsters Local 97 v. State, 434 N.J. Super. 393, 412 (App. Div. 2014) (quoting Printing Mart-Morristown v. Sharp Elecs. Corp. 116 N.J. 739, 746 (1989)). "Rule 4:6-2(e) motions to dismiss should be granted in 'only the rarest [of] instances.'" Banco Popular N. Am. v. Gandi, 184 N.J. 161, 165 (2005) (alteration in original) (quoting Lieberman v. Port Auth. of N.Y. & N.J., 132 N.J. 76, 79 (1993)). The plaintiff's version of the facts are treated "as uncontradicted [and are] accord[ed] [] all legitimate inferences . . . [and] accept[ed] [] as fact" for purposes of review. Id. at 166. The critical concern is whether, upon review of the complaint, exhibits attached thereto and matters of public record, there exists "the fundament of a cause of action"; "the ability of the plaintiff to prove its allegations is not at issue." Id. at 183 (emphasis added) (citing Printing Mart, supra, 116 N.J. at 746).
Nonetheless, "[a] pleading should be dismissed if it states no basis for relief and discovery would not provide one." Rezem Family Assocs., LP v. Borough of Millstone, 423 N.J. Super. 103, 113 (App. Div.), certif. denied and appeal dismissed, 208 N.J. 366 (2011). We review the trial court's decision de novo. Flinn v. Amboy Nat'l Bank, 436 N.J. Super. 274, 287 (App. Div. 2014).
Most importantly for our purposes, "[i]n those 'rare instances,'" where a motion to dismiss is granted, id. at 286 (quoting Smith v. SBC Commc'ns, Inc., 178 N.J. 265, 282 (2004)), "'ordinarily [it] is granted without prejudice.'" Id. at 286-87 (quoting Hoffman v. Hampshire Labs, Inc., 405 N.J. Super. 105, 116 (App. Div. 2009) (citing Smith, supra, 178 N.J. at 282)). We will reverse a "with-prejudice" dismissal of a plaintiff's complaint when it is "premature, overbroad" or based upon a "mistaken application of the law." Id. at 287. And, we generally accord the plaintiff an opportunity to amend the complaint to allege additional facts that support the legal theory pled in the complaint. Hoffman, supra, 405 N.J. Super. at 116.
Here, plaintiffs' first amended complaint did not allege that they suffered property damages during the applicable policy periods. We therefore affirm the June 6, 2014 order.
However, that order did not dismiss the complaint with prejudice, and, as we noted above, a dismissal pursuant to Rule 4:6-2(e) is ordinarily without prejudice to plaintiffs' ability to allege additional facts that support their legal theory. Ibid. Defendants argue an adequate factual record was already produced, such that we should conclude plaintiffs cannot prove they suffered property damages during the policy periods. We disagree. Much of what is in the appellate record was supplied as part of plaintiffs' attempt to stave off reconsideration. In any event, the record does not support the conclusion that defendants are entitled to summary judgment as a matter of law.
We also refuse plaintiffs' request to reverse the August 8, 2014 order by engaging in a detailed analysis of Owens-Illinois or Quincy Mutual Fire and applying those precedents to an undeveloped factual record. We hasten to add that we reach no conclusion as to the merits of plaintiffs' legal arguments in this regard, nor do we accept defendants' assertions to the contrary.
We affirm the orders of June 6, 2014, and August 8, 2014. Plaintiff shall be permitted to file a second amended complaint. I hereby certify that the foregoing is a true copy of the original on file in my office.
CLERK OF THE APPELLATE DIVISION