SMB ASSOCIATES V. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION
Case Date: 04/26/1994
Docket No: SYLLABUS
(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for
the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please
note that, in the interests of brevity, portions of any opinion may not have been summarized).
SMB ASSOCIATES (Anchoring Point) V. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL
PROTECTION (A-118-93)
Argued March 14, 1994 -- Decided April 26, 1994
PER CURIAM
The issues addressed on this appeal are (1) the standing of an environmental interest group to
contest the issuance of a development permit in a coastal zone, and (2) the ability of an interdepartmental
review body to waive the substantive provisions of a regulatory plan that is under the jurisdiction of one of
the agencies.
SMB Associates proposed the building of a 200-slip marina, a 200-room motel, a restaurant, five
nautical shops, a dockmaster's building, and a residential development, consisting of sixty-nine townhouses,
120 condominiums, and 700 parking spaces on an undeveloped bay island. The development, called
Anchoring Point, will require an elevated roadway covering 5.63 acres of a seventeen-acre tract of wetlands
in Egg Harbor Township.
The major regulatory issues surrounding the case arose under the Coastal Area Facilities Review
Act (CAFRA). The Department of Environmental Protection and Energy (DEPE) enforces CAFRA and
has adopted regulations to guide the development of bay-island corridors, which are "non-oceanfront islands
surrounded by tidal waters" and areas "lying upland of wetlands and beaches but including the filled water's
edge." The regulations permit certain forms of "water dependent development" in bay-island corridors if the
property abuts a paved road and a sewage system with adequate capacity. The proposed Anchoring Point
development is "water dependent" because it involves a marina. However, according to DEPE, the property
does not abut a paved road and lacks access to sewers.
The primary issue in controversy is the ability of the Coastal Area Review Board (CARB) to waive
the CAFRA bay-island corridor development requirements for SMB Associates. CARB was established in
1973. It has power to hear appeals from decisions of the Commissioner of Environmental Protection and
Energy. CARB may affirm or reverse the decision of the Commissioner with respect to the applicability of
any provision of CAFRA to a proposed use, it may modify any permit granted by the Commissioner, grant a
permit denied by the Commissioner, deny a permit granted by the Commissioner or confirm his or her grant
of a permit. Beyond that, CAFRA does not grant explicitly any other powers to CARB.
DEPE denied SMB's request for a waiver of the bay-island corridor requirements. SMB then
appealed to CARB, over the DEPE Commissioner's objection. CARB granted the waiver and directed the
issuance of the necessary permits. DEPE elected not to appeal. The American Littoral Society (ALS) filed
a notice of appeal, challenging the waiver and the issuance of the permit. SMB challenged ALS's right to
appeal.
On appeal, the Appellate Division held that ALS had standing to seek judicial review of the
administrative action. In addition, the court, relying on general principles of agency law, concluded that the
power to waive CAFRA regulations must be exercised through the adoption of a rule establishing standards
for the application of waiver authority.
The Supreme Court granted certification.
HELD: In the unusual and non-recurring circumstances of this case, the Appellate Division correctly held
that the Coastal Area Review Board lacked the power to waive the substantive requirements of
the CAFRA bay-island corridor regulatory plan and that the American Littoral Society had the
required standing to challenge the review board's decision.
1. The Legislature did not contemplate that CARB would be authorized to waive substantive
requirements of CAFRA. In view of the nature of CARB, the Court will not generalize about the issue of
agency power. The decision not to decide this case expansively is reinforced by the fact that the Legislature
has recently repealed the CARB statute, thereby abolishing CARB. (pp. 3-4)
2. ALS had the required standing to pursue this appeal. This case is atypical because the position of
the DEPE (the primary regulator) was at odds with CARB (the final review body). ALS argues that it could
not have foreseen that existing DEPE policy would not be applied. Thus, although the dissent argues that
notions of fundamental fairness and exhaustion of administrative remedies should preclude sophisticated
third-party objectors from intervening in litigation after observing its progress for several years, the
application of those principles are not required here. The facts are much too unusual to deny ALS standing
to appeal, even though it should have made its position known earlier in the administrative process.
Therefore, under the circumstances the Appellate Division did not err in concluding that the ALS had
sufficient interests in the water-dependent development issues to appeal the CARB action. (pp. 4-5)
3. The Court need not consider whether D.W. Bennett or Richard Crema had sufficient interests in the
disposition of the case to give them standing to appeal as individuals. (pp. 5-6)
Judgment of the Appellate Division is AFFIRMED.
JUSTICE GARIBALDI, dissents from the Court's holding that knowledgeable and sophisticated
third-party objectors, who knew and monitored this ten-year long proceeding, but who deliberately chose not
to participate in the administrative proceedings or the prior appeal in the Appellate Division, now had the
right to seek judicial review of the final administrative determination. To permit the objectors' standing is
not only fundamentally unfair to the plaintiff but also places an unnecessary burden on the limited resources
of the judiciary and the administrative agencies involved. Moreover, the Court is deprived of the
administrative agency's well-established expertise in this extremely technical field, thus violating the doctrine
of exhaustion of administrative remedies and the statutory and administrative scheme of CAFRA.
CHIEF JUSTICE WILENTZ and JUSTICES CLIFFORD, HANDLER, POLLOCK, O'HERN and
STEIN join in this opinion. JUSTICE GARIBALDI filed a separate dissenting opinion.
SUPREME COURT OF NEW JERSEY
SMB ASSOCIATES
Appellant,
v.
NEW JERSEY DEPARTMENT
Respondent.
Argued March 14, 1994 -- Decided April 26, 1994
On certification to the Superior Court,
Appellate Division, whose opinion is reported
at
264 N.J. Super. 38 (1993).
Richard M. Hluchan argued the cause for
appellant (Levin & Hluchan, attorneys).
Gordon N. Litwin argued the cause for
respondents American Littoral Society, D.W.
Bennett and Richard Crema (Ansell, Zaro,
Bennett, Kenney & Grimm, attorneys).
Mary C. Jacobson, Assistant Attorney General,
argued the cause for respondent Attorney
General of New Jersey (Deborah T. Poritz,
Attorney General of New Jersey, attorney).
PER CURIAM This appeal concerns primarily (1) the standing of the American Littoral Society (ALS), an environmental interest group, to contest the issuance of a development permit in a coastal zone, and (2) the ability of an interdepartmental review body to waive the substantive provisions of a regulatory plan that is under the jurisdiction of one of the agencies. We hold that in
the unusual and non-recurring circumstances of this case the
Appellate Division correctly held that the review panel lacked
the power to waive the substantive requirements of the regulatory
plan and that ALS had the required standing to challenge the
review board's decision.
The facts of the case are set forth in the decision of the Appellate Division. 264 N.J. Super. 38 (1993). Briefly stated, the case involves SMB Associates' proposal to build a 200-slip marina, a 200-room motel, a restaurant, five nautical shops, a dockmaster's building, and a residential development consisting of sixty-nine townhouses, 120 condominiums, and 700 parking spaces on an undeveloped bay island. The development would require an elevated roadway covering 5.63 acres of a seventeen-acre tract of wetlands in Egg Harbor Township. The primary regulatory issues arose under the Coastal Area Facilities Review Act (CAFRA), N.J.S.A. 13:19-1 to -21. The Department of Environmental Protection and Energy (DEPE) is the agency charged with enforcing CAFRA. It has adopted regulations to guide the development of bay-island corridors, which are "non-oceanfront islands surrounded by tidal waters" and areas "lying upland of wetlands and beaches but including the filled water's edge." N.J.A.C. 7:7E-3.24(a)(2) and (3). The regulations permit certain forms of "water dependent development" in bay-island corridors if
the property "abut[s] a paved road and sewage system with
adequate capacity." N.J.A.C. 7:7E-3.24(d). The proposed
Anchoring Point development at issue in this case is "water
dependent" because it involves a marina. However, in the view of
DEPE, the Anchoring Point property does not abut a paved road and
lacks access to sewers. Without detailing the prior history of
the matter, the nub of the present controversy is the ability of
the Coastal Area Review Board (CARB) to waive certain CAFRA bay-island corridor development requirements for SMB Associates.
Beyond that, CAFRA does not grant explicitly any other powers to
CARB.
have inherent power to waive regulatory requirements without
first promulgating a waiver rule pursuant to the Administrative
Procedure Act, N.J.S.A. 52:14B-1 to -21, if "extraordinary
circumstances merit a waiver to prevent an unjust and
unreasonable result in a particular case." judicial appeals that might better be resolved in the agency process is difficult. This case is atypical in that the position of the primary regulator (DEPE) in the administrative hearing was at variance with that of the final review body (CARB). ALS argues that it could not have foreseen that existing DEPE policy would not be applied to the case under review. ALS did not lay back to sandbag its opponents later. Thus, although our dissenting colleague makes an excellent argument that notions of fundamental fairness and exhaustion of administrative remedies should preclude sophisticated third-party objectors from intervening in litigation after observing its progress for several years, this is not the case for application of those principles. These facts are much too unusual to deny ALS standing to appeal, even though ALS should have made its position known earlier in the administrative process. Under the circumstances, the Appellate Division did not err in concluding that ALS, as an association concerned with the preservation of our coastal resources, had sufficient interests in the water-dependent development issues of this case to appeal the CARB action under Rule 2:2-3(a)(2). Because ALS had standing to prosecute this appeal, we need not consider whether D.W. Bennett and Richard Crema had sufficient interests in the disposition of the case to provide them with standing to appeal as individuals. See Elizabeth Fed. S. & L. Ass'n v. Howell, 24 N.J. 488, 499-500 (1957) (holding that right to challenge administrative decisions
"inheres not only in those who are direct parties to the initial
proceedings before an administrative agency * * * but also
belongs to all persons who are directly affected by and aggrieved
as a result of the particular action sought to be brought before
the courts for review").
Chief Justice Wilentz and Justices Clifford, Handler,
Pollock, O'Hern, and Stein join in this opinion. Justice
Garibaldi has filed a separate dissenting opinion.
SUPREME COURT OF NEW JERSEY
IN THE MATTER OF
SMB ASSOCIATES
Appellant,
v.
NEW JERSEY DEPARTMENT OF
Respondent.
GARIBALDI, J., dissenting.
Today the Court holds that knowledgeable and sophisticated
third-party objectors who knew and monitored this ten-year long
proceeding, but who deliberately chose not to participate in the
administrative proceedings or the prior appeal in the Appellate
Division, now have the right to seek judicial review of the final
administrative determination. I respectfully dissent.
administrative scheme of the Coastal Area Facility Review Act
("CAFRA"), N.J.S.A. l3:l9-l to -21. This case commenced nearly ten years ago on October l8, l984, when SMB Associates ("SMB") applied to the Department of Environmental Protection, now the Department of Environmental Protection and Energy (DEPE), for permits under CAFRA. SMB requested the permits so it could proceed with its marina and residential development project known as Anchoring Point. CAFRA prohibits construction of a facility in a coastal area without a permit. See N.J.S.A. l3:l9-5. Because SMB's project constituted a facility, see N.J.S.A. l3:l9-4, the project could not progress without a permit from DEPE. The Commissioner of DEPE conducted a public hearing at which all "interested persons" had the right to participate and present comments. See N.J.S.A. l3:l9-9(a). After the hearing, DEPE denied SMB's applications for permits because, inter alia, SMB's project plan did not satisfy DEPE regulations concerning the bay island corridor policy, see N.J.A.C. 7:7E-3.24 (now N.J.A.C. 7:7E-3.2l), and the general land area policy, see N.J.A.C. 7:7E-5.l. When SMB appealed the denial, the matter was referred to an Administrative Law Judge (ALJ) as a contested case. The ALJ found that DEPE should issue the permits because the project as proposed would meet the CAFRA standards. The Commissioner of DEPE reversed the ALJ's decision and refused to grant the permits based on his finding that the
site plan violated the bay island corridor policy and the general
land area policy.
intensity of development were the only factor
standing in the way of SMB's project, a plan
modification in that respect might result in
DEP approval.
Taking the hint, SMB requested a waiver of the bay island
corridor policy and the general land area policy. DEPE denied
the request, and SMB appealed to the Coastal Area Review Board
("CARB"), which is authorized to hear appeals from decisions of
the Commissioner of DEPE granting or denying a permit. See
N.J.S.A. l3:l9-l3. CARB had three voting members -- the
Commissioner of DEPE, the Commissioner of Commerce and Economic
Development, and the Commissioner of Community Affairs. Over the
DEPE Commissioner's objection, CARB granted the waiver and
directed the issuance of the necessary permits. CARB
reconsidered, pursuant to a DEPE motion, but ultimately affirmed
its initial decision to grant the waiver and to direct DEPE to
issue the necessary permits. DEPE elected not to appeal CARB's
decision to the Appellate Division.
a notice of appeal, challenging the waiver and the issuance of
the permit in the Appellate Division.
aff'd,
94 N.J. 286 (l983). In all those cases, the third-party
objector to the administrative action at least attempted to
participate in the administrative proceedings. Although their
attempts may have proven unsuccessful, they at least registered
their objection on the record. See Elizabeth Federal Sav. & Loan
Ass'n, supra, 24 N.J. at 494 (stating that third-party objectors
wrote to Commissioner to express their objections and their
desire to be heard); In re Waterfront Dev. Permit, supra, 244
N.J. Super. at 436 (noting that ALS sought to intervene in
administrative proceedings); Crema, supra, l82 N.J. Super. at
448-49 (noting that third-party objector appealed to CARB before
seeking judicial review); Public Interest Research Group, supra,
l52 N.J. Super. at 20l-02 (noting that third-party objector
sought to intervene and requested adjudicatory hearing).
addition to filing a response, request permission to participate
in the appeal process." N.J.A.C. 7:7-5.2(c). Such persons are
those interested other than the applicant. N.J.A.C. 7:7-5.2(d)
(stating, "Where the request to participate is filed by someone
other than the applicant, evidence that a copy of the request has
been mailed to the applicant shall be admitted.") (emphasis
added).
Nor was their silence born of ignorance of the process. The
objectors were well aware of their rights and were frequent
players in the game. See, e.g., In re Waterfront Development
Permit, supra,
244 N.J. Super. 426; Crema, supra,
182 N.J. Super. 445 (involving objectors' intervention in CAFRA permit
applications).
Here, the objectors engaged in a classic case of
sandbagging, biding their time and preserving their arguments
until the eleventh hour. Such attempts at sandbagging should not
be, and almost invariably are not, rewarded by allowing a third-party objector to seek judicial review of an administrative
determination. See Red River Broadcasting Co., Inc. v. Federal
Communications Comm'n,
98 F.2d 282 (D.C. Cir.), cert. denied,
305 U.S. 625,
59 S. Ct. 86,
83 L. Ed. 400 (l938); Bergen Pines Hosp.
v. Department of Human Serv.,
96 N.J. 456 (l984).
Commission to consider on its own motion the
possible effect of its action in each case,
upon every person who might possibly be
affected thereby. Such a person should not
be entitled to sit back and wait until all
interested persons who do so act have been
heard, and then complain that he has not been
properly treated. To permit such a person to
stand aside and speculate on the outcome; if
adversely affected, come into this court for
relief; and then permit the whole matter to
be reopened in his behalf, would create an
impossible situation. In a closely settled
area with a number of existing stations such
a procedure would permit successive appeals
by many persons and as a result a complete
blocking of administrative action.
Likewise, in Bergen Pines, we refused to entertain an appeal
of administrative regulations by a hospital that had declined to
participate in the administrative-rulemaking proceeding. We
reasoned that allowing objectors to administrative action to seek
judicial review without first presenting their arguments and
objections to the administrative agency "would force courts to
review potentially overwhelming reams of technical data and to
resolve from scratch issues as to which it does not have
particular expertise." 96 N.J. at 474.
preclude the hospital from arguing against administrative action
for the first time in an appellate court.
* * *
Not only is review restricted to the
administrative record, it is also limited to
the issues raised before the agency. Both
orderly procedure and good administration
require that objections to agency proceedings
be made while the agency has opportunity for
correction. Any issue not raised at the
administrative level may not be considered on
review. "A reviewing court usurps the
agency's function when it sets aside the
administrative determination upon a ground
not theretofore presented and deprives the
Commission of an opportunity to consider the
matter, make its ruling, and state the
reasons for its action."
Our holding in Bergen Pines and the D.C. Circuit's decision
in Red River ultimately rest on a notion of fundamental fairness.
The Supreme Court explained the rationale over forty years ago in
United States v. L.A. Tucker Truck Lines, Inc.,
344 U.S. 33, 37,
73 S. Ct. 67, 69,
97 L. Ed. 54, 58 (l952):
courts should not topple over administrative
decisions unless the administrative body not
only has erred but has erred against
objection made at the time appropriate under
its practice.
Underlying those decisions is the doctrine of exhaustion of administrative remedies. That doctrine does not merely serve as a bar to judicial review where an opportunity still exists to pursue administrative redress. It also serves as a form of estoppel, precluding parties who inexcusably fail to present their objections and arguments before the relevant administrative body from seeking judicial review of administrative determinations. See Frank E. Cooper, State Administrative Law, Vol. II, at 586 (lst ed. l965) (defining "the so-called doctrine of estoppel for failure to exhaust administrative remedies"); II Kenneth Culp Davis and Richard J. Pierce, Jr., Administrative Law Treatise § l5.l, at 306 (3rd Ed. l994) (stating that in such situations, "the court still may decline to review the final agency action because of the petitioner's failure to have exhausted the administrative remedies that were previously available"); see also S & G, Inc. v. Morgan, 797 P.2d l085, l087 (Utah l990) (stating that under corollary of doctrine of exhaustion of administrative remedies, "[i]t is well settled . . . that persons aggrieved by decisions of administrative agencies `may not, by refusing or neglecting to submit issues of fact to such agencies, by-pass them, and call upon the courts to
determine . . . matters properly determinable originally by such
agencies'") (quoting People v. Keith Ry. Equip. Co., l6l P.2d
244, 249 (Cal. Dis. Ct. App. l945)).
[City of Atlantic City v. Laezza, Those interests are undermined by the majority's failure to preclude the objectors' appeal. Indeed, the doctrine functions precisely to preclude appeals such as this one. The propriety of issuing permits under CAFRA is undoubtedly an issue of expertise better decided by an administrative body such as DEPE or CARB. Courts do not have the expertise to evaluate the environmental issues raised by the third-party objectors. ALS's claim that the only issue on appeal is a purely legal one -- whether or not DEPE may waive application of its regulations -- is both untrue and overly simplistic. First of all, the objectors have made factual assertions concerning the potential impact of waiving the bay island corridor policy. Second, inextricably linked to the legal
issue of waiver are the ramifications on economic development and
the environment of allowing or disallowing such a waiver.
Because the issues presented by the third-party objectors on
appeal were not addressed at the administrative level, the
factual underpinnings of those new issues were not developed at
the administrative level.
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