ARCHER & GREINER, PC Marc A. Rollo, Esquire Arthur H. Jones, Jr., Esquire One Centennial ...

227 Pages·2015·4.2 MB·English

ARCHER & GREINER, P.C. PAUL, WEISS, RIFKIND, WHARTON &
Marc A. Rollo, Esquire GARRISON LLP
Arthur H. Jones, Jr., Esquire Theodore V. Wells, Jr., Esquire
One Centennial Square John F. Baughman, Esquire
Haddonfield, NJ 08033 Daniel J. Toal, Esquire
[phone] Jaren Janghorbani, Esquire
1285 Avenue of the Americas
New York, NY 10019-6064

EXXON MOBIL CORPORATION Attorneys for Defendant Exxon Mobil
Alice A. Brown, Esquire Corporation
800 Bell Street, Suite 1503
Houston, TX 77002

NEW JERSEY DEPARTMENT OF SUPERIOR COURT OF NEW JERSEY
ENVIRONMENTAL PROTECTION, LAW DIVISION
UNION COUNTY
Plaintiff,
DOCKET NO.: UNN-L-3026-04
vs. (consolidated with UNN-L-1650-05)

EXXON MOBIL CORPORATION, Civil Action

Defendant.

DEFENDANT EXXON MOBIL CORPORATION’S POST-TRIAL BRIEF

Doc#: US1:9741921v1
Table of Contents

Table of Authorities ...................................................................................................................... vii
Table of Abbreviations ............................................................................................................... xvii
Preliminary Statement ..................................................................................................................... 1
The Record ...................................................................................................................................... 6
Part One: The DEP’s Burden of Proof in This Case ...................................................................... 7
I. The DEP Must Prove Both the Fact of Injury and Appropriate Compensation for
Any Actual Harm Established ............................................................................................ 7
II. The DEP Has the Burden of Proof on All Elements of Its Claims ..................................... 8
III. The DEP Must Prove That the Expert Evidence It Offers Is Reliable and
Admissible ........................................................................................................................ 10
A. The DEP’s Experts Must Use a Generally Accepted Methodology ..................... 11
B. The DEP’s Experts May Not Offer “Net Opinions” ............................................. 13
IV. The DEP’s Litigation Positions Are Not Entitled to Deference ....................................... 14
Part Two: The DEP Did Not Prove the Existence or Extent of Any Compensable Natural
Resource Injury at Bayway ........................................................................................................... 18
I. The DEP Did Not Prove That Allegedly Injured Natural Resources Are Owned,
Managed, or Held in Trust by the State ............................................................................ 20
II. The DEP Did Not Prove Any Injury to Any Identifiable Natural Resources ................... 23
A. The DEP Ignored the Adverse Change Requirement ........................................... 23
B. The DEP Ignored Its Own Published Methodology for Characterizing
Natural Resource Injuries ..................................................................................... 26
C. The DEP Ignored the Generally Accepted, Scientific Process for
Characterizing Natural Resource Injuries ............................................................. 28
III. The DEP Did Not Prove Any Lost Natural Resource Services ........................................ 31
A. The DEP Ignored Its Obligation to Prove Lost Services ...................................... 33
B. The DEP Ignored Evidence That “Valuable” Natural Resource Services
Exist at Bayway .................................................................................................... 35
IV. The DEP Did Not Prove the Predischarge Condition of Allegedly Injured Natural
Resources .......................................................................................................................... 37
A. The DEP Ignored the Established, Common Sense Definition of
Predischarge Condition ......................................................................................... 37
B. Dr. Lipton Ignored the Predischarge Condition Requirement and Offered
“Habitat Types” and “Target Habitats” Instead .................................................... 41
C. Dr. Lipton Ignored Evidence of Actual Conditions at the Sites Prior to
Any Discharges ..................................................................................................... 43
D. Dr. Southgate Did Not Purport to Determine the Predischarge Condition ........... 47
i
Doc#: US1:9741921v1
V. The DEP Did Not Prove Causation for Any Alleged Injury ............................................ 48
A. Dr. Lipton Did Not Analyze Causation ................................................................ 49
B. The Pre-Refinery Habitats Were Destroyed by Physical Modification ................ 50
C. There is No Evidence the Sites Were Contaminated Before Physical
Modification Occurred .......................................................................................... 57
D. The DEP Did Not Establish the Required Link Between Any Alleged
Injury and Any Discharge of a Hazardous Substance .......................................... 57
Part Three: The DEP Did Not Prove the Existence or Extent of Any Compensable
Natural Resource Injury at Bayonne ............................................................................................. 63
I. The DEP Did Not Prove Its Bayonne Claim for the Same Reasons It Failed at
Bayway ............................................................................................................................. 63
II. There Are Additional Site-Specific Gaps in the DEP’s Evidence About Bayonne .......... 64
A. The DEP Has No Evidence of Any Contamination Prior to 1956 ........................ 64
B. The DEP Has No Evidence of Soil Contamination for 246 Acres at
Bayonne ................................................................................................................ 65
C. The DEP Ignored Evidence of Extensive Filling at Bayonne ............................... 67
Part Four: The Court Should Reject All of the DEP’s Litigation Shortcuts ................................ 69
I. The Court Should Reject the DEP’s “Contamination Equals Injury” Shortcut ................ 69
A. “Contamination Equals Injury” Is Not Based on Science .................................... 70
B. “Contamination Equals Injury” Is Not Based on DEP “Policy” ........................... 71
1. No Documents Reflect This Purported “Policy” ...................................... 72
2. DEP Employees Were Unaware of This Purported “Policy” ................... 72
C. “Contamination Equals Injury” Was Invented for This Case ............................... 74
II. The Court Should Reject the DEP’s Use of Screening Thresholds .................................. 75
A. Screening Thresholds Measure the Risk of Injury, Not Actual Injury ................. 76
B. Dr. Lipton’s Screening Thresholds Were Cherry Picked and Had No
Connection to the Sites ......................................................................................... 78
C. Dr. Lipton’s Use of Screening Thresholds Is Internally Inconsistent ................... 79
D. Calling Screening Thresholds “Restoration Criteria” Does Not Make
Them More Valid .................................................................................................. 79
E. HQs, HIs, and Marine Amphipods Do Not Validate the Use of Screening
Thresholds ............................................................................................................. 80
III. The Court Should Reject the DEP’s “Gestalt” Analysis .................................................. 81
IV. The Court Should Reject the DEP’s Last-Minute Assertions About Fill ......................... 84
A. The DEP Has No Evidence That Fill Was Contaminated When It Went in
the Ground ............................................................................................................ 84
B. There Is Countervailing Affirmative Evidence of Clean Fill ............................... 86
ii
Doc#: US1:9741921v1
C. The DEP Has No Evidence of Contamination in Any Specific Dredge
Spoils..................................................................................................................... 87
D. The DEP Has No Evidence That Any Fill Qualifies as a Discharge of a
Hazardous Substance ............................................................................................ 87
V. The Court Should Reject the DEP’s Miscellaneous Theories About
Contamination ................................................................................................................... 88
A. The Record Does Not Support the Theory That Contaminants Migrated
Into Areas Before Operations Began .................................................................... 88
B. The Record Does Not Support the Theory of Obvious Pre-Operation
Contamination ....................................................................................................... 89
C. The Record Does Not Support the Theory About Kerosene ................................ 90
VI. The Court Should Reject the DEP’s Excuses for Its Failure to Prove Causation ............. 91
A. The DEP, as the Plaintiff, Has the Burden of Proving That the Injuries for
Which It Seeks Damages Were Caused by Discharges ........................................ 91
1. The DEP Must Prove What Injuries Were Caused by Discharges
of Hazardous Substances .......................................................................... 91
2. The DEP’s “Concurrent” or “Commingled” Causation Excuses
Are Meritless ............................................................................................. 92
B. Joint and Several Liability Does Not Relieve the DEP of Proving That
Discharges Caused Natural Resource Injuries ...................................................... 95
Part Five: The DEP Did Not Prove Its Claim for Primary Restoration Damages ....................... 97
I. The DEP Did Not Prove the Predischarge Condition ....................................................... 97
II. The DEP Did Not Prove That Its Restoration “Vision” Is Practicable ............................. 97
A. The DEP Did Not Offer an Actual Primary Restoration Plan for the Court
to Evaluate ............................................................................................................ 98
B. The DEP Ignored Numerous Logistical Issues That Make Its “Vision” Not
Practicable ........................................................................................................... 101
1. The DEP Did Not Consult Any Key Stakeholders ................................. 101
2. The DEP Did Not Prove It Will Have Access to the Sites ..................... 102
3. The DEP’s “Vision” Would Shut Down the Bayway Refinery .............. 103
4. The DEP’s “Vision” Is Incompatible With Refinery Operations ........... 104
5. The DEP’s Vision Is Incompatible With Ongoing Development at
Bayway ................................................................................................... 107
6. The DEP Did Not Prove How It Would Implement Its “Vision” ........... 107
C. The DEP’s “Vision” Rests on Inadmissible, Unreliable Opinions ..................... 108
D. The DEP Did Not Offer Competent Expert Testimony That Its “Vision” Is
Practicable ........................................................................................................... 109
iii
Doc#: US1:9741921v1
E. The DEP’s “Vision” Undoes Physical Modification; It Does Not Restore
Injured Natural Resources................................................................................... 110
F. The DEP Did Not Justify the Costs of Implementing Its “Vision” .................... 113
1. Mr. Ostermiller’s Cost Estimates Are Unreliable ................................... 113
2. Mr. Horsak’s Cost Estimates Are Unreliable ......................................... 113
G. The DEP Did Not Prove Why On-Site Primary Restoration Should Be
Pursued Over Less Expensive Off-Site Restoration ........................................... 115
H. The DEP’s Primary Restoration “Vision” Conflicts with Ongoing
Remediation Work Under the ACOs .................................................................. 117
I. Any Primary Restoration Damages Should Be Offset by the Cost of
Remediation, and a Release of Exxon’s Obligations Under the ACOs .............. 119
Part Six: The DEP Did Not Prove Its Claim for Compensatory Restoration Damages ............ 121
I. The DEP Did Not Prove that the Amount of Damages It Seeks Reflects the
Replacement Value of Any Lost Natural Resources ...................................................... 121
A. The DEP Did Not Measure the Value of Anything the Public Lost ................... 122
B. The DEP Erroneously Used Cost as a Substitute for Value ............................... 122
C. The DEP Ignored the Requirement of Valuing “Loss of Use” ........................... 123
D. The DEP Seeks a Windfall and Asks the Court to Award Damages for
Something the Public Never Lost ....................................................................... 125
II. Dr. Lipton’s Testimony Does Not Support an Award of Compensatory
Restoration Damages ...................................................................................................... 126
A. HEA Is Not a Generally Accepted or Reliable Method for Calculating
Litigation Damages ............................................................................................. 126
B. Even If HEA Could Be Reliable, Dr. Lipton Did Not Conduct a HEA ............. 130
1. Dr. Lipton Ignored the Constant Value Assumption .............................. 132
2. Dr. Lipton Failed to Calculate Service Losses ........................................ 135
3. Dr. Lipton Used the Wrong Baseline ...................................................... 138
C. Dr. Lipton’s Inputs Are Fundamentally Flawed ................................................. 140
1. There Is No Basis for Dr. Lipton’s “Start Dates” ................................... 141
2. Dr. Lipton Has No Basis for Using a Three Percent Discount Rate ....... 147
3. Dr. Lipton’s Ten-Year “Ramp-Up” Shows the Absurdity of His
Analysis................................................................................................... 149
D. The DEP Did Not Prove a Reliable Cost Estimate for Any Type of
Compensatory Restoration .................................................................................. 151
1. Dr. Lipton’s Estimates of the Cost of Restoring Intertidal Marsh
and Palustrine Meadow/Forest Are Unreliable ....................................... 151
iv
Doc#: US1:9741921v1
2. Dr. Lipton’s Estimates of the Cost of Restoring Upland Forest Are
Unreliable ................................................................................................ 153
3. Dr. Lipton’s Estimates of the Cost of Restoring Upland Meadow
Are Unreliable ......................................................................................... 155
III. The Court Should Exclude Dr. Lipton’s Testimony ....................................................... 156
IV. The DEP Did Not Present a Viable Compensatory Restoration Plan ............................. 157
A. The DEP Did Not Prove that Its Plan for Restoring 33,320 Acres Is
Practicable ........................................................................................................... 158
B. The DEP Did Not Prove That It Actually Will Restore 33,320 Acres ............... 159
1. The DEP’s Claim Is Based on a False Premise ...................................... 159
2. The DEP’s Inability to Commit to Restore Injured Resources
Means Its Claims Are Preempted By Federal Law ................................. 160
V. New Jersey’s Prejudgment Interest Rule Governs the DEP’s Claims ............................ 161
A. The DEP’s Calculation of Compensatory Restoration Damages Violates
New Jersey Law on Prejudgment Interest .......................................................... 161
B. If the Court Awards Damages, Prejudgment Interest Should be Suspended ...... 162
C. Case-Specific Factors Would Limit Any Award of Prejudgment Interest ......... 163
Part Seven: The Court Should Award No Damages .................................................................. 165
I. Alternative One: Nominal Damages .............................................................................. 165
II. Alternative II: Exxon’s Alternative Analysis Caps Any Potential Damages at $3
Million............................................................................................................................. 166
Part Eight: The DEP Did Not Prove It Is Entitled to Relief for Any of Its Common Law
Claims ......................................................................................................................................... 168
I. The DEP Abandoned Its Trespass and Nuisance Claims: They Relate Only to
Groundwater, Which Is “Not Part of the Case” .............................................................. 168
II. The DEP Did Not Prove the Elements of Its Trespass and Nuisance Claims ................ 169
A. Trespass: The DEP Did Not Prove That It Has Exclusive Possession of
Either Site............................................................................................................ 169
B. Nuisance: The DEP Did Not Prove It Is Entitled to Abatement ........................ 169
III. The DEP Did Not Prove Its Strict Liability Claim ......................................................... 171
Part Nine: The U.S. and New Jersey Constitutions Impose Significant Limits on Any
Recovery the DEP Can Obtain ................................................................................................... 173
I. The Type of Retroactivity Urged by the DEP Is Unconstitutional ................................. 173
II. The DEP’s Reliance on Certain Untestable Ancient Documents Is Unfair .................... 175
III. The DEP Should Not Benefit from Its 126 Year Delay in Bringing this Case ............... 178
IV. The DEP’s Actions Violate New Jersey’s Guarantee of Fundamental Fairness ............ 180
v
Doc#: US1:9741921v1
Part Ten: The DEP Is Not Entitled to Special Treatment Simply Because It Cannot Prove
Its Claims .................................................................................................................................... 182
I. “Best Available Evidence” Is Not an Excuse for a Failure of Proof .............................. 182
A. There Is No “Best Available Evidence” Standard .............................................. 182
B. The DEP Did Not Use the “Best Available Evidence”....................................... 183
C. The DEP’s Accusations of Spoliation Have Been Discredited .......................... 186
II. Exxon Will Not “Escape” Liability if the DEP’s Claims Are Rejected ......................... 187
Part Eleven: Exxon’s Affirmative Defenses .............................................................................. 189
I. In the 1991 ACOs, the DEP Settled and Released Claims for Historical
Discharges ....................................................................................................................... 189
A. The Parties Did Not Intend to Permit the DEP to Bring Additional Claims
Relating to Historical Discharges ....................................................................... 191
1. The Parties’ Contemporaneous Understanding Was That Claims
for Historic Discharges Were Resolved .................................................. 192
2. In 1991, “Natural Resource Damages” Meant Something Very
Different than the DEP’s Current Litigation Position............................. 194
3. The Language in Paragraph 75 Is Lifted from Prior ACOs Based
on CERCLA, Not the Spill Act............................................................... 195
4. The DEP’s Delay in Bringing This Lawsuit Is Inconsistent With Its
Current Interpretation of the ACO .......................................................... 197
5. Judge Anzaldi Did Not Resolve This Issue ............................................ 197
II. The DEP Is Estopped from Pursuing Its Claims in This Case ........................................ 198
III. Exxon Is Not Liable for Any Injuries Caused by Discharges During World War II ...... 199
Conclusion .................................................................................................................................. 202
Appendix A ................................................................................................................................. 203

vi
Doc#: US1:9741921v1
Table of Authorities
Page(s)
CASES
In re Adoption of N.J.A.C. 7:26B,
128 N.J. 442 (1992) .................................................................................................................15
Agha v. Feiner,
198 N.J. 50 (2009) .........................................................................................................148, 153
Allen v. Heritage Court Assocs.,
325 N.J. Super. 112 (App. Div. 1999) ...................................................................................162
Am. Sanitary Sales Co. v. Dep’t of Treasury,
178 N.J. Super. 429 (App. Div. 1981) ....................................................................................10
Arnold v. Mundy,
6 N.J.L. 1 (1821) ......................................................................................................................20
Atl. N. Airlines v. Schwimmer,
12 N.J. 293 (1953) .................................................................................................................192
Bahrle v. Exxon Corp.,
279 N.J. Super. 5 (App. Div. 1995) .......................................................................................129
Battista v. Olson,
250 N.J. Super. 330 (App. Div. 1991) ...................................................................................169
Berkeley Dev. Co. v. Great Atl. & Pac. Tea Co.,
214 N.J. Super. 227 (App. Div. 1986) ...................................................................................199
Boddy v. Cigna Prop. & Cas. Cos.,
334 N.J. Super. 649 (App. Div. 2000) ...............................................................................16, 21
Borough of Fort Lee v. Banque National,
311 N.J. Super. 280, 291 (App. Div. 1998) .............................................................................10
Brun v. Cardoso,
390 N.J. Super. 409 (App. Div. 2006) ...................................................................................148
Caldwell v. Haynes,
136 N.J. 422 (1994) ...................................................................................................................8
Carrino v. Novotny,
78 N.J. 355 (1979) .................................................................................................................162
Chattin v. Cape May Greene, Inc.,
216 N.J. Super 618 (App. Div. 1987) ....................................................................................164
vii
Doc#: US1:9741921v1
Christopher v. SmithKline Beecham Corp.,
132 S. Ct. 2156 (2012) .............................................................................................................15
Cianciulli v. Bd. of Trs.,
244 N.J. Super. 399 (App. Div. 1990) .....................................................................................14
Cipala v. Lincoln Technical Inst.,
179 N.J. 45 (2004) .....................................................................................................................9
In re Civil Commitment of E.S.T.,
371 N.J. Super. 562 (App. Div. 2004) ...................................................................................148
State v. Clawans,
38 N.J. 162 (1962) .................................................................................................................193
Cole v. Jersey City Med. Ctr.,
215 N.J. 265 (2013) ...............................................................................................................168
Connell, Foley & Geiser, LLP v. Israel Travel Advisory Servs., Inc.,
377 N.J. Super. 350 (App. Div. 2005) ...............................................................................95, 96
Conway v. 287 Corp. Ctr. Assocs.,
187 N.J. 259 (2006) ...............................................................................................................192
Creanga v. Jardal,
185 N.J. 345 (2005) .........................................................................................................13, 157
Cruz-Mendez v. ISU/Ins. Servs. of S.F.,
156 N.J. 556 (1999) ...............................................................................................................171
In re D.C.,
146 N.J. 31 (1996) .................................................................................................................183
In re D.K.,
204 N.J. Super. 205 (Ch. 1985) .............................................................................................183
Dafler v. Raymark Indus., Inc.,
259 N.J. Super. 17 (App. Div. 1992) .......................................................................................93
Dall’Ava v. H.W. Porter Co.,
199 N.J. Super. 127 (App. Div. 1985) ...................................................................................162
Davis v. Brickman Landscaping, Ltd.,
219 N.J. 395 (2014) ...........................................................................................................13, 82
Desai v. Bd. of Adjustment,
360 N.J. Super. 586 (App. Div. 2003) .......................................................................................9
viii
Doc#: US1:9741921v1
State v. Dishon,
297 N.J. Super. 254 (App. Div. 1997) .....................................................................11, 126, 134
Doe v. Poritz,
142 N.J. 1 (1995) ...................................................................................................................180
Ohio v. DOI,
880 F.2d 432 (D.C. Cir. 1989) ...............................................................................................116
Ebert v. Briar Knoll Condo. Ass’n,
2006 WL 3345277 (N.J. Super. Ct. App. Div. Nov. 20, 2006) ...............................................94
E. Enters. v. Apfel,
524 U.S. 498 (1998) .......................................................................................................174, 175
Feldman v. Lederle Labs.,
257 N.J. Super. 163 (App. Div. 1992) .....................................................................................94
Ferolito v. Park Hill Ass’n, Inc.,
408 N.J. Super. 401 (App. Div. 2009) ...................................................................................169
United States v. Fisher,
977 F. Supp. 1193 (S.D. Fla. 1997) ...............................................................................127, 128
Fitzgerald v. Tom Coddington Stables,
186 N.J. 21 (2006) ...................................................................................................................38
State v. Fortin,
178 N.J. 540 (2004) ...............................................................................................................130
Frye v. United States,
293 F. 1013, 1014 (D.C. Cir. 1923) .........................................................................................11
New Mexico v. Gen. Elec. Co.,
467 F.3d 1223 (10th Cir. 2006) .............................................................................................160
Glick v. White Motor Co.,
458 F.2d 1287 (3d Cir. 1972).................................................................................................168
United States v. Great Lakes Dredge & Dock Co.,
1999 U.S. Dist. LEXIS 17612 (S.D. Fla. Sept. 27, 1999) .............................................127, 128
United States v. Great Lakes Dredge & Dock Co.,
259 F.3d 1300 (11th Cir. 2001) .....................................................................................127, 128
United States v. Great Lakes Dredge & Dock Co.,
1999 U.S. Dist. LEXIS 23557 (S.D. Fla. July 30, 1999) ...................................................98, 99
ix
Doc#: US1:9741921v1