New Jersey Transit Corporation v. Eugene E. Mori

NOT FOR PUBLICATION WITHOUT THE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).

2 A-0122-12T4
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).

4 A-0122-12T4
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.

5 A-0122-12T4
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

7 A-0122-12T4
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

8 A-0122-12T4
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

9 A-0122-12T4
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

10 A-0122-12T4
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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