United States: NJ LSRPs-Speaking With The Enemy?

Real Estate

With limited exceptions, on May 7, 2012, New Jersey's requirement to use Licensed Site Remediation Professionals ("LSRPs") will be expanded to apply to all persons remediating sites in New Jersey. The LSRP program will definitely result in more timely and cost effective remediation of environmental contamination at many of the thousands of contaminated sites in New Jersey. With this expansion of the LSRP program, it is important to recognize that this program is likely to result in the mandatory disclosure of some information to the New Jersey Department of Environmental Protection ("NJDEP" or the "Department") that has previously been considered privileged and confidential.

As described more fully below, the statute establishing the LSRP Program sets forth extensive reporting and disclosure obligations, many of which require the LSRP to promptly notify both the client and NJDEP. These statutory provisions may arguably expand the exceptions to attorneys' obligations to maintain the confidences and secrets of their clients and reduce the scope of privileged information that would otherwise not be disclosed.

This is significant because attorneys frequently retain their clients' environmental consultants and contractors and attempt to provide that their work product is privileged. Clients generally have an expectation that most, if not all, of that work product may be privileged. Also, even in situations where the information was not privileged, attorneys and their clients usually had time to evaluate the consultant's work product and determine whether to seek a second opinion before submitting most information to the Department. An LSRP's simultaneous disclosure to the Department, the client and the client's attorney will impair the ability of the client to obtain a second opinion before the Department requires corrective action.

No doubt, most LSRPs will conduct their functions in a prudent and professional manner and there are disciplinary procedures to address abusive activity. However, this process will provide an opportunity for unscrupulous LSRPs to pressure clients to perform work that may not be necessary or to perform necessary work at an inflated price based on a mistaken assumption that immediate corrective action is necessary before a third party has an opportunity to critique the initial LSRPs conclusions, recommendations and cost estimates.

Site Remediation Reform Act

In May 2009, the New Jersey legislature passed the Site Remediation Reform Act ("SRRA"), N.J.S.A. § 58:10C-1 to -29, which drastically changed the landscape of remediation in New Jersey by requiring the use of LSRP to conduct, oversee and approve site remediation. The SRRA was initially implemented through a phased approach by requiring only those persons commencing remediation after November 3, 2009 to hire an LSRP, As of May 7, 2012, the SRRA will be fully implemented and all persons remediating sites in New Jersey must utilize the services of an LSRP, no matter when the remediation was commenced. N.J.Stat. § 58:10B-1.3(c)(3).

The SRRA requires the use of an LSRP in connection with almost all remediation activities in New Jersey. Persons responsible for conducting remediation under the Brownfield and Contaminated Site Remediation Act, § 58:10B-1, et seq., the Industrial Site Recovery Act, N.J.Stat. § 13:1K-6, et seq., and the Spill Compensation and Control Act, N.J.Stat. § 58:10-23.11g, must hire an LSRP to perform and approve the remediation. In addition, persons remediating regulated underground storage tanks under the New Jersey Water Pollution Control Act, N.J.Stat. § 58:10A-21, et seq., must utilize an LSRP. The only exceptions to the LSRP requirement apply to persons conducting due diligence at a site and owners or operators conducting remediation of discharges from unregulated heating oil tanks. N.J.Stat. § 58:10B-1.3.

The LSRP program is beneficial because NJDEP approval is no longer required prior to commencing remediation. Yet, as the LSRP program moves beyond its infancy, it has become clear that the benefits of expedited remediation may be offset in some cases by potential harm to site redevelopers resulting from the fiduciary duty that the SRRA creates between LSRPs and the Department. Not only must an LSRP prioritize the protection of human health, safety and the environment over the duty that the LSRP may owe to its employer, the site redeveloper, but the SRRA specifically requires LSRPs to disclose a broad range of documents and information about a site to NJDEP without providing sufficient protections to site redevelopers and other persons responsible for conducting remediation. Therefore, it is crucial that site redevelopers understand the inherent conflicts of interest that may arise when hiring an LSRP so that they may better protect themselves against the possibility of potential harm.

An LSRP's Primary Duty Is To The Protection Of Public Health, Safety And The Environment

The SRRA creates a licensing scheme for remediation professionals that requires all LSRPs to adhere to a strict professional code. No similar formal code for environmental professionals existed prior to the enactment of the SRRA.

The first, and primary, tenet of the LSRP's professional code is that an LSRP's "highest priority in the performance of professional services" is to "the public health and safety and the environment." N.J.Stat. § 58:10C-16(a). An LSRP is prohibited from allowing "any ownership interest, compensation, or promise of continued employment . . . to affect the professional services" that the LSRP provides. N.J.Stat. § 58:10C-16(z). The fiduciary duty that the SRRA imposes on LSRPs is similar in nature to the core mission of NJDEP, which is to protect "the air, waters, land, and natural and historic resources of the State to ensure continued public benefit." N.J.Stat. § 7:1-1.1(a).

While the SRRA does not completely eliminate NJDEP's oversight in connection with a remediation project, the SRRA privatizes site remediation in such a way that an LSRP "steps into the shoes" of NJDEP to ensure that a site is properly remediated. An LSRP's primary duty is not to his client, the site redeveloper, but to the protection of public health, safety and the environment by ensuring that a site is remediated in accordance with the law.

An LSRP Must Disclose A Broad Range Of Site Records And Information To NJDEP

An LSRP's duty to the protection of public health, safety and the environment is manifest in the disclosure obligations imposed by the SRRA on LSRPs. These disclosure obligations go well beyond the traditional requirement to provide immediate notification of a release or discharge under federal and state environmental law. For example, the SRRA imposes an affirmative obligation on LSRPs to disclose to NJDEP:

• Any information (including underlying facts and data) known by the LSRP that is not supportive of the conclusions reached in documents submitted to NJDEP;
• Any information concerning conditions at a site that, in the LSRP's independent professional judgment, are of immediate environmental concern;
• Any information concerning a discharge that occurs at a site when the LSRP obtains specific knowledge of the discharge; and
• Any information concerning actions or decisions by the LSRP's client which deviates from any remediation report developed by the LSRP.

N.J.Stat. § 58:10C-16(i)-(l). In addition, an LSRP is required to cooperate with NJDEP during investigations by "promptly furnishing, in response to formal requests, orders or subpoenas, any information" that the NJDEP deems necessary to the performance of its duties. N.J.Stat. § 58:10C-16(q). An LSRP's obligation to provide information to NJDEP survives its period of employment by a site redeveloper. N.J.Stat. § 58:10C-16(w). Specifically, the SRRA requires an LSRP to notify NJDEP in writing of any material facts, data or other information subsequent to the completion of a report that may result in a material difference from that report. N.J.Stat. § 58:10C-16(n). The SRRA imposes no time restriction on this obligation.

The SRRA prohibits an LSRP from revealing information that is not otherwise in the public domain if the LSRP obtains the information in a professional capacity and if the client provides written notification to the LSRP that the information is confidential. N.J.Stat. § 58:10C-16(m). However, the SRRA provides no mechanism for resolving potential conflicts that may arise between an LSRP's duty to disclose information and a site redeveloper's legitimate confidentiality claims. At this time, the only avenue provided by the SRRA to resolve such a dispute is for the site redeveloper to file an "after-the-fact" ethics complaint with the Site Remediation Licensing Board. The SRRA prohibits any person from taking "retaliatory action" against an LSRP who discloses potentially damaging information to NJDEP about a site, but the SRRA fails to define the scope of the phrase "retaliatory action." N.J.Stat. § 59:10C-26.

It is important to remember that it is common practice for the site redeveloper's attorney to engage the LSRP on the client's behalf. Rule 1.6 of the Rules of Professional Conduct prohibits an attorney from disclosing client information to anyone, including to a government agency, which relates to the representation of the client unless disclosure of the information is impliedly authorized to carry out the representation, specifically consented to by the client, or necessary to prevent the client or another person from committing a criminal, illegal or fraudulent act that is likely to result in death, substantial bodily harm, or substantial injury to the financial interest or property of another. In the past, an attorney had the ability to act as gatekeeper to ensure that an environmental consultant adequately protected confidential client information. Under the SSRA, it is not clear that this is still the case, as the professional code of conduct for LSRPs requires the disclosure of information that the Rules of Professional Conduct may otherwise prohibit. The SRRA provides no mechanism for resolving this potential conflict.

Conclusion

It cannot be denied that, in many ways, the SRRA has greatly improved upon site remediation practices in New Jersey. For example, prior to the SRRA, the NJDEP, which is under-staffed and under-funded, maintained a backlog of remediation cases that numbered in the tens of thousands. It frequently took NJDEP months, and sometimes years, to review and approve remediation activities and reports. Site redevelopers were often required to pay high oversight costs to NJDEP despite NJDEP's inability to efficiently oversee and manage site remediation projects.

The SRRA has accelerated site remediation, which promotes and enhances the redevelopment of underutilized sites by providing greater certainty to site redevelopers as to remediation costs and timing. And yet, the SRRA has also created problems where none previously existed. The inherent conflicts of interest that the SRRA creates between an LSRP and a site redeveloper place a new obstacle ahead of the goal of expediting remediation and redevelopment of underutilized sites. At this time, there is no easy way to reconcile these conflicts. A site redeveloper can not rely on an LSRP to act as the redeveloper's advocate, but must take a more active role in the remediation process to ensure that his or her interests are protected.

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