Russo Development Corp. v. Reilly

No. 87-3916 (HLS) (D.N.J. May 17, 1991)

In a developer's challenge to an Army Corps of Engineers' permit action and an Environmental Protection Agency (EPA) veto under § 404 of the Federal Water Pollution Control Act (FWPCA), the court holds that no evidence exists of agency bad faith or bias in the decisionmaking concerning the permit. The court holds that the case should be reviewed on the administrative record and that no trial is necessary. The court holds that the agencies correctly asserted jurisdiction over a 13.5-acre tract. However, the court remands the case to the agencies to consider new jurisdictional issues and the agencies'alleged failure to credit the developer with the pre-enhanced value of the property in establishing mitigation requirements. The court also holds that the Corps' decision to grant a permit for a 13.5-acre tract with certain mitigation conditions was unreasonable, because it was based on the Corps' improper linkage of the 13.5-acre tract with an adjoining 44 acre tract. Further, EPA's 2:1 mitigation ratio and its veto under § 404(c) were arbitrary and capricious because of the improper linkage of the two tracts.

Counsel for Plaintiff
William J. Prout, Gregory Castano
Tompkins, McGuire & Wachenfeld
4 Gateway Ctr., 100 Mulberry St., Newark NJ 07102
(201) 622-3000

Counsel for Defendants
Paul G. Shapiro, Ass't U.S. Attorney
402 E. State St., Trenton NJ 08608
(609) 989-2190

[21 ELR 21345]

Sarokin, J.:

Opinion

Before the court is defendants' motion for partial summary judgment and to limit judicial review to the administrative record.

Background

The court is quite familiar with the relevant statutory scheme and with the facts of this case, both of which are set out in this court's previous opinions filed on December 17, 1987, November 6, 1989 (reprinted at 735 F. Supp. 631 (D.N.J. 1989)), and March 16, 1990 (reprinted at 20 Envtl. L. Rep. 20938 (Envtl. L. Inst.) (D.N.J. March 16, 1990)). The facts relevant to disposition of this motion are restated below.

Plaintiff Russo Development Corporation (hereinafter "Russo") purchased and developed two tracts of land in Carlstadt, New Jersey, one 44 acre piece and one 13.5 acre piece. The two tracts adjoin one another, and both are located within the Hackensack Meadowlands Development district. The Army Corps of Engineers (hereinafter "Corps") and the U.S. Environmental Protection Agency have asserted jurisdiction over the tracts pursuant to the Clean Water Act ("CWA"), 33 U.S.C. ss1251-1387, and the River and Harbors Act ("RHA"), 33 U.S.C. § 403.

Russo purchased the 44 acre piece in 1979 and filled the entire tract by 1982. Russo's development plans were consistent with the HMDC Master Plan, and Russo obtained the necessary HMDC permits. However, in March 1981, an agent of the federal Fish and Wildlife Service noticed fill activity on the Russo property and was aware that no federal filling permit had been filed for that property. The agent suspected the property to contain federally protected wetlands. The FWS agent sent a letter to the Corps advising of the suspected illegal dumping, and in March 1981, the Corps replied to FWS that a cease and desist order had been issued. However, there is no evidence that any such order was issued: Russo denies ever receiving such an order, and the government's enforcement file has since been destroyed. Without notice of any wetlands problem, Russo proceeded to build six warehouses on the property, and had plans to build a seventh until the Corps asserted jurisdiction over the 44 acre parcel in 1985.

Meanwhile, in January 1985, Russo purchased the adjoining 13.5 acre parcel and began filling the tract in preparation for construction. In March 1985, the Corps received an anonymous telephone complaint of illegal fill activity in the vicinity of the 13.5 acre Russo property. The Corps' field investigators confirmed that fill activity was taking place on the 13.5 acre tract, and on or about March 25, 1985, the Corps advised Russo that the 13.5 acre tract was protected wetlands under the CWA and orally requested Russo to cease and desist from further filling on the property. At that time, 8.5 acres of the tract had already been filled. Russo suspended filling and began preparing a permit application to fill the 13.5 acre tract.

However, Russo continued operations on the 44 acre property. In June of 1985, the Corps orally notified Russo that it considered some or all of the 44 acre piece to be protected wetlands subject to Corps' jurisdiction under the CWA. The Corps advised Russo that it would issue a cease and desist order to stop construction on the 44 acre parcel and that it would refuse to process the 13.5 acre permit application unless Russo also sought an after-the-fact permit application for the 44 acre piece. Russo complied and submitted a permit application to place fill on the remaining five acres on the 13.5 acre tract combined with an after-the-fact permit application to place fill on the 8.5 acre section of the 13.5 acre tract and on the 44 acre tract. Russo's joint permit application was complete and under consideration on August 27, 1985.

On March 23, 1987, after public notice and extensive administrative consideration, the Corps issued its Notice of Intent to Issue a Section 404(b) permit to plaintiff. The Corps Notice and the proposed permit considered the 13.5 and 44 acre tracts together in its assessment of the environmental impact and the proposed mitigation. However, on May 26, 1987, the EPA initiated proceedings under section 404(c) of the CWA, and on March 21, 1988, vetoed the proposed permit. The EPA was especially concerned with what it perceived to be the minimal amount of mitigation required of Russo by the Corps permit, since the EPA was of the opinion that the 13.5 acre tract, including portions of the tract that had already been filled, were "high quality" wetlands. Russo and the EPA could not come to terms, a main point of contention being whether plaintiff would be credited with the pre-"enhanced" value of the wetlands; i.e., if the wetlands were of "low" quality prior to filling activity, Russo would not be required to mitigate as if it had been of "high" quality. Russo would not accept the EPA's stringent mitigation standards and thus brought this suit, alleging that the federal agencies' actions are arbitrary and capricious.

It is important to note that throughout this long administrative process, Russo contested the federal agencies' jurisdiction over the 44 acre tract, but Russo never contested the agencies' jurisdiction over the 13.5 acre tract. In fact, Russo's Amended Verified Complaint concedes jurisdiction over the 13.5 acre parcel at paragraphs 52 through 57. Plaintiff contends that it only had reason to question agency jurisdiction over the 13.5 acre tract as a result of information uncovered during discovery.

In 1989, defendants filed a motion to dismiss or, in the alternative, for summary judgment. Plaintiff then cross-moved for partial summary judgment. The court resolved these motions in its November 6, 1989 Opinion, 735 F. Supp. 631 (D.N.J. 1989). At the time of the 1989 motions, this action concerned the agencies actions with respect to both the 44 and the 13.5 acre parcels, as they were considered together by the agencies. As a result of the 1989 motions, the court ordered all issues and claims regarding the 44 acre tract out of the case. Thus, on this motion, only issues concerning the 13.5 acre parcel remain. Therefore, although this motion by defendants revisits previously considered issues, defendants make this motion in a very different context. Without repeating all aspects of those motions, certain arguments and issues raised by the 1989 motions and addressed in the 1989 Opinion directly impact defendants' current motion.

Specifically, the court denied defendants' motion for summary [21 ELR 21346] judgment on plaintiff's claim that the agencies did not have jurisdiction of the Russo properties. At the time of the 1989 motions, plaintiff challenged the agencies' jurisdiction over both the 44 acre and the 13.5 acre parcels. The court concluded

that the plaintiff's submissions regarding the quality of the lands in question, when combined with plaintiff's allegations of bad faith by the administrative agencies making the jurisdictional determinations, create a sufficient issue of fact regarding whether the assertion of jurisdiction was appropriate. . . .

735 F. Supp. at 635 (emphasis added). The court based this conclusion in part on the factual disputes involving the 44 acre parcel. These disputes were sufficiently troubling when coupled with plaintiff's allegations of bad faith, given that the motions were made before defendants had filed an Answer and prior to any discovery. Similarly, because the court was sufficiently troubled by plaintiff's allegations of agency bad faith and the potential impact on the reasonableness of the agencies' jurisdictional determinations, the court denied defendants summary judgment on plaintiff's challenge to the reasonableness of the EPA veto of the Corps permit. Id. For the same reason, the court also denied plaintiff's motion for summary judgment that the EPA determination of "high value" wetlands was arbitrary and capricious. Id. at 637.

The court's concern with plaintiff's allegations of bad faith on the part of the Corps also affected plaintiff's cross-motion for partial summary judgment. The court's 1989 discussion of plaintiff's bias allegations on the part of the EPA is quoted in full below:

Russo challenges the impartiality of the EPA, contending that the Section 404(c) veto was not considered by an impartial body. Rather, plaintiff argues that the EPA representatives repeatedly made misrepresentations regarding the good faith of Russo, went out of their way to find reasons to disapprove the Corps permit, and vetoed the permit solely as a gesture towards pacifying environmentalist groups and making up for their history of poor enforcement. Defendants contest plaintiff's assertion of bias.

If the administrative record supports the EPA's conclusion, then the motives of the EPA officers may not be relevant. Under the unique facts and circumstances of this case, however, plaintiff should be afforded the opportunity of demonstrating bias and improper behavior directed against plaintiff if relevant to any of the remaining issues in this matter.

Id. at 639. Thus, the court refused both sides' motions, since such fact specific allegations such as bad faith and bias require discovery, and those allegations put any resolution of the arbitrary and capricious allegations on hold, since an agency action can be arbitrary and capricious, even if it is ultimately correct, if the action is taken for the wrong reasons. See Securities and Exchange Comm'n v. Chenery Corp., 318 U.S. 80, 95 (1943).

However, the court did conclude that certain agency actions were arbitrary and capricious. The court concluded that although the two parcels of land were adjacent, they were developed separately and could not be considered the "same project." Therefore, the court held that the Corp requirement that plaintiff include both tracts in its permit application was "arbitrary, unreasonable and not in accordance with applicable regulations," Id. at 637. Accordingly, the "court [ordered] the Corps to take separate appropriate action, if any, with respect to the 44-acre tract, and [limited] the plaintiff's application for a Corps permit and the subsequent grant and veto of the permit to the 13.5-acre parcel." Id. Thus, all issues relating to the 44-acre tract were severed from the pending case, as provided in the court's January 3, 1990 Order effecting the November 6, 1989 Opinion.

The court also held that the EPA's failure to articulate reasons for its departure from the New Jersey Coastal Management Program ("NJ CMP") was arbitrary and capricious. However, the court denied plaintiff's motion for summary judgment on this issue pending resolution of the factual issue whether the EPA actually considered the NJ CMP. Id. at 638.

In the aftermath of the parties' earlier motions, defendants have identified, and plaintiff does not dispute, the following claims which remain in plaintiff's case:

Count 3: Whether the Corps "practice" of not crediting plaintiff with the pre-enhanced value of the filled wetlands is arbitrary and capricious;

Count 10: Whether the Corps "final" decision granting Russo the conditioned fill permit was arbitrary and capricious;

Count 2: Whether EPA insistence on a 2:1 mitigation ratio was arbitrary and capricious; and

Count 9: Whether the EPA veto of the Corps proposed permit was arbitrary and capricious.

Defendants also identify three additional issues in the case as a result of plaintiff's submissions in the pre-trial order:

1) Whether the Corps' June 6, 1986 determination of wetlands jurisdiction over the 13.5 acre tract was arbitrary and capricious;

2) Whether the EPA assertion of wetlands jurisdiction over the 13.5 acre tract was arbitrary and capricious; and

3) Whether the 13.5 acre tract was subject to CWA or RHA wetlands jurisdiction prior to discharge on the site.

See Def. Brief at 10-13. Thus, via the pre-trial order, plaintiff inserts for the first time a challenge to the agencies' jurisdiction over the 13.5 acre parcel, a challenge which plaintiff vigorously asserts in opposition to this motion by defendants for partial summary judgment.

Despite the court's previous findings that the Corps and the EPA's "linkage" of the 44 and 13.5 acre parcels was arbitrary, unreasonable and not in accordance with applicable regulations, after completing discovery, plaintiff has not moved for summary judgment on any issue which remains in this case. This failure to seek judgment when the court has already indicated that certain agency actions were unacceptable can only be explained by plaintiff's desire to press its claims at a trial. Plaintiff contends that it is entitled to a trial rather than judicial review of the administrative record because of plaintiff's claim of agency bias and bad faith. Nevertheless, as discussed infra, there is absolutely no evidence of bad faith before this court, nor is there any reasonable inference of bad faith given the facts presented. Therefore, on this record, and discovery having been completed, the court concludes that plaintiff is entitled to summary judgment on certain claims and that there is no need for plaintiff to press its claims at a trial.

In contrast to plaintiff's reluctance to dispose of this case in the most expeditious manner possible, defendants seek summary judgment on all the pre-trial order claims and on Counts 3 and 10 of the Amended Verified Complaint. In addition, defendants seek to limit judicial review to the administrative record on Counts 2 and 9, and to have the court decide those counts under advisement. However, based on the court's 1989 determination that at least in certain respects, defendants' actions were arbitrary and capricious, defendants are not entitled to summary judgment.

Thus, the court is at a juncture where neither party requests the appropriate relief. Nevertheless, discovery having been completed and closed, the court is obliged to apply its previous rulings in this case as currently presented by the parties. Accordingly, for the reasons expressed below, the court dismisses this action and remands it to the relevant federal agencies.

Discussion

This court can only grant summary judgment for defendants if there is no genuine issue of material fact and, viewing the facts in the light most favorable to the plaintiff, defendants will prevail as a matter of law. See Calotex Corp. v. Catrett, 477 U.S. 317 (1986); Wisniewski v. Johns-Manville Corp., 812 F.2d 82, 84 (3d Cir. 1987).

Section 706 of the Administrative Procedure Act, 5 U.S.C. § 706, governs judicial review of agency actions, and provides that "in all cases agency action must be set aside if the action was 'arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law' or if the action failed to meet statutory, procedural, or constitutional requirements." Citizens to Preserve Overton Park v. Volpe, __ U.S. 402, 413-14 [1 ELR 20110] (1971). In the case at hand, alternative standards of review do not apply,¹ and the court and the [21 ELR 21347] parties agree that this court must determine: 1) whether the agencies' interpretation of Section 404 and its implementing regulations was reasonable, and 2) whether the agencies' application of that interpretation to the facts before them was rational. 735 F. Supp. at 635; Bersani v. U.S. E.P.A., 674 F. Supp. 405, 412-13 [18 ELR 20001] (N.D.N.Y. 1987), aff'd, 850 F.2d 36 [18 ELR 20874] (2d Cir. 1988), cert. denied, 489 U.S. 1089 (1989); Avoyelles Sportsmen's League, Inc. v. Marsh, 715 F.2d 897, 904-07 [13 ELR 20942] (5th Cir. 1983). Courts are highly deferential of agency actions, which are held to a minimum standard of rationality and are presumptively conscientious and valid. Volpe, 401 U.S. at 415; Avoyelles, 715 F.2d at 904; Hercules, Inc. v. E.P.A., 598 F.2d 91, 123 [8 ELR 20811] (D.C. Cir. 1978).

In reviewing agency action under the Administrative Procedure Act's "arbitrary and capricious" standard, 5 U.S.C. § 706, the Supreme Court has stated:

[A] court is not to substitute its judgment for that of the agency. Nevertheless, the agency must examine the relevant data and articulate a satisfactory explanation for its action, including a "rational connection between the facts found the choice made." Burlington Truck Lines, Inc. v. U.S., 371 U.S. 156, 168. In reviewing that explanation, we must "consider whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment." Bowman Transportation, Inc. v. Arkansas-Best Freight Systems, Inc., 419 U.S. 281, 285; Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416. Normally an agency rule will be arbitrary and capricious if the agency has relied on factors which Congress has not intended to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to agency expertise. The reviewing court should not attempt itself to make up for such deficiencies; we may not supply a reasoned basis for the agency's action that the agency itself has not given. SEC v. Chenery Corp., 332 U.S. 194, 196 (1947).

Motor Vehicle Manufacturers Assoc. v. State Farm Auto Ins. Co., 463 U.S. 29, 43 [13 ELR 20672] (1983). Although an agency's actions need only be "reasonable," the action must be "rational": agency action can be arbitrary and capricious, even if it is ultimately correct, if it was based on the wrong reasons or improper grounds. See Securities Comm'n v. Chenery Corp., 318 U.S. 80, 95 (1943) ("an administrative order cannot be upheld unless the grounds upon which the agency acted in exercising its powers were those upon which its action can be sustained"); Industrial Union Dept. v. American Petrol. Inst., 448 U.S. 607, 631 n.31 [10 ELR 20489] (1980) (same). An agency decision based on bad faith is, of course, irrational.

Where there are contemporaneous administrative findings, judicial review is strictly limited to the administrative record on which the agency based its decision, unless certain special circumstances obtain, such as a "strong showing of bad faith or improper behavior" by the agency. Volpe, 401 U.S. at 420. See also Asarco, Inc. v. U.S.E.P.A., 616 F.2d 1153, 1160, [10 ELR 20433] (9th Cir. 1980) (court can only consider information outside administrative record for background material or for limited purpose of ascertaining whether agency considered all relevant factors or fully explicated decision, not to determine correctness of agency decision;if court finds agency inquiry to be flawed, court must remand to agency and must not make own inquiry into merits of decision).

If the record before the agency does not support the agency action, if the agency has not considered all relevant factors, or if the reviewing court simply cannot evaluate the challenged agency action on the basis of the record before it, the proper course, except in rare circumstances, is to remand to the agency for additional investigation or explanation. The reviewing court is not generally empowered to conduct a de novo inquiry into the matter being reviewed and to reach its own conclusions based on such an inquiry.

Florida Power & Light Co. v. Lorion, 470 U.S. 729, 744 [15 ELR 20321] (1985) (emphasis added). See also Camp v. Pitts, 411 U.S. 138, 143 (1973). Thus, plaintiffs challenging agency action are not necessarily entitled to a trial:

The court may require the administrative officials who participated in the decision to give testimony explaining their action. Of course, such inquiry into the mental processes of administrative decision-makers is usually to be avoided. United States v. Morgan, 313 U.S. 409, 422 (1941). And where there are administrative findings . . . that were made at the same time as the decision, as was the case in Morgan, there must be a strong showing of bad faith or improper behavior before such inquiry may be made.

The District Court is not, however, required to make such an inquiry. It may be that the Secretary can prepare formal findings . . . that will provide an adequate explanation for his action. . . . If the District Court decides that additional explanation is necessary, that court should consider which method will prove the most expeditious so that full review may be had as soon as possible.

Volpe, 401 U.S. at 420-21. See also Avoyolles, 715 F.2d at 907 (Court of Appeals reviewed agency decision on the merits, even though district court's de novo review was held to be inappropriate, because project was already unreasonably delayed).

Plaintiff's Allegations of Agency Bias and Bad Faith

As an initial matter, this court must determine whether plaintiff has adduced enough evidence of agency bad faith and/or bias to withstand defendants' current motion for partial summary judgment. The court requires such a modicum of evidence for two reasons: 1) evidence of agency bad faith allows the plaintiff to make its proofs based on evidence outside the administrative record and potentially to have a trial or to otherwise require agency officials to account for their mental processes; and 2) allegations of agency bad faith being a significant factor prompting this court's denial of defendants' 1989 motion for summary judgment on the issue of wetlands jurisdiction over both the 44 and 13.5 acre parcels, the absence of any such evidence after an opportunity for discovery on the issue of bad faith impacts on this court's disposition of defendants' current motion for summary judgment on the issue of wetlands jurisdiction over the 13.5 acre parcel.

The court concludes that there is absolutely no evidence or inference of agency bad faith or bias in the agencies' processing of plaintiff's permit application to fill the 13.5 acre parcel. To the extent that plaintiff's bad faith allegations—i.e., the discovery that the Corps did not response to FWS complaints in 1981 and that the Corps lied about its response actions embarrassed the Corps and prompted it to aggressively assert jurisdiction over the 13.5 acre piece—mimics plaintiff's original basis for its bad faith and estoppel allegations, this court has already determined that "having purchased the 13.5 acres, Russo should not be relieved of its duty to mitigate if federal wetlands jurisdiction is deemed to be appropriate." 735 F. Supp. at 637. Contrary to plaintiff's suggestion (Plt. Facts at P330), there is simply no evidence or inference that any potential embarrassment from the 1981 mishandling on the 44 acre tract could be linked to the Corps' assertion of jurisdiction over the 13.5 acre piece. Indeed, at the time that the Corps field investigator visited the 13.5 acre site and made a preliminary determination that the 13.5 acre tract was protected federal wetlands, there is no evidence that either the Corps or the FWS were aware that the 13.5 acre tract was being developed by the same party responsible for the reported 1981 fill activity. Def. Brief at 33. Furthermore, this particular theory of bad faith, which plaintiff sets out in the vaguest of terms (Plt. Brief at 30), principally concerns the 44-acre tract. The Corps had no reason to falsely assert jurisdiction over the 13.5 acre parcel or to foster a "lynching atmosphere" based on the 1981 "cover up."²

Plaintiff has also suggested that because the Corps was embarrassed by an August 1984 FWS report criticizing the Corps' handling of 40 separate wetlands sites, including the 1981 Corps mishandling of the 44 acre Russo tract, plaintiff contends that the Corps decided to [21 ELR 21348] aggressively assert jurisdiction over the Russo 13.5 acre tract. Plt. Facts at PP331. But there is absolutely no evidence before the court that the Corps was "embarrassed" by the FWS report. Nor does the mere fact of a critical FWS report give rise to any inference of Corps embarrassment. The FWS and the Corps are separate agencies which are encouraged to challenge each other. A case in point is that the FWS and the Corps have strongly disagreed about the Russo permits from the beginning of the administrative process. See Def. Facts at PP63-69 (detailing Corps' rejection of FWS and EPA requests for stricter mitigation requirements); Def. Brief at 36-37.

Moreover, the undisputed facts negate any inference that the Corps asserted jurisdiction over the 13.5 acre parcel due to its "embarrassment" by the 1984 report. It was not until 1985 that the Corps asserted jurisdiction over the 13.5 acre parcel promptly after receiving the 1985 anonymous complaint about filling in the area. It was only after the Corps had confirmed its jurisdiction over the 13.5 acre parcel that the Corps turned its attention to the neighboring 44 acre parcel which was identified in the 1984 FWS Report, and the Corps could have investigated that parcel well before 1985.

Thus, the undisputed timing and factual impetus for the Corps' 1985 activity with regard to the 13.5 acre parcel does not support any inference of bad faith with regard to that tract.

As for plaintiff's allegations of EPA bias, plaintiff focuses on two incorrect statements made by EPA officials which suggested that plaintiff was not complying with a Corps' cease and desist order. See Plt. Facts at P331.³ However, those misstatements were immediately corrected by the EPA as honest mistakes once the official discovered the errors, and the EPA's final decision-maker was aware of the error. Def. Brief at 41-43. Any theory of bad faith based on the fact that "the EPA Regional Administrator never apologized to Mr. Russo for his false statement" (Plt. Facts at P331e) is not supported and is directly challenged by the documented correction of the misstatement. Plaintiff's other theory of EPA bias is that the reports and tests on which the EPA relied were so flawed, that the agency's reliance on those reports constituted bad faith. See Plt. Facts at PP350-366. These facts, as outlined by plaintiff, do not suggest any claims of bad faith; rather, they outline plaintiff's challenge to the agency determination of jurisdiction as arbitrary and capricious, which is addressed infra.⁴

Given the foregoing undisputed facts and the dearth of evidence which would suggest agency bad faith or bias, the court concludes that no theory which plaintiff currently presents supports an inference of agency bad faith or bias by either the Corps or the EPA. The court requires a strong showing of agency bad faith or bias before it will require agency officials to testify at trial and to account for their actions. See discussion of Volpe, 401 U.S. at 42-21, supra. Given this absence of any "bad faith" issue for trial, plaintiff's action as a whole is not appropriate for trial. Instead, the court concludes that the court shall review plaintiff's challenge to the agency actions based on the administrative record. See discussion of Volpe, 401 U.S. at 42-21, supra.

Wetlands Jurisdiction Over the 13.5 Acre Parcel

Plaintiff challenges the agencies' jurisdiction over the 13.5 acre parcel for the first time in the pre-trial order. The agencies themselves, as opposed to their legal counsel, have never had an opportunity to address plaintiff's points. Defendants argue that they are entitled to summary judgment on the issue of their wetlands jurisdiction over the parcel. In response, plaintiff attacks the credibility and methodology of defendants' field agents and experts in order to create a disputed material fact which would bar granting defendants' motion.

The court previously denied defendants summary judgment on the jurisdictional issue. The current summary judgment motion differs from the previous one in two ways: 1) the 44 acre tract is no longer at issue; and 2) plaintiff has had an opportunity for discovery on the bad faith allegations.

Plaintiff's point-by-point and test-by-test challenge to defendants' six separate jurisdictional determinations does not create a disputed material fact for purposes of this motion. Since the court must uphold the agency determinations if they are "reasonable," then a disputed issue of material fact can only exist if there were some evidence or suggestion that defendants' actions could not be reasonable under any circumstances. As defendants correctly reason, "factual disputes about which reasonable minds could differ are not material issues of fact, and thus do not require a trial; a trial is warranted only if Russo Development can demonstrate that the agencies reached conclusions that no reasonable mind could accept." Def. Reply Brief at 14. This is not to says that plaintiff must here prove its ultimate burden that the agency action is unreasonable. Rather, plaintiff must simply present a colorable argument that there is a possibility that the agency's action could not possibly have been reasonable given the record that was before the agency. For instance, if the agency action turned on one factor, and there is a possibility that the agency was clearly wrong in that crucial determination, then plaintiff could defeat defendants' summary judgment motion.

But that is not the case here. Plaintiff challenges every agency expert's methodology, often without explanation. But on this motion, plaintiff must present the possibility that every single agency determination was outside the realm of reasonable possibilities based on the evidence that was then before the agencies (provided that the agencies did not overlook essential information). Even if plaintiff's assessment of the land is ultimately more plausible or even correct, such a conclusion would not necessarily indicate that the agencies acted unreasonably. If the evidence that was before the agencies can support the agencies' interpretations, then those determinations are not arbitrary or capricious. See Stoeco Dev. v. Dept. of the Army Corps of Engin., 701 F. Supp. 1075, 1080 [19 ELR 20634] (D.N.J. 1988) (agency held to "minimal standards of rationality"), appeal dismissed, 879 F.2d 860 (3rd Cir. 1989); Avoyelles, 715 F.2d at 917-18.

Defendants rely on plaintiff's expert's testimony that "reasonable people can disagree" on wetlands assessments because it is not a fine science, and from that, defendants argue that this testimony confirms the "reasonableness" of defendants' determinations. Def. Reply Brief at 16-19, citing 10/25/90 Cascino Dep. at 252-53. While this concession is illustrative of the latitude which the court must afford the agency decisions on jurisdiction, this weak, general statement by plaintiff's expert does not constitute a concession that defendants' testers specifically acted within the realm of reasonable approaches.

Nevertheless, defendants are entitled to summary judgment on the question of wetlands jurisdiction over the 13.5 acre parcel. None of plaintiff's experts dispute that at least some of the 13.5 acre parcel is jurisdictional wetlands; rather, plaintiff's experts apparently contest the scope of the wetlands determination, i.e., that some portion of the parcel is not wetlands. See Triegel Dep. at 89, 90, 134(1/11/91 Triegel Cert., Exh. B); 1/11/91 Triegel Cert. at P6; see also citations appearing at Def. Reply Brief at 17. That is an issue which would affect the mitigation requirements imposed on plaintiff; it would not affect the agencies' jurisdiction to condition the placement of fill on the parcel. Therefore, the court concludes that there is no disputed issue of material fact and that defendants are entitled to summary judgment on plaintiff's challenge to federal wetlands jurisdiction over the 13.5 acre parcel.

However, based on the evidence submitted before the court, plaintiff would still contest the agency determinations that all of the 13.5 acreage was wetlands. Because neither the Corps nor the EPA have ever been presented with plaintiff's jurisdictional objections, and given the court's intention to remand this action based on the discussion presented infra, the court concludes that a remand to the agencies [21 ELR 21349] of plaintiff's jurisdictional challenge is the most expeditious and fair manner in which to proceed on this issue.

Count 3: Agency "Practice" of Not Crediting Pre-Enhanced Value

Defendants seek summary judgment on Count 3 of plaintiff's Amended Verified Complaint, which challenges the EPA and Corps' "practice of refusing to credit applicants with the pre-enhanced value of property utilized for the purpose of enhancing wetlands in compliance with the mitigation requirements of a 404(b) permit." Amended Verified Complaint P71. The parties have not addressed this claim at all in these moving papers, nor did they address the full merits of this claim in their papers for the 1989 summary judgment motions. For this reason, the court cannot resolve the merits of defendants' motion on this claim if what plaintiff is claiming is that the Corps has a policy of no-accreditation. However, based on plaintiff's submissions, it appears that what plaintiff is in fact challenging is the Corps' decision on plaintiff's permit specifically. Therefore, given that the court remands this action to the agencies for new consideration of plaintiff's permit application, the court will remand plaintiff's claims on this count as well. Perhaps plaintiff's claim can then be clarified before the agencies.

Count 10: The Corps Decision on the Permit

Defendants seek summary judgment on Count 10 of plaintiff's Amended Verified Complaint, which alleges that the final decision of the Corps on the 404(b) fill permit application is arbitrary and capricious and has no reasonable basis in fact or law. The Corps intended to grant the permit with certain mitigation conditions. However, the mitigation conditions were premised on the linkage of the 44 acre and 13.5 acre parcels. According to this court's 1989 Opinion, this linkage was arbitrary and capricious.

The court concludes that the Corps improperly required plaintiff to include both tracts of land in its application. The two parcels of land are contiguous to each other, but they were developed separately. It is only the unique circumstance that the parcels are contiguous which could have justified the Corps' insistence on including the two parcels in one application. However, the facts clearly show that the development of the two parcels was not the "same project". The 44-acre parcel was purchased separately from the 13.5-acre parcel and was almost completely developed at the time of the purchase of the 13.5-acre plot.

The court thus concludes that the requirement by the Corps that plaintiff include both tracts in its application was arbitrary, unreasonable and not in accordance with applicable regulations. The court will order the Corps to take separate appropriate action, if any, with respect to the 44-acre tract, and will limit the plaintiff's application for a Corps permit and the subsequent grant and veto of the permit to the 13.5-acre parcel.

735 F. Supp. at 637.

However, the Corps' entire consideration of the Russo permit was premised on the linkage of the 13.5 and 44 acre parcels. Therefore, the Corps decision on the permit was arbitrary and capricious. The court remands this claim to the agency for further consideration in light of this court's current and prior rulings.

Count 2: The EPA 2:1 Mitigation Ratio

Defendants move the court to consider Count 2 of plaintiff's Complaint under advisement. Count 2 alleges that throughout the Corps' consideration of Russo's permit application, the EPA insisted on a 2:1 mitigation ratio for all 57.5 acres of Russo property addressed in the permit. As discussed supra, the linkage of the 44 and 13.5 acre properties was arbitrary and capricious. Given that the 2:1 mitigation ratio was based on the agencies' consideration of the two tracts together, the considerations which led to the conclusion that a 2:1 mitigation ratio was required were arbitrary and capricious. The agencies should have determined the mitigation ratio based on the impact of the 13.5 acre fill alone. Thus, the court remands this claim to the agencies for consideration in light of this court's current and prior rulings.

Count 9: The EPA Final Decision

Defendants move the court to consider Count 9 of plaintiff's Complaint under advisement. Count 9 alleges that the EPA's final decision to reject the Russo permit application without strict 2:1 mitigation was arbitrary and capricious and has no reasonable basis in fact or law. As discussed supra, the entire agency consideration and determination on the Russo permit application was arbitrary and capricious, because Russo never should have been required to link the 44 and 13.5 acre properties.

Furthermore, the EPA never articulated its reasons for deviating from the NJ CMP, a failure which this court has already determined was arbitrary and capricious. 735 F. Supp. at 638. Although the EPA submits the 12/20/90 affidavit of Mario Del Vicario, in which the affiant states that EPA officials did consider the NJ CMP, there is no dispute that the EPA did not articulate its reasons for this deviation in its Final Decision. The EPA Final Decision is arbitrary and capricious for this reason, as well as for the linkage of the 13.5 and 44 acre parcels, which tainted the entire permit application process. The court remands this claim to the agencies for consideration in light of this court's current and prior rulings.

Conclusion

The court concludes that there is no evidence or reasonable inference which supports plaintiff's allegations of bad faith or bias on behalf of the Corps or the EPA in their handling of plaintiff's application to place fill on the 13.5 acre parcel of land at issue in this case. These claims are hereby dismissed from this case.

The court further concludes that defendants are entitled to summary judgment on plaintiff's challenge to the agency determinations that the 13.5 acre parcel was federally protected wetlands. However, the court remands this action to the agencies for consideration of plaintiff's objection that not all of the parcel contained wetlands.

The court remands all remaining claims in this action to the agencies for reconsideration of plaintiff's application for a permit to fill 5 acres of the 13.5 acre parcel and an after-the-fact permit to fill 8.5 acres of the 13.5 acre parcel. The agencies must also reconsider the appropriate level of mitigation to be required of plaintiff. The agencies must limit their deliberations and considerations to the impact of placing fill on the 13.5 acre parcel under consideration.

Because the new considerations required by the Corps and potentially the EPA will result in an entirely new permit proposal, the court deems it appropriate to dismiss rather than to stay this action.

Order

This matter having come before the Court open the motion of defendants' motion for partial summary judgment and to limit judicial review to the administrative record; and the court having considered the submissions of the parties; and for the reasons expressed in the accompanying opinion; and for good cause shown;

IT IS this 17 day of May, 1991, hereby

ORDERED that all claims arising from plaintiff's allegations of bad faith and bias on behalf of defendants in their handling of plaintiff's application to place fill on the 13.5 acre parcel of land are hereby dismissed from this case; and it is further

ORDERED that defendants' motion for summary judgment is granted on plaintiff's wetlands jurisdiction claim, identified in the pre-trial order; and it is further

ORDERED that this action be and is remanded to the defendant agencies for consideration of plaintiff's objection that portions of the 13.5 acre parcel were not jurisdictional wetlands; and it is further

ORDERED that all remaining claims in this action be and hereby are remanded to the defendant agencies for reconsideration of plaintiff's permit applications relating to the 13.5 acre parcel, and that such reconsideration be in accord with the opinion accompanying this order; and it is further

ORDERED that this action be and hereby is dismissed.

1. 5 U.S.C. § 706(2)(E) provides for a "substantial evidence" standard of review "only when the agency action is taken pursuant to a rulemaking provision . . . or when the agency action is based on a public adjudicatory hearing." Volpe, 401 U.S. at 414, neither of which is at issue here.

5 U.S.C. § 706(2)(F) provides for de novo review only "when the action is adjudicatory in nature and the agency factfinding procedures are inadequate." Id. at 415. Plaintiff has not registered such a complaint.

2. Nor do the facts support the inference (which plaintiff does not make but which a fact-finder might ponder) that the Corps used its jurisdiction over the 13.5 acres in order to seize jurisdiction over the 44 acre tract. Given the 1981 complaints by the FWS regarding the 44 acre tract, the Corps did not need any "excuse" to assert jurisdiction over the 44 acre parcel.

3. The first misstatement occurred when the EPA requested the Corps to elevate the decision-making on the Russo permits. The EPA Assistant Administrator for Water wrote to the Corps in an April 20, 1987 letter that Russo knew that he was not to fill prior to his filling the 8.5 acres. Def Facts at § 67. The Corps immediately contacted the Assistant Administrator and advised him that no cease and desist order had been issued prior to placement of fill on the 8.5 acres. Id. at § 67b.

The second EPA misstatement was made in the EPA's January 1, j1988 Recommended Decision on the Russo permit. That report again incorrectly stated that Russo had been on notice not to fill any portion of the 13.5 acre parcel. The Assistant Administrator for Water, who had previously been notified by the Corps that this EPA misconception was in error, cotrected this statement in the EPA's Final Decision. Id. at § 88. This second misstatement in the Recommended Decision could not have worked any prejudice or unfair dealings against Russo, since the Assistant Administrator for Water, who clearly knew of the error, was the official ultimately responsible for EPA's processing of the Russo application.

4. As for plaintiff's other tidbit of "evidence," defendant admits that the Corps agent who wrote the 1981 letter to the FWS misrepresenting the Corps' response to the 1981 filling was involved with the Russo 404(c) proceedings at the EPA. Def. Brief at 35, n. 13. However, this fact alone does not suggest bias; indeed, it cuts against plaintiff's original "cover up" theory—in which plaintiff argued that the Corps attempted to cover up its 1981 misrepresentation to the FWS—because the same official belatedly acknowledged the necessity for government intervention.