Lighting the way: the Lighthouse decision and judicial review of agency action.

• Author: Riesel, Daniel
• Position: New York

1. OVERVIEW

   Despite the increasing complexity of administrative agency action, New York's courts have received relatively limited guidance on judicial review or oversight of such agency actions, particularly informal agency action. However, the law of judicial review of agency action received an important addition in the Court of Appeals decision Lighthouse Pointe Property Associates LLC v. New York State Department of Environmental Conservation. (1) This development in New York administrative law marks a limit on judicial deference to agency action and perhaps more importantly demonstrates the need for a realistic hard look at the agency record, as well as a degree of deference calibrated to the reliability of the administrative action because not all agency decisions deserve the same degree of deference. (2)

   The need for these refinements is particularly important in the environmental arena where the New York State Department of Environmental Conservation ("DEC") is involved in regulating a substantial aspect of New Yorkers' lives and business endeavors. (3) This regulatory process involves making both formal and informal decisions--decisions that the DEC claims should receive significant deference from the courts due to its expertise in regulating the environment. (4) Accordingly, the standard of judicial review dealt with in the Lighthouse decision is a matter that affects our daily lives, and therefore deserves considerable attention. (5) However, there has long been a tension between advocates of a more probing review and the more conventional approach of granting considerable deference to agency action. (6) This may be a result of the complex balancing act courts must perform: they must review many different types of agency action across myriad factual contexts, inquiring deeply enough to satisfy legally prescribed criteria of rationality and fairness but maintaining a light enough touch to respect the legitimate authority of agencies to make policy. (7)

   Historically, views on where the correct balance lies have evolved over time, from the origins of the administrative state in the time of the New Deal to the present day. (8) The stakes of agency decision making can be high. (9) This is especially true in the realm of environmental law, where agency determinations regarding complex scientific phenomena can have significant implications for the environment, human health, and the economy. (10) As Professor Strauss has written, the key is striking the right balance:

   If one could capture in a formula the level and object of judicial scrutiny that would arm the forces of reason within the agencies without encouraging defensive, excess that would be our goal. It is, as it always has been, a matter of the judges being aware of their own limits at the same time as they set limits for others. (11) But regardless of precisely where the balance of rigor and deference is struck, the need for some kind of meaningful judicial review--a review that actually engages with the critical issues of a case--is an enduring theme of American administrative law. Louis Jaffe has opined, '"[t]he availability of judicial review is the necessary condition, psychologically if not logically, for a system of administrative power which purports to be legitimate, or legally valid."' (12) The Lighthouse appeal is a fair example of the Court of Appeals trying to find the correct balance.

2. THE LIGHTHOUSE LITIGATION

   Lighthouse involved a dispute over the administration of a new legislative program, the Brownfield Cleanup Program ("BCP"), (13) designed to put areas contaminated with hazardous waste into productivity through tax credits keyed to cleanup and subsequent capital expenditures, and a state certification that the site had been cleaned up to a level where it could be developed. (14) The critical issue in Lighthouse was whether the petitioner's property was sufficiently contaminated with hazardous waste to be classified as a "brownfield" within the meaning of the BCP. (15) As the Court of Appeals noted: "The BCP broadly defines the term 'brownfield site' as 'any real property, the redevelopment or reuse of which may be complicated by the presence or potential presence of a contaminant.'" (16)

   The Lighthouse petitioner submitted an application for the inclusion of two adjacent parcels into the BCP stating that there were hazardous materials on the parcels that were above the DEC-issued soil cleanup objectives ("SCOs") and asserted that there would be difficulty in financing development due to the uncertainty of the required cleanup. (17) Unfortunately for the Lighthouse petitioner, its application for participation in the BCP arose in the context of the DEC having realized a miscalculation in the cost of the BCP program. (18) At the outset of the BCP, the DEC had estimated that successful BCP applicants might receive a total of $135 million. (19)

   However, by 2008 the State Comptroller estimated that property enrolled in the program might receive a total of as much as $3.1 billion and that certain developers would receive as much as $100 million for a single site. (20) The legislature responded to this issue by reducing the tax credits that would be available to new applicants. (21) The more generous tax credits would apply to sites that had already filed for admission into the program, such as the Lighthouse petitioner. (22) The DEC had been active in attempting to winnow out high-end developments that would be entitled to the original significantly higher tax credits. (23)

   The BCP legislation directed DEC to promulgate soil cleanup standards, (24) and the Lighthouse petitioner argued that the soil on its sites exceeded those standards in certain areas. (25) Nevertheless, the DEC Brownfield Program director denied the application for the two parcels based on a DEC engineer's evaluation that, although there were hazardous wastes on the parcels, '"[t]here [was] no indication that contaminants ... are present at levels that would complicate the redevelopment or reuse of this property....'" (26)

   The Lighthouse petitioner then brought an Article 78 petition alleging that the denial of its participation in the BCP was arbitrary and capricious. (27) The DEC relied upon its staff engineer's analysis, as summarized by the Court of Appeals:

   On December 4, 2007, DEC answered, and asked Supreme Court to dismiss Lighthouse's petition. DEC relied principally on the affidavit of the staff environmental engineer who recommended denying Lighthouse's requests for acceptance into the BCP. He opined that the 'exceedances of soil and groundwater cleanup standards' at the properties were 'limited in number compared with the large amount of data available'; and that '[t]he excedances revealed by both historical and current sampling data were few in number, limited in magnitude, and widely dispersed.' As a result, '[t]aken as a whole, the data [did] not indicate the presence of contamination at the [Riverfront and Inland Sites] in quantities or concentrations sufficient to require remediation.' (28) The Lighthouse petitioner responded that the hazardous waste on the properties did complicate development and also submitted an affidavit from an experienced real estate attorney averring that the sites could only be developed by participating in the BCP.

   He maintained, however, that there was 'no question that the Project is feasible, would get financed, and could proceed if these were the only issues'; and that what prevented Lighthouse from going forward was the presence of hazardous wastes at the Riverfront and Inland Sites. He noted that '[n]o one will finance [Lighthouse's project]' absent '[DEC's] approval of the investigation and remediation of hazardous wastes at the [properties], and a release of liability' because '[o]therwise the risks are too great for lenders, particularly due to the relative low value of property in Upstate New York compared to the rest of the country'; and that 'the [MCDPH] continues to insist that [Lighthouse] undertake remediation, but there is no one to sanction it' since DEC 'has disavowed jurisdiction' under the BCP. (29) In granting the petition, the supreme court held that the Lighthouse sites were brownfields within the meaning of the BCP statute. (30) However, on appeal, the Appellate Division reversed, holding that "DEC's well-reasoned analysis of the BCP applications ... coupled with the mandate that we must not substitute our judgment for that of the DEC, compels the conclusion that the court erred in granting the petition and directing the DEC to accept petitioner into the BCP." (31)

   Indeed, the DEC argued that the courts did not have the requisite expertise to second guess its technical analysis and that the Lighthouse sites did not require remediation despite the presence of hazardous substances. (32) Thus, Judge Read writing for the Court of Appeals accurately summed up the DEC's position:

   Because the BCP is meant to restore contaminated real property to productive use, DEC argues that the phrase 'may be complicated' in the statutory definition of the term 'brownfield site' is reasonably interpreted to mean that the property's redevelopment or reuse may be complicated by the need for a cleanup, an environmental decision of which it is the sole arbiter; and here, "[f]rom a perspective that only an expert can have, DEC found the exceedances on [Lighthouse's] property to be relatively small in number and minimal in magnitude. Without the benefit of the agency's expertise or perspective borne of experience, the courts lack any basis to substitute their own judgment for that of DEC." Further, DEC contends, once it determined that no cleanup was warranted, redevelopment or reuse of the properties was, by force of this circumstance alone, not "complicated" within the meaning of the statutory definition. (33) The DEC's action, the decision to reject the Lighthouse sites as brownfields, like many...