Birchwood Lakes Colony Club, Inc. v. Borough of Medford Lakes

Citations: 449 A.2d 472; 90 N.J. 582; 13 Envtl. L. Rep. (Envtl. Law Inst.) 20115; 1982 N.J. LEXIS 2176

Court: Supreme Court of New Jersey; August 3, 1982; New Jersey; State Supreme Court

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The New Jersey Supreme Court addressed two primary issues in the case of Birchwood Lakes Colony Club, Inc. v. Borough of Medford Lakes: (1) the ability of downstream property owners to recover damages for nuisance caused by municipal sewage discharge, and (2) the applicability of the New Jersey Tort Claims Act (TCA). The Court ruled that a public entity can be sued for nuisance and confirmed that the TCA applies to such cases. 

The plaintiff, representing Birchwood Lakes residents, sought damages and injunctive relief against the Borough of Medford Lakes, alleging that its sewage treatment plant discharged effluent with harmful levels of nitrates, ammonia, and phosphates into Birchwood Lakes, leading to eutrophication. This environmental degradation resulted in algae growth, fish mortality, and rendered the lakes unsuitable for recreational activities, severely diminishing the quality of life for residents. 

The sewage treatment plant, operational since 1939 and extensively modified in 1964, had its plans approved by the State Department of Health. Residents observed algae blooms beginning in 1969, and by the early 1970s, the lakes were largely unusable. In March 1972, the Department of Environmental Protection (DEP) confirmed the eutrophication issue and ordered the borough to implement corrective measures by the end of 1972, citing a significant health threat posed by the sewage discharge. The borough contested the DEP's findings and the required actions, raising questions about the nature of the problem and funding for solutions.

In 1974, after negotiations, the borough received a construction permit for improvements to its sewage treatment plant, allocating $74,000 for the project. However, all bids exceeded this budget and were rejected. Subsequently, the Department filed a lawsuit to compel the borough to address pollution issues, resulting in a consent judgment in June 1977 requiring specific abatement methods, with a completion deadline of January 1979. The original suit was filed in July 1975, and during the May 1978 trial, the plaintiff presented multiple liability theories, including the borough's negligence in construction and operation of the plant, failure to comply with federal permit conditions, and a duty to correct pollution damaging the plaintiff's lake.

The jury found the borough negligent for not preventing excessive nutrient discharge and for failing to adhere to its operating permit, awarding the plaintiff $45,000 in damages and $2,500 in expert fees. On appeal, the Appellate Division determined that the jury's conclusion regarding negligence related to the operating permit was unsupported, as the permit did not mandate low phosphate levels until late 1976, and there was no evidence of damage thereafter. Furthermore, the jury's conflicting findings about the borough's response to a 1972 Department of Environmental Protection (DEP) order raised concerns about consistency.

The Appellate Division also examined the borough's potential liability for nuisance, stating that the borough could be liable for compensatory damages if its effluent unreasonably polluted waters, regardless of when the offending actions began. However, since the jury was not instructed on the nuisance issue, the court deemed this oversight plain error, necessitating a new trial solely on the liability aspect related to nuisance.

The court determined that the Tort Claims Act does not grant the borough immunity from lawsuits and that the borough failed to demonstrate the applicability of design immunity. Regarding expert fees awarded to plaintiffs, the court ruled this award as erroneous since, under N.J.S.A. 2A:35A-1 et seq., such fees are available only to a prevailing party seeking declaratory or equitable relief. The trial court's denial of an injunction, due to an ongoing companion suit, meant the plaintiff was not a prevailing party and thus not entitled to fees. The defendant's petition for certification was granted, and the Attorney General of New Jersey was invited to participate as amicus curiae. Both the defendant and the Attorney General contended that the Tort Claims Act serves as the exclusive source for public entity tort liability and that the decision below improperly allows a common law nuisance claim against public entities, which is not expressly authorized by the Act. However, the Appellate Division held that the Tort Claims Act does encompass nuisance liability and found no statutory immunity applicable based on the existing record. 

Private nuisance liability can arise from various types of conduct, including intentional actions or negligent, reckless, or abnormally dangerous activities. Liability occurs if the invasion is intentional and unreasonable, or if it is unintentional but actionable under relevant liability rules. An invasion is deemed intentional if it is purposely caused or substantially certain to occur as a result of the actor's actions. An invasion is considered unreasonable if the harm's gravity outweighs the utility of the conduct or if the financial burden of compensating for the harm makes the conduct impractical. Invasions of interest in downstream water use can constitute a nuisance, which has been recognized in New Jersey's legal history, particularly regarding water pollution by municipalities, despite outdated legal analyses of active wrongdoing.

The discharge of treated sewage effluent into a running stream is not inherently an unreasonable riparian use, but it may be deemed unreasonable if the resulting harm outweighs the benefits. In *Borough of Westville v. Whitney Home Builders*, the court emphasized that the determination of an actionable invasion of a riparian owner's rights requires weighing the reasonableness of the defendant's use against the material harm inflicted on reasonable water uses. This reasoning aligns with New Jersey's general principle that reasonableness governs competing water rights, as seen in *Armstrong v. Francis Corp.* and *Sans v. Ramsey Golf and Country Club, Inc.* 

Public entity liability for nuisance is recognized under the Tort Claims Act, with two key sections implicated: N.J.S.A. 59:4-2 and N.J.S.A. 59:2-2. N.J.S.A. 59:4-2 establishes liability for injuries caused by dangerous conditions of public property if the plaintiff can show the condition was dangerous at the time of injury, that the injury was proximately caused by this condition, and that either a negligent act of a public employee created it or the entity had prior notice of it. The section stipulates that municipalities are liable for nuisance if their actions are deemed 'palpably unreasonable,' thereby maintaining common law principles of landowner liability for water pollution. N.J.S.A. 59:2-2 addresses vicarious liability, stating that public entities are liable for injuries caused by public employees acting within their employment scope, mirroring the liability of private individuals under similar circumstances.

Public entities are held liable for the actions and omissions of their employees to the same extent as private individuals under similar circumstances, particularly concerning nuisance claims. The statute emphasizes a flexible liability provision that allows courts to tailor principles to specific case circumstances. There is no indication that public entities are exempt from liability for nuisance claims, aligning with interpretations of the California Tort Claims Act and the United States Tort Claims Act. 

Notably, California courts have recognized liability for nuisances caused by public entities, such as aircraft landing patterns, indicating that public entities can be liable under both nuisance statutes and dangerous conditions of public property. Federal courts have similarly allowed claims for nuisance due to low-flying aircraft. Historical cases suggest that a nuisance can be akin to a taking of property without just compensation, as demonstrated in Causby, where government interference was considered a taking under the Fifth Amendment.

The Appellate Division has affirmed that actions for nuisance can proceed against municipalities within the framework of the Tort Claims Act. However, a necessary modification is that the public entity's actions must be palpably unreasonable, as stipulated by N.J.S.A. 59:4-2. The Tort Claims Act prioritizes immunity, with provisions that may supersede liability claims. The municipality argues for two specific immunities: plan and design immunity and discretionary immunity, as outlined in N.J.S.A. 59:4-6 and N.J.S.A. 59:2-3, respectively.

Interpretation of statutory immunities necessitates examining the legislative history of public sewer system regulation. New Jersey has collaborated with the federal government to create a comprehensive water pollution control program. In 1972, Congress enacted the Federal Water Pollution Control Act Amendments (Pub.L.No. 92-500) due to inadequacies in the federal program, making it illegal to discharge pollutants without a permit (33 U.S.C.A. 1311, 1342). The Environmental Protection Agency (EPA) oversees this act and establishes specific effluent limitations that must be adhered to in permit conditions (EPA v. State Water Resources Control Board, 426 U.S. 200). New Jersey enacted its own legislation that outlines the Department of Environmental Protection's responsibilities, allowing the state to manage its water pollution control program and issue permits. Under New Jersey law, discharging pollutants without a valid permit is prohibited. Permit holders must comply with federal and state effluent standards, adhere to compliance schedules, and reapply for permits in case of changes in discharge characteristics. These regulations collectively form a robust framework for water pollution control.

Understanding these regulations can inform the application of defenses under the Tort Claims Act. If a public entity designs treatment works in cooperation with the DEP to meet approved effluent limitations, it is not liable for injuries caused by permitted discharges. N.J.S.A. 59:4-6 provides immunity for public entities and employees from liability for injuries linked to approved plans or designs. Compliance with discharge permit conditions grants immunity from monetary liability, as state and federal authorities have the primary right to define reasonable water use. Courts lack the authority to adjust water entitlements once Congress has made determinations, and common law nuisance standards should not supersede a comprehensive regulatory framework.

Under Maryland law, citizens cannot seek remedies against a public sewer system if it complies with EPA permit standards, as established in *Committee For Jones Falls Sewage System v. Train*. However, public entities can be held liable for negligence, nuisance, or trespass, as shown in *Wilson v. United States*. If a public entity delays installation or repair of sewer works and this results in injury, or if it operates or constructs works negligently, it can be liable. Immunity for public entities does not depend on the reasonableness of a design but requires that any alleged dangerous condition be part of a plan or design that received prior governmental approval. The *Ellison* case illustrates that a housing authority must prove that specific design elements were included in federal plans to assert immunity. A public entity is also responsible for proving its affirmative defense of immunity, particularly under N.J.S.A. 59:2-3, which outlines various circumstances under which a public entity is not liable, including the exercise of judgment or discretion. However, this immunity does not protect against negligence by employees in executing ministerial duties. The Appellate Division upheld the denial of a defendant's motions for judgment based on discretionary immunity since no specific subsection was cited.

The municipality is obligated to secure funding to comply with a Department of Environmental Protection (DEP) order, as noted in sections (b) and (c). However, there was insufficient evidence of significant competing demands in subsection (d). The plant in question generates revenue, and the municipality issued a $74,000 bond for its reconstruction, yet rejected bids that were only slightly above the expected cost without rebidding or modifying specifications. The municipality's claim that budgetary restrictions under the 'Cap Law' limited available funds is countered by the argument that the necessary capital expenditure was likely exempt from the spending ceiling.

Despite acknowledging its responsibility, the municipality appeared inactive in addressing pollution and did not comply with the DEP order. Subsection (a) pertains to the exercise of discretion in policy-making, which is distinct from operational decisions. The ongoing pollution discharge is classified as an operational issue, thereby suggesting that immunity from liability for public sewer discharges hinges on prior approval of plans and designs by competent authority and adherence to operational care. The municipality may also be protected from liability if it proves discretion was exercised in accordance with the relevant statutes.

The case's complexity arises from claims related to incidents both before and after the Tort Claims Act's effective date. The jury's finding of negligence in not observing operating permit conditions was unsupported, as the permit did not impose a phosphate limit until 1976, and there was no evidence of further damages post that date. There is also a contradiction in finding the borough negligent for failing to act on the DEP order while concurrently ruling it was not negligent in its response, as the necessary corrective action was the construction of additional facilities. Moving forward, the focus will be on evaluating the reasonableness of the municipality's actions against the harm caused. The borough will not be liable for damages occurring after permit acquisition if specific discharge conditions are met, nor for damages arising from an approved plan designed to meet pollutant removal standards, provided it can demonstrate the exercise of discretion.

If the defendant successfully establishes immunity under the Tort Claims Act (TCA), the jury will be directed to divide damages between injuries incurred before and after July 1, 1972. For injuries occurring after this date, the plaintiff must demonstrate that the borough's actions were palpably unreasonable to recover for nuisance, with damages again needing to be apportioned if applicable. The lower court's findings regarding notice under the TCA and the relevant statute of limitations remain unchanged, as these were fact-sensitive issues without substantial challenges to their accuracy. The jury's damage award is upheld, but the issue of liability is remanded for further consideration. The Appellate Division's decision not to award expert fees is confirmed. The judgment of the Appellate Division, with modifications, is affirmed, with all justices in agreement for affirmation and none opposing.

Eutrophication is identified as the decline in the quality of lakes and estuaries due to excessive nutrients from effluents, leading to harmful algal blooms and subsequent ecological issues. Prior to trial, discussions among the parties and the judge determined the legal theories applicable, resulting in the trial court dismissing the nuisance claim as it is not permissible under New Jersey's Tort Claims Act, which prohibits strict liability claims against public entities (N.J.S.A. 59:9-2(b)). The Attorney General's Task Force on Sovereign Immunity provided commentary supporting this interpretation. A public entity’s decision to delay necessary improvements can be viewed as a taking of property, referencing cases like Masley v. City of Lorain and Glace v. Town of Pilot Mountain.

Before 1977, sewage disposal powers were governed by N.J.S.A. 58:12-2. The borough did not explicitly assert plan or design immunity in its defenses but the Appellate Division treated it as if included. The case references Rivera v. Gerner, highlighting the importance of explicitly pleading statutory defenses. Previous cases like Massaker v. Petraitis and Barney's Warehouse indicate that municipalities may not be liable for resource allocation decisions or for natural flooding unless there is a direct invasion of property. The court in Woodsum v. Pemberton Tp. refrained from deciding on water rights takings due to compensated well deepening. On remand, the plaintiff may seek injunctive relief if the defendant is found non-compliant with a prior consent order.