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Opioid Addiction is Now an Eligible Condition Under New Jersey’s Medicinal Marijuana Program

Opioid addiction is now an eligible condition under New Jersey’s Medicinal Marijuana Program (MMP). Gov. Phil Murphy made the announcement while unveiling several new initiatives aimed to combat the opioid epidemic. In 2018, more than 3,000 individuals in New Jersey died due to overdoses.

Photo courtesy of GJB Miller (Pixabay.com)
NJ Adds Opioid Addiction as Qualifying Condition

Previously, individuals addicted to opioids could only qualify for medical cannabis if they became dependent while seeking to treat chronic pain associated with a musculoskeletal disorder. Medical cannabis can now be used as an adjunct to Medication Assisted Treatment (MAT) for all patients that suffer from opioid addiction. According to New Jersey public health officials, doctors may immediately begin recommending cannabis for opioid addiction.

“We are pleased to announce that, as of today, opioid use disorder is a condition for which physicians can recommend medical marijuana to patients,” Health Commissioner Dr. Shereef Elnahal said in a press statement. “We are also taking steps to ensure that these patients will be on MAT for their addiction, in addition to marijuana. Finally, DOH is doubling down on syringe access programs and initiatives to reduce opioid prescribing, proven methods for reducing the impact of opioid addiction.”

NY Adds Opioid Replacement as Qualifying Condition

Last summer, New York took similar action. The state enacted emergency regulations authorizing registered practitioners to certify patients to use medical marijuana as a replacement for opioids, provided that the precise underlying condition for which an opioid would otherwise be prescribed is stated on the patient’s certification. Adding opioid replacement as a qualifying condition allows patients with severe pain that doesn’t meet the definition of chronic pain to use medical marijuana as a replacement for opioids.

“Medical marijuana has been shown to be an effective treatment for pain that may also reduce the chance of opioid dependence,” said New York State Health Commissioner Dr. Howard Zucker. “Adding opioid replacement as a qualifying condition for medical marijuana offers providers another treatment option, which is a critical step in combatting the deadly opioid epidemic affecting people across the state.”

Studies Show Access to Cannabis Eases Opioid Epidemic

The availability of medical cannabis has been shown to reduce opioid prescribing and addiction. A study published last summer found that medical marijuana laws were associated with an almost 30 percent reduction in the amount of Schedule III opioids prescribed to Medicaid enrollees. “[I]f all the states had legalized medical cannabis by 2014, Medicaid annual spending on opioid prescriptions would be reduced by 17.8 million dollars,” the study projected.

Another recent study found that counties with medical marijuana dispensaries experience six to eight percent fewer opioid overdose deaths overall and 10 percent fewer heroin overdose deaths. “Importantly, these effects are limited to counties where dispensaries opened and do not apply to non-dispensary counties in states with that have legalized medical cannabis,” the researchers explained. That is, “while legalizing medical cannabis is not associated with lower levels of opioid overdose mortality, the presence of dispensaries has a large negative impact on the number of opioid-related deaths.”

Key Takeaway

The addition of opioid addiction/replacement as a qualifying condition is good news for everyone, including patients, medical cannabis dispensaries, and the public. Of course, both New Jersey and New York are now considering whether to legalize recreational cannabis. While the efforts are advancing in New York, legislation has stalled again in New Jersey as lawmakers hash out the final details, including oversight and taxing.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Dan McKillop, at 201-806-3364.

This article is a part of a series pertaining to cannabis legalization in New Jersey and the United States at large. Prior articles in this series are below:

The post New Jersey Medical Marijuana Program Adds Opioid Addiction as Qualifying Condition appeared first on Scarinci Hollenbeck.

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The NJDEP is Proposing Several Significant Amendments to the State’s Stormwater Management Regulations

The New Jersey Department of Environmental Protection (NJDEP) is working to overhaul its Stormwater Management rules (N.J.A.C. 7:8). The rules provide the standards for the management of stormwater runoff associated with major development and require maintenance groundwater recharge standards, stormwater runoff quantity standards, and stormwater runoff quality standards. They are implemented by the NJDEP, the Department of Transportation, municipalities, counties, and regional planning agencies.

Photo courtesy of Jan Fillem (Unsplash.com)
NJDEP’s Proposed Stormwater Protection Rules

The NJDEP is proposing several significant amendments to the state’s stormwater management protection rules. Below is a brief summary of several key changes:

Green Infrastructure

Citing continuing issues in implementation of the existing rules, the NJDEP is proposing to replace the current requirement that major developments incorporate nonstructural stormwater management strategies to the “maximum extent practicable” to meet groundwater recharge standards, stormwater runoff quantity standards, and stormwater runoff quality standards, with a requirement that green infrastructure be utilized to meet these same standards. Under the proposed amendments, “green infrastructure” is defined to mean stormwater management measures that manage stormwater close to its source either by infiltration into subsoil, treatment by vegetation or soil, or storage for reuse. Examples include rain gardens, green roofs and permeable pavement.

According to the agency, “the use of green infrastructure BMPs [Best Management Practices], such as pervious paving, infiltration basins, and bioretention systems, will more effectively achieve the Department’s goals under the existing rules of reducing stormwater runoff volume, reducing erosion, encouraging infiltration and groundwater recharge, and of maintaining, or reproducing as closely as possible, the natural hydrologic cycle and minimizing the discharge of stormwater-related pollutants, such as TSS [total suspended solids] and nutrients.

Definition of Major Development

The NJDEP is proposing to clarify and modify the definition of “major development,” which defines the scope of projects to which the stormwater management rules apply. Under the proposal, the term means “an individual development, as well as multiple developments that individually or collectively result in:

  1. The disturbance of one or more acres of land since February 2, 2004;
  2. The creation of one-quarter acre or more of “regulated impervious surface” since February 2, 2004;
  3. The creation of one-quarter acre or more of “regulated motor vehicle surface” since (the operative date of this rulemaking); or
  4. A combination of 2 and 3 above that totals an area of one-quarter acre or more.

Major development includes all developments that are part of a common plan of development or sale (for example, phased residential development) that collectively or individually meet any one or more of paragraphs 1, 2, 3, or4 above. Projects undertaken by any government agency that otherwise meet the definition of “major development,” but which do not require approval under the Municipal Land Use Law, are also considered “major development.”

NJDEP’s Additional Proposed Changes

The NJDEP is proposing changes to apply the total suspended solids (TSS) removal requirement to the runoff from motor vehicle surfaces. It also plans to remove the TSS removal requirement as it applies to runoff from other impervious surfaces not traveled by automobiles, such as rooftops and sidewalks. The NJDEP is proposing several changes which will support water quality and stormwater management improvements in communities with combined sewer systems.

Finally, proposal will also make changes to existing definitions, add new definitions and make other changes consistent with the proposed amendments to the Stormwater Management rules. The NJDEP is also proposing minor amendments to provisions in the Coastal Zone Management Rules, the Freshwater Wetlands Protection Act Rules, the Flood Hazard Area Control Act Rules, the New Jersey Pollutant Discharge Elimination System rules, and the Highlands Water Protection and Planning Act Rules, which will reflect the new rules.

Impact on New Jersey Businesses

For New Jersey developers, the NJDEP’s proposed rules clearly discourage the use of structural components, like stormwater detention systems, in favor of green infrastructure. In its proposal, the agency states that its proposed means of controlling and managing runoff will not make development costlier. The NJDEP also maintains that the “green” industry will benefit from increased demand. Of course, the proposal will also likely hurt the manufacturers of traditional systems.

What’s Next?

Environmental groups applauded several aspects of the rule, particularly the green infrastructure requirements. However, they also argued that it doesn’t go far enough to address issues with the existing stormwater management rules. “The proposal, in and of itself, does not go far enough,’’ said Rebecca Hammer of the Natural Resources Defense Council.

“The rule has major flaws in it,’’ Jeff Tittel, director of the New Jersey Sierra Club, stated. “It exempts existing development, which is already the largest source of non-point pollution in our state. If we don’t deal with stormwater in developed areas, we’ll never meet clean water standards.’’

Comments on the proposal closed on February 1, 2019. According to the NJDEP, it plans to hold additional stakeholder discussions to evaluate further potential future changes to N.J.A.C. 7:8, which are not part of the current rulemaking. The attorneys of Scarinci Hollenbeck’s Environmental Law Group will continue to monitor the proposed Stormwater Management rules and post updates as they become available.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Dan McKillop, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.

The post What New Jersey Developers Need to Know About the NJDEP’s Proposed Stormwater Regulations appeared first on Scarinci Hollenbeck.

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The New Jersey Legislature is advancing environmental justice legislation designed to give certain New Jersey communities greater oversight over the environmental permitting process. 

On January 24, 2019, the Senate Environment and Energy committee unanimously voted to advance Senate Bill 1700 (S1700), and it now heads to the Senate Budget and Appropriation Committee for additional consideration.  

While similar bills have been introduced over the past several years, they failed to gain traction. The likelihood of passage is arguably greater now that environmental justice is a top priority of the Murphy Administration

New Jersey Environmental Justice Legislation 

S1700 would require entities seeking environmental permits for power plants, resource recovery facilities or incinerators, sewage treatment plants, transfer stations, recycling centers, landfills and similar facilities to meet certain additional requirements before obtaining a permit if the facility is located in a “burdened community.” The term “burdened community” is defined as any census tract, as delineated in the most recent federal decennial census, that is ranked in the bottom 33 percent of census tracts in the State for median household income.   

Meanwhile, “facility” is defined as any: (1) electric generating facility with a capacity of more than ten megawatts; (2) resource recovery facility or incinerator; (3) sludge combustor or incinerator;  (4) sewage treatment plant with a capacity of more than 50 million gallons per day; (5) transfer station, recycling center, or other solid waste facility with a combined monthly volume in excess of 25 tons; (6) landfill, including, but not limited to, a landfill that accepts ash, construction or demolition debris, or solid waste; (7) medical waste incinerator; or (8) major source of air pollution, as defined by the federal Clean Air Act. 

Specifically, Senate Bill 1700 provides that, beginning 180 days after its enactment, the New Jersey Department of Environmental Protection (NJDEP) would not be permitted to grant certain environmental permits for any new facility, or for the expansion of an existing facility, located in whole or in part in a burdened community, unless the permit applicant first:  

  • Prepares a report assessing the environmental impact of the proposed new or expanded facility. The report would assess the environmental impact on the burdened community including cumulative impacts, any adverse environmental effects that cannot be avoided should the permit be granted, and the public health impact on the burdened community of the proposed new or expanded facility;  
  • Transmits the report at least 30 days in advance of the public hearing required under the bill to the NJDEP, the governing body and the clerk of the municipality in which the burdened community is located, and the designated representative of the burdened community. The permit applicant would be required to make the report available to the public at least 30 days prior to the public hearing; and   
  • Organizes and conducts a public hearing in a location as convenient as possible to all interested parties. The bill establishes specific requirements for public notice of the hearing.  At the public hearing, the permit applicant would be required to provide clear, accurate, and complete information about the proposed new or expanded facility and its potential environmental and health impacts in the burdened community.  The permit applicant would also be required to provide an opportunity for meaningful public participation by residents of the burdened community. Following the hearing, the DEP would be required to consider testimony presented at the public hearing, and evaluate any revisions or conditions to the permit that may be necessary to reduce the adverse impact to the public health or to the environment in the burdened community.  

Under S1700, the NJDEP would not be permitted to issue a decision on the permit application until at least 60 days after the public hearing. More importantly, the agency would have the authority to deny a permit application in a burdened community upon a finding that approval of the permit, together with the cumulative impacts posed by the proposed new or expanded facility, would constitute an unreasonable risk to the health of the residents of the burdened community and to the environment in that community.  The DEP, when evaluating an application for a permit under the bill, would be required to assess community support for the proposed new or expanded facility, and be required to consider such support, or the lack thereof, in its decision to grant or deny a permit.  

As originally drafted, S1700 would have authorized the governing body of a municipality to prevent the NJDEP from issuing a permit for a new or expanded facility. However, the version that the Senate committee approved omits the provision. 

Likelihood of Passage 

Environmental groups support the New Jersey environmental justice legislation. “For far too long, we have dumped these facilities that no one wants in these communities,’’ said Jeff Tittel, director of the New Jersey Sierra Club. “For the first time, this bill puts teeth into environmental justice measures.’’  However, business groups maintain that the bill will add another layer of bureaucracy to the environmental permitting process, resulting in both delays and higher costs.  

The attorneys of the Scarinci Hollenbeck Environmental Law Group will continue to monitor the progress of the bill and post updates.  

The post New Jersey Legislature Advances Environmental Justice Bill appeared first on Scarinci Hollenbeck.

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For An Arbitration Agreement to be Enforceable, Employees Must Affirmatively Assent to the Terms

While technology has made it easier for employers to execute workplace agreements, it is still imperative to keep basic contract principles in mind. Notably, for an agreement to be enforceable, employees must affirmatively assent to the terms.

According to a New Jersey appeals court, Pfizer Inc.’s use of emailed arbitration agreements did not pass muster. “This case exemplifies an inadequate way for an employer to go about extracting its employees’ agreement to submit to binding arbitration for future claims and thereby waive their rights to sue the employer and seek a jury trial,” the Appellate Division of the New Jersey Superior Court held in Skuse v. Pfizer.

Dispute Over Mandatory Arbitration Agreement

In November 2017, plaintiff Amy Skuse filed an employment lawsuit against her former employer Pfizer, Inc. (Pfizer), and several other Pfizer officials. Her complaint alleged a violation of the New Jersey Law Against Discrimination (NJLAD), based on religious discrimination, and a failure to provide reasonable accommodation for her religious beliefs. In response to the complaint, the defendants sought to dismiss the suit and compel arbitration.

According to Pfizer, Skuse plaintiff electronically received and completed a training module presenting the company’s mandatory binding arbitration policy. In May 2016, Pfizer emailed to its workforce what it called a “training module” (or “activity” or “course”). The module described the company’s mandatory arbitration policy, as presented in a series of slides on computer screens. One screen provided employees with the opportunity to access a “Resource” link to the full text of the policy. In a separate email, the employer supplied a computer link to Frequently Asked Questions (“FAQs”) concerning the policy.

On the third slide of the module presentation, the employees simply were asked to “acknowledge” it with the click of an electronic button. The module declared that if an employee did not click the acknowledgement, but continued to work for the company for sixty or more days, the employee would be “deemed” to be bound by the arbitration policy.

While the arbitration policy is labeled an “agreement,” the module did not request employees to provide signatures conveying their agreement. Nor were the employees asked – within the four corners of the pivotal “click” box at the end of the presentation – to memorialize that they expressly agreed to the policy. They were only asked within the box to “acknowledge” it.

The trial court dismissed plaintiff’s complaint with prejudice and directed her to proceed with arbitration, pursuant to the terms of the company’s policy. While the court acknowledged that Pfizer’s acknowledgment procedure “nowhere specifically asks plaintiff to confirm that she has received the agreement,” it was persuaded that, given plaintiff’s continued employment well-past the specified sixty days and “[i]n light of the text on the slides and plaintiff’s action or inaction, plaintiff’s apparent intent was to be bound by this agreement.”

Court Rules Agreement Is Unenforceable

The Appellate Division reversed, holding that the mandatory arbitration agreement is unenforceable. “The wording and method of Pfizer’s training module is inadequate to substantiate an employee’s knowing and unmistakable assent to arbitrate and waive his or her rights of access to the courts,” the court wrote.

As the court highlighted, New Jersey’s case law has extended the contractual requirements of mutual assent and knowing and voluntary waiver to the setting of arbitration provisions contained within employment relationships. Specifically, in Leodori v. CIGNA Corp., 175 N.J. 293 (2003), the Supreme Court of New Jersey held that “a waiver-of-rights provision must reflect that an employee has agreed clearly and unambiguously to arbitrate the disputed claim.” Moreover, such a valid waiver “results only from an explicit affirmative agreement that unmistakably reflects the employee’s assent.”

In reaching its decision, the Appellate Division highlighted that the arbitration policy must be “presented in a fashion that produces an employee’s agreement and not just his or her awareness or understanding.” Specifically, the court found that the “click box” that appears at the end of the presentation was a “critical shortcoming” of the company’s procedure to obtain its employees’ individual assent to waive their rights. As highlighted by the court, it uses the verb “acknowledge” and does not use the verb “agree.” The court also noted that final slide thanks the employee for “reviewing” the document, and the whole process is referred to a “training activity.” According to the court, “Communications so vital to the mutual process of contract formation should not hinge upon loose and inconsistent wording that is reasonably capable of being misunderstood as something short of an agreement.”

The Appellate Division noted that employers like Pfizer can easily make arbitration agreements enforceable, while still relying on technology. As the panel explained:

[R]ather than euphemistically calling the process a unilateral “training” activity, the company could identify the process to employees with terms that more accurately convey what it actually must be: for example, an agreement and a waiver of rights. More importantly, to comply with the tenets of Leodori, 175 N.J. 293, the click box which seeks an employee’s legally binding response should contain the word “agree” or “agreement.” For example, it could say, “Click here to convey your agreement to the terms of the binding arbitration policy and your waiver of your right to sue.”

Finally, the Appellate Division rejected the trial court’s reliance on Jaworski v. Ernst & Young U.S. LLP, 441 N.J. Super. 464 (App. Div. 2015), in concluding that Pfizer’s sixty-day “deemer” provision was legally sufficient to manifest plaintiff’s assent to the arbitration policy, because she worked at the company for over a year after the policy became effective. “Unless and until the Supreme Court alters its precedent in Leodori, we respectfully decline to follow our sister panel’s ruling in Jaworski,” the court wrote. “The sixty-day provision, in the absence of separate evidence – apart from continued employment – of the employee’s affirmative assent to be bound by the arbitration policy, does not salvage defendants’ position.”

Key Takeaway for NJ Employers

As the decision in Skuse v. Pfizer makes clear, employers may rely on electronic means to disseminate and obtain employees’ assent to workplace agreements. However, in order to avoid judicial scrutiny, it is imperative to make sure that the terms of the agreement are clear and straightforward and that the employee’s consent is abundantly clear.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Joel N. Kreizman, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.

The post NJ Employers Can’t Cut Corners When Executing Mandatory Arbitration Agreements appeared first on Scarinci Hollenbeck.

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The U.S. Patent and Trademark Office Is Working to Clarify Patent Subject Matter Eligibility Guidance

The U.S. Patent and Trademark Office (USPTO) is working to clarify when inventions are eligible for patent protection. Early last month, the agency published revised guidance for subject matter eligibility under 35 U.S.C. § 101.

Photo courtesy of STIL (Unsplash.com)

“These guidance documents aim to improve the clarity, consistency, and predictability of actions across the USPTO,” USPTO Director Andrei Iancu stated. “The USPTO will provide training to examiners and administrative patent judges on both documents to ensure that guidance is being properly administered.”

U.S. Supreme Court’s Alice/Mayo Test

The first step of the USPTO’s eligibility analysis entails considering whether the claimed subject matter falls within the four statutory categories of patentable subject matter identified by 35 U.S.C. § 101: process, machine, manufacture, or composition of matter. The second step involves determining whether the claimed invention also qualifies as patent-eligible subject matter. The three judicial exceptions that the courts have found to be outside of, or exceptions to, the four statutory categories of invention are abstract ideas, laws of nature and natural phenomena (including products of nature). 

In accordance with the U.S. Supreme Court’s decisions in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. _, 134 S. Ct. 2347 (2014) and Mayo Collaborative Servs. v. Prometheus Labs., Inc., 566 U.S. 66  (2012), a patent claim must not be directed to a judicial exception unless the claim as a whole includes additional limitations amounting to significantly more than the exception. Stated another way, the first part of the Alice/Mayo test is to determine whether the claims are directed to an abstract idea, a law of nature or a natural phenomenon (i.e., a judicial exception).  If the claims are directed to a judicial exception, the second part of the Mayo test is to determine whether the claim recites additional elements that amount to significantly more than the judicial exception. 

2019 Revised Patent Subject Matter Eligibility Guidance

In its Revised Patent Subject Matter Eligibility Guidance, the USPTO notes that, in the wake of Alice, courts have been comparing patent claims before them to those previously determined to be directed to abstract ideas. “While that approach was effective soon after Alice was decided, it has since become impractical,” the guidance states. “The Federal Circuit has now issued numerous decisions identifying subject matter as abstract or non-abstract in the context of specific cases, and that number is continuously growing. In addition, similar subject matter has been described both as abstract and not abstract in different cases. The growing body of precedent has become increasingly more difficult for examiners to apply in a predictable manner, and concerns have been raised that different examiners within and between technology centers may reach inconsistent results.”

To provide greater clarity, the guidance makes two significant changes to how patent examiners apply the first step of the U.S. Supreme Court’s Alice/Mayo test, which determines whether a claim is “directed to” a judicial exception. First, in accordance with judicial precedent and in an effort to improve certainty and reliability, the revised guidance extracts and synthesizes key concepts identified by the courts as abstract ideas to explain that the abstract idea exception includes certain groupings of subject matter: mathematical concepts, certain methods of organizing human activity, and mental processes.

As detailed by the USPTO, mathematical concepts include mathematical relationships, formulas, equations, or calculations. Methods of organizing human activity include fundamental economic principles or practices, commercial or legal interactions, or managing personal behavior or relationships or interactions between people. Mental processes include concepts performed in the human mind, including an observation, evaluation, judgment, or opinion. Claims that do not recite matter that falls within these enumerated groupings of abstract ideas should not be treated as reciting abstract ideas, except in rare circumstances that require approval by the Technology Center Director.

The Revised Patent Subject Matter Eligibility Guidance goes on to establish a two-prong inquiry for whether a claim is “directed to” a judicial exception. In the first prong, examiners will evaluate whether the claim recites a judicial exception and if so, proceed to the second prong. In the second prong, examiners evaluate whether the claim recites additional elements that integrate the identified judicial exception into a practical application.

According to the guidance:

A claim that integrates a judicial exception into a practical application will apply, rely on, or use the judicial exception in a manner that imposes a meaningful limit on the judicial exception, such that the claim is more than a drafting effort designed to monopolize the judicial exception.

If a claim both recites a judicial exception and fails to integrate that exception into a practical application, then the claim is “directed to” a judicial exception. In such a case, further analysis pursuant to the second step of the Alice/Mayo test is required. To illustrate the analysis, the USPTO provides the following example:

For example, when evaluating a claim reciting an abstract idea such as a mathematical equation and a series of data gathering steps that collect a necessary input for the equation, an examiner might consider the data gathering steps to be insignificant extra-solution activity in revised Step 2A, and therefore find that the judicial exception is not integrated into a practical application. However, when the examiner reconsiders the data gathering steps in Step 2B, the examiner could determine that the combination of steps gather data in an unconventional way and therefore include an “inventive concept,” rendering the claim eligible at Step 2B.

What’s Next for Patent Subject Matter Eligibility?

The USPTO is seeking public comment on all the issues addressed by the guidance. Impacted entities are encouraged to submit written comments to Eligibility2019@uspto.gov(link sends e-mail) on or before March 8, 2019. 

If finalized in its current form, the Revised Patent Subject Matter Eligibility Guidance provides useful insight into how patent examiners will analyze claims under the Mayo/Alice test. The new framework also strongly favors eligibility, which is good news for entities that are seeking patent protection.

While the USPTO guidance is welcome news, this area of patent law is expected to continue to develop. We encourage our readers to stay tuned for updates and contact one of Scarinci Hollenbeck’s experienced technology law attorneys with any questions you may have.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, David Einhorn, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.

The post USPTO Issues Revised Patent Subject Matter Eligibility Guidance appeared first on Scarinci Hollenbeck.

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Senate Bill 1073 Has Reached the Desk of Gov. Phil Murphy, Which Would Allow New Jersey Municipalities to Charge Property Owners a Rain Tax

Senate Bill 1073 has reached the desk of Gov. Phil Murphy that would allow New Jersey municipalities to establish local stormwater utilities, which could then charge property owners a fee based on “a fair and equitable approximation” of how much runoff is generated from their property. 

While former Gov. Chris Christie vetoed similar legislation in the past, the odds of enactment are far better under Gov. Murphy. The New Jersey Department of Environmental Protection (NJDEP) also publicly supports the legislation. 

New Jersey Stormwater Utility Legislation

Under Senate Bill No. 1073, the governing body of any county or municipality could approve a resolution or ordinance that establishes a stormwater utility for the purposes of acquiring, constructing, improving, maintaining, and operating stormwater management systems. Similarly, the governing body or bodies of one or more municipalities that have established a municipal sewerage authority or utilities authority could request that the authority establish a stormwater utility.

Local governments that establish a stormwater utility would be authorized to charge and collect reasonable fees and other charges to recover the utility’s costs for stormwater management. Under the proposed bill, these fees and other charges would be collected from the owner or occupant (or both) of any real property from which originates stormwater runoff which enters the stormwater management system or the waters of the State. 

Senate Bill 1073 provides that any stormwater management fee would be based on a “fair and equitable approximation of the proportionate contribution of stormwater from a real property.” The bill provides that municipalities that establish stormwater utilities must issue credits in certain circumstances, including a partial fee reduction in the form of a credit for any property that maintains and operates a stormwater management system that complies with the State and local stormwater management standards that were in place at the time the system was approved.

Under the legislation, the owner of a stormwater management system that complies with stormwater management standards that were in place at the time the system was approved may retain ownership of the system or may offer to dedicate it to the county, municipality, or authority. However, an owner who dedicates a system would still be liable for paying any applicable utility fees imposed under the bill.

Municipalities would also be required to provide a credit for any property that has installed and is operating and maintaining current stormwater best management practices that reduce, retain, or treat stormwater onsite.  An additional credit would be required for any property which has installed and is operating and maintaining green infrastructure onsite. Notably, Senate Bill 1073 specifies that the credit for installing and operating stormwater best management practices applies only if current best management practices are used.

With respect to enforcement, the proposed stormwater utility bill  provides counties, municipalities, and authorities with several enforcement mechanisms, which are similar to the enforcement mechanisms that currently exist for water and sewer utilities. Specifically, interest would accrue on the unpaid fees and other charges; the unpaid balance and any accrued interest would constitute a lien on the parcel which would be enforced in the same manner as delinquent property taxes and municipal charges; and the unpaid balance and any accrued interest could be recovered in a civil action, along with attorney’s fees.

While most agree that New Jersey needs to better address stormwater runoff, critics of Senate Bill 1073 maintain that its proposed solution amounts to a “rain tax” on businesses that are often already doing their part to curb runoff. They further maintain that local cities and towns would have too much discretion in determining what fees to impose.

“For many businesses, the fees authorized in this bill would amount to double taxation,” NJBIA Vice President of Government Affairs Tony Bawidamann said. “Companies would be assessed a fee by a local stormwater authority, even if they already have a [stormwater] permit. Furthermore, there is no guarantee that these fees will be used for their intended purposes.”

What’s Next?

The New Jersey Legislature passed the bill on January 31, 2019. Gov. Phil Murphy has 40 days to act on it. Provided Gov. Murphy does sign it into law, the NJDEP would then draft the regulations needed to implement it, which may take time. The next step would be for local municipalities to determine whether to create stormwater utilities. Given the importance of this issue for New Jersey businesses, the attorneys of the Environmental and Land Use Law practice group at Scarinci Hollenbeck will keep you posted on any updates.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Dan McKillop, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.

The post Will Your New Jersey Business Soon Be Charged a Rain Tax? appeared first on Scarinci Hollenbeck.

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Under the Equitable Doctrine of Judicial Estoppel, Parties are Precluded from Taking a Position in a Case that is Contrary to a Position it has Taken in Earlier Legal Proceedings

Under the equitable doctrine of judicial estoppel, parties are precluded from taking a position in a case that is contrary to a position it has taken in earlier legal proceedings. As explained by the Appellate Division in Cummings v. Bahr, 295 N.J. Super. 374, 387 (App. Div. 1996), “If a court has based a final decision, even in part, on a party’s assertion, that same party is thereafter precluded from asserting a contradictory position.”

In Terranova et al. v. General Electric Pension Trust et al., the Appellate Division of the New Jersey Superior Court held that the doctrine of judicial estoppel precluded the owners of a gas station from seeking contribution costs under the New Jersey Spill Compensation and Control Act (Spill Act) from certain defendants because the owners had already obtained a court order holding other parties responsible for the contamination at issue.

Allegations and Defenses Raised in Terranova

In Terranova, Matthew P. Terranova, Karen L. Terranova and New Land Holdings, LLC (“Plaintiffs”), owners of a commercial property long used as a gas station, alleged that former owner-operators General Electric Pension Trust and Atlantic Richfield Company, Amerco Real Estate Company, and Charles Boris, Jr., Carol Boris and Edward Wilgucki (collectively, the “Defendants”) were liable under the Spill Act for contribution toward the cost of clean-up and removal of hazardous substances.

However, Plaintiffs had previously leased the property to Keith Friedman and Michael Puccio, who operated a gas station there from 1981 until 2008. In May 2010, Plaintiffs amended an action filed against Puccio and Friedman related to an escrow agreement, adding claims alleging Puccio’s and Friedman’s environmental contamination of the property, including one for contribution under the Spill Act.  The case went to arbitration, and based on conclusions of Plaintiffs’ expert reports, Plaintiffs were awarded $45,000 for expended remediation costs in 2012.  Friedman and Puccio were also required to take over the remediation process.  Friedman and Puccio failed to fulfill this obligation. Plaintiffs subsequently conducted further studies at the site and concluded that “soil and groundwater contamination . . . associated with the gasoline storage and handling” began on the property “on or before 1963 and continued until… 2000.” On November 10, 2015, the plaintiffs filed the present action against the Defendants based on these new conclusions.  During discovery the Defendants became aware of Plaintiffs’ initial litigation against Puccio and Friedman and filed motions for summary judgment, citing judicial estoppel.  The court agreed, finding that judicial estoppel prohibits a party from maintaining conflicting positions at different points in litigation and barred Plaintiffs’ Spill Act claims. 

Appellate Division’s Decision

Plaintiffs appealed, but the Appellate Division affirmed the trial court’s grant of summary judgment to the Defendants.  “Judicial estoppel is a defense to Spill Act claims for contribution and its application was proper under the material circumstances of this case which we now review in the light most favorable to plaintiffs,” the panel held.

In reaching its decision, the appeals court rejected the Plaintiffs’ argument that judicial estoppel is not a recognized defense to Spill Act claims. “Adhering to the [Supreme] Court’s logic, judicial estoppel is not a defense subject to any overriding legislation and, as such, it may be maintained against a Spill Act claim,” the court wrote. “The doctrine is an equitable principle… designed to “prevent litigants from playing fast and loose with the courts,” the appeals court further explained, citing the Third Circuit’s decision in Ryan Operations v. Santiam-Midwest Lumber.

The court went on to conclude that that judicial estoppel precluded the Plaintiffs’ Spill Act claims. “The decision to disregard the possibility that other dischargers — from whom Plaintiffs now seek contribution — were responsible under the Spill Act and pursue only Puccio and Friedman is the type of inconsistent practice necessitating application of the judicial estoppel doctrine,” the appeals court held.

Key Takeaway for NJ Property Owners

The Appellate Division’s decision makes clear the need for contaminated property owners to identify all potentially responsible parties prior to pursuing any remediation claim under the New Jersey Spill Act. If not, they may be precluded for later seeking contribution from additional parties, even though they may have indeed been responsible for the contamination.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Dan McKillop, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.

The post Judicial Estoppel Available When Defending New Jersey Spill Act Suits appeared first on Scarinci Hollenbeck.

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Courts Continue to Enforce Electronic Signatures, Even When Applied to Arbitration Agreements

Courts continue to enforce electronic signatures, even when applied to arbitration agreements. In Dicent v. Kaplan University, the Third Circuit Court of Appeals ruled that the plaintiff’s allegation that she never consented for her electronic signature to be attached to an arbitration agreement was not supported by the evidence, citing that the plaintiff clicked a button labeled “Electronically Sign.”

Photo courtesy of Burst (Unsplash.com)
E-Signed Contracts

When it comes to executing contracts, including business, employment, consumer agreements, electronic signatures are generally considered valid. Under the Electronic Signatures in Global and National Commerce Act (ESIGN), which went into effect in 2000, digital and electronic signatures are just as legal as their paper and ink counterparts for transactions in or affecting interstate or foreign commerce. It specifically provides that a contract or signature “may not be denied legal effect, validity, or enforceability solely because it is in electronic form.”

The federal e-sign law defines an e-signature as “an electronic sound, symbol, process attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record and be legally bound.” Examples include typing your name, uploading a written signature, and clicking a button that says, “I agree.”

Dispute Over Electronically-Signed Arbitration Agreement

Maria Dicent (Dicent) enrolled in online courses offered by Kaplan University (Kaplan). As a part of the enrollment process, Dicent was required to log in to an enrollment portal website, where she was asked to enter various information necessary to become a student. After completing this process, the enrollment portal generated an “Enrollment Packet” in a Portable Document Format (PDF), which included all of the information Dicent had provided, and also included, among other things, an Arbitration Agreement and Waiver of Jury Trial (Arbitration Agreement). Dicent electronically signed (e-signed) the Enrollment Packet PDF.

Dicent subsequently filed suit against Kaplan for various causes of action, including allegations that Kaplan misled her about the availability of career counseling and had prohibited her from keeping materials she had produced in class following her graduation. Kaplan moved to dismiss and compel arbitration, arguing Dicent’s claims fell within the Arbitration Agreement Dicent had e-signed as part of her enrollment documents. Dicent argued that she did not e-sign the Arbitration Agreement; rather, she maintained that Kaplan never informed her of the Arbitration Agreement, and that Kaplan never had her permission to use her e-signature for the Arbitration Agreement.

As detailed by the Third Circuit, Dicent argued she “was tricked and not informed that she would be waiving jury trial or was entering an arbitration agreement” when she was going through the enrollment process. She specifically maintained that she was not aware of the Arbitration Agreement until Kaplan submitted it in Court.  She argued that the “entire enrollment process is deceitful, and the Arbitration Agreement was just simply attached without her knowledge and consent.”

The district court granted Kaplan’s motion to dismiss and compel arbitration. It held that Dicent’s arguments relied on the assertion that her e-signature was used without her consent, which was not supported by any evidence. The district court further noted that Dicent had acknowledged her participation in the enrollment process, in which an e-signature was used in order for her to become a student. Thus, it concluded that Dicent’s arguments were completely contrary to the undisputed facts that the Enrollment Packet PDF contained the Arbitration Agreement, and that she e-signed the document.

Third Circuit Enforces Arbitration Agreement

The Third Circuit affirmed, agreeing that Dicent assented to the Arbitration Agreement. “Dicent presented no evidence to contradict Appellee’s statements, other than to generally argue that she was unaware of the Arbitration Agreement until Appellee presented it to the District Court,” the panel concluded.

In reaching its decision, the Third Circuit rejected Dicent’s argument that she was “tricked” into signing the arbitration agreement. “Appellee’s enrollment process walks prospective students through a series of steps necessary to become a student, which includes the production of an enrollment packet PDF that requires an e-signature to finalize the prospective student’s relationship with appellee. Included within this packet is the clearly labeled arbitration agreement,” the court explained. “Dicent herself conceded that she e-signed the enrollment packet PDF.”

The court added: “The most reasonable inference we can draw from the evidence presented is that Dicent simply did not read or review the enrollment packet PDF closely before she e-signed it, which will not save her from her obligation to arbitrate.”

Key Takeaway

The Third Circuit’s decision in Dicent v. Kaplan University highlights that you can’t simply rely on the fact that a contract was electronically signed in order to avoid its enforcement. Prior to “signing” any contract, it is imperative to read it thoroughly and make sure you understand how it may impact your legal rights, particularly the ability to pursue legal claims in court versus arbitration.

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Robert E. Levy, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.

The post Third Circuit Upholds E-Signed Arbitration Agreement appeared first on Scarinci Hollenbeck.

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The NYDFS Recently Issued Guidance Outlining Principles and Best Practice For Businesses When Designing Their Whistleblower Programs

The New York Division of Financial Services (NYDFS) issued guidance outlining principles and best practices that all entities regulated by the agency should take under consideration when designing and implementing their whistleblower programs. The guidance comes after the NYDFS fined Barclays Bank PLC and its New York branch $15 million for violations of New York Banking Law related to the bank’s whistleblower program.[1]

NYDFS Whistleblower Guidance:  Essential Elements of Effective Whistleblower Program

On January 7, 2019, the principles and best practices outlined in the Guidance apply to all NYDFS-regulated institutions “regardless of industry, size, or number of employees.”

The NYDFS notes that there is no “one size fits all” approach to whistleblower programs. Instead, policies and procedures should be tailored to the entity’s size, geographical reach, and line of business, among other factors. The NYDFS advises that the  following principles are integral to an effective whistleblower program:

  • Independent, well-publicized, easy-to-access, and consistent reporting channels: Entities should have dedicated channels that employees, customers, or other stakeholders can use for whistleblowing. Examples include a toll-free number, dedicated email address, or special mailing address. The guidance also highlights that companies should consider third-party reporting services given that whistleblowers may have more confidence reporting to an outside enity .
  • Strong protections for whistleblower anonymity: Entities’ entire whistleblowing process, from the initial whistleblower submission through follow-up actions, should include safeguards to protect the anonymity of submitters who wish to remain anonymous.
  • Established procedures for identifying and managing the effects of possible conflicts of interest: NYDFS notes that conflicts may arise when an employee who manages a whistleblower matter, or works on the investigation, is the subject of the complaint; is a potential witness or source of information; or supervises, reports to, or has some other close relationship with the subject of the complaint.
  • Adequately trained staff members responsible for receiving a whistleblowing complaints, determining a course of action, and competently managing any investigation, referral, or escalation: Staff who manage the whistleblower program must have adequate resources, autonomy, independence, and access to senior management in order to ensure they can carry out their duties effectively.
  • Established procedures for appropriately investigating allegations of wrongdoing: Procedures should be in place to ensure whistleblowing complaints are investigated appropriately by qualified, independent staff. Investigative procedures should also include objective standards for evaluating the risk presented by each allegation and ensure that more serious allegation are escalated appropriately.
  • Established procedures for ensuring appropriate follow-up to valid complaints: Institutions should establish protocols to govern the referral of valid complaints to the appropriate department and ensure the entity takes appropriate action, such as referring the matter to the legal department or board of directors.
  • Protections against any form of retaliation: Institutions must take concrete steps to ensure whistleblowers are protected from any form of retaliation, whether the report was made anonymously or not.
  • Confidential treatment, including safeguards to protect the confidentiality of the whistleblower and the whistleblowing matters themselves: NYDFS emphasizes that confidentiality serves several purposes, including protecting the integrity of in-progress investigations, protecting the subjects of allegations from the consequences of as-yet-unverified allegations, and protecting the institution’s reputation until claims are thoroughly investigated.
  • Appropriate oversight by senior managers, internal and external auditors, and the Board of Directors: This should include oversight from senior members of the compliance department, senior members of the legal department, an independent director, senior members of the internal audit department, and external auditors.
  • A top-down culture of support for the whistleblowing function: Institutions can best instill confidence in potential whistleblowers through genuine and demonstrated support for the program from across management, including the board of directors.
Key Takeaways for NY (and other) Businesses

Businesses under the purview of the NYDFS should review the guidance in its entirety. The failure to implement and enforce a robust whistleblower program can not only lead to a whistleblower suit but also costly regulatory fines. Additionally, businesses should perform a risk analysis by reviewing existing whistleblower policies and procedures, all instances of whistleblowing reporting, and the Company’s responsive performance.

If you have questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me,  Paul Lieberman, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.

[1] According to the NYDFS investigation, Barclay’s CEO attempted to identify the author(s) of two whistleblowing letters, which violated Barclays’ established whistleblowing policies and procedures. According to the NYDFS press statement announcing the fines, “shortcomings in governance, controls and corporate culture relating to Barclays’ whistleblowing function permitted a sequence of events that potentially could have had a detrimental impact on the efficacy of Barclays’ whistleblowing program.” 

The post Will Your Whistleblower Program Pass NYDFS Scrutiny? appeared first on Scarinci Hollenbeck.

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While New Jersey’s Shareholder Oppression Statute is Intended to Protect Minority Shareholders in Closely-Held Corporations, it Cannot be Used to Prevent the Termination of an At-Will Employee

New Jersey’s shareholder oppression statute is intended to protect minority shareholders in closely-held corporations. However, it cannot be used to prevent the termination of an at-will employee subject to a shareholders agreement which expressly so provided, according to a recent Appellate Division decision. The court’s decision in Metro Commercial Management Services, Inc. v. Istendal is noteworthy because it considers the potential interplay between at-will status and a minority shareholder’s “reasonable” expectations of continued employment.

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New Jersey’s Oppressed Minority Shareholder Statute

Minority shareholders in closely-held corporations are uniquely vulnerable because they may be frozen out of the decision-making process. The Oppressed Minority Shareholder Statute (N.J.S.A. 14A:12-7(1)(c)) establishes the circumstances under which a shareholder oppression action may be brought. Among these circumstances are the following:

[where] the directors or those in control have acted fraudulently or illegally, mismanaged the corporation, or abused their authority as officers or directors or have acted oppressively or unfairly toward one or more minority shareholders in their capacities as shareholders directors, officers, or employees.

Notably, oppression in the context of an oppressed minority shareholder action does not require illegality or fraud by majority shareholders or directors. As the New Jersey Supreme Court observed in Brenner v. Berkowitz, 134 N.J. 488, 506 (1993), “[o]ppression has been defined as frustrating a shareholder’s reasonable expectations.”

In an oppressed shareholder action, the court must first determine the shareholders’ expectations of the corporation and whether these expectations are reasonable. The complaining shareholder then has the burden to demonstrate a nexus between the alleged oppressive conduct and his or her interest in the corporation. In determining that nexus, Brenner instructs that “[t]he court has discretion to determine which factors are pertinent to its evaluation of the quality and nature of the misconduct . . .”  A minority shareholder’s expectations must also be balanced against the corporation’s ability to exercise its judgment to run its business efficiently. If a court determines that a person is an oppressed minority shareholder, it may in its discretion impose equitable remedies, such as the appointment of a custodian or the sale of stock.

In the employment context, termination of a minority shareholder’s employment may constitute oppression under the Oppressed Minority Shareholder Statute because a person who acquires a minority share in a closely-held corporation often does so based on the assurance of employment in the business in a managerial position. As the New Jersey Supreme Court explained in Muellenberg v. Bikon Corp., 143 N.J. 168, 181(1996), these expectations often include not only “the security of long-term employment and the prospect of financial return in the form of salary,” but also having “a voice in the operation and management of the business and the formulation of its plans for future development.” Where these expectations are frustrated by majority shareholders or directors, a court may find that oppression has occurred.

Alleged Shareholder Oppression

Defendant Nancy Van Istendal worked as an accountant for Metro Commercial Management Service, Inc. (Metro), a closely-held real estate management company. In 2001, she became the chief financial officer and a 12 percent shareholder, subject to a Stock Purchase and Transfer Restriction Agreement. In 2002, the parties entered into a Shareholders Agreement (Agreement) providing for Metro to issue stock options to Van Istendal for the purchase of nine shares of common stock, paid through bonuses. The Agreement specifically stated that Van Istendal was an “employee-at-will” and could be terminated by Metro “at any time for any reason.”

In September 2015, defendant was terminated. Shortly thereafter, she brought suit seeking reinstatement of her employment with Metro and position as CFO. In her complaint, defendant alleged she was an “oppressed shareholder” under N.J.S.A. 14A:12-7(1)(c), based upon her reasonable expectation of continued employment, notwithstanding her at-will status. The trial court dismissed her complaint, without prejudice, finding that her termination did not constitute shareholder oppression because it was expressly authorized under the Agreement and, therefore, she could not have had any reasonable expectation of continued employment.  The lower court added that  defendant was “not without recourse since the [Agreement] provides a repurchase option for [her] stocks.”

Appellate Division’s Decision in Metro Commercial Management Services, Inc. v. Istendal

The Appellate Division affirmed the lower court ruling, concluding that Van Istendal could not have had a reasonable expectation of continued employment in light of the Agreement to which she was a party.

As the appeals court noted, the Agreement expressly stated that Von Istendal was an at-will employee who could be terminated “at any time for any reason.” The panel further explained:

The judge duly recognized that there is no statute, case law, or rule in New Jersey that addresses whether an employee’s at-will status is a relevant consideration in analyzing whether an employee has a reasonable expectation of continued employment. Here, the record contains ample evidence to support the judge’s conclusion that the parties entered into the Agreement and stipulated that defendant was an at-will employee.

The Appellate Division’s decision in Metro Commercial Management Services, Inc. v. Istendal is noteworthy because it specifically addresses the reasonable expectations of employment of at-will employees in closely-held companies. In this case, the express terms of the Agreement defeated any claims of shareholder oppression. Closely-held companies, therefore, should review the material terms in their operative documents and their employment contracts with shareholder members to address any ambiguities regarding the status of their shareholder members. 

If you have any questions, please contact us

If you have any questions or if you would like to discuss the matter further, please contact me, Charles H. Friedrich, or the Scarinci Hollenbeck attorney with whom you work, at 201-806-3364.

The post When Does Termination Constitute Shareholder Oppression? appeared first on Scarinci Hollenbeck.

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