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Amerada Hess Corporation - Ruling, February 22, 2002

Ruling, February 22, 2002

STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION

In the Matter of

the Alleged Violations of Article 12 of the Navigation Law and
Articles 3, 17, and 19 of the Environmental Conservation Law of the State of New York and
Title 6, Parts 230, 610, 612, 613, 624, 703 and Title 17, Parts 30-32 of
the Official Compilation of Codes, Rules and Regulations of the State of New York

- by -

AMERADA HESS CORPORATION,

Respondent.

RULING ON MOTION TO CLARIFY

AFFIRMATIVE DEFENSES

Case No: R2-MOSF1520

February 22, 2002

PROCEEDINGS

The New York State Department of Environmental Conservation (the "Department") commenced the instant action on or about August 16, 2001, by service of a Notice of Hearing and Complaint (the "Complaint") on the Respondent Amerada Hess Corporation (the "Respondent"). By subsequent agreements between the parties, the Respondent's time to answer the Complaint was extended ultimately to January 4, 2002, and, on such date, Respondent served on the Department its Answer to Complaint and Request for Hearing. In its Answer, Respondent articulated fifteen Affirmative Defenses as well as an assertion that it reserved "the right to assert additional defenses based upon any information discovered subsequent to the filing of this Answer." On January 11, 2002, and pursuant to the provisions of Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York ("NYCRR") Sections 622.4(c) and 622.4(f), the Department, by its attorney, Benjamin A. Conlon, Esq., moved for clarification of the affirmative defenses set forth in the Answer of the Respondent or, in the alternative, dismissal thereof. This motion was opposed by Respondent pursuant to an Affirmation in Opposition and Memorandum of Law in support thereof submitted by its attorney, Michael J. Tone, Esq., and filed on or about January 24, 2002.

The Department's Complaint alleges that Respondent owns and operates a petroleum storage and dispatching facility located at 722 Court Street, Brooklyn, New York (the "Facility"). The Facility, the Department alleges, is comprised of five (5) underground tanks holding over eight (8) million gallons of petroleum and five (5) aboveground tanks holding over twenty (20) million gallons of petroleum. The Department further alleges that the Respondent was issued Major Oil Storage Facilities ("MOSF") License Number 2-1520 for the Facility on April 20, 2000, and that the Department proposed to renew said license on April 1, 2001, with the insertion of certain special conditions. Parenthetically, while not specifically articulated in the Complaint, correspondence between the parties and a copy of the proposed renewal license annexed as Exhibit C to the Respondent's Affirmation in Opposition, indicates that these conditions would, inter alia, require the Respondent to submit a proposal for the repair of the bulkhead and tank foundation of Storage Tank No. 9414 at the Facility. Believing that certain of these special conditions are unwarranted and inappropriate, Respondent appealed them pursuant to applicable provisions of 6 NYCRR Part 621 and 17 NYCRR Section 30.7(b). No hearing on this appeal has been convened and the Department Staff, as part of the relief sought in its Complaint, seeks to have these matters subsumed into the instant enforcement action.

In addition to the forgoing pleadings, after service of the Complaint by the Department but before service of the Answer by the Respondent, on October 1, 2001, the Department served an initial discovery request on the Respondent seeking various documents and records relating to the operations and maintenance of the Facility. By consent of the parties, the actual production of the requested materials has not yet taken place.

The Complaint alleges eight causes of action, as follows:

  • First Cause of Action: Certain repairs made to Facility Tank Numbers 9409, 9410, 9411, 9412, 9414 and 9415 were not certified by a professional engineer licensed by the State of New York in contravention of the requirements of Respondents MOSF license and 6 NYCRR 613.6(3)(iii) [sic.].
  • Second Cause of Action: The storage by Respondent of Fuel Oil Type 4 in Facility Tank Number 9411, which Tank the Department alleges was listed in the Facility's MOSF license as only available to store Fuel Oil Types 5 and 6, is a substantial modification or major change in the use of Facility Tank Number 9411 requiring the prior approval of the Department. Such prior approval was not obtained resulting in violations of the terms of the Facility's MOSF license and 17 NYCRR 30.6(3) [sic.], promulgated pursuant to Navigation Law ("NL") Section 191.
  • Third Cause of Action: Certain repairs were made to Facility Tank Number 9414 without the prior approval of the Department and said tank was subsequently returned to service without providing the Department with any information as to the repairs actually made in violation of the terms of the Facility's MOSF license and 6 NYCRR 613.6(3)(iii) [sic.].
  • Fourth Cause of Action: The Respondent failed to conduct and to properly certify the secondary containment of the Facility in violation of NL 170, 17 NYCRR 30, 6 NYCRR 610 and 6 NYCRR 613.6(3)(iii) [sic.].
  • Fifth Cause of Action: In effecting repairs to Facility Tank Number 9414, Respondent placed fill in navigable waters of the State and, moreover, placed said fill below the mean high water level in violation of 6 NYCRR 608.5 and Environmental Conservation Law ("ECL") Section 15-0505.
  • Sixth Cause of Action: Respondent failed to tightness test Facility Tank Number 9414 in violation of 6 NYCRR 613 and 614.
  • Seventh Cause of Action: Respondent failed to timely tightness test Facility Underground Storage Tanks Numbers 9403, 9404, 9405, 9409 and 9410 in violation of 6 NYCRR 613.5.
  • Eighth Cause of Action: This cause of action addresses three separate petroleum discharges. First, on September 8, 1998, Respondent entered into a stipulation agreement to remediate groundwater contamination caused by a petroleum discharge on April 20, 1995, Spill Number 9500858. Pursuant to said stipulation, the Respondent was required to submit timely reports to the Department as to the progress of the remediation, but failed to do so and is therefore in violation of the stipulation. Second and third, petroleum discharges at the Facility on October 10, 1992, Spill Number 9207990, and on February 17, 1994, Spill Number 9313521, each constitute violations of ECL Sections 17-0501 and 17-0503, NL Section 176 as well as the rules and regulations promulgated thereunder.

APPLICABLE REGULATORY MOTION PROCEDURES

Section 622.4(c) of 6 NYCRR directs that:

The respondent's answer must explicitly assert any affirmative defenses together with a statement of the facts which constitute the grounds of each affirmative defense asserted. Whenever the complaint alleges that respondent conducted an activity without a required permit, a defense based upon the inapplicability of the permit requirement to the activity shall constitute an affirmative defense.

Moreover, Section 622.4(f) of 6 NYCRR further provides that:

The department staff may move for clarification of affirmative defenses within 10 days of completion of service of the answer on the grounds that the affirmative defenses pled in the answer are vague or ambiguous and that staff is not thereby placed on notice of the facts or legal theory upon which respondent's defense is based.

DISCUSSION AND RULING

Essentially, the Department Staff argues that each of the Affirmative Defenses pled by the Respondent is so vague or ambiguous that Staff is not thereby placed on notice of the facts or legal theory upon which each articulated Affirmative Defense is based. Department Staff therefore seeks dismissal of each of the Affirmative Defenses or, in the alternative, clarification of them as provided in 6 NYCRR 622.4(f). In addition, Department Staff objects to Respondent's assertion reserving the right to assert additional defenses in the future, beyond those raised in its Answer of January 4, 2002.

Citing certain numbered paragraphs of its Answer, the Respondent argues that in its Answer it has provided a detailed response to each allegation of the Complaint setting forth, as appropriate, a legal and /or factual basis for its Answer. These detailed answers, the Respondent argues, "provide clear notice of the factual and legal basis of Respondents' [sic.] position, and the underlying premise of Respondents' [sic.] affirmative defenses." Affirmation in Opposition, Paragraphs 16 and 17. Moreover, Respondent argues that the Department's motion is based merely on "pro forma recitals", is premature in view of the fact that discovery which is not yet complete may provide additional information in support of the Affirmative Defenses, and is infirm because the Department has not claimed that it has been prejudiced by any of the enumerated Affirmative Defenses. Finally, the Respondent argues that since in its view the Complaint is vague, it, of necessity, reserves the right to assert additional defenses as may become apparent during the course of discovery. For the foregoing reasons, the Respondent urges that the Department Staff's motion be denied, or, in the alternative that it be permitted to serve an Amended Answer, inter alia, clarifying its Affirmative Defenses, within thirty (30) days following the close of discovery.

When viewed together, the substance of Sections 622.4(c) and (f) of 6 NYCRR is apparent. An affirmative defense is to be specifically pled and it is to be articulated with sufficient factual clarity so that Department Staff may be reasonably apprized of the circumstances out of which the affirmative defense arises and the legal theory upon which it is based. The reason for this explicitness in pleading is also equally apparent. In order to ensure the just and equitable disposition of a matter, a fair consideration of the merits is required. But this is only possible when the parties, in the first instance, plead their respective positions with sufficient factual and legal clarity to ensure that any opposing party is not surprised at a hearing on the merits or is not asked to rebut a position that is not clearly stated on the face of a pleading. The meaning and intent of Sections 622.4(c) and (f) of 6 NYCRR is further amplified by a reading of their analogous counterpart in the Civil Practice Law and Rules (CPLR). Section 3018(b) of the CPLR, entitled Affirmative defenses, provides that "[a] party shall plead all matters which if not pleaded would be likely to take the adverse party by surprise or would raise issues of fact not appearing on the face of a prior pleading...."

In addition, when an affirmative defense is pled, the facts which support that particular affirmative defense must also, and at that point, be reasonably stated. A mere general reference to paragraphs or other factual recitals appearing elsewhere in a responsive pleading in support of a particular affirmative defense is not sufficient. This is the reason Section 622.4(c) of 6 NYCRR plainly states that the Answer "must explicitly assert any affirmative defenses together with a statement of the facts which constitute the grounds of each affirmative defense asserted."(Emphasis supplied.) To allow otherwise would be to require Department Staff to guess at the factual assertions that underlie an affirmative defense and would obviously impede the fair disposition of a matter on the merits that is contemplated by Part 622 of 6 NYCRR. Moreover, the assertion that subsequent discovery will bring to light the facts which support a particular affirmative defense is not dispositive of the issue. Again, Section 622.4(c) requires that any affirmative defense pled be accompanied by "a statement of the facts" giving rise to the particular affirmative defense. The failure to provide this statement of facts renders the pleading of the particular affirmative defense defective. This being said, it is also clear that should additional facts be developed during discovery which give rise to additional causes of action or affirmative defenses, these matters may be the subject of an appropriate motion to amend, timely brought pursuant to Section 622.5(b) of 6 NYCRR.

Finally, the assertion that the factual allegations of the Complaint lack specificity precluding specificity in the factual allegations of each articulated affirmative defense is not availing. Respondent could have elected to move for a more definite statement of the Complaint pursuant to Section 622.4(e) of 6 NYCRR, but chose not to do so. We turn now to a consideration of the Affirmative Defenses raised in Respondent's Answer.

First Affirmative Defense

The first affirmative defense asserts that "[t]he actions taken by the DEC with regard to Respondent were arbitrary, capricious, and contrary to law." Answer, p. 52. While such an assertion may be better suited to an inquiry pursued as part of a proceeding brought under Article 78 of the CPLR after a final agency decision, it is impossible to tell at this point since the affirmative defense as articulated contains no statement of facts in support thereof. As set forth above, an affirmative defense must be articulated with sufficient factual clarity so that Department Staff may be reasonably apprized of the circumstances out of which the affirmative defense arises. This failure to provide any factual support for the affirmative defense asserted renders it vague and ambiguous and does not place Department Staff on notice of the facts as is required by Section 622.4(c) of 6 NYCRR. Accordingly, while the Department's motion to dismiss this affirmative defense is denied, its motion to clarify this affirmative defense is granted.

Second Affirmative Defense

The second affirmative defense asserts that "[a]ll tank inspections at the Terminal were performed in accordance with applicable regulations." Answer, p. 52. Without additional detail, this affirmative defense fails to provide sufficient information to place the Department on notice of the facts upon which this affirmative defense is based. The Department's motion to dismiss this affirmative defense is denied, but its motion to clarify this affirmative defense is granted.

Third Affirmative Defense

Respondent's third affirmative defense states that "[t]o the extent alleged in the answer above, all work performed by Respondent at the terminal was performed with the Department's advanced knowledge and consent." Answer, p. 53. At this point in the pleading, no facts are set forth in support of this affirmative defense. Again, the mere general reference to factual recitals in the earlier part of a pleading without any specificity is inadequate, renders the asserted affirmative defense vague and ambiguous, and does not place Department Staff on notice of the facts as required by Section 622.4(c) of 6 NYCRR. The Department's motion to dismiss this affirmative defense is denied, but its motion to clarify this affirmative defense is granted.

Fourth Affirmative Defense

This affirmative defense asserts: "Notwithstanding the fact that the mounded tanks which are the subject of this proceeding are exempt from the requirement of periodic tightness testing, the tanks were inspected and found to be tight." Answer, p. 53. No other facts are cited in support of this defense, such as a reference to the applicable regulation providing for the exemption, or when the alleged inspections were made, or whether the Department was notified of these inspections, and, if so when. Without this factual information, the defense is vague and does not comport with the requirements of 6 NYCRR 622.4(c). The Department's motion to dismiss this affirmative defense is denied, but its motion to clarify this affirmative defense is granted.

Fifth Affirmative Defense

This affirmative defense states: "By letter dated July 9, 2001, Amerada Hess Corporation confirmed to the Department that the mounded tanks which are the subject of the Complaint were exempt from the requirement of tightness testing and notwithstanding the foregoing, and in disregard of that notification, the Department commenced the instant proceeding therefore, the Department's action in that regard is arbitrary, capricious and contrary to law." Answer, p. 53. As noted earlier, whether the Department's action is arbitrary, capricious and contrary to law is an issue more appropriate for consideration in an Article 78 proceeding under the CPLR. However, the defense asserted does raise a triable issue appropriate to this forum and has articulated facts in support thereof. In its motion, the Department has not denied the existence of the alleged correspondence of July 9, 2001, nor requested a copy of it. This affirmative defense does not appear to be vague or ambiguous. Moreover, it appears to put Department Staff on notice of the facts and legal theory upon which the defense is based. The Department's motion for dismissal of this affirmative defense is denied and its motion to clarify this affirmative defense is also denied.

Sixth Affirmative Defense

This defense asserts: "The monetary penalty sought is unlawfully excessive in that such penalties are unreasonable, unwarranted by the facts, inconsistent with applicable penalty policies, and otherwise inappropriate." Answer, p. 53. No facts are alleged in support of this defense. Without this additional detail, this affirmative defense fails to provide sufficient information to place the Department on notice of the facts upon which this affirmative defense is based. The Department's motion to dismiss this affirmative defense is denied, but its motion to clarify this affirmative defense is granted.

Seventh, Eighth, and Ninth Affirmative Defenses

The Seventh Affirmative Defense states that "[i]f any penalty policy was used to determine the amount of the penalty assessed, such use violates the State Administrative Procedure Act and is otherwise unlawful, since such policy has not been the subject of notice and comment." Answer, p. 54. The Eighth Affirmative Defense asserts that "[s]ome or all of the regulations, permits and guidance documents relied on by the Department fail to give fair warning of the prohibited conduct, and therefore violate Respondent's right to due process, and any such interpretation of the Department of such regulation, permit and guidance is arbitrary and capricious." Answer, p. 54. And the Ninth Affirmative Defense alleges that "[t]o the extent that the Department claims that Respondent violated or failed to comply with 'requirements of the Department' or practices, policy, guidance or standards which the Department seeks to impose on Respondent as a requirement or obligation, and where such 'requirements' have not been lawfully promulgated in regulation, any such 'requirements' fail to give fair warning of the probable conduct and violate Respondent's right to due process, and are arbitrary, capricious and contrary to law." Answer, p. 54. Even though no facts are articulated in support of these affirmative defenses in contravention of 6 NYCRR Section 622.4(c), it is clear that an enforcement hearing convened pursuant to Part 622 of 6 NYCRR is not the appropriate forum to consider the legal challenges raised by them. Accordingly, the Department Staff's motions to dismiss each of these affirmative defenses, with prejudice, is granted.

Tenth, Eleventh and Twelfth Affirmative Defenses

The Tenth Affirmative Defense states, "Respondent acted at all relevant times in good faith and with due diligence in connection with compliance activities at the Terminal." Answer, p. 54. The Eleventh Affirmative Defense asserts: "Respondent has been materially prejudiced by the Department's delay in commencing this proceeding and/or asserting all or some of the claims alleged in the Complaint." Answer, p. 55. And the Twelfth Affirmative Defense states, "The Department failed to join all necessary parties to this action." Answer, p. 55. While arguably these may not be affirmative defenses at all, they each fail to include any statement of facts as required by 6 NYCRR 622.4(c). Without additional detail, these affirmative defenses fail to provide sufficient information to place the Department on notice of the facts upon which these affirmative defenses are based. The Department's motion to dismiss each of these affirmative defenses is denied, but its motion to clarify each of these affirmative defenses is granted.

Thirteenth and Fourteenth Affirmative Defenses

The Thirteenth Affirmative Defense asserts: "The Department is barred from maintaining the instant proceeding by the doctrines of estoppel and laches," while the Fourteenth Affirmative Defense states: "The commencement of the instant proceeding and the claims asserted herein are time barred in whole or in part." Answer, p. 55. Each of these affirmative defenses fails to include any statement of facts as required by 6 NYCRR Section 622.4(c). Without additional detail, these affirmative defenses fail to provide sufficient information to place the Department on notice of the facts upon which these affirmative defenses are based. Moreover, additional detail is needed to determine if any of these defenses have any applicability in the instant proceeding. The Department's motion to dismiss each of these affirmative defenses is denied, but its motion to clarify each of these affirmative defenses is granted.

Fifteenth Affirmative Defense

Respondent's Fifteenth Affirmative Defense asserts: "The Department may not commence or maintain the instant administrative proceeding to seek civil penalties pursuant to the Navigation Law Section 192 which only may be awarded by a court of competent jurisdiction." Answer, p. 55. This affirmative defense fails to include any statement of facts as required by 6 NYCRR Section 622.4(c). Without additional detail, this affirmative defenses fails to provide sufficient information to place the Department on notice of the facts upon which this affirmative defense is based. Moreover, additional detail is needed to determine if this defense has any applicability in the instant proceeding in light of the language of Section 200 of the Navigation Law which suggests that an action to recover certain penalties under the Navigation Law can be based, in the first instance, on an order of the Commissioner determining the amount of such penalty. See, e.g., Matter of the City of Hudson Industrial Development Agency, et al., ALJ Ruling on Motions to Dismiss (NYSDEC, August 24, 1998), 1998 WL 1780962, * 5, (finding that the Commissioner may assess a penalty under Navigation Law Section 192, and the penalty, if not paid, can be recovered in an appropriate court action). The Department's motion to dismiss this affirmative defense is denied, but its motion to clarify this affirmative defense is granted.

Finally, Respondent concludes its Answer by reserving "the right to assert additional defenses based on any information discovered subsequent to the filing of this Answer." Answer, p. 56. No ruling with respect to such an assertion is required. These proceedings are governed by the rules of procedure set out in Part 622 of 6 NYCRR. Should either party herein wish to amend its pleadings in the future, it shall be by motion brought and determined pursuant to the requirements and dictates of Section 622.5 of 6 NYCRR entitled, Amendment of pleadings.

CONCLUSION

The Department Staff's motion pursuant to 6 NYCRR Section 622.4(f) to clarify the Affirmative Defenses articulated in the Respondent's Answer is granted to the extent provided herein. Respondent is directed to serve an amended Answer consistent with this ruling on or before March 29, 2002.

/s/
By: Richard R. Wissler
Administrative Law Judge

TO: Benjamin A. Conlon, Esq.
New York State Department of Environmental Conservation
Division of Environmental Enforcement
Bureau of State Superfund and Voluntary Cleanup, 14th Floor
625 Broadway
Albany, New York 12233-5500

Michael J. Tone, Esq.
Nixon Peabody LLP
Attorneys for Respondent
990 Stewart Avenue
Garden City, New York 11530

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