On July 6, 2012 the Appellate Division of the New Jersey Superior Court invalidated precise NJDEP Regulations which exempt certain facilities from the Industrial Site Recover Act (ISRA). In De Champs Laboratories, Inc. v. Martin, Docket No. A-3235-10T4 (App. Div. July 6, 2012), the Appellate Division invalidated ISRA Regulations requiring “De Minimis Quantity” applicants to also certify that the subject property is not contaminated.

Generally, prior to closing of certain transactions and other triggering events, ISRA requires clearance from NJDEP in the event operations qualifying as an “industrial establishment”. The De Minimis Quantity (DMQ) exemption is available to applicants demonstrating that low threshold levels of hazardous substances exist on-site. Recent regulations have also required an additional showing that, to the applicant’s knowledge, the property is clean. In the De Champs Laboratories case, the court determined that NJDEP acted “arbitrarily and capriciously” and had no statutory authority to require DMQ applicants to certify as to the environmental condition of the property. The court left open the possibility that further amendments to ISRA may provide the statutory power source authorizing the “contamination free” requirement. Transactions with ISRA implications should be reviewed in light of this recent decision.