Yes, Virginia, You Can Estop the Government

One of the first lessons I learned as a summer associate, more years ago than I care to remember, is that the probability of a successful estoppel claim against the government is approximately the same as the probability that there is a Santa Claus. After the recent decision from the District of New Jersey in FMC Corporation v. American Cyanamid, the probability of a successful estoppel claim may still be low, but it isn’t zero.

FMC involves claims concerning the Higgins Farm Superfund Site, in Franklin, New Jersey. According to the decision, FMC contacted the State of New Jersey in 2001 in order to obtain information concerning the scope of its potential liability. One of the questions involved natural resource damages. New Jersey determined that it would not assess NRD for the site and that conclusion was communicated by telephone to FMC in late 2002. As settlement negotiations continued, in 2003, New Jersey actually provided to FMC a copy of the memorandum that had been prepared documenting that no NRD would be assessed.

The reason for the determination apparently was a NJDEP policy that, where no off-site groundwater contamination existed, no NRD would be assessed. However, that policy changed later in 2003, after a change in administration at NJDEP. Ultimately, in 2006, NJDEP filed suit against FMC seeking natural resource damages. In responding to FMC’s motion to dismiss, NJDEP made the argument most of us would expect:

the doctrine of waiver should not be applied under these circumstances [because] a government agency may change policies for the benefit for the public without creating rights in parties who claim to have relied on the old policy.

The Court wasn’t buying it. While acknowledging that “the application of waiver or estoppel principles to government actions is to be most strictly limited,” the Court concluded that New Jersey had expressly waived its right to recover NRD. It was significant to the Court that NJDEP did not qualify the waiver in any way. Given the absence of qualifying language, the Court concluded that to allow NJDEP to bring NRD claims after such an unqualified waiver “would serve to completely alter the calculus of the litigation and undermine settlement negotiations that parties engage in with the State.”

The biggest lesson of FMC will probably be for government attorneys – make sure you qualify your waivers. Nonetheless, it does suggest that, at least in the right case, the government will be held to its promises.

Merry Christmas, FMC.


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