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COA reverses finding IDEM breached agreement

February 18, 2010

The Indiana Court of Appeals reversed the finding that the Indiana Department of Environmental Management breached a settlement agreement because the trial court didn't have subject matter jurisdiction to determine whether it committed a breach.

IDEM and NJK Farms entered into a settlement agreement in 2005 after a petition for judicial review was remanded to Marion Superior Court. The two parties were in a dispute about the denial of a permit application to operate a landfill in Fountain County. The agreement laid out the terms required for IDEM to grant the permit. While a permit application was pending before IDEM in 2008 and scheduled for a public comment period, the Indiana legislature passed a law concerning permits for solid waste landfills in counties without comprehensive zoning regulations.

Fountain County at that time didn't have a zoning ordinance, but a month later enacted regulations that included landfills. IDEM asked NJK to submit a new application because of the statute and the new Fountain County ordinances. NJK instead filed a motion with the trial court alleging IDEM breached the settlement agreement. IDEM then denied the permit and NJK filed a petition for review with the Office of Environmental Adjudication that it find the trial court had subject matter jurisdiction. An administrative law judge stayed the petition pending ruling of the trial court. The trial court found it had exclusive jurisdiction and that IDEM breached the settlement.


On interlocutory appeal in Ind. Dept. of Environmental Management v. NJK Farms, Inc., No. 49A02-0902-CV-123, the Court of Appeals concluded Marion Superior Court didn't have jurisdiction over the matter, relying on Ind. Dept. of Environmental Management v. Raybestos Products Co., 897 N.E.2d 469 (Ind. 2008). The Indiana Supreme Court held that the exclusive means for review of IDEM's actions was by petition for review by the OEA and that money damages aren't authorized under the state Administrative Orders and Procedures Act.

In the instant case, IDEM is an agency subject to the AOPA, and IDEM's entry into the settlement agreement and actions following the agreement regarding NJK's permit application were agency actions, wrote Judge Michael Barnes. NJK argued that Raybestos is inapplicable and the settlement agreement was a contract and not an agency action because it arose out of a judicial proceeding instead of an administrative one. NJK argued if an agreement was entered to resolve issues during the administrative process, the AOPA would apply and damages couldn't be awarded. If an agreement was entered after a petition for judicial review, then AOPA wouldn't apply and the agency could be liable for damages.

That interpretation would lead to illogical results contrary to the purpose of the AOPA, wrote Judge Michael Barnes. "Clearly, it is better for such issues to be presented in the typical administrative review process prior to consideration by the trial court," he wrote. "The administrative review process allows IDEM to correct its own mistakes and allows those with the requisite expertise a first look at the issues." The judicial review of the OEA's determination in 2000 that NJK was not a real party in interest didn't confer jurisdiction on the Marion Superior Court to directly review all further actions of IDEM regarding NJK's permit application, wrote the judge. Money damages to NJK aren't authorized under the AOPA. The case was remanded for further proceedings.

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