Estoppel: Sometimes you can hold the government to its promises

From Foley Hoag's Law and the Environment blog, "Yes, Virginia, You Can Estop the Government" by Seth Jaffe (Foley Hoag, Boston):

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.

During negotiations, New Jersey said it would not try to collect certain environmental penalties from FMC. Four years (and a change of administrations) later, surprise, surprise, they try to collect. FMC objects, based on the earlier statements.

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.

Might be a fun case for classroom discussion on the problem of policy changes. EMM