The lawsuit contends that as a result of what state Attorney General W. Cary Edwards yesterday called a "fraud upon the public of this state, a fraud that will probably cost the taxpayers $15 million," Wawa should now be forced to pay the cost of replacing the dam.
The lawsuit names as defendants the Delaware County-based owner of the chain of convenience stores with annual sales of about $300 million, Wawa executive Frederick L. Wood, Wawa general counsel Vincent P. Anderson and the company's board of directors at the time of the sale.
Wawa executives could not be reached yesterday for comment.
The attorney's general's office also announced yesterday that it had decided that insufficient evidence existed to charge anyone criminally in connection with the Union Lake sale.
In bringing its civil action yesterday in Mercer County Superior Court, the office thus concluded parallel criminal and civil investigations of the lake transaction, which was touted as a significant step toward improving the state's recreational holdings.
Instead, the deal has been disowned by the Kean administration and denounced by many lawmakers here, including Sen. Laurence Weiss (D., Middlesex), chairman of the Senate Appropriations Committee, who has called it ''one of the greatest boondoggles in New Jersey fiscal history."
The lawsuit in many respects recapitulated a stinging report issued in March by the State Commission of Investigation, which sharply criticized both Wawa and a former top official of the state Department of Environmental Protection.
The commission report, which urged the state to sue Wawa, said that the department official, Curt J. Hubert, who at the time was in charge of a state program that bought park land, pressed to complete the deal with "blinders-on zeal" even though some of his subordinates were warning him that Union was a ''problem lake."
Among the lake's problems is that the mud on its bottom is poisoned with arsenic.
The lake's water poses no risk to swimmers or to people who eat its fish. But the repair work on the dam has forced the state to lower the level of water in the lake. This, in turn, has exposed much of the lake bottom. As a result, the state last summer banned all use of the lake until next year, when the dam is to be finished and the water level is to be restored.
Yesterday's lawsuit makes no mention of the arsenic, which has been traced to a nearby plant that manufactures weedkiller. The contamination ended a decade ago, officials have said.
A letter released yesterday by Edwards and sent to the leaders of the Senate and Assembly predicted that the litigation would be "long and difficult," with "significant pitfalls and risk."
Indeed, the existence of evidence suggesting the state ignored some warnings about the lake may cloud New Jersey's effort to prevail in its action against Wawa.
Wrote Edwards in his letter: "There is sometimes a tendency to say that the (state) agency, because of its mistakes, got what it deserved and, therefore, is without legal recourse.
"The better view in our judgment is that the public should not have to remain the silent victim of sharp and misleading conduct by one who sells land to the state, even though there were shortcomings in judgment by state employees."
At the heart of the controversy over the lake has been the allegation that Wawa possessed an engineering study warning that the dam's spillway needed to be "investigated in detail."
The lawsuit says Wawa never conducted that investigation nor warned the state, before the sale, that such an investigation was needed. As a result, the lawsuit, contends, the state thought the lake's repair would cost only $1 million.
"A seller of real estate has an affirmative duty to disclose negative conditions to the buyers," the lawsuit says. "Wawa, by not having to perform the dam repairs now being undertaken by the state, has been unjustly enriched."