NJ Supreme Court Declares No Statute of Limitations Defense in Contribution Actions under State’s Cleanup Law

Posted on January 30, 2015 by David B. Farer

On Monday, January 26, 2015, the New Jersey Supreme Court issued its opinion in Morristown Associates, a closely watched case on the potential applicability of the state’s general 6-year limitations period to actions by contribution plaintiffs under the state’s strict, joint and several liability cleanup law, the Spill Compensation and Control Act (commonly referred to as the “Spill Act”).

The Court found no such applicability, and declined to impose a limitations period for commencement of Spill Act contribution actions.

The Spill Act itself expressly provides private parties with a powerful statutory cause of action to seek recompense from others (known as “contribution defendants”) for costs incurred in cleaning up and removing discharges of hazardous substances.  Defenses are statutorily limited to those set forth in the Spill Act, such as acts of war, sabotage and God.  The Spill Act does not articulate a limitations period within which aggrieved parties must commence contribution actions.

Lower state courts had differed on the question of imposing a Spill Act limitations period, and decisions of the federal district court in New Jersey had applied New Jersey’s general 6-year statute, noting that this would be consistent with the approach under CERCLA --  the federal Superfund law -- which does impose limitations periods.  In the trial court and appeals court decisions in Morristown Associates, both of the lower courts had found the state’s general 6-year period to be applicable.  The trial court further held that the 6-year limitation period commenced at the point when the contribution plaintiff should have discovered through investigation that it had the basis for a Spill Act claim, another point that the Appellate Division affirmed.

Focusing on the plain language of the Spill Act, and the legislature’s express statements of intent as set forth in the law, the Supreme Court rejected application of any limitation period.  The Court particularly looked to the restricted set of defenses under the law, and the verbiage that contribution defendants are to be afforded “only” those defenses. 

The Court found that the plain text of the Spill Act supports the legislature’s intention to include no statute of limitations defense, noting that “the Spill Act is remedial legislation designed to cast a wide net over those responsible for hazardous substances and their discharge on the land and waters of this state.”

The Court also saw “no reason to interpose in these factually complex cases a new requirement to determine when one knew of a discharge in order to afford the remediating party the contribution right that the Spill Act confers as against all other responsible parties.  We decline to handicap the Spill Act’s intentionally broad effect in such manner.”

The Appellate Division’s judgment was reversed, and the case remanded.

The Role of Environmental Forensic Experts After Dimant

Posted on December 3, 2012 by John A. McKinney Jr

Prior posts (by David Farer and William Hyatt) have featured comment on the litigation that resulted in the New Jersey Supreme Court’s decision in NJDEP v. Dimant (September 26, 2012) under the New Jersey CERCLA analog, the Spill Act, requiring a “reasonable link” between the discharge, the putative discharger, and the site specific contamination.  This alert focuses on the implications of the decision for building a liability case.

Dimant concerned liability for required remediation of perchloroethylene (“PCE”) contaminated groundwater at a site.  The New Jersey Department of Environmental Protection (“DEP”) inspectors observed for a portion of one day a pipe dripping a liquid onto blacktop.  Testing showed the drip contained more than 3,000 times the maximum contaminant level for PCE.  There was no evidence presented at trial, however, to indicate the blacktop was cracked, where the drips went, or the frequency or duration of the drips.  The DEP did not establish groundwater flow direction and therefore could not prove if the pipe location was up or down gradient of the PCE contaminated groundwater requiring remediation.  Also, there were several other potential sources of PCE in proximity to the defendant.  In other words, there was no proof connecting the defendant’s discharge of PCE to the PCE contaminated groundwater.

Keep in mind that the Spill Act imposes strict, joint and several liability on a person discharging or “in any way responsible” for a discharge, an arguably very broad standard indeed.  In its decision, the Court made it clear that “in an action to obtain damages, authorized cost and other similar relief under the [Spill Act] there must be shown a reasonable link between the discharge, the putative discharger and the contamination at the specifically damaged site.”  The Court disclaimed a proximate cause analysis, but did require “sufficient proof of a reasonable, tenable basis” showing how the discharge resulted in the contamination causing at least some of the damage at issue.  In short, the DEP failed to demonstrate “the requisite connection” between the dripping PCE and the PCE contaminated groundwater. 

What sunk the DEP’s case was a failure to prove the nexus between drips of PCE to the blacktop’s surface and some pathway for contribution of PCE through the soil and into the groundwater.  To avoid a similar fate, plaintiffs (including the State) will need proof that the defendant’s discharge actually reached the contaminated resource.  That evidence might be historical, physical or chemical analyses done to determine the source of releases affecting the resource.  This type of work is often referred to as environmental forensics and finding the right experts in this field will, in many New Jersey cases, be critical to establishing the “reasonable link” required by NJDEP v. Dimant.  To the extent that other state courts follow New Jersey’s lead, similar proofs will be necessary.

NJ Supreme Court Reins in DEP Strict Liability Claims Against Dischargers, Requiring" Reasonable Link" to Contamination

Posted on October 2, 2012 by David B. Farer

On September 26, 2012, the New Jersey Supreme Court issued its decision in NJDEP v Dimant, rejecting an attempt by the state DEP to seek damages from an alleged discharger under the state's strict liability statute, the Spill Compensation and Control Act (typically referred to as the "Spill Act").  The court found that DEP had not established the necessary connection, or nexus, between the alleged discharge and the contamination at the specifically damaged site. 

This was the second New Jersey appellate court decision in the past three months in which DEP's positions on regulatory and statutory authority have been successfully challenged.

In Dimant, DEP had sued to recover costs associated with investigation and remediation of PCE-contaminated groundwater found in residential wells, and was also seeking compensation for natural resource restoration. The defendant was a dry cleaner that had operated near the contaminated wells and had used the common dry-cleaning solvent PCE for 15 months in the late 1980s.  During that period, in the course of a site inspection, DEP noted an external pipe at the dry cleaning facility which the agency found to be dripping PCB-bearing liquid onto the pavement.

The Spill Act provides that “[a]ny person who has discharged a hazardous substance, or is in any way responsible for any hazardous substance, shall be strictly liable, jointly and severally, without regard to fault, for all cleanup and removal costs no matter by whom incurred.”

DEP argued that the discharge was sufficient to connect the dry cleaner to the contaminated groundwater in the nearby wells. The court rejected this argument, finding that DEP had not met its burden of proof. It noted that DEP never presented sufficient proof of a “reasonable, tenable basis” for how drips of fluid observed at the dry cleaner on one occasion resulted in groundwater contamination in the Bound Brook wells. 

The New Jersey Supreme Court upheld the prior trial court and Appellate Division decisions in the case, rejecting DEP's claims and holding that in order to obtain the requested relief, a real rather than hypothetical nexus must be shown to exist between the discharge of hazardous substances and the actual contamination at the specifically damaged site. That the substance dripping on the pavement in one location was the same as that found in the groundwater at another location was not a sufficient connection and did not constitute the “reasonable link” required to impose liability on the defendant.

The court further concluded that DEP could not credibly claim, many years after observing the dripping pipe, that the dry cleaner should bear the expense of studying how the drip may have impacted groundwater, and how the groundwater condition must now be addressed.

This was the second appellate court setback for DEP since July.  In an unrelated ruling on July 6, 2012 in Des Champs Laboratories, Inc. v. Robert Martin, the New Jersey Appellate Division found that DEP had overstepped its regulatory authority in narrowing one of the statutory exemptions available under the state's transaction-triggered environmental law, the Industrial Site Recovery Act ("ISRA").

Under ISRA, a wide range of property owners and operators must investigate and if necessary clean up contamination at subject properties upon the occurrence of specific business events such as cessations of operation or sales of properties or businesses, regardless of fault.  However, the legislature built certain exemptions into the law.  One of them, available to those who have used only small – or de minimis – amounts of hazardous substances, is known as a De Minimus Quantity Exemption, or "DQE."

However, in 2009 DEP issued new regulations unilaterally imposing an additional requirement on DQE applicants that they also establish that the subject property is free of contamination.  As the revision to the regulation was unsupported by the ISRA statute, and appeared to circumvent the very purpose of the DQE, Des Champs Laboratories challenged the regulation before the Superior Court, Appellate Division after its own application for a DQE was denied.

On July 6, 2012, the Appellate Division ruled in favor of Des Champs, invalidating the DEP regulatory change.  DEP subsequently issued the De Minimis Quantity exemption to Des Champs.

[Note:  See also William Hyatt's alert posted on September 2, 2011 on the NJ Appellate Court decision on the Dimant case.]

A Swing of the Pendulum?

Posted on March 30, 2012 by John A. McKinney Jr

It’s long been posited that as courts become more familiar with environmental remediation cases, they will be less likely to defer to a regulator’s overstated claims of environmental harm or assertions of environmental liability.  Instead, courts will require proof rather than conclusory evidence masquerading as a fact.  A recent case in New Jersey, where the state law akin to CERCLA is the Spill Compensation and Control Act (“Spill Act”), may be the harbinger of similar decisions elsewhere.

In New Jersey Department of Environmental Protection v. Dimant, 418 N.J.Super. 530, 14 A.3d 780 (App.Div. 2011), the intermediate appellate court reviewed a trial court decision on liability for remediation of a 365 acre site contaminated predominantly with perchloroethylene (PCE), a cleaning solvent and degreaser.  The site included residences, dry cleaners, and a former gas station site, with two federal Superfund sites nearby.  The NJDEP had observed a pipe dripping PCE years earlier at a defendant’s property, and it contended that the defendant was strictly liable for the cost of remediating the 365 acres even if the hazardous substance discharge was de minimis.  Instead, the trial court ruled that it is not enough to show a discharge, and that damages from the discharge must also be shown.  In other words, there must be a “nexus” between the contamination being remedied and the actual discharge.  The appellate court agreed, opining that a plaintiff seeking to prevail must “demonstrate that the defendant had some connection to the damages caused by the PCE contamination, or had added to any contamination already caused by past operation.”

Both this decision and that below are examples of a court going back to basics.  Causation cannot be presumed.  Discharges must be tied to damages.  The failure to prove a nexus to the damages sought will not be ignored in a rush to judgment or under the guise of facilitating cleanups.  Prove the case or watch out!  But the New Jersey Supreme Court has granted certification on the strict liability issue, and so we will soon see how far that pendulum has swung.