September 03, 2011

Nexus Under the N.J. Spill Compensation and Control Act

Posted on September 3, 2011 by William Hyatt

Many practitioners, along with the New Jersey Department of Environmental Protection, assumed, until recently, that the standard of liability under the New Jersey Spill Compensation and Control Act (Spill Act) was more liberal than the comparable standard under the federal analogue, CERCLA.  A recent decision of the Appellate Division of the New Jersey Superior Court, however, appears to have called that assumption into question.  New Jersey Department of Environmental Protection v. Dimant. 

The case involved a fairly classic fact pattern in which PCE ground water contamination could have been caused by a number of different dry cleaning establishments.  The relevant provision of the Spill Act provides that “any 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.”  After a bench trial, the lower court ruled that the State “had not proved a nexus between a discharge by [the only remaining] defendant and the contamination” and dismissed the complaint.  The State sought to amend its complaint to assert direct claims against several third-party defendants, but the trial court ruled it was too late. 

 On appeal, the State argued that under the language of the Spill Act, “a direct causal connection between the discharge and the damages need not be established.”  In making this argument, the State relied on the language of CERCLA, which the State claimed “requires no direct causal connection between a defendant’s release or threatened release of hazardous substances and the plaintiff’s incurrence or response costs” and the earlier admonition of the State Supreme Court that even parties remotely responsible for causing contamination are liable under the Spill Act.  The Appellate Division found the State’s reliance on CERCLA to be “misplaced,” on the ground that CERCLA case law still requires a connection between a release of a hazardous substance and the incurrence of response costs.  The Court noted that Spill Act case law, up until then, had focused on the connection between the discharger and the offending discharge, and that “[a]lthough none of the Spill Act cases expressly state the necessity for further proving a ‘nexus’ between a discharge and damages resulting from the contaminated discharge, such a requirement is implicit in these holdings.”  The Court found support for that conclusion from the statutory definition of the term “discharge,” which “refers to resultant damage[s].”  The Court then held that “[a]s is plain from that definition, some nexus between the use or discharge of a substance and its contamination of the surrounding area is needed to support a finding of Spill Act liability.”

A subsequent Appellate Division decision followed the reasoning of Dimant. Voellinger v. Electro-Coatings, Inc.; See also, Magic Petroleum Corp. v. ExxonMobil Corp.

These decisions would appear to make it more challenging for the State to obtain liability judgments under the Spill Act, especially in those common cases where tracing the contamination back to its source is problematic.  That challenge is avoided under CERCLA, under which the government need only prove a nexus between the covered person and the facility from which there is a release, and a separate nexus between the release (not the covered person or the covered person’s hazardous substances) and the incurrence of response costs.



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