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.]