Earlier this week, the New Jersey Supreme Court clarified in NL Industries, Inc. v. State of New Jersey, (A-44-15) (March 27, 2017), that the State of New Jersey retains its sovereign immunity under the New Jersey Spill Compensation and Control Act (Spill Act), N.J.S.A. 58:10-23.11 to 23.24, for discharges of hazardous substances that occurred prior to the 1977 enactment of that law.

In a Spill Act contribution claim against the State and several private parties for the costs to remediate parts of the Raritan Bay impacted by contaminated slag used in the early-1970s to construct a seawall, NL Industries alleged that the State was a liable “person” under the Spill Act and subject to a private party contribution claim.  The State had approved the construction of the seawall and the disposal of the contaminated slag in the Raritan Bay.

When the Spill Act was adopted in 1977, it created a Spill Fund to pay for the clean-up of hazardous substances discharged by “any person” after the law was enacted.  The Spill Act defined “person” to include the State.  In 1979, the Legislature amended the Spill Act to allow the State, but not private parties, to use the Spill Fund to remediate discharges that occurred prior to the enactment of the Spill Act.  In 1991, the Spill Act was amended again, imposing strict liability on any responsible “person” for cleanup costs “no matter by whom incurred,” and allowing private party contribution claims to recover costs from any such “person,” including for pre-Spill Act discharges.  NL Industries argued that these amendments worked together to allow private party contribution claims against the State for pre-Spill Act discharges.  NL Industries also agreed with the trial court’s conclusion that the State’s sovereign immunity for pre-Spill Act discharges was waived based on the Supreme Court’s decision in Department of Environmental Protection v. Ventron Corp., 94 N.J. 473 (1983), which applied Spill Act liability retroactively for pre-Spill Act discharges.

The Court rejected NL Industries’ argument and the trial court’s reliance on Ventron.  The Court began its analysis by affirming that the State’s sovereign immunity can be waived only by a clear and unambiguous expression of legislative intent.  While the Court acknowledged that it may be possible to construe the language of the 1991 amendments to the Spill Act to allow for contribution claims against the State for pre-Spill Act discharges, the Court explained that this was not enough.  Neither the 1991 amendments, nor any other provision of the Spill Act, contained the deliberate, clear and unambiguous expression by the Legislature required to strip the State of its sovereign immunity for pre-Spill Act discharges.  The Court also clarified that the retroactive application of the Spill Act in Ventron applied narrowly to only pre-Spill Act discharges that the State remediated with Spill Fund monies and sought reimbursement for from private parties, leaving the State’s sovereign immunity protection from liability for its own pre-Spill Act discharges in place.

Justice Albin, in his dissent from the Court’s majority opinion, wrote that the Court’s interpretation of the Spill Act “leads to the absurd result” of a private party being held on the hook for the entire cost to clean-up a pre-Spill Act discharge even when the State and the private party are both jointly responsible.  Given that discharges of hazardous substances can occur decades before contamination is discovered and that the State can easily be one of many, if not the primary, “person” responsible for pre-1977 discharges, it is worth watching how the Court’s decision impacts a private party’s remediation at such sites now that the State is immune from contributing to the cleanup of pre-Spill Act discharges.

Last week, the New Jersey Department of Environmental Protection (NJDEP) announced a new Response Action Outcome (RAO) Notice, which allows Licensed Site Remediation Professionals (LSRPs) to issue an RAO for a site with contaminated sediment that migrated from an off-site source.  The new notice, entitled “Sediment Contamination From an Off-Site Source Not Remediated – General,” is the most recent addition to the growing list of RAO notices.

The notice can be used after a Preliminary Assessment and Site Investigation (PA/SI) confirms that the source of the sediment contamination is off-site and not related to the site being evaluated.  The off-site source must be reported to NJDEP and the resultant new incident number included in the Notice.  Furthermore, the LSRP can identify an existing NJDEP case if it is known to be the off-site source and is currently undergoing investigation or remediation.

Given that it is well-established law that you are not responsible for contamination coming from offsite, the primary purpose of this action appears to be to streamline the RAO process.  So, this is another tool in the LSRP toolbox for the often complicated sediment cases, which continue to garner regulator’s attention here in New Jersey and nationwide.

Read more on sediment contamination in these discussions:

JOIN THE CLUB: EPA Sizing Up Hackensack River for Superfund Listing

WE ARE JUST GETTING STARTED: EPA Issues Much Anticipated Cleanup Plan for the Lower 8.3 Miles of the Lower Passaic River

 

The New Jersey Appellate Court recently upheld a spoliation claim against a plaintiff company that sued prior owners for violations of New Jersey’s Spill Compensation and Control Act and common law claims of nuisance and negligence.

In 18-01 Pollit Drive v. Engel, Docket No. A-4833-13T3, the new owner of a former printing facility site discovered contamination during redevelopment activities and filed a contribution suit against several former owners for investigation and remediation costs.  The owner’s expert concluded that contamination under the building came from an acid dilution sump pit and sewer piping under the concrete slab floor.  To demonstrate the timing and source of the discharges of contamination, the owner’s expert relied on photos of the pipe, the sump pit and concrete floor, samples of piping from another location on the site, and data derived from sludge in the sump pit and soil from under the sump, all of which had been excavated and discarded before defendants’ experts could examine them.  Defendants argued that their experts needed to examine the original pipe, sump pit and concrete floor and filed motions to dismiss the action on spoliation grounds.

A “spoliation claim arises when a party in a civil action has hidden, destroyed, or lost relevant evidence and thereby impaired another party’s ability to prosecute or defend the action.”  Plaintiff argued that it was not required to save the pipe because it did not intend to bring suit at the time it was discarded.  The Court disagreed, stating that “the obligation to preserve evidence is not triggered by the spoliator’s intent to bring suit but rather it arises when litigation is probable.”  Noting that plaintiff was a sophisticated investor that knew the site was contaminated, had access to remediation experts and knew about an ongoing cleanup at a nearby Superfund site, the Court held that plaintiff should have anticipated that it could become involved in litigation in some capacity regarding the contamination and therefore had a legal duty to preserve the original pipe.  The Court also affirmed that plaintiff had a duty to preserve the sump and concrete floor materials.

The Appellate Court reversed the trial court’s dismissal of plaintiff’s complaint and remanded the case for consideration of whether a lesser sanction could have cured the prejudice created by the spoliation.

As this decision illustrates, failing to preserve evidence in an environmental case can have serious consequences, including dismissal.

After the NJ Supreme Court Finally Closed the Door on The Statute of Limitations Defense To NJ Spill Act Contribution Claims, Laches Emerges as a Possible Backdoor Defense. 

The Bergen County Superior Court issued a surprise decision this month in 22 Temple Avenue v. Audino, Inc., et al., Docket No. BER-L-9337-14, ruling that NJ’s Spill Compensation and Control Act permits the defense of laches as an affirmative defense to contribution liability.  The decision is inconsistent with the NJ Supreme Court’s 2015 Morristown Associates v. Grant Oil Co., 220 N.J. 360 (2015) ruling, which not only confirmed that there is no statute of limitations time bar to contribution claims, but also confirmed that the universe of defenses available to contribution defendants is limited to only those specifically identified in the Spill Act or permitted by court rule.  The Spill Act does not identify laches – or any equitable defenses – to contribution claims.

Unlike a statute of limitations, which bars claims brought after the expiration of a time period specified by statute, the defense of laches relied upon by the 22 Temple Avenue court is an equitable defense that bars claims when the passage of time renders it unfair to a defendant for the claim to move forward.  This unpublished decision is not only inconsistent with the Morristown Associates decision, but it is also inconsistent with another unpublished decision, Ann Bradley v. Joseph Kovelesky, Docket No. A-0423-14T4, in which the Appellate Division refused to apply the defense of laches to a Spill Act contribution claim.

The Morristown Associates decision had been viewed as bringing finality to the longstanding question of whether a Spill Act contribution claim can be affirmatively time barred.  Yet, the 22 Temple Avenue decision raises the question of whether a backdoor time bar exists to Spill Act contribution claims.

22 Temple Avenue

22 Temple Avenue asserted Spill Act contribution claims against Peter Audino, the former operator of a dry cleaner, for contamination related to those operations.  The court rejected 22 Temple Avenue’s claim for cleanup costs for discharges that occurred from 1989 to 1992 against the then 89-year old Audino, individually, based on the defense of laches.  Notwithstanding the Morristown Associates ruling against a time bar for Spill Act private party contribution actions, the court sought to apply “basic principles of fairness and substantial justice” in the context of 22 Temple Avenue’s claims.

The court’s reliance on Morristown Associates and the 2012 Supreme Court decision in N.J. Dept. Env. Protection v. Dimant, 212 N.J. 153 (2012) in applying the defense of laches to 22 Temple Avenue’s claim is surprising.  The Morristown Associates Court made no mention of the defense of laches or other equitable defenses as an exception to its very clear ruling that the language of the Spill Act contribution provision provides that there are no defenses to a Spill Act private party contribution claim except those that the New Jersey Legislature wrote into the Spill Act or those that are established by court rules under the jurisdiction of the Supreme Court.  The defense of laches is neither written into the Spill Act nor established under the New Jersey court rules.  Indeed, some federal district courts, including NJ, have applied similar reasoning in holding that there are no equitable defenses to a Superfund §107(a) cost recovery claim.

Likewise, the Supreme Court made no mention of the defense of laches in Dimant.  In that matter, the Court refused to find a dry cleaner liable for a discharge because NJDEP could not prove any nexus between drips of PERC to pavement and contamination found in groundwater.  However, the Court projected that where there is liability, equitable factors such as the passage of time disabling the dry cleaner’s ability to defend itself can be considered in allocating damages.  A similar use of equitable considerations has been used by courts in the context of apportionment of Superfund liability.

The 22 Temple Avenue decision does not undo the Morristown Associates holding that there is no statute of limitations time bar to private party Spill Act contribution claims.  This decision does however raise the question as to whether lower courts are looking to create an equitable backdoor of laches to bar such claims.

The United States Environmental Protection Agency (“EPA”) recently issued the Record of Decision (“ROD”) for the lower 8.3 miles of the Lower Passaic River, which sets forth EPA’s $1.38 billion remedy. Potentially Responsible Parties (“PRPs”) will be interested to know that the $1.38 billion price tag only addresses one of the operable units that comprise the Diamond Alkali Superfund Site, which includes the 17-mile tidal stretch of the Lower Passaic River.

Sediment Mega Sites

In recent years, EPA has increasingly shifted more of its focus towards contaminated waterways, as opposed to the traditional single site Superfund site.  Of all the Superfund sites throughout the United States, “sediment mega sites” like the Gowanus Canal, Fox River, Portland Harbor and the Hudson River (just to name a few) are among the most complex to investigate, the largest in areal extent, and the most challenging and expensive to remediate.

Remediating sediment mega sites is a massive undertaking because of the persistent nature of the contaminants, the hundreds of potential sources and the migration and mixing of the contamination from tidal influences. It comes as no surprise that the remediation costs for these sediment mega sites can exceed $1 billion.

As is common for these waterways, the sediments in the Passaic River consist of a chemical soup of hazardous substances, including dioxin, PCBs, mercury, pesticides (including DDT) and heavy metals, created from generations of industrial operations along the waterways.  According to EPA, the remedy released in this ROD is the final action for the sediments in the lower 8.3 miles and an interim action for the water column in this section of the river.  Meanwhile, EPA and some of the PRPs are still studying the sediments in the upper 9 miles, the water column of the entire 17 miles of the river and the entire Newark Bay Study Area. The scope and cost of those remedies are unknown. We have a long road ahead of us.

The Proposed Remedy

The scope of the proposed remedy is extensive.  It includes:

  • Bank to bank dredging of approximately 3.5 million cubic yards of sediments;
  • Installing an engineered cap over the river bottom for the entire 8.3 miles;
  • Transporting the dredged materials to be dewatered, treated and disposed;
  • Long-term monitoring and maintenance of the engineered cap; and
  • Long-term monitoring of fish, crabs and sediment.

What’s Next?

If EPA is following its Superfund playbook for traditional sites, its next move is to issue “Special Notice Letters” to some or all of the PRPs inviting them to perform or fund the proposed remedy. Given the complexity of sediment mega sites, however, EPA has reserved the right to depart from the playbook.  EPA may therefore take a different approach enforcing this ROD, which is certainly possible in light of the overwhelming number of PRPs involved.  The next step is to see if EPA issues any Special Notice Letters, or takes an alternative approach.

Also, keep in mind the $1.38 billion remedy does not address natural resource damages (“NRDs”). The Natural Resource Trustees (which have jurisdiction over NRDs) have yet to publish an NRD Assessment.

Stay tuned to the Cole Schotz blog as we continue to monitor this landmark cleanup.