Environmental Litigation

The New Jersey Supreme Court recently clarified the elements needed to sustain a claim for nuisance and trespass in the environmental context.  Generally, plaintiffs assert claims under common law such as nuisance and trespass to recover non-cleanup costs associated with environmental contamination.  In Ross v. Lowitz, the defendant homeowners tested an underground storage tank (“UST”) on their property and discovered that the UST leaked.  They subsequently notified their insurance companies.  The contamination on the defendant homeowners’ property migrated to the plaintiffs’ adjacent property.  The insurance companies funded the cleanup and the New Jersey Department of Environmental Protection eventually issued a No Further Action Letter for the cleanup.  However, as a result of the contamination, a prospective purchaser of the plaintiffs’ house cancelled the contract of sale.

The plaintiffs filed suit against defendant homeowners and asserted among other claims, nuisance and trespass.  The plaintiffs also sued the defendant homeowners’ insurance companies asserting that they were a third party beneficiary under the insurance policies.  The plaintiffs sought damages for alleged loss of use of their home and diminution in the value of their property.  The defendants moved for summary judgment and the trial court dismissed the claims against the insurance company and plaintiffs’ claims under the theories of nuisance and trespass.  The appellate division affirmed the trial court’s determination.

The New Jersey Supreme Court in affirming the lower court’s decision, clarified the necessary elements to maintain a cause of action under common law nuisance and trespass.  The Court reviewed the Restatement (Second) of Torts to determine the validity of plaintiffs’ nuisance and trespass claims.  In addressing the nuisance claim, the Court noted that under Section 822 of the Restatement, the plaintiffs must show that the discharge of contaminants from the homeowners’ UST was either negligent or the result of an abnormally dangerous activity.  The Court noted that the storage of home heating oil in a UST is not an abnormally dangerous activity.  The Court further found no fault on behalf of the defendant homeowners that would support a claim for nuisance.

The Court made a similar determination regarding plaintiffs’ trespass cause of action.  Again relying on the Restatements, the Court concluded that to maintain a cause of action under trespass, the plaintiffs must show that defendant homeowners were at fault.  Because the homeowners acted in a reasonable manner in having the UST tested and then contacting their insurance companies upon finding that the UST leaked, the Court affirmed the dismissal of the plaintiffs’ trespass and nuisance claims.

In addressing plaintiffs’ claim against the homeowners’ insurance company, the Court noted that in order for a third party to be found a beneficiary to a contract, the contracting parties must have expressed an intent to have the third party a beneficiary of the contract when they entered into their agreement.  The Court found that there was no evidence that the parties intended the plaintiffs to be third-party beneficiaries to the insurance policy.  The Court ruled that the trial court properly dismissed plaintiffs’ claims against the insurance companies.

The take away from this case is that the mere discharge of contamination that impacts the property of another is insufficient to support claims under common law nuisance and trespass.  There must also be a showing that the persons responsible for the discharge of contaminants were at fault in allowing the discharge to occur.

After months of controversy, public comments, response to public comments, motions to intervene, amicus briefs, oral arguments, editorials and a sustained flurry of activity in social media, the decision we have been waiting for is here – Judge Michael J. Hogan granted NJDEP’s motion to approve the consent judgement with ExxonMobil that settles out for $225 million the State’s original $8.9 billion claimed for natural resource damages.

Based on initial reports on the ruling, the court found that the settlement amount was a reasonable compromise in light of the risks still attached to the complex and costly litigation that has lasted more than a decade, including the risk of a number of appeals preserved by ExxonMobil through the years. Initial reports also indicate that the court found that NJDEP’s damages estimate was rational and the settlement was consistent with the Spill Act and with the public interest.

It can be fully expected that the coalition of environmental groups and State Senator Raymond Lesniak, who have been leading the charge in challenging the settlement as a dirty deal and woefully inadequate, will strongly disagree with the ruling and take steps to overturn it.

Amicus Curiae Briefs Due Today; Oral Argument on Motion to Approve Settlement Rescheduled

After denying their motions to intervene last week (see our coverage here), Judge Hogan issued a Scheduling Order that sets today as the deadline for the eight environmental organizations and State Senator Lesniak (D-Union) to file their amicus curiae briefs.  NJDEP and Exxon Mobil must file their response briefs by the end of the week at noon on Friday, July 24, 2015.

Oral argument on the motion to approve the proposed settlement, which was previously scheduled for tomorrow, will now be held Thursday, July 30, 2015.  Judge Hogan is allowing the amici to participate in the oral argument if they choose to, which we should all expect at this point.

An amicus curiae, a Latin term that literally means ‘friend of the court,’ is an entity that is not a party to a case, but has an interest in the outcome and files a brief to provide information and arguments to the court and otherwise weigh in on the case.  As a non-party, an amicus curiae does not have a right to appeal the final outcome of a case, which is what the eight environmental groups and Senator Lesniak were ultimately seeking when they filed their motions to intervene.  So, these amicus curiae briefs and next week’s oral argument are their very last opportunity to voice their opposition to the settlement before the judge decides whether to approve it (unless they appeal the denial of the motions to intervene; no word so far on whether they will file an appeal).  Senator Lesniak vowed to file such a brief after his motion to intervene was denied, so we expect to see plenty of activity this week.

Stay tuned for discussions on NJDEP’s response to the more than 16,000 public comments on the settlement, which the judge will likely consider in his evaluation of the proposed settlement, as well as a closer look at natural resource damages and what they actually mean.  And continuing updates on the case’s docket.

UPDATE: After the posting of this blog, the Sierra Club of New Jersey posted a press release announcing that it made the amici filings, along with other environmental groups, earlier today.

A New Jersey state judge ruled on Monday that eight environmental groups and a New Jersey state senator cannot intervene to challenge the $225 million settlement with Exxon Mobil proposed by the New Jersey Department of Environmental Protection (NJDEP) to end litigation lasting more than a decade and originally alleging more than $8 billion in natural resource damages.

The environmental groups and New Jersey Senator Ray Lesniak (D-Union) sought to urge the court to reject the “sweetheart deal” between Exxon Mobil and Christie’s administration and, if the court approved the settlement, to appeal the approval as a party to the litigation. However, Burlington County Superior Court Judge Michael J. Hogan denied the motions to intervene, ruling that they did not demonstrate the adversity of interest, collusion or nonfeasance necessary to justify their intervention. Instead, the court found that NJDEP adequately represents their interests and that the public comment period provided an adequate forum to voice their objections to the settlement. Judge Hogan also ruled that the motions failed on the timeliness factor, pointing out that the intervenors were aware of the lawsuit since it was filed in 2004 and “have known of their interests in its outcome for eleven years.”

The proposed settlement has been subject to extensive criticism and outcry since NJDEP released the draft consent judgement on April 6, 2015. New Jersey’s environmental statute commonly known as the Spill Act requires a public comment period for at least thirty days for proposed settlements under the statute. Given the controversy and overwhelming public attention, NJDEP doubled the public comment period and collected comments for sixty days. NJDEP received approximately 16,000 public comments – most in opposition to the settlement – by the time the comment period ended on June 5, 2015. The court may also consider the comments in determining if the settlement is fair, reasonable and in the public interest.

Keep in mind that the court has not yet passed judgement on the fairness or reasonableness of the proposed settlement – the hearing for that decision is currently scheduled for Tuesday, July 21, 2015. That is, unless, the intervenors file an appeal of Judge Hogan’s decision on their motions to intervene in the next few days and the hearing is delayed pending that appeal.

The Supreme Court on Monday dealt a setback to the Environmental Protection Agency’s regulation limiting mercury and other toxic emissions from power plants – the “mercury rule.” In Michigan v. Environmental Protection Agency, the Court held that EPA acted unreasonably by making its initial decision to regulate plant emissions without considering the cost of regulation. Although the ruling interrupted the Court’s much-publicized string of “liberal” rulings, in the end the decision may have more impact on the way EPA makes regulations than on whether EPA ultimately regulates emission of mercury and other pollutants from power plants.

The Clean Air Act directs EPA to study and decide whether it is “appropriate and necessary” to regulate power plant emissions. In 2000, EPA concluded that mercury and other toxic emissions from power plants pose a danger to human health and the environment and that regulation of power plants was therefore “appropriate and necessary.” In 2012, after years of further study, rule-making, and litigation, EPA issued its mercury rule. EPA considered costs of compliance in developing the regulations but not in deciding whether to regulate in the first place.

The Supreme Court disagreed with this process. In a 5-to-4 decision, Justice Scalia’s opinion for the majority interpreted the statutory term “appropriate” to require EPA to consider all pertinent factors, including the cost of regulation, in deciding whether to regulate at all. In the Court’s view, EPA’s consideration of cost in fashioning the regulations came too late in the process. The Court therefore held that the power plant regulations were improperly issued.

Justice Kagan’s opinion for the four dissenters agreed with the majority that EPA had to consider cost of any proposed regulations at some time in its rule-making process. But she disagreed that EPA had to do so in deciding whether to regulate power plant emissions in the first place. She argued that EPA reasonably determined that regulation was appropriate based on the finding that exposure to airborne mercury causes extensive health concerns and that EPA could properly consider costs in determining how to regulate, rather than whether to regulate.

The decision in Michigan v. EPA was a loss for environmental advocacy groups that supported the regulation, but it is a narrow ruling, hinging on the meaning of “appropriate.” EPA will have to re-review its decision to regulate emissions from plants and take costs into account, but the Court’s decision does not suggest that cost considerations will ultimately scuttle the mercury rule itself. In fact, industry had already begun to plan operations and investments based on the mercury rule. It remains to be seen how industry and the courts will treat the mercury rule while EPA’s re-review is pending – and what impact, if any, the ruling may have on the Obama EPA’s climate change agenda and other initiatives.