Statute of Limitations

Property owners who suffer damages as a result of contamination must be aware of time limitations to recover damages.   A New Jersey appellate court recently upheld the rule that, unlike recovery of cleanup costs in contribution actions under the New Jersey Spill Compensation and Control Act, recovery of other damages under tort theories, such as lost sales, lost rental values and the like, remain subject to the six-year statute of limitations.  In 320 Assocs., LLC v. New Jersey Natural Gas Co., (A-1831-16T2) (June 29, 2018), the Appellate Division, upheld a lower court’s decision dismissing Plaintiff’s claims for money damages as untimely.

The owner of commercial property located near a New Jersey Natural Gas property sued the gas company for damages resulting from coal tar that had migrated onto the owner’s property.  The owner asserted common law claims against the gas company for negligence, per se negligence, strict liability, nuisance and trespass.  It sought damages for a lost sale and lost rental value as well as an order mandating the gas company to cleanup up both properties.

The Appellate Division determined that, since Plaintiff discovered the contamination in 2008, the six year statute of limitations barred all but one claim.  Only the nuisance survived for further fact finding because nuisance is considered ongoing so long as the nuisance can be abated.

The case is a reminder that property owners with common law claims need to be aware that, while environmental statutes permit claims for cleanup and cleanup costs without time limitations, other damages are not recoverable if they are asserted after the statutory limitations periods.

In a stunning decision, the New Jersey Appellate Division held on August 23 that the State’s general six-year statute of limitations for property damage applies to private claims for contribution under the New Jersey Spill Compensation and Control Act.  Morristown Associates v. Grant Oil Co., (App. Div., No. A-0313-11T3, August 23, 2013).   The six-year clock begins to run when “the injured party discovers, or… should have discovered that he may have a basis for an actionable claim.”  Morristown, slip op. at 3 (quoting Lopez v. Swyer, 62 N.J. 267 (1973)).

The statute of limitations applicable to Spill Act claims has long been a subject of controversy.  The Act itself does not specify a limitations period.  In 1994, the Appellate Division held that a ten-year statute of repose did not apply to Spill Act contribution claims.  Pitney Bowes v. Baker Industries, Inc., 277 N.J. Super 484 (App. Div. 1994).  There, the court reasoned that the Spill Act “casts a broad net” and that the purposes of the Act would be defeated if responsible parties were excluded from liability because of a statute of repose.

Five years later, the Appellate Division held that no statute of limitations applied to private claims for contribution under the Spill Act.  Mason v. Mobil Oil Corp., 1999 WL 33605936 (N.J.Super.A.D.).  However, the decision was unpublished and therefore was not binding on other courts or litigants.

More recently, a federal court interpreting New Jersey law reached the opposite conclusion, holding that the six-year statute of limitations applied to Spill Act claims.  Reichhold, Inc. v. United States Metals Refining Co., 655 F. Supp.2d 400 (D.N.J. 2009).

The appellate court in Morristown rejected or distinguished its own earlier decisions, and sided with the 2009 federal court decision.

Still, uncertainty remains.  While the Appellate Division has now spoken in Morristown, the State Supreme Court has not yet weighed in on the issue, and the State Legislature, too, could seize the opportunity to amend the Spill Act if it disagrees with the holding in the Morristown case.

In the recent case of Northern International Remail and Express Co. v. Lester Robbins, et al., the Appellate Division held that a plaintiff’s claim against a former owner of property cannot survive without evidence that the former owner’s tenants did more than just generate hazardous waste. In Northern International, Northern International Remail and Express Co. (“Northern”) purchased a site in Union, New Jersey from defendant, Lester Robbins (“Robbins”) in 1991. The site was purchased by Robbins in 1976, and at the time was being leased by Baron Blakeslee, Inc. (“Baron”). Baron was engaged in the storage and distribution of chlorinated solvents, and used “a minimum of two 1,000 gallon outdoor tanks” for storage of such solvents. Although Baron continued to be a tenant at the Union site after it was purchased by Robbins, Baron, however, moved the work it performed at the Union site to another location in 1970.

After moving its operations in 1970, Baron subleased the Union property to J&J Construction Co. (“J&J”), a corporation engaged in the installation of car radios. Another entity known as T&T Corporation (“T&T”) may also have operated at the property. The evidence indicates that both J&J and T&T generated hazardous waste. However, there was no evidence of the type of hazardous waste generated or if any governmental actions were taken against any of these entities for the storage of hazardous waste at the Union site.

In 1998, Northern sought to refinance the Union property. In connection with the refinancing, contamination was uncovered at the Union property, which was attributed to past operations by Baron. Northern’s counsel in 1998 asked Robbins to contribute to the cost of the clean up at the Union property.

Northern eventually sued Robbins in 2008 based on New Jersey’s Spill Compensation and Control Act (the “Spill Act”) and common law claims of strict liability, nuisance, negligence, indemnification and restitution. On motion for summary judgment, the lower court dismissed Northern’s common law claims on the basis that the six year statute of limitations expired. The lower court also entered a judgment in favor of Robbins under the Spill Act on the basis that the evidence produced did not show that there had been a discharge of hazardous substances during the period of Robbins’ ownership of the Union property. Northern appealed the lower court’s ruling.

In order for Robbins to be held liable under Spill Act, Northern had to prove that hazardous substances were discharged at the Union site while Robbins was the owner of the property. Because Baron transferred its operations from the Union site prior to Robbins taking title to the Union property, Northern did not allege that Baron discharged any contamination at the Union property after Robbins took title to the property. Rather, Northern argued on appeal that Robbins was not entitled to summary judgment under the Spill Act because J&J and T&T were “registered generators of hazardous waste at the Union property during the period that Robbins was owner” asserting that this fact was sufficient to establish that there was a discharge at the Union property during Robbins’ ownership.

The Appellate Division rejected Northern’s contention noting that there was no evidence that the hazardous waste generated by J&J and T&T included the contaminants that were being detected at the Union property. The Court reasoned that given the absence of such evidence, it could not find that J&J or T&T discharged hazardous substances at the property. Therefore, the Court concluded that the “generation of hazardous waste, without more, does not give rise to [Spill Act] liability.”

The Court also dismissed Northern’s argument that Robbins was responsible for the continuing discharge of hazardous waste from Baron’s operation even though Baron’s activity at the property ended prior to Robbins’ ownership of the property. The Court held that liability under the Spill Act cannot be imposed “if a party’s only link to the discharge is through the passive migration of pre-existing contamination.” Thus, continuing contamination from a pre-existing contamination is insufficient to impose liability under the Spill Act.

The Appellate Division also upheld the lower court’s determination that Northern’s common law claims should be dismissed on the basis of the statute of limitations. The Court noted that the information obtained by Northern in 1998 at the time it was refinancing its property “was more than sufficient” for Northern to realize that it should have pursued its claim against Robbins. Thus, Northern’s cause of action accrued in 1998 and clearly by statute would have had to bring suit within six years of 1998.

This case is instructive for several reasons. In order to establish liability of a prior owner or operator for contamination at a site, there must be evidence connecting the prior owner’s or operator’s operations at the site to the contamination being detected at the property. The mere fact that a former owner or operator handled hazardous substances is insufficient. Typically, such a connection is established through direct evidence such as former employee testimony or expert testimony based on the expert’s review of records linking the former owner’s or operator’s operations to the contamination at the site. Thus, it is essential when contemplating an environmental cost recovery action to put in place a team of experts and attorneys that will be able to gather the necessary evidence to maintain a case against former owners or operators that were responsible for the contamination.

One of the most common mistakes by a property owner is delaying to act upon information suggesting that a prior owner or tenant may have contaminated the property. Therefore, it is imperative to bring a cost recovery action immediately when you know or suspect your property was contaminated by a prior owner or current or former tenant at the property. This information can be based on, as in Northern International, recent soil or groundwater sample results indicating that the property is contaminated. Generally, once such information is available, the “clock” starts running for filing a cost recovery action. For common law claims such as strict liability, nuisance, and negligence the statute of limitations is six years. Thus, to avoid running afoul of the statute of limitations for these types of claims, an action must be brought within six years of when you knew or should have known that the that the property was contaminated.