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NJ Supreme Court Rules No Statute of Limitations in Spill Act CasesJanuary 28, 2015

In a closely watched case, an unanimous New Jersey Supreme Court reversed the Appellate Division’s ruling that a six-year statute of limitations should apply to Spill Act cases holding that there is no statute of limitations to bar contribution claims for the cost of remediation. The Supreme Court summarized the history of the Spill Act and the Legislature’s intent to encourage and fund the clean-up of contaminated sites in New Jersey.  The Spill Act was enacted as a law which provided that the New Jersey Department of Environmental Protection (“NJDEP”) would be responsible for the clean-up of contaminated sites.  The law was amended to provide that responsible parties can seek contribution from the dischargers of hazardous substances and other responsible parties for clean-up costs.  Justice LaVecchia wrote the opinion and concluded that the language of the Spill Act provides solely for three specific enumerated defenses to a Spill Act claim: an act or omission caused solely by war, sabotage, or God, or a combination thereof.  Justice LaVecchia further opined that the Legislature had amended the Spill Act several times and failed to include a defense of statute of limitations.  The Supreme Court, refraining from stepping into the preview of the Legislature, based this unanimous decision on the fact the Legislature “could not have intended to permit its imposition of contribution liability on culpable dischargers to be frustrated by the imposition of a general and prior enacted, but unreferenced, statute of limitations.”

This holding reinforces the history of the Spill Act and the understanding that no limitations period restricts contribution claims against responsible parties.

Related Practice: Environmental & Land Use

Attorney: Frances Stella

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CITGO Petroleum Corp. to pay $23.25 million to settle MTBE contamination claimsNovember 12, 2013

CITGO Petroleum Corporation has agreed to pay $23.25 million to New Jersey to settle methyl tertiary butyl ether (MTBE) contamination claims.

In June 2007, the New Jersey Department of Environmental Protection (NJDEP) filed suit against nearly 50 MTBE manufacturers, refiners and marketers alleging that they were responsible for contamination of state waters with the gasoline additive MTBE. The proposed Judicial Consent Order (New Jersey Dep’t of Envtl. Prot. v. Atlantic Richfield Co., S.D.N.Y., No. 08-CIV-00312, proposed consent order 10/21/13) would resolve CITGO’s alleged liability for damages, past cleanup and removal costs, and injunctive relief under the New Jersey Spill Act and the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).  CITGO’s remediation obligations, if any, are not affected by this settlement.

A copy of the proposed Judicial Consent Order is available for inspection via the Internet at http://www.nj.gov/dep/srp/legal/ and at the Department’s Office of Record Access.

Related Practice: Environmental & Land Use

Attorney: Frances Stella

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New Jersey Appellate Division Finds Liability For Owner Who Fails to Conduct Due Diligence Pre-1993November 13, 2012

The Appellate Division adds uncertainty to property owners for Spill Act liability in New Jersey State School Development Authority v. Marcantuone et al. This decision has opened the door for the court to set the due diligence standards for liability for pre-1993 property purchases, rather than the Legislature.

The plaintiff sued the former owners of a property, which was condemned by the State, seeking contribution for costs associated with the remediation pursuant to the Spill Act. The Trial Court dismissed the case on defendants' summary judgment motion, based upon the uncontested fact that no contamination occurred during the defendants' ownership and that they had purchased the property prior to 1993.

Plaintiff appealed arguing that the 2001 Amendments to the Spill Act and the defense of all appropriate inquiries presupposes the existence of liability for owners of contaminated property who fail to conduct environmental due diligence. The defendants countered that the legislature did not expressly provide that all persons who acquired title prior to 1993 were in any way responsible for pre-acquisition discharges and if the legislature had wanted to expand the liable parties for property contamination it would have specifically done so. The trial court relied on the White Oak decision to interpret "in any way responsible." On appeal, the plaintiffs argued that the White Oak decision was superseded by the 2001 Amendments to the Spill Act, which were adopted prior to the release of the White Oak decision and became effective one week after the decision. The Appellate Division was persuaded by the plaintiff's argument.

The Appellate Division reversed the trial court's dismissal finding that the defendants can be found "in any way responsible" for the hazardous substances on the property by virtue of their lack of due diligence in discovering the contamination when they purchased the land.

The Appellate Division directed that, on remand, the trial court must first determine what the generally accepted good and customary standards were at the time the defendants acquired title to the property. The defendants then can present evidence as to what pre-purchase efforts and investigation they undertook. The Court concluded that "liability will depend upon whether defendants satisfied the prevailing standard as found by the court."

Related Practice: Environmental & Land Use

Attorney: Frances Stella

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NJ Supreme Court Affirms that Spill Act Requires a Reasonable Link Between Discharge and Contamination to Hold an Operator LiableSeptember 28, 2012

In New Jersey Department of Environmental Protection, et al. v. Ofra Dimant, et. al., the New Jersey Supreme Court affirmed the Appellate Division's ruling that the New Jersey Department of Environmental Protection ("NJDEP") did not prove a nexus between a discharge by Defendant and the contamination in the groundwater.

NJDEP filed a New Jersey Spill Act claim for contribution and indemnification pursuant to the New Jersey Spill Act, N.J.S.A. 58: 10-23.11 to 23.24 ("Spill Act") against several defendants, including Sue's Clothes Hanger and its individual owners ("Defendant") alleging that the laundromat and dry cleaner was responsible for groundwater contamination on properties in Bound Brook. The only remaining Defendant in the case was the operator, who leased a unit of a strip mall that was north and northeast of the properties that had contaminated groundwater and had operated dry cleaning machines for the period of May 1987 to early 1987. NJDEP submitted evidence that there had been a pope leaking tetrachloroethylene ("PCE") and other contaminants that discharged onto the asphalt covered are at the exterior of the Defendant's unit during the period of Defendant's operations. Significantly, NJDEP did not investigate the leaking pipe discharge further to determine if the contents of the pope were entering the soils or the groundwater.

The trial court held the NJDEP did not prove a nexus between the alleged contamination from the Defendant's operations at the property and the groundwater contamination in the general area. The Appellate Division affirmed the trial court's ruling.

Justice LaVecchia wrote that NJDEP needs to demonstrate a nexus between the Defendant's discharge during its period of operation and the groundwater contaminate at issue. The Supreme Court held that NJDEP did not establish a nexus or pathway in this case. The court noted that there must be a reasonable link between the discharge, the discharger and the contamination at the specific site. In this case, NJDEP did not make the requisite connection showing how the PCE contaminated water dripping from a pipe that discharged to an asphalt covered area behind the unit during the period the Defendant leased the unit reasonably could have made its way into the groundwater.

Related Practice: Environmental & Land Use

Attorney: Frances Stella

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New Jersey Appellate Division Invalidates DEP Landowner Chemical ExemptionJuly 18, 2012

On July 6, 2012, the New Jersey Appellate Division published its decision in Des Champs Laboratories, Inc. v. Martin, A-3235-10, and ruled certain Department of Environmental Protection ("DEP") regulations that bar sales of industrial properties containing trace amounts of hazardous substances are invalid. Specifically, the Court was asked whether the Industrial Site Recovery Act of 1993 ('ISRA"), the Site Remediation Reform Act of 2009 ("SRRA"), or any other statue authorities the DEP to impose obligations upon the owners of industrial establishments that stored or handled small quantities of hazardous substances, as a condition of obtaining a "de minimis quantity exemption" ("DQE") from ISRA requirements.

By way of background, the Environmental Cleanup Responsibility Act of 1983 ("ECRA") required properties with environmental issues to be "in an environmentally appropriate condition" prior to being sold. In order to ensure same, owners planning to close industrial businesses were required to complete an arduous process regulated by the DEP, or risk having a subsequent sale or business transfer invalidated. As the ECRA evolved, it became clear that its obligations upon owners and operators that handled only "de minimis" quantities of hazardous substances were too onerous, leading the DEP to promulgate regulations for a DQE. The DQE allowed for an owner or operator to simply sign an affidavit stating the site was not subject to the discharge of hazardous substances, or that any such discharge had been remediated.

In Des Champs, the Court was asked to determine the validity of regulatory provision N.J.A.C 7:26B-5.9 requiring the affidavit from a DQE applicant to certify the property where the de minimis quantities have been present is now "clean," and the validity of related provisions within regulatory provision N.J.A.C. 7:26B-5.9 requiring such applicants to remediate the property if the DEP disapproves the DQE application, and the application is not withdrawn.

From 1982 through 1996, Des Champs Laboratories operated an industrial establishment in Livingston, New Jersey assembling heat recovery ventilators. In 1996 Des Champs' environmental consultant submitted a General Information Notice and a Preliminary Assessment Report to the DEP, which were required by ISRA in anticipation of Des Champs terminating its operations at the Livingston site. Des Champs also submitted a Negative Declaration Affidavit to the DEP in January of 1997, certifying "there have been no discharges of hazardous substances or hazardous wastes from the industrial establishment." In response, the DEP issued Des Champs a "no further action" letter authorizing it to cease operations. Later in 1997, the property was sold to R&K Associates.

Eight years later, the DEP was investigating the potential source of ground water contamination in Livingston, and determined the source of the contamination originated in Des Champs' former property.  The DEP therefore issued Des Champs a letter rescinding its 1997 "no further action" letter, and notifying Des Champs it "no longer had the required authorization that allowed the sale of property to occur in 1997." The DEP further instructed Des Champs that in order to regain compliance with ISRA, an application for remediation was to be submitted within fifteen (15) days of receiving the notification.  Lastly, the DEP directed Des Champs to conduct an investigation of its former site to further define the source of ground water contamination, and to submit a preliminary assessment and site investigation report with the appropriate review fees for further review by the DEP, within one hundred eighty (180) days.

Rather than complying with the DEP's direction, Des Champs submitted to the DEP a DQE affidavit on March 23, 2009 pursuant to N.J.S.A. 13:1K -9.7 and N.J.A.C. 7:26B -2.3 (now N.J.A.C. 7:26B-5.9). In the accompanying correspondence, Des Champs's counsel noted that because Des Champs handled a de minimis quantity of hazardous substances, its operations were exempt from ISRA. On April 21, 2009, the DEP denied Des Champs' application for DQE stating "the overlying presumption that an industrial establishment, without regard to fault, should not qualify for a DQE when contamination is known to exist at the site." After additional correspondence, neither Des Champs nor the DEP changed its position. As a result, on September 30, 2010, the DEP issued a directive pursuant to the New Jersey Spill Act (N.J.S.A. 58:10-23.11) directing Des Champs to hire a licensed site remediation professional to perform the remediation; to complete delineation of the immediate environmental concern contaminant source; to conduct remediation; and the establish a remediation funding source.

After analyzing the overview of the statutory framework and the history of the corresponding regulatory provisions, the Court ruled the DEP had exceeded its statutory authority "by injecting into the DQE process a requirement that the governing statutes do not authorize, i.e., forcing an applicant that has only handled or stored de minimis quantities of hazardous materials to provide a certification that the property is free of contamination before its operations can be closed or title to its property transferred." The Court found the DEP actions to be inconsistent with the intent of the SRRA and the ISRA, which both sought to streamline the regulatory process, and minimize government involvement. The Court's decision, however, was made without prejudice to the DEP's ability to seek a cleanup of such an industrial site under other environmental statutes and regulations that are not tied to the DQE approval process.

Related Practice: Environmental & Land Use

Attorney: Anthony Juliano

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NJ Appelate Divistion Holds NJDEP Must Prove Nexus Between Discharge and Contamination Under Spill ActApril 14, 2011

In New Jersey Department of Environmental Protection, et al. v. Ofra Dimant, et al., Docket No. A-3180-09T2, the Appellate Division upheld the trial court's ruling that the New Jersey Department of Environmental Protection ("NJDEP") did not prove a nexus between a discharge by defendant and the contamination in the area.

NJDEP filed a New Jersey Spill Act claim for contribution and indemnification pursuant to the New Jersey Spill Act, N.J.S.A. 58:10-23.11 to 23.24 ("Spill Act") against several defendants, including Sue's Clothes Hanger and its individual owners ("defendant") alleging that the laundromat and dry cleaner was responsible for water contamination on properties in Bound Brook. The defendant occupied a unit of a strip mall that was north and northeast of the contaminated properties. There were also several other dry cleaners in the area as well as a gasoline station and two Superfund sites.

The defendant began its operation as a self-serve laundromat and a twice-per-week dry cleaner, after purchasing the property from another dry cleaner in May 1987. In early 1989, the defendant discontinued use of the dry cleaning machines and dismantled and sealed the discharge pipes, making the period of defendant's operations, for purposes of this case, May 1987 to early 1989. In 2000, the NJDEP investigator and geologist found that the potable wells with the highest levels of perchloroethylene ("PCE") in 1988 and 1989 were located behind the defendant's property and another dry cleaner. NJDEP took additional samples, which resulted in soil samples containing almost undetectable levels of PCE, trichloroethylene ("TCE"), and dichloroethylene ("DCE"), but groundwater samples above the maximum contamination levels ("MCL") for PCE and methyl tertiary butyl ether ("MTBE"), a gasoline additive. The investigator concluded that the defendant was the primary source of the contamination but that the presence of TCE and DCE indicated that the contamination had been there for a long time prior to 1988.

The defendant's expert also opined that the contamination was there prior to the defendant's business operations and certain contamination was from the upgradient gasoline service station. The NJDEP investigator and the defendant's expert had differing views of the direction of the flow of groundwater.

In 2004, NJDEP filed a complaint against the defendant, the strip mall owner, the other dry cleaner and the individual owners of the dry cleaner seeking contribution for the costs of the environmental remediation. The defendant filed an answer, counterclaim and third-party complaint against prior owners and operators, including the previous owners of their business. Several defendants settled with the NJDEP, while others filed for and received bankruptcy protection. The defendant was the only remaining party at trial. The trial judge found that the NJDEP did not establish by a preponderance of the evidence that there was a nexus between discharge by the defendant and the groundwater contamination on the adjacent properties. The judge held that even though the Spill Act provides for strict liability, there is a requirement that a nexus between the discharge and the consequent damages be proved. The judge made several other findings regarding the NJDEP's investigation, as well as the historic operations at the site. NJDEP appealed.

The Appellate Division noted that Spill Act cases are generally focused on the connection between the discharge and discharger and that the "in any way responsible" standard is usually interpreted very broadly. The Court does, however, note that the statute's definition of discharge specifically refers to a resulting damage. The NJDEP did not cite any cases in which a discharger is held liable under the Spill Act without some proof of damage. The Court held that it was NJDEP's burden to demonstrate that the defendant had some connection to the PCE contamination or had contributed to the contamination from previous site operations. The Appellate Division also upheld the trial court's finding that the NJDEP did not prove whether the defendant's predecessors had caused the contamination and not one of the other tenants in the strip mall; thus the defendant could not be found liable as the successor operator, even though it continued the business operations of the previous owner as there was insufficient evidence to establish a discharge.

This case demonstrates that it is critical to demonstrate that it is critical to demonstrate a nexus between a discharge and the contamination.

Related Practice: Environmental & Land Use

Attorney: Frances Stella

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