In a recent decision, the New Jersey Supreme Court held that in an action to obtain damages under the Spill Compensation and Control Act (Spill Act), the Department of Environmental Protection (DEP) must show a reasonable link between the discharge and the contamination at a specifically damaged site. N.J. Dep't of Environmental Protection v. Ofra Dimant, 2012 N.J. Lexis 956, at *54 (N.J. Sept. 26, 2012). According to the state Supreme Court, DEP had failed to show a reasonable link, and the court denied DEP's claim for damages under the Spill Act.
New Jersey passed the Spill Act in 1976 to protect the public health, safety and welfare and to preserve the state's lands, waters and natural resources. The Spill Act authorizes DEP to respond to environmental contamination by imposing strict liability upon any person who has discharged or is in any way responsible for the discharge of any hazardous substance. DEP also may recover from responsible parties up to three times the cost of remediation when the responsible parties do not participate in the cleanup.
In Ofra Dimant, a 1988 DEP investigation of residential wells revealed the presence of perchloroethylene (PCE), which is a chemical used in the dry-cleaning industry and automobile shops. PCE is a volatile organic compound that quickly evaporates when exposed to air and dissolves in water. Although a gas station, a car dealership and two other dry cleaners were located nearby, the investigation focused on two dry cleaners: Sue's and Zaccardi's.
At Sue's, the investigation found a leaking pipe with more than three thousand times the permitted level of PCE. However, the investigators never returned to retest the pipe. Notably, the leakage from Sue's must have stopped in early 1989 because Sue's discontinued its dry-cleaning business at that time. More than 10 years later in 2000, DEP prepared a report concluding that Zaccardi's and Sue's were responsible for the PCE contamination. At trial, DEP could not offer any evidence about whether the pipe continued to drip, the frequency of the drip or where the drip flowed.
The trial court held that DEP did not establish by a preponderance of the evidence that Sue's contributed to the contamination of the groundwater. The trial court emphasized that dry cleaners had operated in the building since the 1950s. Further, DEP could not offer any evidence linking the PCE contaminated groundwater to Sue's, and other nearby businesses could have been responsible for the PCE discharge. DEP appealed the trial court's decision, and the appellate court affirmed, stating that the Spill Act requires a causal nexus between a discharge and damages from the discharge.
Upholding the decision, the New Jersey Supreme Court first defined the term discharge as applied to the Spill Act. A discharge occurs "when a hazardous substance is spilled or leaked, or otherwise released, 'into the waters or onto the lands of the State, or into waters outside the jurisdiction of the State when damage may result to the lands, waters or natural resources within . . . the State.'" Id. at *34. The state Supreme Court found that Sue's had discharged PCE and ruled that the Spill Act contains no de minimis exception.
The New Jersey Supreme Court proceeded to state the analysis required for DEP to prove a damages case. First, DEP must establish that the party is responsible for the discharge. Once this element is satisfied, DEP next must show a nexus between the discharge and contaminated site. The court defined the nexus between the discharge and the contamination at the site to be a reasonable link and specifically rejected a tort law proximate cause standard because it would frustrate the Spill Act's purpose.
It is important to note that the New Jersey Supreme Court's causation analysis only affects a case where DEP is seeking damages. The Spill Act also authorizes DEP to seek injunctive relief on proof of the existence of a discharge. Here, DEP immediately could have elected to pursue injunctive relief against Sue's in 1988 when it found three thousand times the permitted level of PCE in the discharge coming from Sue’s store. However, because DEP chose to pursue a damages claim against Sue's, DEP had to demonstrate a reasonable link between the discharge and the contamination at the site.
Owners of property in New Jersey should be encouraged by the Supreme Court of New Jersey's decision in Ofra Dimant. The state Supreme Court's decision clarifies confusion that had existed about the level of causation required under the Spill Act and requires a plaintiff to demonstrate a reasonable link between the discharge and the contamination at the specific site.
If you would like more information about this Alert, please contact Drew K. Kapur, any member of the Real Estate Practice Group or the attorney in the firm with whom you are regularly in contact.
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