United States: New Jersey's Appellate Division Holds State May Be Liable For Cleanup Costs Under New Jersey's Spill Act

Last Updated: October 6 2015
Article by John J. DiChello,Jr.
Action Item: On August 26, 2015, in a case of first impression, the Appellate Division of the New Jersey Superior Court in NL Indus., Inc. v. State of New Jersey, No. A0869-14T3, 2015 N.J. Super. LEXIS 161 (N.J. Super. Ct. App. Div. Aug. 26, 2015), held that the State of New Jersey is subject to strict liability for the discharge of hazardous substances under New Jersey’s Spill Compensation and Control Act, N.J.S.A. 58:10-23.11, and is not immunized from liability based on the New Jersey Tort Claims Act, N.J.S.A. 59:1-1 - 12-3 or any other principles of sovereign immunity. This ruling clarifies that a responsible party at a cleanup site may obtain contribution for cleanup and removal costs under the Spill Act from both private and public entities, including the State of New Jersey. The Appellate Division’s decision was approved for publication on September 23, 2015.  

Responsible parties cleaning up contaminated sites in New Jersey now have an additional party to target for contribution to further reduce their liability for cleanup and removal costs: the State of New Jersey itself. Faced with an issue of first impression, the Appellate Division of the Superior Court of New Jersey in NL Indus., Inc. v. State of New Jersey, No. A0869-14T3, 2015 N.J. Super. LEXIS 161 (N.J. Super. Ct. App. Div. Aug. 26, 2015) (approved for publication on September 23, 2015), held that the State of New Jersey is subject to the strict liability provisions of New Jersey’s Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 (“Spill Act”), and cannot evade such liability based on the immunities enumerated in New Jersey’s Tort Claims Act, N.J.S.A. 59:1-1 - 12-3 (“TCA”) or any doctrine of sovereign immunity. This ruling is significant because it will allow responsible parties at cleanup sites to sue not only private, corporate entities for contribution to recover cleanup costs under the Spill Act, but also the state if the state “is in any way responsible” for the discharge of a hazardous substance. The state need not be an active participant in a discharge to be held liable for cleanup costs under the Spill Act; the state may be liable, for example, if it exercised a degree of control over the actual discharger.  In that regard, the ruling in NL Industries also reaffirms that the Spill Act imposes broad liability for discharges of hazardous substances.

Facts

In NL Industries, the State of New Jersey, Old Bridge Township, and the United States Army Corps of Engineers entered into an agreement in the 1950s relating to the construction and maintenance of a beachfill protective structure, a levee, and other measures to address shoreline and beach erosion in the Laurence Harbor area of Old Bridge Township. The project, known as the Shore Protection Project, was completed in 1966. Under the parties’ agreement, the state and the township were required to maintain, operate, and inspect the beachfill and levee structures. 

Thereafter, in the late 1960s, a private developer named Sea-Land Development Corporation acquired property in the Laurence Harbor area, including a portion of what is now called the Raritan Bay Slag (or RBS) Superfund site. Sea-Land proposed construction of a seawall composed of furnace “slag,” a by-product material containing lead and other heavy metals, to replace the beachfill protective structure built as part of the Shore Protection Project.  The state authorized Sea-Land to construct the proposed seawall and fill the adjoining land after Sea-Land accepted certain conditions requested by the state. This work was completed in the early 1970s. 

Significantly, the state did not prohibit Sea-Land’s use of the lead-bearing slag material to construct the seawall. Nor did the state take any action to remove the slag material once the seawall was constructed. This was so even though the state knew the seawall would come into contact with Raritan Bay; state and township officials and citizens raised concerns about the use of lead-bearing slag in the seawall; the New Jersey Department of Environmental Protection inspected the seawall; and several meetings were held to discuss the use of slag, including one at which the state openly acknowledged both ownership of the beach where the seawall was constructed and concerns of “lead slag dumped by Sea-Land.”

In 2009, the United States Environmental Protection Agency (“EPA”) added the RBS site (which included the seawall and the western jetty constructed by Sea-Land) to the National Priorities List after detecting elevated levels of lead and other heavy metals in soil, beach sand, and sediment. In 2014, the EPA issued a Unilateral Administrative Order requiring NL to remediate the site after identifying NL’s lead-smelting facility in Perth Amboy, New Jersey, as a source of contamination. NL allegedly produced at that facility some of the slag that Sea-Land used to build the seawall and fortify the western jetty. The total cost to clean up the RBS site was estimated to be $79 million. 

NL sued the state and other public and private entities to recover costs associated with the cleanup of the RBS site under the Spill Act. For the state’s part, NL contended that the state caused and contributed to contamination at the site by approving Sea-Land’s construction of the seawall and western jetty that incorporated the use of lead-bearing slag and compounding the problem by failing to take appropriate action to address the slag. The state moved to dismiss on three grounds: (1) the Spill Act does not retroactively abrogate the state’s sovereign immunity from lawsuits for conduct occurring before the Spill Act’s effective date of April 1, 1977; (2) NL failed to comply with the procedural and substantive requirements of the TCA; and (3) NL did not plead facts sufficient to find the state “in any way responsible” for contamination at the site under the Spill Act. 

Procedural History

The trial court denied the state’s motion to dismiss. See NL Indus., Inc. v. State of New Jersey, No. MID-L-1296-14 (N.J. Super. Ct. Law Div. Aug. 27, 2014) (Wolfson, J.). On appeal, the Appellate Division of the Superior Court affirmed the trial court’s decision “substantially for the reasons set forth by [trial court] Judge Douglas K. Wolfson in his thoughtful and erudite seventeen-page written opinion that accompanied the order denying the motion.” The Superior Court incorporated by reference the trial court’s analysis in its decision and did not provide any additional rationale of its own.

The Trial Court Ruling Affirmed by the Appellate Division        

In holding that the state is subject to liability under the Spill Act, the trial court in NL Industries was guided by three principles of statutory construction: (1) statutory language should be interpreted using the ordinary, plain meaning of the language; (2) any waiver of sovereign immunity must be narrowly construed; and (3) statutory amendments should be read in harmony with the original statutory language. 

Against this backdrop, the trial court began by stating that the New Jersey Legislature expanded the scope of the Spill Act in 1979 by amending it to provide that “any person who has discharged a hazardous substance, or is in any way responsible for any hazardous substance, shall be strictly liable, jointly and severally, without regard to fault, for all cleanup and removal costs no matter by whom incurred.” N.J.S.A. 58:10-23.11g(c)(1) (emphasis added). Moreover, since its inception, the Spill Act has expressly defined the term “person” to include—rather than exclude—the “State of New Jersey and any of its political subdivisions or agents.” N.J.S.A. 58:10-23.11b. In addition, the court stated that the legislature amended the Spill Act in 1991 to expressly grant a right of contribution for any person who has discharged a hazardous substance “against all other dischargers and persons in any way responsible for a discharged hazardous substance”—again without any exclusion or exception for the State. N.J.S.A. 58:10-23.11f(a)(2) (emphasis added). Therefore, based on the plain meaning of the statutory language, the court concluded that the state is subject to strict liability under the Spill Act.

The trial court rejected the state’s argument that the Spill Act should not be applied retroactively to the state’s conduct before the Spill Act’s effective date, citing the New Jersey Supreme Court’s decision in State, Dep’t of Envtl. Prot. v. Ventron Corp., 94 N.J. 473 (N.J. 1983). In that, case, the Supreme Court upheld retroactive application of the Spill Act and imposition of liability for a party’s actions that occurred before the effective date of the Spill Act because the Spill Act explicitly provides that it should be given retroactive effect. Consistent with Ventron, the court in NL Industries gave retrospective effect to the Spill Act in this case.

The trial court in NL Industries also held that the TCA neither provides the state with immunity for discretionary actions nor mandates that a plaintiff like NL adhere to certain procedural or substantive requirements, such as a notice of claim, before filing its contribution action under the Spill Act. The TCA limits the tort liability of the state and other public entities by providing specific immunities, including from liability for injuries resulting from the exercise of judgment or discretion. N.J.S.A.59:2-3. The trial court noted that at least one federal district court has concluded that the substantive requirements and immunities of the TCA do not apply to the Spill Act. The court added that the TCA and the Spill Act could not be read in pari materia, or to achieve a “unitary and harmonious whole,” because the two statutes were designed to serve different purposes and were enacted at different times for “wholly different ends.” Furthermore, the trial court could not divine any intent in the legislative history of the Spill Act to make the procedural protections of the TCA applicable to Spill Act claims.

Lastly, the trial court held that NL adequately pleaded a claim under the Spill Act against the state. The court first rejected the state’s argument that it could not be liable under the Spill Act when no action or omission of the state was directly responsible for the discharge. The court reasoned that the Spill Act is not limited to active participants in the discharge of hazardous substances. Rather, the plain language of the Spill Act is broadly worded to impose strict liability on “any person who has discharged a hazardous substance, or is any way responsible for any hazardous substance” and does not distinguish between public and private actors. N.J.S.A. 58:10-23.11g(c)(1). 

The court then applied the two-prong nexus test for determining whether a contributing party may be held liable under the Spill Act established by the New Jersey Supreme Court in New Jersey Dep’t of Envtl. Prot. v. Dimant, 212 N.J. 153 (N.J. 2012). The first prong requires evidence of “some connection between the discharge complained of and the alleged discharger,” and the second prong requires a showing of a nexus between “the discharge for which one is responsible—in any way—and the contaminated site.” In other words, a party must demonstrate a reasonable nexus or connection between the alleged discharge and the contamination. That may be shown if a party had some degree of control over the direct discharger. The trial court in NL Industries concluded that NL sufficiently alleged facts to support its contention that the state constitutes a person “in any way responsible for any hazardous substance” under the Spill Act because NL alleged that the state (1) played a significant role in planning and constructing the seawall and western jetty; (2) had actual knowledge of the use of lead-bearing slag at the RBS site; (3) actively operated and maintained the Shore Protection Project that was supplemented by the seawall; and (4) failed to take steps to prevent or abate the risk of contamination despite having notice of the potential harm. These facts, if proven, would constitute a sufficient nexus between construction of the seawall and western jetty of lead-bearing slag and the actions and omissions of the state for purposes of Spill Act liability.

Conclusion

The NL Industries decision is an outright victory for responsible parties saddled with the costs to clean up contaminated sites in which the state bears some level of responsibility for the contamination. Because environmental cleanup costs can be costly, the addition of just one more potentially responsible party to help shoulder the burden is not inconsequential. Unless the New Jersey Supreme Court states otherwise, responsible parties may minimize their share of cleanup costs by seeking contribution relief under the Spill Act from not only private entities, but also the state—even if the state was not an “active participant” in, or directly responsible for, the discharge and simply had some level of control over the discharger. NL Industries should have an immediate impact on the scope and nature of contribution claims under the Spill Act.

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John J. DiChello,Jr.
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