United States: The State Is Not Liable For Pre-Enactment Conduct Under The Spill Act

In NL Industries, Inc. v. State, Docket No. 076550, decided on March 27, 2017, the Supreme Court of New Jersey held that the State of New Jersey's waiver of sovereign immunity for contribution claims under the Spill Compensation and Control Act ("Spill Act"), N.J.S.A. 58:10-23.11, et seq., does not apply to State conduct that occurred before the Spill Act's enactment. The Court's decision will have significant implications, including creating immunity for the State and its political subdivisions from Spill Act liability for historic contamination.

Background

In 1968, a private developer notified the State that it desired to build a seawall using "slag" to replace an existing beachfill protective structure. The State took a hands-on role in seeking and obtaining federal and local approvals for the seawall project. During the late-1960s and early-1970s, the seawall was constructed, at least partially, on beach property owned by the State. Lead contamination was found at the seawall and in surrounding areas and, in 2009, the United States Environmental Protection Agency ("EPA") designated the area the Raritan Bay Slag Superfund Site. The EPA alleged that NL Industries, Inc.'s secondary lead smelting operations in Perth Amboy, New Jersey were a source of the slag used to construct the seawall and directed NL Industries to remediate the contamination.

NL Industries, represented by the Archer law firm, filed a contribution action against the State under the Spill Act. The State moved to dismiss, arguing: (1) sovereign immunity bars Spill Act claims against the State for conduct prior to the Spill Act's 1977 effective date; (2) the "public function" immunities of the Tort Claims Act should be harmonized with the Spill Act; and (3) the facts alleged in the Complaint failed to show that the State is "in any way responsible for a hazardous substance." The trial court denied the State's motion and the Appellate Division affirmed. See NL Indus., Inc. v. State, 442 N.J. Super. 428, 499 (Law Div. 2014), aff'd, 442 N.J. Super. 403 (App. Div. 2015). The Supreme Court of New Jersey granted the State's motion for leave to appeal.

Sovereign Immunity and Retroactive Liability

New Jersey courts have long recognized that "[a]ny waiver of sovereign immunity cannot be implied, but must be unequivocally expressed." Jacobson v. United States, 422 N.J. Super. 561, 568 (App. Div. 2011). Similarly, there is a presumption of prospective application of statutes and retroactive application is allowed only when such intent is expressly stated or clearly implied in the statute. See Gibbons v. Gibbons, 86 N.J. 515, 522-23 (1981).

In 1976, the Legislature enacted the Spill Act and provided, under section 8, that "any person" who has discharged a hazardous substance "shall be strictly liable . . . for all cleanup and removal costs." L. 1976, c. 141, § 8(c). The Spill Act defined a "person" to include the "State of New Jersey". L. 1976, c. 141, § 3(n). The Court acknowledged that the inclusion of the State in the definition of a "person" "signaled the Legislature's clear intention to include the State as a party responsible for its hazardous discharges and brought about the waiver of sovereign immunity for this new breed of statutory liability . . . ." Section 7 of the Spill Act required the NJDEP to remove or arrange for the removal of a discharge. At the time, the Spill Act contained no retroactive liability provision.

In 1979, sections 7 and 8 were amended. Retroactive liability was introduced through a new provision in section 7: "the [NJDEP], after notifying the administrator and subject to the approval of the administrator with regard to the availability of funds therefor, may remove or arrange for the removal of any hazardous substance which . . . [h]as been discharged prior to the effective date of the act . . . ." L. 1979, c. 346, § 4(b). The amendment authorized the NJDEP to use the Spill Fund to remediate pre-enactment discharges. Section 8 was amended to create liability for any person who has discharged a hazardous substance as well as any person "in any way responsible for any hazardous substance which the [NJDEP] has removed or is removing." L. 1979, c. 346, § 5(c).

In 1991, the Legislature again amended section 8 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 for all costs "no matter by whom incurred." L. 1991, c. 85, § 4(c). This authorized private parties who incurred cleanup costs to seek contribution from other responsible parties, including the State and its political subdivisions.

In making these amendments, the Legislature did not alter the definition of a "person" or otherwise signal any intent that the State's sovereign immunity should not continue to be deemed waived to the full extent of the statute's scope. NL Industries argued that this was sufficient indication of the Legislature's intent to waive sovereign immunity for private party contribution claims against the State for pre-enactment conduct. That interpretation is consistent with the well-established principle that the Spill Act is to be interpreted broadly to accomplish its remedial goals, including the goal of ensuring that the parties responsible for contamination pay to clean it up. See State Dep't of Envtl. Prot. v. Ventron, 94 N.J. 473, 496 (1983).

However, the Court held that failing to alter the definition of a "person" to exclude the State when the Legislature subsequently expanded the scope of the Spill Act to permit private parties to file contribution actions for pre-enactment discharges does not provide convincing evidence of legislative intent to waive the State's sovereign immunity retroactively. Rather than trying to ascertain the Legislature's intent from the current language of the Spill Act, the majority opinion, written by Justice LaVecchia, analyzed the Legislature's intent at each successive amendment. The Court found that the amendments were not accompanied by an express indication of legislative intent to extend retroactive liability to the State. Finding no clear and explicit statement by the Legislature waiving the State's sovereign immunity under the Spill Act for the State's liability for pre-enactment conduct causing contamination, the Court held that the provision in the Spill Act creating retroactive liability for "persons" responsible for a discharge does not apply to the State.

The Other Issues Raised By the State

The Supreme Court offered a few short remarks on the other issues raised by the State's appeal. The Court rejected the State's argument that the Spill Act needed to be harmonized with the Tort Claims Act, holding that the notice-of-claim requirements of the Tort Claims Act do not apply to Spill Act cases. The Court also addressed, in dicta, the State's argument that it cannot be liable for discretionary government activities, observing that "we can find no clear evidence in the legislative history of the Act that it was intended to strip the State of immunity for the discretionary governmental activities of a sovereign."

The Dissent

Justice Albin's dissenting opinion argued that because there was no ambiguity regarding how the Legislature defined a "person," there was no doubt that the Legislature intended the Spill Act to apply retroactively to the State. The dissent noted that the majority's interpretation of the Spill Act will lead to the inequitable result that when the State and a private party are both responsible for a site contaminated before enactment of the Spill Act, the private party is liable for the entire cleanup even if that party's share of responsibility is small compared to that of the State.

Implications

The primary implication of the Court's decision is to immunize the State from liability for contamination it created prior to 1977. Many private parties bring contribution actions for recovery of cleanup costs in federal court under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601, et seq. However, pursuant to the Eleventh Amendment, the State is immune from suit in federal court for environmental contamination under CERCLA. See Seminole Tribe v. Florida, 517 U.S. 44, 71 (1996). Thus, the New Jersey Supreme Court's new decision in the NL Industries case effectively insulates the State from liability for pollution it caused before 1977. The decision also shields the State's political subdivisions from Spill Act liability for pre-enactment conduct, though such political subdivisions do not enjoy Eleventh Amendment immunity from CERCLA actions.

The Court's opinion also limited its prior ruling in Morristown Assocs. v. Grant Oil Co., 220 N.J. 360 (2015). In Morristown Assocs., the issue was whether the statute of limitation for injury to real property was available as a defense in Spill Act contribution actions, despite the fact that the Spill Act itself contained no limitations period for such claims. The Court held that the only defenses attributable to Spill Act liability are those expressly specified in the statute and a contribution defendant cannot avail itself of statutory or common law defenses beyond those listed in N.J.S.A. 58:10-23.11g(d). See Morristown Assocs., 220 N.J. at 382. However, in a footnote in its new NL Industries decision, the Court distinguishes the Morristown Assocs. case on the basis that it dealt with "defenses," not "immunities." This may open the door for arguments from responsible parties who attempt to avoid Spill Act liability by characterizing defenses as "immunities."

The Court's decision also suggests how future cases concerning retroactive liability and sovereign immunity might be analyzed. Rather than focusing on the plain language of a statute, the Court's analysis may be to trace each amendment of the statute from its inception. Statutes with seemingly clear waivers of sovereign immunity on their face may be subject to a deeper analysis of legislative intent when challenged by the State or its political subdivisions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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