New Jersey's Appellate Division Opens Door to Spill Act Claims Against the State

Factual Background and Procedural History
In the 1950s, the State of New Jersey, Old Bridge Township, and the United States Army Corps of Engineers entered into an agreement for the construction and maintenance of a beach-fill protective structure, a levee, and other measures to address shoreline and beach erosion in the Laurence Harbor area of Old Bridge Township. The project was completed in 1966. Under the parties’ agreement, the State and the Township were required to maintain, operate, and inspect the beach-fill 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 beach-fill 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.

It is significant that 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 U.S. 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 New Jersey’s Tort Claims Act (TCA), sections 59:1-1 to 12-3 of the New Jersey Statutes; 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.

The trial court denied the State’s motion to dismiss. See NL Indus., Inc. v. 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.”

The Trial Court’s Ruling
In holding that the State is subject to liability under the Spill Act, the trial court in NL Industries 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. Stat. Ann. § 58:10-23.11g(c)(1). 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. Stat. Ann. § 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. Stat. Ann. § 58:10-23.11f(a)(2). 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 New Jersey, Department of Environmental Protection 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.

The trial court in NL Industries also held that the TCA, which limits the tort liability of the State and other public entities by providing specific immunities, 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 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.

Last, the trial court held that NL adequately pled 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, it imposes strict liability on “any person who has discharged a hazardous substance, or is any way responsible for any hazardous substance.” N.J. Stat. Ann. § 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 Department of Environmental Protection 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.” The trial court 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.

Conclusion
The NL Industries decision, barring reversal by the New Jersey Supreme Court, can be expected to change the strategy of responsible parties for pursuing contribution claims under the Spill Act. In addition to seeking contribution from private entities, responsible parties now have a second, often ignored, possible avenue of recovery of cleanup costs under the Spill Act: the State of New Jersey. And given the broad scope of the Spill Act, the State may be subject to liability for contribution if it “is in any way responsible” for the hazardous substance—even if it was not an active participant in the discharge.

Keywords: environmental litigation, New Jersey Spill Compensation and Control Act, Raritan Bay Slag Superfund Site, sovereign immunity

_{John J. DiChello is a partner with Blank Rome LLP in Philadelphia, Pennsylvania.}

^{Copyright © 2015, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).}