Coming of Age for Spill Act Liability: The State Is Not Considered a “Person” with Liability until after 1977

Last month the New Jersey Supreme Court held that the State of New Jersey does not have cleanup liability for its actions that pre-date the 1977 enactment of the New Jersey Spill Compensation and Control Act (the “Spill Act”).  NL Industries, Inc. v. State of New Jersey,  (A-44-15)(076550)(Sup. Ct., March 27, 2017).  This decision creates a disparity in liability for private parties, which have retroactive Spill Act liability, and the State, which does not.  This case will certainly impact sites involving pre-1977 discharges where the State may have responsibility and now, as a result of this decision, will not have to contribute to the cost of the remediation.  But, perhaps most striking about this decision is the Court’s rigorous application of the rules of statutory construction in reviewing the enactment of and amendments to the Spill Act.  As a result, after a detailed and somewhat convoluted review, the Court said it could find no evidence that the Legislature clearly and unambiguously intended to abrogate the State’s sovereign immunity for pre-1977 discharges. 

By way of brief background, NL Industries, Inc. (“NL”) brought the case after being compelled to conduct an expensive remediation of the Raritan Bay Slag Superfund Site.  NL brought its action against the State under the Spill Act based upon actions the State took, or failed to take, in the 1960’s and early 1970’s in connection with the construction of a seawall to address beach erosion in the Laurence Harbor.  Material used in the construction included slag, an industrial byproduct, some of which was allegedly brought from the former NL secondary lead smelter in Perth Amboy.  NL’s complaint sought recovery from the State for providing a grant to riparian land owned by the State upon which the seawall was constructed.  In addition, NL alleged that the State had liability because the New Jersey Department of Environmental Protection knew that slag was being used in the construction that was completed in the early 1970’s, but took no action.  All of the State’s actions occurred prior to the 1977 enactment of the Spill Act. 

In response, the State moved to dismiss NL’s complaint, arguing in part that sovereign immunity barred NL’s claims.   The parties did not dispute that, upon the enactment of the Spill Act in 1977, the State has potential liability because the State is expressly included in the Act’s definition of “person.”  N.J.S.A. 58:10-23.11b.  Rather, the question was whether that liability applies retroactively to encompass activities that occurred before the Spill Act became effective. 

The Court engaged in a detailed review of the Spill Act and its various amendments looking for an express intent by the Legislature to have the statute apply retroactively to the State in abrogation of its sovereign immunity.  Even though the Spill Act defines the State as a “person,” and there were amendments that applied Spill Act liability retroactively and that provided the right to contribution from any “person” responsible for a discharge, the Court determined that it could not find the express intent that is needed.   

Justice Albin, the lone dissenter, found that the majority engaged in “interpretive acrobatics” leading to an “absurd result” and that a clear reading of the Spill Act requires treating both private parties and the State the same way because they are both defined as “persons.”  Thus, to the extent the Spill Act applies retroactively to a private entity, it should also apply against the State. 

While the effect of this decision is somewhat limited because it only applies to cases where the State may have liability for pre-1977 discharges, on a broader level, the NL decision appears to be a departure from the long line of cases in New Jersey that have applied the rules of statutory interpretation to limit the defenses available under the Spill Act. For example, as recently as 2015, the Supreme Court held that there is no statute of limitations for private party contribution claims because such a defense is not listed among the available defenses in the Act.  Of course, this case addresses claims against the government, which involves overlapping, but not identical, policy considerations from matters affecting private entities.  Whether in response to this decision the Legislature will act to unequivocally waive sovereign immunity for pre-1997 discharges by amending the Spill Act remains to be seen.  Until that happens, however, do not look to the State to contribute to the cost of remediating their pre-1977 discharges.  

For more information, please contact the author Alexa Richman-La Londe at alalonde@riker.com or any attorney in our Environmental Practice Group.