Environmental Law

Dirty Dirt or Clean Fill – Absent Proof It’s Dirty, New Jersey Court Says No Liability for Disposal of Clean Fill
New York Extends Statute of Limitations for Superfund Site Tort Claims
New Jersey Appellate Division Holds Environmental Escrow in Condemnation Cases Set at Cost of Remediation to Achieve Highest and Best Use
Equity Prevails Over Technicality: NJ Court Finds Defense of Laches Bars Spill Act Claim
Regulatory Update
New Jersey Legislative Update
 

Dirty Dirt or Clean Fill – Absent Proof It’s Dirty, New Jersey Court Says No Liability for Disposal of Clean Fill 

In recent years, the New Jersey Department of Environmental Protection (“NJDEP”) has focused on addressing the improper disposal of contaminated soil, which can result in soil piles that create environmental and health risks from polluted run-off. To address one such site, in 2011 the NJDEP filed suit alleging that an approximately 60-foot high contaminated soil stockpile in Woodbridge, New Jersey had been operated as an illegal landfill for over 11 years. NJDEP filed suit against the property owner and the business operator, seeking to hold them responsible for violating environmental laws and for the cleanup of the site. NJDEP also sought the same relief against several companies that brought material, usually from utility line or roadway projects, to the site for disposal (the “Contractor Defendants”). In a recent decision, the Court granted the Contractor Defendants’ motion for summary judgment finding there is no liability resulting from the disposal of “clean fill” at the site. New Jersey Department of Environmental Protection v. LWS Spector-Woodbridge Company, LLC et al., Docket No. C-107-11 (Ch. Div. Sept. 15, 2016).

The Court disagreed with NJDEP’s assertion that the Contractor Defendants were subject to the New Jersey Solid Waste Management Act (“SWMA”) when bringing “clean fill” to the site. The Court looked at the solid waste regulations and found that the term “clean fill” is defined as uncontaminated “inert solid such as rock, soil, gravel, concrete, glass and/or clay or ceramic products.” N.J.A.C. 7:26-1.4. The Court went on to note, however, that the term “clean fill” is not used anywhere else in the regulations and concluded that is because “clean fill” is not solid waste and, thus, is not regulated by the SWMA. Accordingly, the Contractor Defendants had no liability under the SWMA for the disposal of “clean fill.”

Applying the New Jersey Supreme Court holding in New Jersey Department of Environmental Protection v. Dimant, 212 N.J. 153 (2012) to the SWMA, the Court found that to prevail on its claim, the NJDEP was required to establish a nexus or that it was more likely than not that some solid waste found at the site had been brought there by the Contractor Defendants. Through discovery, however, the Contractor Defendants established that any materials that would not qualify as “clean fill,” such as asphalt and concrete with rebar, were separated out at the point of generation and transported to another facility for disposal. Only the remaining soil, which may have contained pieces of brick or concrete, was brought to the Woodbridge site as “clean fill.” The operator of the site corroborated the Contractor Defendants’ account, testifying that he inspected every load and the only material accepted from the Contractor Defendants was “clean fill.” In addition, the evidence established that the Contractor Defendants contributed approximately 71% of the material found at the site, with many other parties contributing the remainder.

The Court found that, despite having had years to collect evidence, including by conducting inspections while the site was operating, the NJDEP did “not have an ounce of proof” that the Contractor Defendants brought anything other than “clean fill” to the site. The Court went on to hold that NJDEP cannot use circumstantial evidence (or res ipsa loquitur) to establish a nexus between the Contractor Defendants and the solid waste at the site, stating that “[j]ust because the dirt pile at the. . . site contains solid waste does not as a matter of law lead to liability for the Contractor Defendants.”

Similarly, the Court found that the cross-claims brought against the Contractor Defendants by the property owners under the New Jersey Spill Compensation and Control Act (the “Spill Act”) were similarly defective because there was no proof that the “clean fill” brought to the site by the Contractor Defendants contained hazardous substances. Thus, absent a nexus between the Contractor Defendants and any contaminated material at the site, the owners were unable to sustain a Spill Act claim.

This decision expands Dimant beyond the Spill Act and opens a new avenue of defense because it requires NJDEP to show a reasonable nexus or connection when pursuing violations of the SWMA. Dimant has had and will continue to have a significant impact on litigation strategy for NJDEP as well as defendants.

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New York Extends Statute of Limitations for Superfund Site Tort Claims  

The New York State Legislature recently passed a law allowing plaintiffs to pursue “personal damages” for injuries caused by “exposure to any substance or combination of substances contained within an area designated as a [S]uperfund site” under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) or New York’s Environmental Conservation Law within three years after the site’s designation. CPLR 214-f. Although characterized by its Assembly sponsors as a “narrowly tailored legal mechanism” in response to the highly publicized water contamination in the town of Hoosick Falls, the law could have broad and unpredictable effects. It is certain, however, to encourage litigation.

Prior to the passage of CPLR 214-f, the statute of limitations for personal injury claims arising from exposure to hazardous substances was governed by the interplay between New York’s discovery rule, CPLR 214-c, and CERCLA’s federally required commencement date, 42 U.S.C. § 9658. Under this scheme, plaintiffs were required to bring these claims either (1) within three years of discovery of the injury on which the claim is based (or within three years of the date the injury should have been discovered), or (2) within one year of discovering the cause of the injury, provided that scientific knowledge identifying the cause of the injury did not exist in the three years after the injury was discovered. In re Pfohl Bros. Landfill Litig., 26 F. Supp. 2d 512, 531 (W.D.N.Y. 1998), vacated on other grounds by Freier v. Westinghouse Corp., 303 F.3d 176 (2d Cir. 2002). The new statute discards this complex regime for personal injury claims arising from newly listed Superfund sites. While CPLR 214-f uses the enigmatic term “personal damages,” the statutory heading demonstrates the Legislature’s intent to extend the statute of limitations only for personal injury claims. Tort claims for damages to property, such as trespass and nuisance, from a Superfund site remain subject to the three-year discovery rule of CPLR 214-c. Jensen v. Gen. Elec. Co., 82 N.Y.2d 77 (1993).

CPLR 214-f presents thorny retroactivity questions. Plainly, claims arising from a site listed after the law’s effective date will benefit from the extended statute of limitations. But will the statute apply retroactively to sites listed in the three years before CPLR 214-f was enacted? To answer this question, courts may be called upon to decide whether CPLR 214-f is a remedial statute designed to correct imperfections in existing law. City of New York v. LaserShip, Inc., 33 F. Supp. 3d 303, 315 (S.D.N.Y. 2014). If so, these prior listings also would be interpreted to extend the limitations period. Note, however, that if a plaintiff’s claim would have been time-barred before passage of CPLR 214-f, the statute may be deemed unconstitutional as applied to such claims because of New York’s limitations on “revival statutes” that resurrect an already time-barred claim. Although revival statutes for toxic tort personal injury claims have been upheld, Hymowitz v. Eli Lilly & Co., 73 N.Y.2d 487 (1989), courts are more skeptical of revival statutes benefitting plaintiffs who also could avail themselves of the CPLR 214-c discovery rule. In re World Trade Ctr. Lower Manhattan Disaster Site Litig., 66 F. Supp. 3d 466 (S.D.N.Y. 2014).

Putting aside questions of interpretation and validity, CPLR 214-f provides an additional incentive for aggrieved parties to have sites added to the federal National Priorities List (“NPL”) or New York’s state registry of Inactive Hazardous Waste Disposal Sites (“Registry”). Any person interested in having a site added to the Registry may provide relevant information to the New York Department of Environmental Conservation, which will add the site to the Registry if the site constitutes a significant threat to public health or the environment or if it is reasonably foreseeable that the site will pose such a threat in the future. 6 N.Y.C.R.R. § 375-2.7(b). While plaintiffs may seek to have a site added to the NPL or the Registry to take advantage of the limitations period under CPLR 214-f, parties facing the threat of litigation because of CPLR 214-f now have an additional incentive to remain off these lists and may even consider entering into New York’s voluntary brownfield cleanup program, which defers a Registry listing. 6 N.Y.C.R.R. § 375-2.7(c).

In any event, potentially responsible parties should monitor federal and state Superfund listings for sites in New York because of the potential for tort law exposure under the new CPLR 214-f. New York courts’ interpretation of the new law may have a significant effect on businesses affected by CERCLA and similar state laws, particularly if other states follow New York’s lead and tie accrual of tort claims to regulatory listings as opposed to the plaintiff’s discovery of an injury.

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New Jersey Appellate Division Holds Environmental Escrow in Condemnation Cases Set at Cost of Remediation to Achieve Highest and Best Use

In New Jersey, governmental entities with the power of condemnation have long battled with owners of real property over the compensation that the government must pay for condemned property. One important issue in these clashes has been the impact of environmental contamination on the valuation of real property and the cost of the investigation and remediation of contamination for which the property owner is otherwise liable. It is well-settled law in New Jersey that courts must value environmentally-contaminated property that is the subject of condemnation based on its “highest and best use” (i.e., the most profitable use for the property, whether residential, commercial or industrial), and that courts should perform this valuation as if the property has been fully remediated. A corollary to this principle allows courts to order the establishment of an escrow (i.e., a financial reserve) to cover the costs of investigating and remediating such property, for which the property owner is responsible. Against this backdrop, the New Jersey Appellate Division recently set the amount of such an escrow at the cost to achieve the use for which the property was valued (i.e., a residential development), even though the governmental entity may only need to conduct a significantly less expensive remediation to achieve its intended use (i.e., an industrial development). New Jersey Transit Corp. v. Mary Franco, et al., Docket No. A-3802-12T4 (N.J. App. Div. Oct. 19, 2016). This ruling answers an important question but, as with many environmental decisions, may result in unintended impacts.

The facts in Franco were as follows. In 2009, the New Jersey Transit Corporation (“NJT”) initiated proceedings to condemn several adjacent parcels of real property located in Hudson County (the “Property”). NJT and the owners of the Property (the “Owners”) ultimately agreed that the “highest and best use” for the Property was a residential development, but the parties disagreed about many things, including the proper valuation of such residential development and the amount of the environmental escrow. Following a trial, the jury sided with the Owners and determined that the value of the property based on a high-rise residential development exceeded $9 million. The trial court, however, sided with NJT on the proper amount of the escrow and ordered the establishment of an escrow of approximately $2 million to account for the cost to remediate the Property for a residential development. In appealing this decision, the Owners argued that the trial court should have set the amount of the escrow at less than $500,000. In so doing, the Owners asserted that the amount of the escrow should have been based on the remediation costs required to achieve the use of the Property that NJT originally intended (i.e., for a construction shaft associated with a tunnel under the Hudson River), which the Owners estimated at less than $500,000, even though NJT no longer intended to use the Property for this purpose. In rejecting this argument, the Appellate Division held that “[t]he escrow for the estimated costs of environmental cleanup of a condemned contaminated property should be based on the remediation necessary to achieve the highest and best use of the property used to calculate the amount of the condemnation award.” The Appellate Division refused to determine the amount of the escrow based on the remediation required to achieve the actual use of the property by the condemning authority. Because the parties agreed that the highest and best use was as a residential development, the Appellate Division held that the trial court correctly set the amount of the escrow at the $2 million required to properly remediate the property for residential use.

This holding, however, may have some unintended impacts, including the potential for a windfall to the Owners and other similarly situated condemnees. That is, the Appellate Division recognized in Franco that the Owners would be entitled to receive any amounts remaining in the escrow after NJT completes its remediation. Even though the Appellate Division approved an escrow based on a remediation to a residential level, if NJT remediates the Property only to a lower level, the Owners would receive the difference remaining in the escrow. This arguably would result in a windfall to the Owners because they would have received the value of the property as if remediated for residential development (i.e., $9 million) but would only have had to pay for a lower level of remediation (i.e., the $500,000 required for the originally intended use of the property and not the $2 million required to support a residential development). Alternatively, however, because the Appellate Division set the amount of the escrow based on a remediation to a residential level, NJT may be free to remediate the Property to the residential standards at the expense of Owners even though the actual use of the Property for transportation purposes may not require that level of remediation. It remains to be seen how the Appellate Division and other New Jersey courts will deal with these impacts and others resulting from Franco if they arise in future litigation involving condemnation of contaminated property.

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Equity Prevails Over Technicality: NJ Court Finds Defense of Laches Bars Spill Act Claim

A New Jersey trial court recently determined that the equitable defense of laches can bar a private-party claim for contribution under the New Jersey Spill Compensation and Control Act (the “Spill Act”). 22 Temple Avenue, Inc. v. Audino, Inc., et al., Docket No. BER-L-9337-14 (Law Div. Oct. 5, 2016). This is a seemingly surprising decision considering that just last year the New Jersey Supreme Court ruled that there is no statute of limitations defense for private-party contribution actions under the Spill Act. Morristown Associates v. Grant Oil Co., 220 N.J. 360 (2015). Although these rulings may appear inconsistent, in Audino, Judge Rachelle L. Harz found that even though there is no statutory time limit on bringing claims under the Spill Act, that does not mean such a claim could not be barred in equity by a laches defense. Unlike a statute of limitations that bars claims brought after a set amount of time, laches is a common law equitable defense that bars claims if a defendant is unfairly harmed by plaintiff’s unreasonable delay in asserting the claim.

In Audino, a longtime property owner sought contribution for environmental cleanup costs from Peter Audino, individually, as a former operator of a dry cleaning business at the property (the “Property”). The Property had been operated as a laundry and dry-cleaning business since 1947. In 1973, Mr. Audino and his brothers, each shareholders in Audino, Inc., purchased the business and leased the Property from the plaintiff. The Audinos operated the dry cleaning business at the Property until 1992 when they sold the business to Elite Cleaners.

In 2004, plaintiff conducted a Phase I environmental assessment, which revealed the potential for contamination related to the dry-cleaning operations. Four years later, plaintiff conducted a Phase II investigation of the Property, which confirmed the presence of perchloroethylene (“PERC”) above the applicable remediation standards. It was not until 2014, ten years after first learning of the potential PERC contamination, that plaintiff finally brought suit against Mr. Audino. Mr. Audino, now 89 years old and not healthy enough to give a deposition or participate at trial, had just a year earlier disposed of all of Audino Inc.’s business records, which he had been keeping in his attic since selling the business. In addition, a number of former employees with knowledge of the Audino’s operations and who could have provided valuable testimony in Mr. Audino’s defense had passed away between 2005 and 2012.

The court found that plaintiff’s delay in bringing the contribution action was unreasonable. Further, the court found that, as a result of the delay and passage of time, Mr. Audino had been so severely prejudiced in his ability to mount a defense that it would be inequitable and unjust to allow the lawsuit to proceed. Judge Harz recognized that while the New Jersey Supreme Court had determined that no statute of limitations applies to contribution actions under the Spill Act, that ruling did not preclude common law defenses such as res judicata or laches under the Spill Act, even though they are not explicitly identified in the statute. Moreover, Judge Harz determined that the application of laches does not diminish the rationale underpinning the Spill Act; to hold those that are responsible for contamination liable for the costs of cleanup. Here, the court found that Mr. Audino was not seeking to avoid liability based upon a legal “technicality,” but rather that plaintiff’s delay in bringing the claim had so substantially degraded Mr. Audino’s ability to defend himself that the claim should be dismissed.

In the event that this ruling is appealed, it will be interesting to see if it will stand up to appellate review. Notably, another trial judge in a recent unpublished decision, Ann Bradley v. Joseph Kovelesky, Docket No.A-0423-14T4, found that laches, just like a statute of limitations, is not a defense to a Spill Act claim.

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