Manufacturers Who Sold Hazardous Substances to a Discharger Could Face Spill Act Liability

In the decades since its adoption in the 1970s, the New Jersey Spill Compensation and Control Act (the “Spill Act”), N.J.S.A. 58:10-23.11 et seq., has not been understood to impose liability on the sellers of chemicals that a purchaser later discharged into the environment.  However, in a pair of recent decisions, New Jersey federal judges entertained the novel theory that the manufacturer and seller of a chemical could be strictly liable for a discharge to the environment under the Spill Act, even if the manufacturer merely sold the chemical to a third party that actually caused the contamination.  If this interpretation of the Spill Act becomes widely accepted, the scope of environmental liability in New Jersey would expand significantly, and parties that previously had not faced Spill Act liability could find themselves facing a bevy of new lawsuits for the costs of cleaning up contaminated sites.

The New Jersey Department of Environmental Protection (“NJDEP”) seemingly initiated this trend in 2019 when it issued a “statewide directive” under the Spill Act ordering several companies to, among other things, “discuss [with NJDEP] a good faith estimate” of the costs of investigating and remediating per- and polyfluoroalkyl substances (“PFAS”) in the environment throughout New Jersey and also to “discuss” the establishment of a remediation funding source by these companies to fund these costs.  NJDEP included among the recipients of its directive 3M Corp., which had manufactured PFAS and sold them to various manufacturers with operations in New Jersey.  However, NJDEP did not allege that 3M had discharged PFAS.  The Department’s inclusion of 3M raised eyebrows because no party had been held liable under the Spill Act merely for selling a chemical that was later discharged to the environment by a third party.  And federal courts had long held, culminating in the U.S. Supreme Court’s 2009 Burlington Northern decision, that parties like 3M, who sold a “useful product” that its customers used and ultimately discharged as a hazardous waste, are not liable under federal law (i.e., CERCLA) unless the seller intended that its product would be disposed into the environment.

NJDEP’s new theory was put to the test in two cases in 2021, and, in each case, the court found that the plaintiffs had stated a Spill Act claim against 3M merely for manufacturing and selling PFAS.  In Giordano v. Solvay Specialty Polymers USA, LLC, 522 F. Supp. 3d 26 (D.N.J. 2021), the plaintiffs were South Jersey homeowners who claimed that their private wells had been contaminated by PFAS discharged into groundwater at two nearby manufacturing facilities; 3M allegedly had supplied the PFAS that each facility used.  3M moved to dismiss the Spill Act claim against it, arguing that manufacturing a hazardous substance has never given rise to Spill Act liability.  In a cursory footnote, the court denied 3M’s motion and held that the Giordano plaintiffs had stated a claim that 3M was “in any way responsible for” the contamination under the Spill Act, N.J.S.A. 58:10-23.11g(c)(1).

The district court’s unpublished opinion in NJDEP v. E.I. du Pont de Nemours & Co., Civil Action Nos. 19-14766; 19-14767, 2021 U.S. Dist. LEXIS 247973 (D.N.J. Dec. 30, 2021), relied on the Giordano footnote and likewise found that the plaintiff, NJDEP, had stated a Spill Act claim against 3M based on similar allegations.  As relevant here, NJDEP brought Spill Act claims against DuPont and related corporate entities as well as against 3M for remediation costs and natural resource damages stemming from contamination at two DuPont manufacturing facilities.  Referencing the “nexus” requirement for Spill Act liability from NJDEP v. Dimant, in which the New Jersey Supreme Court held that a Spill Act plaintiff must show “a reasonable link between the discharge, the putative discharger, and the contamination at the specifically damaged site,” the DuPont court held that NJDEP’s allegation that DuPont “purchased [from 3M] the [PFAS] it required for its manufacturing activities” at the relevant sites stated a claim under the Spill Act.

Although there is no reason in principle that the logic of these two cases would not apply to manufacturers of chemicals besides PFAS or to defendants in other contexts with similarly indirect responsibility for a discharge, another recent federal court case rejected Giordano’s expansive view of Spill Act liability.  In Borough of Edgewater v. Waterside Construction, LLC, Civil Action No. 14-5060, 2022 U.S. Dist. LEXIS 32404 (D.N.J. Feb. 24, 2022), Edgewater sought recovery under the Spill Act for costs it incurred to remove contaminated fill material from a municipal park.  Edgewater alleged that Waterside, with whom the Borough had contracted to construct park improvements, imported to the park crushed concrete contaminated with PCBs from a nearby site that previously had been a factory operated by Alcoa, now known as Arconic.  Alcoa sold the property in 1997 to an affiliate of Waterside.  Edgewater sought to hold Arconic responsible for contaminated material that originated from the property Alcoa had owned and operated prior to 1997.  The court rejected Edgewater’s Spill Act claim and granted summary judgment to Arconic on that claim in 2021 because “Edgewater [had] not cited any case imposing Spill Act liability in similar circumstances.”  In denying Edgewater’s motion for reconsideration in February 2022, the court noted the Giordano decision in a footnote but treated it as an outlier from the general rule that, to be liable under the Spill Act, a party must either have ownership or control over the property at the time of the discharge or control over the hazardous substance that caused the contamination.  If that test had been applied in Giordano and DuPont, the complaints against 3M likely would have been dismissed. 

New Jersey’s state appellate courts ultimately will decide whether the newly expansive conception of Spill Act liability suggested by the surprising survival of the recent claims against 3M will prevail.  Until the issue is settled, parties responsible for cleanup costs at New Jersey sites may begin to bring Spill Act claims against the suppliers of hazardous substances that were discharged at the site, if the identities of those suppliers can be ascertained.  Notably, there is no statute of limitations for Spill Act contribution claims, so manufacturers that had supplied hazardous substances could face new claims for contamination that has long been known.  It remains to be seen whether the initial success of the plaintiffs in Giordano and DuPont simply is the result of courts’ reluctance to grant motions to dismiss, or whether it signals the expansion of Spill Act liability to a new class of defendants.  Future developments in these cases merit close scrutiny.

For more information, please contact the author Michael Kettler at mkettler@riker.com or any attorney in our Environmental Practice Group.