NJDEP continues to assert a novel theory of Spill Act liability in a suit against the manufacturer of polychlorinated biphenyls (“PCBs”). On August 4th, NJDEP filed a lawsuit in state court against the successors of “old Monsanto,” which had been the country’s sole producer of PCBs, the once widely used chemical that was banned under the Toxic Substances Control Act in the 1970’s. The State seeks recovery of remediation costs and damages incurred by the Spill Fund, as well as natural resource damages (“NRD”), arising from a former Monsanto facility in Gloucester County and, significantly, from all discharges of PCBs that occurred throughout the entire state. New Jersey joins several other states that, through plaintiff-side private firms engaged on a contingency basis, have sued Monsanto entities for statewide releases of PCBs. In the last few months, Ohio and New Hampshire have obtained settlements of $80 million and $25 million, respectively, in such cases. NJDEP’s new lawsuit has a New Jersey-specific twist—the use of the Spill Act to impose liability on a party that manufactured and sold, but did not actually discharge, a hazardous substance. Both private plaintiffs and the State have had initial success pursuing this novel theory of Spill Act liability in per- and polyfluoroalkyl substances (“PFAS”) litigation, and now NJDEP seeks to extend it to PCBs. Favorable rulings for NJDEP in the new Monsanto case also may have significant repercussions for site remediation in New Jersey, as it could open the door for new contribution claims at any site impacted by PCBs.
Our May 4th article discussed two pending cases in which Spill Act claims survived motions to dismiss brought by 3M, which manufactured PFAS and sold them to New Jersey industrial facilities, but never discharged PFAS in New Jersey. PCBs are a logical candidate for this novel extension of Spill Act liability to non-discharging manufacturers. Both PCBs and PFAS were exclusively manufactured by one company—NJDEP’s complaint alleges that Monsanto manufactured 99% or more of all PCBs sold in the U.S., and 3M was the sole supplier of PFAS chemicals. These unusual facts relieve plaintiffs of the difficult burden of having to establish which manufacturer long ago supplied the chemicals that eventually were discharged into the environment, a burden the plaintiff otherwise would bear in a Spill Act claim relating to chemicals that historically were manufactured by many different firms.
In NJDEP’s new case and any other Spill Act cases filed against Monsanto, it appears that New Jersey state courts, rather than federal courts, will decide the scope of Spill Act liability of non-discharging manufacturers. This is because one of the defendants named in the State’s complaint—Pharmacia LLC—is alleged to have its principal place of business in New Jersey, which if true would destroy federal court diversity jurisdiction. In contrast, because of its location outside of New Jersey, 3M is able to remove similar Spill Act claims against it for PFAS to federal court.
Absent a quick settlement with Monsanto, the New Jersey state appellate courts that have the ultimate authority to interpret the Spill Act under state law may decide in this case whether the Spill Act permits claims against manufacturers like Monsanto and 3M and, if it does, what a plaintiff must prove to succeed on such a claim. If the courts recognize any Spill Act claim against a non-discharging manufacturer, perhaps the most significant issue in this new class of claims will be the level of culpability that could make a non-discharging manufacturer “in any way responsible” for a hazardous substance under the Spill Act. Put another way, will a manufacturer and seller of a product be strictly liable under the Spill Act as long as the plaintiff can demonstrate that a subsequent purchaser of the product discharged it in New Jersey (i.e., the defendant’s product caused the remediation costs), or will some additional showing of fault be required on top of a showing of causation? Although the text of the Spill Act explicitly imposes strict, joint, and several liability regardless of fault, see N.J.S.A. 58:10-23.11g.c.(1), NJDEP’s complaint against Monsanto suggests that some showing of fault should be required for a product manufacturer to be liable under the Spill Act. Specifically, the Spill Act count of the recently-filed complaint alleges that (1) Monsanto knew that discharges of PCBs were “inevitabl[e]” during their “ordinary, intended use;” (2) Monsanto knew that PCBs were toxic; (3) Monsanto failed to warn its customers about the risk of contamination; and (4) Monsanto advised its customers to dispose of PCBs in ways that caused discharges to the environment. If courts are willing to entertain at all a Spill Act claim against a manufacturer that is not the discharger, they may require the plaintiff to prove that the defendant was at fault (e.g., the defendant knew about and did not mitigate the risk of discharges to the environment) in addition to proving causation, which would be consistent with the theory espoused in the complaint.
Other private parties who have incurred remediation costs for PCBs could have Spill Act claims against the Monsanto entities if NJDEP’s claim in its new lawsuit succeeds. Notably, there is no statute of limitations for Spill Act contribution claims following the New Jersey Supreme Court’s 2015 Morristown Associates decision, so there could be new claims for long ago remediation costs. However, Monsanto would not be without defenses based on the passage of time. Courts have held that laches may be a defense to a Spill Act claim. If there was prior litigation over remediation costs at a site, Monsanto might also have a defense under the entire controversy doctrine if it was prejudiced by not being joined in the earlier litigation. NJDEP’s new case against Monsanto, as well as the already pending cases against 3M regarding PFAS, may create a new frontier of Spill Act liability that all parties engaged in New Jersey site remediation should follow closely.
Michael S. Kettler