Environmental UPDATE June 2011

October 30, 2016

Nexus Between Discharge and Damage Required for Liability Under the Spill Actt

Take Remediation Timeframes Into Consideration When Structuring Transactions

Proposed Changes to Endangered Species List Will Decrease Amount of Land Subject to Restriction

One More Step Towards Off-Shore Wind Power in New Jersey

Legislative Update

New Jersey Appeals Court Reinstates NFA Letter

State UST Remediation, Upgrade and Closure Fund has Insufficient Funding

EPA Update

Parties with Contribution Claims May Be Out of Luck

Nexus Between Discharge and Damage Required for Liability Under the Spill Act

Under the New Jersey Spill Compensation and Control Act (the "Spill Act"), a person who is in any way responsible for the discharge of a hazardous substance is strictly liable for cleanup and removal costs. N.J.S.A. 58:10-23.11g(c)(1). On March 18, 2011, the Superior Court, Appellate Division affirmed the Law Division's ruling that a finding of liability under the Spill Act requires a nexus between the discharge of a hazardous substance and the resultant damage to the environment and need for remediation. New Jersey Dept. of Envt'l Prot. v. Dimant, Docket No. A-3180-09T2, Superior Court of New Jersey, Appellate Division (March 18, 2011).

In Dimant, the New Jersey Department of Environmental Protection (the "NJDEP") brought a claim for contribution for cleanup and removal costs under the Spill Act, alleging that defendant, Sue's Clothes Hanger, a laundromat and dry cleaner, was responsible for perchloroethylene ("PCE") contamination to groundwater on various properties in Bound Brook, New Jersey. Although there were at least three dry cleaners in the area and other possible sources of PCE, the NJDEP focused its investigation on the defendant, which was a relatively short-term operator of one dry cleaning facility. Following a bench trial, the trial court made several findings of fact which demonstrated that defendant's discharge of PCE did not cause or contribute to the contamination of the groundwater. The trial court noted that the NJDEP's expert failed to take into account the presence of PCE contamination that preceded the defendant's operations, as well as other possible sources of the contamination. Accordingly, the trial court found that the NJDEP "did not establish by a preponderance of the direct and circumstantial evidence that there [was] a nexus between any discharge by defendant Sue's Clothes Hanger and the groundwater contamination at issue."

On appeal, the NJDEP contended that the trial court misapplied the Spill Act by not finding the defendant strictly liable for a PCE discharge from an exterior pipe, even if it was a de minimus discharge. In support of its argument, the NJDEP cited to the Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. § 9601 et seq. ("CERCLA"), which it claimed requires no direct causal connection between a defendant's release or threatened release of hazardous substances and the plaintiff's incurrence of response costs. The Appellate Division, however, determined that the NJDEP's reliance on CERCLA's less stringent standard for liability was misplaced.

Unlike CERCLA, the Spill Act requires some nexus between the discharge of a hazardous waste and the resultant damage to the environment. The Appellate Division found that:

Spill Act cases determining issues of liability have generally focused on the necessary connection between the offending discharge and the discharger and/or owner of the property, broadly construing the statutory standard of 'in any way responsible' as encompassing either ownership or control over the property at the time of the damaging discharge, or control over the hazardous substance that caused the contamination.

Although none of the earlier Spill Act cases expressly state that a "nexus" between the discharge and the resultant damages to the environment is required, the Appellate Division found that it was implicit in these prior holdings. The Court also found that the "nexus" requirement was guided by the definition of "discharge" under the Spill Act, which explicitly refers to resultant "damage[s]." As a result, the Appellate Division held that a "nexus between the use or discharge of a substance and its contamination of the surrounding areas is needed to support a finding of Spill Act liability."

In Dimant, the NJDEP failed to prove that defendant's discharge of PCE caused or contributed to the contamination of groundwater at issue. Accordingly, the Appellate Division affirmed the trial court's ruling that the defendant was not liable under the Spill Act. This case is significant because it demonstrates that a party seeking contribution for cleanup costs under the Spill Act must establish that the defendant's discharge of a hazardous substance caused or contributed to the resultant damage to the environment and need for remediation.