Supreme Court Clarifies Timing of Spill Act Claims

July 30, 2014 | No Comments
Posted by Paul H. Schneider

New Jersey’s Spill Compensation and Control Act (Spill Act) prohibits the discharge of hazardous substances into the environment, and makes dischargers jointly and severally liable for the resulting environmental contamination.  Joint and several liability means the State may collect the entire amount of cleanup costs from one discharger, even when that party was only partially responsible for the contamination.  The Spill Act also establishes a private right of action for contribution so that a discharger targeted by the DEP can compel other responsible parties to share in the cleanup costs.  The Spill Act provides that “[w]henever one or more dischargers or persons cleans up and removes a discharge of a hazardous substance, those dischargers and persons shall have a right of contribution against all other dischargers and persons in any way responsible for a discharged hazardous substance . . .”  Such a contribution lawsuit is brought in the courts, and the Spill Act directs the courts to allocate the cleanup costs among liable parties using “equitable factors.”  The Spill Act also provides that a discharger is required to have written DEP approval for the actual remediation expenses they incur in order to recover those costs from other liable parties.

How does this process work?  Must a discharger targeted by DEP wait until the remediation is complete before going to court to seek contribution from other potentially-responsible parties?  If not, must he at least wait until DEP has given written approval of the investigation and remediation plan?  The New Jersey Supreme Court answered these questions in a July 28, 2014 decision known as Magic Petroleum Corporation v. Exxon Mobil Corporation.  DEP was requiring Magic Petroleum to remediate a contaminated site and Magic sued Exxon Mobil for contribution, contending Exxon Mobil had contributed to the contamination.  A trial court dismissed Magic’s contribution lawsuit against Exxon Mobil and the Appellate Division agreed, finding that only the DEP could identify the contamination, analyze the extent of the discharge, and devise a cleanup strategy, and that those findings must be made prior to a court’s allocation of liability among multiple responsible parties. The Appellate Division also decided that a party must first obtain written approval of the remediation plan from the DEP before suing others for contribution under the Spill Act.

The New Jersey Supreme Court disagreed. The Supreme Court decided it would be contrary to the stated goals of the Spill Act — which promote prompt remediation — to force a discharger to bear the full burden of the entire cleanup cost until such time as the remediation is fully complete, noting that the completion of a site’s remediation may take many years and could involve substantial expenses.  The Supreme Court decided that a party determined to be a discharger and held responsible for the cost of cleanup by the DEP is entitled to bring a contribution claim against other potentially responsible parties before the final tally of cleanup costs.  The Supreme Court found this approach is consistent with the Legislature’s intent to encourage expeditious and efficient remediation of contamination.  The Court concluded the allocation of liability is independent from the issue of the total amount of the costs.

Finally, the Supreme Court ruled that a contribution plaintiff need not obtain the DEP’s written approval of the investigation and remediation plan prior to suing for contribution. While such  approval will be needed in order to receive contribution from others for remediation expenses, this is not a prerequisite to allocation of responsibility for the costs associated with an approved remediation.

The Magic Petroleum  decision states common sense policy reasons for the approach adopted by the Supreme Court.  Nonetheless, in some situations it may not be possible to determine which party’s discharge most affects the nature, scope and cost of the remediation until the investigation is completed and a remediation plan determined.  Until those questions are answered, it may sometimes be difficult to allocate liability in a truly equitable manner.

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