Court “Un-Laches” Backdoor Defense to Spill Act?

by Cole Schotz
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After the NJ Supreme Court Finally Closed the Door on The Statute of Limitations Defense To NJ Spill Act Contribution Claims, Laches Emerges as a Possible Backdoor Defense. 

The Bergen County Superior Court issued a surprise decision this month in 22 Temple Avenue v. Audino, Inc., et al., Docket No. BER-L-9337-14, ruling that NJ’s Spill Compensation and Control Act permits the defense of laches as an affirmative defense to contribution liability.  The decision is inconsistent with the NJ Supreme Court’s 2015 Morristown Associates v. Grant Oil Co., 220 N.J. 360 (2015) ruling, which not only confirmed that there is no statute of limitations time bar to contribution claims, but also confirmed that the universe of defenses available to contribution defendants is limited to only those specifically identified in the Spill Act or permitted by court rule.  The Spill Act does not identify laches – or any equitable defenses – to contribution claims.

Unlike a statute of limitations, which bars claims brought after the expiration of a time period specified by statute, the defense of laches relied upon by the 22 Temple Avenue court is an equitable defense that bars claims when the passage of time renders it unfair to a defendant for the claim to move forward.  This unpublished decision is not only inconsistent with the Morristown Associates decision, but it is also inconsistent with another unpublished decision, Ann Bradley v. Joseph Kovelesky, Docket No. A-0423-14T4, in which the Appellate Division refused to apply the defense of laches to a Spill Act contribution claim.

The Morristown Associates decision had been viewed as bringing finality to the longstanding question of whether a Spill Act contribution claim can be affirmatively time barred.  Yet, the 22 Temple Avenue decision raises the question of whether a backdoor time bar exists to Spill Act contribution claims.

22 Temple Avenue

22 Temple Avenue asserted Spill Act contribution claims against Peter Audino, the former operator of a dry cleaner, for contamination related to those operations.  The court rejected 22 Temple Avenue’s claim for cleanup costs for discharges that occurred from 1989 to 1992 against the then 89-year old Audino, individually, based on the defense of laches.  Notwithstanding the Morristown Associates ruling against a time bar for Spill Act private party contribution actions, the court sought to apply “basic principles of fairness and substantial justice” in the context of 22 Temple Avenue’s claims.

The court’s reliance on Morristown Associates and the 2012 Supreme Court decision in N.J. Dept. Env. Protection v. Dimant, 212 N.J. 153 (2012) in applying the defense of laches to 22 Temple Avenue’s claim is surprising.  The Morristown Associates Court made no mention of the defense of laches or other equitable defenses as an exception to its very clear ruling that the language of the Spill Act contribution provision provides that there are no defenses to a Spill Act private party contribution claim except those that the New Jersey Legislature wrote into the Spill Act or those that are established by court rules under the jurisdiction of the Supreme Court.  The defense of laches is neither written into the Spill Act nor established under the New Jersey court rules.  Indeed, some federal district courts, including NJ, have applied similar reasoning in holding that there are no equitable defenses to a Superfund §107(a) cost recovery claim.

Likewise, the Supreme Court made no mention of the defense of laches in Dimant.  In that matter, the Court refused to find a dry cleaner liable for a discharge because NJDEP could not prove any nexus between drips of PERC to pavement and contamination found in groundwater.  However, the Court projected that where there is liability, equitable factors such as the passage of time disabling the dry cleaner’s ability to defend itself can be considered in allocating damages.  A similar use of equitable considerations has been used by courts in the context of apportionment of Superfund liability.

The 22 Temple Avenue decision does not undo the Morristown Associates holding that there is no statute of limitations time bar to private party Spill Act contribution claims.  This decision does however raise the question as to whether lower courts are looking to create an equitable backdoor of laches to bar such claims.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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