New Jersey Supreme Court Allows Early Contribution Claims Under the Spill Act

by Blank Rome LLP
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Environmental Litigation

Overview

Parties sued by the New Jersey Department of Environmental Protection (“DEP”) for remediation now have an immediate right to seek contribution from other potentially responsible parties. Following last week’s unanimous ruling by the New Jersey Supreme Court in Magic Petroleum Corporation v. Exxon Mobil Corporation, parties conducting remediation no longer have to wait until after the remediation is complete, nor do they need to obtain written approval of a remediation plan from the DEP, before bringing contribution claims against other parties in an effort to recoup cleanup costs. This will allow courts to assign liability among parties prior to the completion of remediation, even though the total cost of the remediation may not yet be known.

Facts & Procedural History

In Magic, the DEP sued Magic Petroleum for expenses incurred during the remediation of hazardous material on land owned and operated by the company in Clarksburg, New Jersey. Although Magic Petroleum asserted that other parties were also responsible for the contamination, Magic Petroleum bore the entire cost of the cleanup due to the DEP’s determination that it was a discharger at the site. Magic Petroleum filed a contribution claim against the neighboring land owner, and several other parties, alleging that they were responsible for a portion of the cleanup costs. The trial court dismissed the claim, reasoning that the contribution claim could only be filed after complete remediation of the site. The Appellate Division affirmed, reasoning that while the courts and the DEP have concurrent jurisdiction to determine whether other entities are responsible parties, only the DEP could identify the contamination, analyze the extent of the discharge, and devise a cleanup strategy. Relying on the doctrine of primary jurisdiction, the panel found that unsettled issues would best be decided by the expertise of the DEP, and that those findings should be made prior to the court’s allocation of liability. The Appellate Division also found that a party must first obtain written approval of the remediation plan from the DEP before commencing a contribution claim. The Supreme Court reversed and allowed Magic Petroleum to proceed with its suit against the other potentially responsible parties.

The Supreme Court’s Analysis

The Supreme Court began by looking at the history and purpose of the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 to -23.24 (the “Spill Act”), as well as the DEP’s authority to restore lands affected by environmental contamination. Because the legislature established strict liability for causing environmental contamination and mandated that dischargers are jointly and severally liable, the DEP can collect the entire amount of cleanup costs from a single discharger, even when that one party was only partially responsible for the contamination. The Court noted that the Spill Act was amended to clarify that dischargers ordered by the DEP to pay the entirety of cleanup costs were entitled to seek contribution from other responsible parties, and that such claims should be brought before a court, giving courts broad discretion to allocate the costs of cleanup and removal among various parties using appropriate equitable factors. Thus, under the Spill Act, the legislature established a private right of action in contribution so that dischargers designated by the DEP could share the cost of remediation with additional potentially responsible parties not initially designated by the DEP.

The Supreme Court also addressed the doctrine of primary jurisdiction. Primary jurisdiction is a doctrine whereby a court favors allowing an agency an initial opportunity to decide an issue in which the court and the agency have concurrent jurisdiction. The Court noted that courts can essentially retain jurisdiction, but defer action until the agency—in this case the DEP—has reviewed the case and employed its expertise. In situations where the court and the agency have concurrent jurisdiction, disputed factual issues should be evaluated by the agency because of its expertise, but legal issues should be left to the court to decide. In analyzing several factors, i.e., the “Gore factors,” which are often used by federal courts, the Supreme Court ultimately concluded that primary jurisdiction was not applicable to Magic Petroleum’s contribution claim because, among other reasons, contribution claims do not necessitate the expertise of the DEP. Assigning liability and analyzing expert testimony in contribution cases are matters within the conventional expertise of judges. Thus, the Court concluded that the DEP and the courts share concurrent jurisdiction over the recovery of cleanup costs. Notably, the Court recognized that it would be contrary to the stated goals of the Spill Act—which promotes prompt remediation—to force a discharger to bear the burden of the entire cleanup cost until such time as the remediation is complete. Site remediation can take many years and involves substantial expense. To force one party to shoulder those expenses could prevent remediation from proceeding promptly. Similarly, the Court noted that compelling one party to pay all the cleanup costs would be adverse to the stated goals of the Spill Act, particularly when that one party was not entirely at fault for all of the contamination. Thus, the Court held that a party determined to be a discharger and held responsible for cleanup costs by the DEP is entitled to bring a contribution claim against other potentially responsible parties before the final amount of cleanup costs is determined.

Separately, the Court also found that a contribution plaintiff need not obtain the DEP’s written approval of the investigation and remediation plan prior to filing a contribution claim. The Court noted that the issue of allocation of liability is independent from the issue of the total amount of costs. While dischargers are required to have written approval for the actual expenses that they incur for purposes of remediation in order to seek contribution for those expenses, it is not a prerequisite to allocation of responsibility for the costs associated with the approved remediation. Thus, the Court concluded that written approval of a remediation plan is not required prior to filing a contribution claim.

Conclusion

The implications of this decision are particularly significant to the regulated community. For entities bearing the sole brunt of remediation, this decision is welcome news as it allows courts to make a percentage allocation of liability prior to the final tally of cleanup costs. Most spill cases go on for many years and involve multiple parties, some of which may have initially escaped the DEP’s crosshairs. Now, following the Supreme Court’s precedential ruling, responsible parties will no longer be able to sit on the sideline and avoid paying their fair share until after remediation is complete. This should, in effect, ensure that remediation proceeds promptly and foster greater cooperation between responsible parties. At a minimum, it will provide more clarity on the approach, strategy, and budget when it comes to addressing cleanup costs.

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