State of New Jersey Unsuccessful in Trying to Expand Environmental Liability

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Summary
Any company handling hazardous substances in New Jersey must be aware that while the state was recently unsuccessful in expanding liability for damages under the Spill Act, the Supreme Court clarified what constitutes a "discharge" under the Spill Act, which could create unforeseen liability.

On September 26, 2012, the New Jersey Supreme Court in New Jersey Department of Environmental Protection v. Dimant (Docket No. 067993) decided the level of proofs required to establish a causal nexus between a discharge and damaged natural resources in order to impose liability for damages and cleanup and removal costs under the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11a et seq. (the "Spill Act") against a party that has caused a discharge of hazardous substances.

The Court ruled that a plaintiff, including the New Jersey Department of Environmental Protection (the "NJDEP"), seeking damages under the Spill Act must show by a preponderance of the evidence that a discharge occurred and that the discharge is "reasonably linked" to the environmental damage at issue, such as groundwater contamination.

The Court clarified what constitutes a "discharge" under the Spill Act. A spill of a hazardous substance onto the lands of the state, such as onto asphalt "under which there was no structure to contain it," constitutes a discharge. Further, in-state spills do not require resultant damages while spills that occur outside the state must result in damages inside the state. While the clarification of "discharge" was not the focus of the decision, it is important to note that such a broad interpretation of "discharge" could create unforeseen liability for companies handling hazardous substances because to obtain injunctive relief, the state need only establish by a preponderance of the evidence the existence of a discharge; there is no de minimis discharge exception or requirement to prove actual damages.

When seeking damages, as opposed to injunctive relief, under the Spill Act, the analysis does not end with finding a discharge, but instead proceeds to the nexus between the discharge and the contamination for which the damages are sought. The Court rejected the NJDEP's argument that the Court should adopt the Federal Comprehensive Environmental Response, Compensation and Liability Act's ("CERCLA") "some connection" nexus standard because the legislative history and language of the Spill Act are silent on that language. The Court also declined to impose the common law "proximate cause" nexus standard proposed by others involved in the case.

While the Court explained that a plaintiff must prove a "reasonable link" between the discharge and the charged environmental damage "in some real, not hypothetical" way, "neither the Spill Act nor its corresponding legislative history definitively address the level of causation needed to impose liability on a discharger." The Court did provide some guidance as to how the state could have met its burden under the reasonable link nexus standard. Referring to cases cited by amici in the case, the Court commented that some evidence of a plausible migration pathway by which the contaminants could have traveled from the defendant's site to the area at issue "might have made for a different result in this matter."

Importantly, the Court made it clear that this "reasonable link" nexus standard only applies to the recovery of damages and other costs provided under the Spill Act, not injunctive relief. As the Court recognized, based on its review of the Spill Act's legislative history, "all liability under the Spill Act is not tied to some static causation nexus." In applying this standard to the trial court's findings of fact, the Court affirmed both the trial and appellate courts' conclusions that the NJDEP's proofs at trial were insufficient to impose liability for damages and those costs available under the Spill Act.