The Wait Is Over: Liable Parties Can Now Seek Early Contribution Claims Without New Jersey Department of Environmental Protection Approval

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The recent Supreme Court of New Jersey ruling in Magic Petroleum v. Exxon Mobil  demonstrates a trial court’s ability to allocate liability to “dischargers” while maintaining the role of the state’s Department of Environmental Protection (DEP) in determining the remediation and clean-up costs.

Background
When the plaintiff, the property owner of a site servicing a gasoline station, was issued a Field Directive from the DEP for the need to investigate and remediate the hazards “discharged” under the New Jersey Spill Compensation and Control Act (Spill Act), the plaintiff sought contribution from its neighbor, Exxon Mobil. The plaintiff sought allocation of responsibility for costs expended and damages relating to the cleanup of the hazardous substances on the property. The trial court dismissed plaintiff’s claim in favor of Exxon, reasoning that allocation of liability would be more accurate if adjudged after the DEP had detailed information about the extent of contamination and necessary remediation, as it would affect the dollar amount of clean-up costs to be paid by the responsible parties.

The Appellate Division upheld this ruling, holding that the DEP has sole jurisdiction over identifying contaminants on the land and assessing the extent of the discharge to formulate the proper remediation. The Appellate Division stated: “Prior to adjudicating the possible liability of the parties, the scope and nature of that liability must be determined … and only the DEP can define the contaminants, determine the extent of the discharge, identify the authorized forms of investigative testing, and the permissive methodology of cleanup.” The Appellate Court also held that prior to seeking reimbursement under the Spill Act, a party must obtain written approval from the investigation plan, severely limiting a plaintiff’s ability to seek contribution from any other responsible party.

NJ Supreme Court Review
Upon review, Justice Fernandez-Vina focused on the legislative intent of the New Jersey Spill Act. First, pursuant to NJSA 58:10-23.11a, the Spill Act prohibits the “discharge” of hazardous substances into the environment and provides for cleanup of that discharge. Therefore, under the Act of 1976, the Legislature established strict liability for environmental contamination and mandated that dischargers are jointly and severally liable. This allowed the DEP to collect the entire amount of clean-up costs from one discharger, even when that party was only partially responsible for the spill. However, the 1992 Amendment to the Act clarified that dischargers ordered by the DEP to pay for the entirety of the clean-up costs were entitled to seek contribution from other responsible parties. Importantly, the Legislature directed that contribution plaintiffs seek relief before a court and that the courts have liberal discretion to “Allocate the costs of clean up and removal among liable parties using such equitable factors as the court determines are appropriate.”

By reasoning that the purpose of this contribution amendment was to “encourage prompt and effective remediation by those parties responsible for contamination who might otherwise be reluctant to cooperate in the remediation efforts for fear of bearing the entire cost,” the Supreme Court ultimately broadened the scope of the doctrine of primary jurisdiction to give more leeway to the plaintiff and allow him to seek contribution at the outset of his claim.

Doctrine of Primary Jurisdiction
Primary jurisdiction is applicable when a case is properly filed in the Superior Court but the court declines original jurisdiction, referring specific issues to the appropriate administrative body. The court gives deference to the administrative body’s interpretation of its own regulations and findings of fact on particular issues that are within the special competence of the agency pursuant to applicable statutes.

The Supreme Court set forth a four-part test to determine whether (1) primary jurisdiction applies, (2) the matter is within the conventional experience of judges, (3) the matter is peculiarly within the agency’s discretion or requires expertise, (4) inconsistent rulings might disrupt the statutory scheme, and (5) prior application has been made to the agency.

The Court essentially held that the doctrine of primary jurisdiction did not apply in this instance because:

  • Dischargers statutorily are afforded the same right as the DEP to sue other potentially responsible parties to recover contribution costs. Since the DEP may join a party at the onset of a claim, so can a private entity.
  • The New Jersey Spill Act gives the Court, not the DEP, jurisdiction over contribution claims and the trial court is the best platform to determine the percentage of liability or it can be up to the parties.
  • Contribution claims do not necessitate the expertise of the DEP, rather contribution claims allocate liability and this is within the conventional experience of judges.
  • Contribution cases require expert testimony, which is integral to proving liability and within the court’s jurisdiction to determine.

After this thorough analysis, the Supreme Court ultimately held that the courts and the DEP shared concurrent jurisdiction over the recovery of cleanups: The courts could determine the percentage of liability among multiple responsible parties and the DEP could determine the costs of the liability dictated by the remediation project. This ultimately allows the plaintiff to be free to seek contribution from other responsible parties before the DEP’s determination of remediation costs. By again emphasizing the legislative intent, the Supreme Court highlighted that the goal of the New Jersey Spill Act is to promote prompt remediation, and to force a discharger to bear the entire burden of clean-up costs would be contrary to that goal.

Furthermore, the Supreme Court went as far as to overturn the Appellate Division’s ruling that the DEP’s written approval of the investigation and remediation plan is required before filing a claim for contribution. By again separating the roles of the courts and the DEP, Justice Fernandez-Vina held that while dischargers are required to have written approval for the actual expenses that they incur for the purpose of remediation in order to seek contribution for those expenses, that is not a prerequisite to allocation of responsibility for the costs associated with the approved remediation.

This ultimate ruling stands for the proposition that the trial court assigns liability to responsible parties based on evidence presented at trial, but it is up to the DEP to issue a final damages award. By establishing the concurrent jurisdiction shared among the courts and administrative agency, Justice Fernandez-Vina seamlessly broadened the scope of the doctrine of primary jurisdiction without undercutting the scope of the DEP’s authority.

Practice Points
With this recent ruling, the goal behind the amendment to the New Jersey Spill Act might now actually be met. Giving plaintiffs the ability to seek contribution from other responsible parties before the DEP makes a final determination may encourage not only settlement but also more effective and efficient cleanup of properties affected by hazardous materials from all parties. This reduction in uncertainty will allow for quicker resolutions between parties as well as motivate the initial plaintiffs to be less reluctant to engage in clean-up efforts, as they now have the comfort of knowing they are only partially liable and will not have to shoulder the entire burden of recovery.

 

Topics:  Environmental Liability, Environmental Remediation Costs, Exxon Mobil, Jurisdiction, Liability, Oil & Gas, Subject Matter Jurisdiction

Published In: Civil Procedure Updates, Energy & Utilities Updates, Environmental Updates, Commercial Real Estate Updates, Toxic Torts Updates

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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