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Recent New Jersey Case Law on Environmental Claims

March 1, 2015

Key Points:

  • Six-year statute of limitations does not apply to private claims for contribution made pursuant to the New Jersey Spill Compensation and Control Act (Spill Act).
  • Under the Spill Act, a “discharger” may pursue a contribution claim prior to final resolution of a site remediation plan by the NJDEP.
  • Property owners may recover for diminution in property value due to contamination or recover restoration costs, but not both.

 

In Morristown Assoc. v. Grant Oil Co., 2015 N.J. LEXIS 50 (N.J. Jan. 26, 2015) the issue on appeal was whether the general six-year statute of limitations contained in N.J.S.A. 2A:14-1 applies to private claims for contribution made pursuant to the New Jersey Spill Compensation and Control Act (Spill Act), N.J.S.A. 58:10-23.11f(a)(2)(a). The New Jersey Supreme Court held that it does not and reversed the lower courts, who had determined that the plaintiff’s claims were time-barred.

In Morristown, the plaintiff, Morristown Associates, purchased commercial property in 1979. The property contained a strip-mall style shopping center known as Morristown Plaza. Among the tenants of Morristown Plaza was Plaza Cleaners, a dry cleaning business owned at the time by Robert Herring (Herring). Herring and his wife had entered into a lease with the property’s previous owner, Morris Center Associates, in 1976. Due to construction, Herring was unable to occupy and operate Plaza Cleaners until approximately January 1, 1978. At some point before moving in, Herring installed a steam boiler in a room at the rear of the leased space and an underground storage tank (UST) for fuel to operate the boiler. In 1985, Herring sold Plaza Cleaners to defendants, Edward and Amy Hsi (collectively Hsis). The Hsis owned the business until 1998 when it was sold to current owner and third-party defendant, Byung Lee (Lee).

In August 2003, the monitoring of a well installed near Plaza Cleaner’s UST revealed fuel oil contamination. A subsequent investigation revealed that, although the UST was intact, the fill and vent pipes were “severely deteriorated, with large holes along the significant portion of their lengths.” The plaintiff’s experts concluded that those holes had developed as early as 1988 and, since that time, oil had been leaking from the pipes each time the tank was filled. Each of the named oil company defendants in the case allegedly supplied fuel oil to Plaza Cleaners at various times between 1988 and 2003.

The plaintiff took steps to remediate and clean up the contamination. On July 31, 2006, the plaintiff filed an initial three-count complaint naming Grant Oil Company as a defendant. Count I of the complaint asserted a claim under the Spill Act, seeking contribution for costs related to the cleanup and removal of the fuel oil. Between October 2007 and July 2009, the plaintiff filed three amended complaints, adding the Hsis and other heating oil companies as party defendants. Lee and Multi Cleaners, Inc., doing business as Plaza Cleaners, were brought into the action as third-party defendants. In response to a series of motions, the trial court granted summary judgment in favor of the defendants on various claims against them. In particular, the trial court held that the general six-year statute of limitations for injury to real property, N.J.S.A. 2A:14-1, applied to private claims for contribution pursuant to the Spill Act and, as such, the claims against the defendants for damage that had occurred more than six years before they were brought into the case were time-barred.

On appeal, the plaintiff argued, in part, that its claims were not untimely because the six-year statute of limitations contained in N.J.S.A. 2A:14-1 was inapplicable to Spill Act contribution claims. The Appellate Division rejected that argument and affirmed the trial court’s judgment. The court cited decisions from the New Jersey Supreme Court that had found general statutes of limitations applicable when particular statutes did not set forth a specific limitation period. Because of its holding on the statute of limitations issue, the court did not address any other issues raised by the parties.

The plaintiff filed a petition for certification to the New Jersey Supreme Court that focused on whether the general six-year statute of limitations applied to contribution claims under the Spill Act. The New Jersey Supreme Court granted certification.

On the merits, the New Jersey Supreme Court held that the general six-year statute of limitations contained in N.J.S.A. 2A:14-1 does not apply to private claims for contribution made pursuant to the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11f(a)(2)(a). Therefore, the New Jersey Supreme Court reversed the judgment of the Appellate Division and remanded the case for consideration of the unaddressed issues raised that have been raised on appeal.

In Magic Petroleum Corp. v. Exxon Mobil Corp., 96 A.3d 175 (N.J. 2014), the New Jersey Supreme Court ruled that, in private contribution claims arising under the Spill Act, a party determined to be a discharger and held responsible for the cost of remediation by the NJDEP is entitled to bring a contribution claim against other potentially responsible parties prior to NJDEP’s approval of a final cleanup plan.

More particularly, the court held that a party who incurs cleanup and removal costs may immediately pursue a claim for contribution against other responsible parties, and a court may allocate liability before the final resolution of a site remediation plan by the NJDEP. The right to pursue the contribution claim arises out of the express language of the Spill Act, as well as common law (as codified in the Joint Tortfeasors Contribution Law and the Comparative Negligence Act).

In concluding that an NJDEP-approved mediation plan is not a prerequisite to filing a claim for contribution, the Supreme Court noted the distinction between an allocation of liability and the total amount of cleanup costs. While recoverable “cleanup and removal costs” may include only those approved by the NJDEP, a court may assign a percentage of responsibility for a particular site. Therefore, the court held that a trial court may determine, subject to proofs, whether one or more dischargers are responsible for contamination and may assign liability to responsible parties.

Finally, in Favorito v. Puritan Oil Company, 2014 N.J. Super. Unpub. LEXIS 2109 (N.J. Super. Appl. Div. Aug. 27, 2014), the New Jersey Appellate Division recently affirmed summary judgment against a property owner whose investment property was contaminated by a leaking underground storage tank owned by the defendant, Puritan Oil Company. The property owner’s property damage case was dismissed because he failed to completely allege all of his damages at the trial court level. In Favorito, a 1988 underground storage tank leak at a Puritan Oil-owned gas station reached the groundwater and migrated underneath the plaintiff’s property. The plaintiff sued Puritan Oil Company and others for nuisance, trespass and other legal claims.

Under New Jersey law, in a nuisance or trespass claim, a plaintiff property owner, like Favorito, may “receive the difference between the value of the land before and after the harm or, at the party’s election, the cost of restoration—but not both.” The Appellate Division reasoned that because Puritan was already cleaning up the groundwater contamination on Favorito’s land, he could not also obtain damages for diminution in property value. Favorito did not allege any other damages, other than diminution in property value, at the trial court level, such as damages for loss of use of the property, inconvenience created by the contamination (or its remediation) or stigma—the fact that the property value might be diminished post-cleanup. The plaintiff attempted to raise some of these damages before the Appellate Division, but to no avail. According to the court, those damages were not part of the record and, therefore, as an appellate court, the court would not consider them. Because the only damages alleged were for diminution in value of the property, and the plaintiff’s property was already being restored, the New Jersey Appellate Division affirmed the trial court’s order dismissing the plaintiff’s case against the oil company.

Thus, according to Favorito, where a defendant voluntarily cleans up a site, a plaintiff cannot recover for any claimed loss in property value. This applies to claims filed under the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq., as well as common law claims for nuisance and trespass.

*Lila is a shareholder in our Cherry Hill, New Jersey office. She can be reached at 856.414.6026 or ltwynne@mdwcg.com.

Defense Digest, Vol. 21, No. 1, March 2015

Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2015 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.

Affiliated Attorney

Lila Wynne
Co-Chair, Environmental & Toxic Tort Practice Group, NJ
(856) 414-6026
ltwynne@mdwcg.com

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