In a recent unpublished decision, In the Matter of Spill Fund Lien, DJ No. 129570-02, the Appellate Division held that the New Jersey Department of Environmental Protection (“NJDEP”), through the Spill Fund Administrator (the “Administrator”), could file a Spill Act lien against the property of a person in any way responsible for a discharged hazardous substance (“person in any way responsible”). The court also found that NJDEP’s “lien contest” guidance, the procedure for challenging Spill Act liens, satisfied procedural due process requirements. This decision removes a potential ground for challenging Spill Act liens, expands the universe of persons against whom a Spill Act lien can be filed, and may even expand the universe of persons against whom NJDEP can level treble damages claims.
In 1988, the owner of a gas station, Daniel Shoplock, discovered a discharge while removing underground storage tanks. NJDEP ordered Shoplock to investigate and address contaminated soil. However, NJDEP, not Shoplock, performed the remediation with money from the New Jersey Spill Fund. During the cleanup, Shoplock entered into a lease-purchase agreement with John & Jerry, Inc. (“J&J”), which thereafter operated the gas station. In 2002, while Shoplock was still the owner, the Administrator filed a lien for expenditures made as of April 2002. The lien identified Shoplock as “the discharger,” but did not mention J&J or its owner, Peter Singh. Then, in 2004, with the Fund’s lien on file in Superior Court, J&J purchased the gas station, and a week later, transferred the gas station to another Singh-owned entity, Branch 2002 LLC (“Branch”). NJDEP’s remediation continued, and in March of 2015, NJDEP wrote to Branch advising that remediation expenditures had reached $1,876,689.77. On June 5, 2015, the Administrator filed an amended lien in Superior Court. The amended lien identified Shoplock as “discharger,” and Branch as “a person in any way responsible.” Ten days later, NJDEP notified Branch of the lien amendment, and advised that Branch could contest the amendment – using NJDEP’s lien contest guidance – if it believed NJDEP lacked a reasonable basis therefor. Following an adverse decision in its lien contest, Branch appealed.
The Appellate Division held that, because persons in any way response are dischargers, NJDEP was authorized to file a lien against Branch. The court recognized that the Spill Act makes a distinction between a discharger and a person in any way responsible, and that its literal language allowed liens only against a “discharger.” However, citing In re Kimber Petroleum Corp., 110 N.J. 69 (1988), the court noted that the New Jersey Supreme Court had once defined a “discharger” as one who has “discharged a hazardous substance or is in any way responsible for such a discharge” (emphasis added). While the court was careful to point out that this definition was arguably dicta, the court emphasized that it was bound to adhere to the Supreme Court’s pronouncements, dicta or not.
The Appellate Division also held that the lien had not substantially impaired Branch’s rights. Indeed, Branch had offered no proof that the lien had deprived Branch of a financing or sales opportunity. The court also examined the lien contest process, and found that it passed constitutional muster even though the amount of the lien, the reasonableness of the costs incurred, could not be challenged. The lien contest gave Branch sufficient notice through NJDEP’s mailings, as did Branch’s purchase of the gas station while encumbered by the lien. Branch’s opportunity to review the records that formed the basis of the lien reduced the risk of error. Because the lien contest could be resolved with documentary proof, discovery and live hearings were unnecessary, as they would not reduce the risk of error, greatly divert NJDEP resources, and impede its ability to swiftly clean up and remove hazardous substances. Given the foregoing, the court found that the lien contest struck the right balance between protection of private interests, and conservation of government resources. Branch had not been denied procedural due process.
This decision has many potential implications. For one, it validates the constitutionality of a procedure that had heretofore gone untested. Of greater significance may be the Appellate Division’s holding that persons in any way responsible are dischargers. NJDEP may now place liens on the property of persons who are in any way responsible, but exactly who counts as a person in any way responsible has not been fully explored. Certain cases have established that certain facts meet the standard, such as State, Dep’t of Envtl. Prot. v. Ventron Corp., 94 N.J. 473 (1983), but those cases do not establish the outer edge of who can be held liable. Certainly those that acquire contaminated property, such as Branch, are in any way responsible, but the universe may be broader. The Spill Act regulations offer some interesting possibilities. N.J.A.C. 7:1E-1.6’s definition of “person responsible for a discharge” includes any person whose acts or omission result in a discharge, any person who owns or controls a hazardous substance that is discharged, or any person that brokers, generates, or transports a hazardous substance that is discharged. This decision may also have implications for cost recovery actions. Like the lien provision, the Spill Act only expressly authorizes treble damages claims against “dischargers.” Following the court’s logic, NJDEP could pursue persons in any way responsible as dischargers for treble damages. With so many issues at stake, this decision may well be appealed to the New Jersey Supreme Court.