The Appellate Division has affirmed a $66,200 administrative penalty imposed by DEP against the owner of a shopping center constructed atop a closed municipal landfill. The unpublished and non-precedential decision in NJDEP v. Raritan Shopping Center LP found liability based on current ownership of the contaminated site, despite the landowner never discharging hazardous substances and conducting due diligence prior to purchasing.

Raritan purchased the property in 1993 after conducting environmental tests that discovered low levels of tetrachlorothylene (a common solvent also known as Perc) in the groundwater. The Perc was attributed to the closed landfill. In 2003, a prospective purchaser detected additional groundwater contamination, leading to the discovery and excavation of three buried steel drums. Thereafter, Raritan entered into an agreement to submit remedial reports to DEP. In 2004, Raritan submitted the required reports and requested a no-further action letter. DEP rejected Raritan’s request and instead requested submission of a remedial action workplan. In 2011, DEP advised Raritan of its remedial obligations. In 2014, DEP issued an administrative order requiring Raritan to remediate the groundwater contamination and assessing the $66,200 fine.

Raritan requested a hearing and the administrative law judge found in favor of DEP. On appeal, the Appellate Division affirmed based on a DEP regulation stating that Spill Act liability includes “subsequent owners of real property where the discharge occurred prior to the filing of [a no further action letter or response action outcome] with the Department.” N.J.A.C. 7:26C-1.4(a)(4). Curiously, the Appellate Division does not explain why DEP’s interpretation of Spill Act liability, a purely legal question, is entitled to deference. Rather, the decision cites to N.J. Schs. Dev. Auth. v. Marcantuone, 428 N.J. Super. 546, 559 (App. Div. 2012), which states that liability may exist for an owner who, unlike Raritan, purchased contaminated property without conducting due diligence. In this case, the innocent purchaser defense did not apply because Raritan’s due diligence detected the contamination.

Though unpublished, the decision demonstrates the Court’s deference to DEP’s expansive interpretation of environmental liability. Perhaps more practically, the case also demonstrates the prudence of remediating reported discharges while seeking contribution from those who discharged the hazardous substances.

In a recent decision, U.S. Masters Residential Property (USA) Fund v. New Jersey Department of Environmental Protection – Financial Services Element, the New Jersey Superior Court’s Appellate Division held that a claimant could not recover from the Spill Fund where contamination on the claimant’s properties was the result of historic fill and defuse anthropogenic pollution (“DAP”), not oil. The claimant owned several contiguous residential properties in Bayonne not far from Upper New York Bay and the Hudson River. During Hurricane Sandy, the properties and the surrounding area were flooded and inaccessible for days. When the floodwaters receded, claimant found staining from what it believed to be petroleum and/or hazardous substances on the interiors and exteriors of its buildings, and detected a petroleum odor emanating from the properties’ yards. Claimant claimed the floodwaters had carried petroleum or other hazardous substances from an offsite source onto its properties.

The New Jersey Department of Environmental Protection (“NJDEP”) disagreed. Soil samples from the properties revealed contamination from historic fill, not oil. Historic fill is contaminant-bearing material used to fill in low lying areas, usually consisting of coal, wood ash, dirt, and the like. Strictly speaking, contaminants found in historic fill are “hazardous substances” under the Spill Act. Further, the regulatory definition of historic fill describes what the “fill” is, but does not state when the fill must be deposited to qualify as “historic.” NJDEP construed the term “historic fill” to mean fill deposited before the Spill Act, or pre-1977. In accordance with its interpretation, NJDEP denied the claim while reserving its right to deny the claim on any other appropriate basis. The claimant sought arbitration.

At the arbitration hearing, NJDEP’s expert in analytical chemistry testified that the soil samples taken from the properties lacked tell-tale signs of oil contamination, chemicals called “aliphatics.” The soil samples also contained arsenic and lead, chemicals not commonly found in oil. NJDEP’s expert ultimately concluded that the soil sample results were indicative of historic fill and DAP, not oil. DAP consists of air pollution particles that fall onto the ground or water and accumulate over time. NJDEP, whose definition of DAP contains no time component, treated the finding of DAP as a per se sign of a pre-Spill Act discharge.

The claimant’s expert described a “petroleum odor” and “bathtub ring” he found at the properties, but offered no opinion regarding the missing aliphatics. The claimant’s expert also relied on news reports indicating that oil had been discharged in the general area of the properties in the course of the storm. Based on the analytical results, the arbitration judge found that Hurricane Sandy had stirred up DAP in local waterways and deposited the same on the properties. Accordingly, the arbitration judge denied the claim.

The Appellate Division affirmed the arbitration judge’s decision. The burden of proof was on the claimant to prove a post-Spill Act discharge, and the claimant had simply failed to make its case. The missing aliphatics, the inability of claimant’s expert to opine on the soil results, and the claimant’s failure to show that Hurricane Sandy had placed oil, not just in the area of, but specifically on the properties, all persuaded the Appellate Division that the arbitration judge’s denial was proper.

A lesson here is, when bringing a Spill Fund claim, claimants should have a good handle on their analytical results, and be sure that their contamination is from a spill, not fill. This is because, apparently, NJDEP has concluded that historic fill and DAP are per se pre-Spill Act discharges for which the Spill Fund is not liable. This is an intriguing position on several grounds. First, neither the definition of historic fill nor DAP have time components. Thus, the Department is taking an implicit leap that, if historic fill and DAP are found, they must be pre-Spill Act historic fill and DAP. Factually, this could be disputed, as, for example, coal, wood ash, dirt, and the like, could very well have been deposited after 1977. Second, NJDEP’s interpretation appears to be a rule of general applicability and continuing effect, meaning that the interpretation should have been promulgated through New Jersey’s rulemaking process. Finally, estoppel theories may apply as well. On the one hand, persons responsible for conducting the remediation are required to address historic fill, and according to NJDEP, should address DAP at their sites. On the other hand, NJDEP is indicating that the Spill Fund is not liable to pay claims for the very same kind of contamination. This asymmetry of treatment may open NJDEP’s interpretation to challenge. So another lesson is, if claimants must bring a Spill Act claim for historic fill and DAP, their claims may not be barred as a matter of law.

The Appellate Division of the Superior Court of New Jersey recently (in an unpublished opinion) applied the six year statute of limitations (“SOL”) for tortious injury to real property in barring plaintiff’s claim for permanent diminution in the value of its property. 320 Associates, LLC v. NJ Natural Gas Co., Docket No. A-1831-16T2 (N.J. App. Div. June 29, 2018). As a result, the neighboring property owner was unable to bring a claim for tortious injury to real property caused by the migration of coal tar contaminants from defendant neighboring property owner. Importantly, the court did allow plaintiff’s nuisance claim to proceed noting that if a nuisance can be abated, the failure to do so constitutes a continuing tort entitling plaintiff to relief and is not barred by the SOL.

In 320 Associates, the property owner, 320 Associates, LLC, owned a piece of commercial property located just north of defendant New Jersey Natural Gas Co.’s (“NJNG”) property. Plaintiff asserted that NJNG property was polluted with coal tar. The discharges on defendant’s property decades earlier from industrial operations had resulted in the migration of a coal tar plume onto plaintiff’s land causing damage.

Plaintiff stated in its complaint that it first learned of the migration of coal tar plumes onto its property in 2008. As a result of the newly discovered pollution, it could not sell its property to a current commercial tenant. Plaintiff further asserted that the pollution from NJNG’s land had decreased the value of plaintiff’s land and might negatively affect plaintiff’s future ability to either sell or lease the property. Damages were estimated at $2.5M. Based on these essential facts, plaintiff filed claims for negligence, negligence per se, strict liability, violation of the Spill Act, violation of New Jersey Environmental Rights Act, nuisance and trespass. In each count, the plaintiff sought the same relief, including damages for the lost sale or rental value of its property, and injunctive relief requiring NJNG to cleanup pollution on NJNG’s property and on plaintiff’s property.

The parties agreed that the applicable statute of limitations is the six year SOL for tortious injury to real property. N.J.S.A. 2A:14-1. The court confirmed the law axiom that ordinarily a cause of action would accrue when the right to institute and maintain a suit first arose. However, in environmental cases, under the so called discovery rule, a cause of action is found not to accrue until the injured party discovers, or by an exercise of reasonable due diligence and intelligence should have discovered that he may have a basis for an actionable claim.

The Appellate Division (in a de novo review) agreed with the trial court that the latest plaintiff learned about the condition was in 2008, therefore, the six year statute of limitations for a damages claim based on permanent diminution in the value of the property began to run in 2008 and expired in 2014 and therefore, was time barred. Additionally, the Appellate Court rejected plaintiff’s argument that the migration of contaminants constitutes a new “discharge” of pollutants every time it occurred. The court noted that the discharge of pollutants on defendant NJNG’s property occurred decades ago and therefore, the migration of those pollutants onto plaintiff’s land did not constitute a new discharge and therefore, the claims could not proceed based on the time bar.

Interestingly, the court reached a different conclusion with respect to plaintiff’s nuisance claim. Finding that since there was no dispute that defendant NJNG could have abated the contamination on plaintiff’s property, the failure to abate constitutes a continuing tort that entitles the plaintiff to relief and the applicable SOL did not bar plaintiff’s nuisance claim. The court further observed if the nuisance cannot be abated, there is no continuing tort, and the statute of limitations begins to run when the defendant creates the harmful condition. Finding these issues not ripe for the court’s consideration, the court found the trial court acted prematurely in dismissing plaintiff’s nuisance claim and remanded for the purpose of reinstating those claims and proceeding with discovery.

Property owners that have been impacted by contamination from a neighbor should consider bringing a nuisance claim for damages stating that the failure to abate the contaminants constitutes a continuing tort even though its other common law environmental claims may be time barred.

For more information or for a copy of this decision, please contact Michael J. Naughton at mnaughton@csglaw.com.