(Lukiyanova Natalia)

New Jersey taxpayers can collectively breathe easier as a result of the state Supreme Court’s March 27 ruling in NL Industries v. State of New Jersey. ___ N.J. ___ (2017), rev’g 442 N.J. Super. 403 (App. Div. 2015). For additional discussion of the lower court decisions that were reversed, see L. Goldshore, “The State’s Spill Act Liability,” 222 N.J.L.J. 943 (Mar. 21, 2016).

NL Industries, confronted with the $79 million cleanup of the Raritan Bay Slag (RBS) site, a National Priority List (NPL) site, looked to share that burden by spreading the liability net to include numerous other parties. To realize that objective, the company filed a Spill Compensation and Control Act (the Spill Act) contribution claim against the state based on actions it took, or failed to take, in the 1960s and early 1970s. N.J.S.A. 58:10-23.11 et seq.

The problem for the company was that its claims were grounded on actions/inactions that occurred prior to the Spill Act’s effective date in 1977. On that basis, they were held to be barred by sovereign immunity. For a related case pending in the U.S. District Court against other public and private parties, see NL Industries v. Old Bridge Township, et al., 3:2013-cv-03493.

The state’s involvement with the RBS site was in many respects similar to the state’s role in hundreds, if not thousands, of other sites where there has been an actual or potential discharge of hazardous substances. As the court noted, if the state was held to have Spill Act liability in the current scenario, such a finding “could have [a] profound impact on the fiscal affairs of the state.”

Setting

The case originated decades ago in an effort to address beach erosion in the Laurence Harbor section of Old Bridge Township. To remedy this condition, in 1966, the U.S. Army Corps of Engineers constructed a levee and undertook beach fill measures.

Two years later, a developer proposed to augment the Corps’ work with a seawall. The subsequent contamination/remediation issues were linked to the use of slag, an industrial byproduct, as a construction material on the seawall and a pre-existing jetty.

The state was involved with the site as those operations proceeded. In 1969, the state approved a riparian grant that enabled the seawall’s construction. A few years later the state became aware of slag-related concerns in the adjacent watercourse but took no action.

It was not until 2007 that attention was again focused on the site when the DEP discovered contamination in the vicinity of the seawall. The USEPA was advised and, due to the presence of elevated concentrations of lead and other heavy metals, the RBS site was placed on the NPL in 2009. That was followed by the federal agency’s issuance of a record of decision and administrative order that required NL, as the source of the slag, to undertake remedial actions. The company’s Spill Act contribution suit asserted that the state had responsibility for the contamination in its capacities as a regulator and riparian landowner.

Lower Courts

The state moved to dismiss the complaint, prior to the end of discovery, on the grounds of sovereign immunity, Tort Claim Act (TCA) immunity, and failure to state a claim. The trial court reasoned that sovereign immunity had been waived because the state was included in the Spill Act’s definition of “person”; that the state had not been immunized or excluded from the reach of contribution actions when the statute was amended; and that the Spill Act had previously been found to have retroactive application. The trial court also rejected the state’s TCA-based defenses and found that there was a reasonable nexus between the state’s actions and the contamination.

The Appellate Division’s five-paragraph opinion did not provide an independent review of the legal issues presented. Rather, it merely affirmed substantially for the reasons set forth by the trial court.

Supreme Court

The court identified the primary statutory issue as whether the Spill Act retroactively stripped the state of sovereign immunity for pre-Act activities. That inquiry required a review of the statute as enacted and as amended.

NL’s position was based on the state being included in the definition of “person” when the Act was adopted. Additionally, when the statute was amended to permit private contribution actions for pre-Act discharges, the state was not expressly excluded from potential liability. The company also contended that the court’s landmark Ventron decision supported the statute’s retroactive application. Department of Environmental Protection v. Ventron Corp., 94 N.J. 473 (1983).

The state disputed NL’s interpretation of the Spill Act amendment as well as its view of Ventron’s impact in respect of retroactivity. Moreover, the state argued that a retroactive waiver of sovereign immunity was strongly disfavored.

The court traced the legislative history and noted that it was:

silent on the relationship between the 1991 amendment and its connection to contribution actions against the state generally, and with respect to pre–Act activities by the state, in particular. It is debatable from the combination of amendments to the Act in 1991, and accompanying legislative statements, whether the change … signaled a broadly intended opening-up of contribution actions … against any and all dischargers, including the state, for hazardous discharges that preceded enactment of the Spill Act.

An additional factor to be considered in this case was the impact, if any, of the state’s sovereign immunity. As the court noted, “a legislative waiver of sovereign immunity must be expressed clearly and unambiguously and a retroactive waiver of sovereign immunity requires the clearest of expression.”

That test was not satisfied merely because the legislature did not revise the definition of “person” when the Act was amended to authorize private contribution actions for pre-Act discharges. Based on its review, the court was unable to conclude that the legislature had clearly and unambiguously expressed the intent to impose liability on the state in a private contribution action based on its pre-Act activities.

The court also rejected NL’s reliance on Ventron to support its argument that the Spill Act subjected the state to retroactive liability for pre–Spill Act activities. Rather, that ruling only addressed retroactivity where the state sought reimbursement for a pre-Act discharge that it had remediated—not retroactivity in all contexts.

Having disposed of the matter, the court then opted to provide “guidance in order to avoid confusion in contribution claims pertaining to state discharges post-enactment of the Spill Act:”

In light of the fact that the state’s regulatory actions in this matter all preceded the original passage of the Spill Act, we add, concededly in dicta, only that we can find no clear evidence in the legislative history of the Act that is intended to strip the state of immunity for the discretionary governmental activities of a sovereign.

Reactions

As expected, the litigants’ attorneys had differing views of the court’s decision. Attorney General Chris Porrino indicated that “[t]he bottom line is that this decision prevents what would have been an improper expansion of the State’s liability in environmental matters, and we are gratified that the Court agreed with our position.”

In contrast, NL Industries’ attorney Christopher Gibson questioned whether the Spill Act was intended to differentiate between the state and other potentially responsible parties: “[o]ne of the things we’ve taken somewhat as an article of faith is that anyone who contaminates the land is responsible for its remediation. I always thought what the Spill Act did was make that equally true if you were a municipality, the New Jersey DEP or if you were a chemical company.” app.com, Mar. 27, 2017.

The voice of the state’s organized environmental community, Jeff Tittle, director of the Sierra Club New Jersey chapter, was quoted as agreeing with the court’s decision while not missing the opportunity to criticize the state for its involvement with the site: “the state is guilty of allowing National Lead to move forward by granting permits, they are still not the polluting party. We hope to see more cases where the polluting companies are forced to clean up their messes rather than the taxpayers of New Jersey doing it. Only in New Jersey will you find a beach that is now closed because it is a Superfund site.” myCentralJersey.com.•