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Laches to defeat a private party contribution claim under the Spill Act?

In 2015, the New Jersey Supreme Court ruled that private party contribution claims under the New Jersey Spill Compensation and Control Act (the “Spill Act”) are not time barred by a statute of limitations. See Morristown Associates v. Grant Oil Co., 220 N.J. 360 (2015).  Accordingly, private claims for contribution pursuant to the Spill Act could, in theory, be brought many years or even decades after the discovery of contamination at a site.  The Morristown Associates ruling further confirmed that the defenses available to contribution defendants are only those specifically identified in the Spill Act itself.  Notably, the defense of laches, an equitable principle that bars longstanding and legally stale claims, is not one of those specifically enumerated in the Spill Act.  It too, is not a defense established by the New Jersey Rules of Court and thus, not seemingly applicable in the Spill Act context.

However, a New Jersey Superior Court, for what appears to be in the first instance, applied the laches defense to bar a private party’s Spill Act contribution claim. See 22 Temple Ave., Inc. v. Audino, Inc., et al., Dkt. No. BER-L-9337-14 (Oct. 2016).  In 22 Temple Ave., Inc., the Bergen County Superior Court found a private party’s ten-plus year delay in filing a Spill Act lawsuit after discovering contamination to be inapposite of the fundamental principles of fairness and substantial justice.  Plaintiff, 22 Temple Avenue, Inc., brought Spill Act contribution claims against a former tenant for allegedly contributing to the contamination of plaintiff’s Hackensack property.   Said tenant, Defendant, Peter Audino, who operated a business named Audino, Inc. with his two brothers, purchased plaintiff’s dry cleaning business in 1973 and continued operations at plaintiff’s property until the early 1990’s.

Plaintiff arranged for a Phase I environmental site assessment to be performed in 2004, which identified Perchlorethylene (“PCE”) contamination consistent with dry cleaning operations.  In 2008, a Phase II follow up assessment was performed, confirming PCE contamination at the subject property.  Plaintiff then delayed five years to hire an environmental consultant to commence remedial activities.  In 2014, some ten years after its discovery of PCE contamination at the subject property, plaintiff finally noticed the contribution defendants of its intent to seek contribution and shortly thereafter, initiated a lawsuit alleging Spill Act violations.

It is important to note that plaintiff’s lawsuit alleged that Peter Audino, in his individual capacity, contributed to the contamination at the property.   Peter Audino, of advanced age, was unable to competently participate in the litigation, and other Audino, Inc. shareholders and employees were similarly unavailable to participate or testify in the matter.  Further, in 2013, a year before the lawsuit was filed, all of Audino, Inc.’s records were destroyed, as many years passed since Audino, Inc. last operated its dry cleaning business.  From Peter Audino’s and Audino, Inc.’s perspectives, defending plaintiff’s Spill Act contribution claim became exceedingly difficult in light of these materially changed circumstances.

Cognizant of this difficulty, the court reasoned that “[h]ad the plaintiffs contacted the potentially liable parties in 2004, and/or provided copies of the Phase I report in 2004, and/or provided copies of the Phase II report in 2008, it is reasonable to assume that Peter Audino would have retained Audino, Inc.’s records, and knowing the advanced age of the important witnesses concerned, his counsel could have exercised his right to preserve their testimony.”  Instead, the court found “plaintiff’s conduct to evidence[ ] an intent to avoid its legal responsibilities,” therein noting the importance of public policy to the Spill Act’s viability.  “Without the risk of encountering a laches defense, Spill Act litigants would be encouraged to do what the [plaintiffs] did – postpone investigation and clean up – while other parties are harmed by their delay.”  To the court, plaintiff’s delay in noticing defendants and commencing the litigation “so degraded Peter Audino’s ability to defend this case that this court finds that it is inequitable and unjust to let this lawsuit proceed against him.”

The court also, noted a lack of nexus between Peter Audino and the discharges discovered on the property.  Plaintiff proffered no scientific dating to delineate between the different time periods of different owners to establish which potentially responsible party caused the contamination.  As such, plaintiff failed to meet its burden to establish the nexus between discharger and the contamination.

While it is safe to assume this decision will be appealed, the same is important to those potentially responsible parties defending contribution actions for decades-old environmental issues.  The attorneys at Lieberman Blecher & Sinkevich P.C. are experienced in defending contribution claims and welcome the opportunity to assist you or your business with the Spill Act.

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