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State of New Jersey Not Liable for pre-1977 Hazardous Discharges

On March 27, 2017, the New Jersey Supreme Court issued a very important decision concerning Spill Act liability in contribution cases.  In the case of NL Industries, Inc. v. State of New Jersey, the Court held that the State is not liable to pay cleanup costs for “pre-Act” discharges, meaning discharges that occurred before the law’s 1977 effective date.

In so doing, the Court reversed both a trial court and appellate court decision reaching different conclusions.  This means that the State will not share any of the costs of remediating pre-1977 discharges that generally occurred on State owned property.

NL Industries had an operation that produced contaminated slag as byproduct and some of that slag was released into Laurence Harbor.  Some of the discharging occurred on property on which the State had riparian ownership.  This became a federal Superfund site and in 2014 the EPA demanded that NL Industries pay remediation costs.  NL Industries sued the State for contribution under the Spill Act because the State owned some of the property from which releases occurred.

The State moved to dismiss on several grounds.  The one relevant here is that the State never waived sovereign immunity for discharges that took place before the Act’s 1977 effective date.  Both the trial court and an appellate panel rejected NL Industries’ arguments finding that a 1979 amendment to the law clearly provided for retroactive liability to all persons, and that the State was included within the definition of person.

However the Supreme Court reversed.  After undertaking an in-depth review of the original legislation and applicable amendments, the Court found no unambiguous statement by the Legislature that sovereign immunity was waived for pre-Act releases in cases where the State would otherwise be liable.  The Court held that a waiver must be clear, and it cannot be inferred.  The majority found no unequivocal waiver.

The Court rejected arguments that the case of Department of Environmental Protection v. Ventron Corp., 94 N.J. 473 (1983), holding that the post-1979 Spill Act amendments clearly provided overall retroactive liability, did not address the narrow issue of waiver that the Court now confronted.  Likewise the majority rejected Justice Albin’s view on dissent largely holding that because the 1979 Spill Act amendment failed to remove the State from the definition of a person, that the State was liable for pre-Act releases to the same extent as every other liable party.

To conclude, the New Jersey Supreme Court excluded the State from liability for pre-1977 hazardous substance releases in contribution cases on a sovereign immunity basis.  It should be noted that the Court acknowledged that State could be held liable for post-Act releases.  The question that remains is whether the Legislature will not amend the Spill Act to respond to this decision and unequivocally waive immunity.  At least for now, that is the only way this issue can be re-visited, should the Legislature so decide that this is something it wishes to entertain.

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