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NJLJ Special Environmental Law Report

As if by Magic: No Waiting to Sue on Pollution Claims

In Magic v. Exxon, Supreme Court clarifies law on multiparty contribution to environmental cleanup costs

Shari M. Blecher and Shawn M. LaTourette, New Jersey Law Journal  (November 24, 2014)

This summer, the New Jersey Supreme Court clarified the right of a private party conducting an environmental remediation to immediately pursue claims against others believed to be responsible for the contamination at issue. In Magic Petroleum Corp. v. Exxon Mobil Corp., 218 N.J. 390 (2014), the court reversed a 2011 Appellate Division decision concluding that a company or individual responsible for cleaning up contaminated property must await state approval of its cleanup plan before suing others who are also believed to have discharged hazardous substances, contributing to the need for environmental remediation.

The case concerned the remediation of soil and groundwater contamination emanating from gasoline station operations in Millstone Township, N.J. At issue were two neighboring gas stations with competing theories of which one caused the regional petroleum contamination. One station was previously owned by ExxonMobil, and the other was operated by Magic Petroleum. When the New Jersey Department of Environmental Protection (DEP) filed administrative actions against Magic to compel the company to conduct environmental remediation, Magic initiated a lawsuit against Exxon. The lawsuit alleged that Exxon was in fact responsible for most of the cleanup costs as a result of its petroleum discharges under the contribution provision of New Jersey’s Spill Compensation and Control Act (Spill Act), N.J.S.A. 58:10-23.11f(a)(2). That provision entails a private right of action whereby multiple parties responsible for environmental “cleanup and removal” costs may seek contribution from one another depending on their respective shares of liability.

The trial court found that Magic’s contribution claim against Exxon was premature because the DEP had not yet approved a final cleanup plan for the site. The trial court believed that allocation of liability between Magic and Exxon would be more accurate if it was adjudged after the DEP performed its role in overseeing investigation and cleanup. The Appellate Division, relying on the doctrine of primary jurisdiction, affirmed the dismissal. Primary jurisdiction permits the courts to defer action on a matter within the expertise of an administrative agency, while retaining original jurisdiction pending the agency’s decision. The Appellate Division stated that a party like Magic who was seeking Spill Act contribution must first obtain the DEP’s written approval of a cleanup plan before it could pursue its claim in the courts.

Reversing the Appellate Division’s decision, the Supreme Court held that a party who incurs cleanup and removal costs may immediately pursue a claim for contribution against other parties responsible for the contamination. This right to pursue contribution lawsuits grows out of the express language of the Spill Act, as well as common law, codified in the Joint Tortfeasors Contribution Law, N.J.S.A. 2A:53A-1, and the Comparative Negligence Act, N.J.S.A. 2A:15-5.1. The high court also found that primary jurisdiction was not applicable, and that “plaintiff property owners or other responsible parties are permitted to file contribution claims in Superior Court, and a court may allocate liability before the final resolution of a site remediation plan by the DEP.” In finding that a DEP-approved remediation plan was not a prerequisite to filing a contribution claim, the court highlighted the distinction between (1) an allocation of liability and (2) the recoverable amount of cleanup costs. While recoverable cleanup and removal costs may include those approved by the DEP, the courts may allocate a percentage of responsibility for a particular cleanup liability. Thus, a “trial court may determine, subject to proofs” whether one or more dischargers are responsible for contamination and “may assign liability to responsible parties, based on evidence presented at trial.”

Magic makes clear that “a party determined to be a discharger and held responsible for the cost of cleanup by the DEP is entitled to bring a contribution claim against other potentially responsible parties before the final tally of cleanup costs.” The ruling answered a critical question opened by the Appellate Division’s earlier decision, particularly in light of the fact that the identification, investigation and remediation of contaminated property can take years to complete. The process also involves considerable expense. If parties were required to complete that process before they could pursue others who might have contributed to the contamination, they would be forced to expend substantial funds that may not be readily available. This is especially true of small businesses and property owners that often lack the environmental reserves of larger corporations that have a greater ability to forecast such needs. The immediate availability of contribution claims creates a mechanism to speed up the cleanup process by allowing parties to spread the cost burden early in the process.

The Magic decision provides clarity to the regulated community. Those engaged in the often expensive endeavor of investigating and remediating environmental contamination do not need to defer their efforts to obtain contribution from other potentially responsible parties. However, the related issue of how long a party has to assert that claim is currently before the Supreme Court, on appeal from the Appellate Division decision in the case of Morristown Associates v. Grant Oil Co., 432 N.J. Super. 287 (App. Div. 2013).

Morristown involves Spill Act contribution claims filed by the owner of a shopping center to recover environmental cleanup costs from oil companies and a dry cleaner. The Appellate Division held that the plaintiff’s contribution claim was time-barred because it was filed after the catchall six-year statute of limitations period imposed by N.J.S.A. 2A:14-1. The limitations period began running in 1999, when the shopping center should have realized that contamination may have existed. The court reasoned that enforcing the statute of limitations does not prevent a diligent plaintiff from recovering contribution under Spill Act claims; it just requires that a plaintiff under the Spill Act file in a timely manner. Before Morristown, it had been widely understood by the environmental law community that there was no statute of limitation on Spill Act claims.

Accordingly, while Magic permits dischargers cleaning up property to immediately seek contribution from other responsible parties, the outer limit for bringing such claims remains an open question. There are many practical reasons that a remediating party may not wish to pursue an immediate contribution claim, including the allocation of resources between cleanup and legal processes. Identifying and developing proofs against other responsible parties may divert funds from investigation and remediation activities, which are themselves subject to statutory and regulatory time frames. Until a ruling on Morristown is issued, however, remediating parties are left with one message: exercise diligence in identifying other potentially responsible parties, and act swiftly to preserve contribution claims.

Reprinted with permission from the November 24, 2014 issue of the New Jersey Law Journal. © 2014 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.

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