New Jersey Supreme Court Confirms Businesses Are Not Liable for Cleanup Costs Under New Jersey Spill Control Act Unless State Meets High Burden of Proof

By Samantha Sherman, Esq.

The New Jersey Supreme Court ruled on September 26, 2012 that the state must show “a reasonable nexus or connection” between the suspected polluter’s hazardous discharge and contamination at the damaged site in order to obtain damages and other authorized costs under the New Jersey Spill Compensation and Control Act (“Spill Act”).  The 42-page unanimous decision in New Jersey Department of Environmental Protection v. Dimant (“Dimant”) represents a victory for the business community over environmental organizations, both of which had filed amici curiae because of potential implications for future attempts to recover cleanup costs from businesses statewide.

The litigation stems from the discovery in 1988 that residential wells in Bound Brook, New Jersey had been contaminated with perchlorethylene (“PCE”), a solvent commonly used by dry cleaners and auto-body shops.  That year, state investigators looking for the source of contaminated groundwater found an external pipe from Sue’s Clothes Hanger (“Sue’s”) dripping PCE onto a driveway.  Sue’s was a family-owned laundromat and dry cleaning business in a small strip mall.  Although Sue’s had only been in operation for about fifteen months, the property had been used by laundry and dry cleaning businesses since the 1950s. The state did not perform any additional testing and did not take any enforcement action at that time.

Approximately sixteen years later, in 2004, the NJDEP brought a Spill Act claim against Sue’s for investigation and cleanup costs.  Other parties settled prior to trial.

The trial court found that the NJDEP did not establish that Sue’s contributed to the groundwater contamination by a preponderance of the evidence.  The court noted that the contamination preceded the dry cleaning operation; that the drip was not retested and was not shown to have been continuous; that there was no evidence that the dripping PCE had penetrated all the way through the asphalt beneath the pipe; and that there was no way to tell that the PCE in the groundwater came from Sue’s as opposed to other local dry cleaners or prior dry cleaning businesses at the same site.  The Appellate Division affirmed.

The NJDEP argued before the Supreme Court that the courts below had applied the wrong standard, and that it should be able to establish liability under the Spill Act by showing that Sue’s had been responsible for a discharge and that the same substance had been found at the site.

The court rejected the NJDEP’s argument and held there was no basis for the state to shift liability onto Sue’s because it never showed that the discharge by Sue’s was connected to the groundwater damage “in some real, not hypothetical, way.”  The court held that DEP must prove by a preponderance of the evidence that leakage from the pipe during Sue’s operation actually caused contamination of the groundwater.

In dicta, the court distinguished the Spill Act from its federal counterpart, the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) and used their legislative histories to explain the different proofs of causation required under the two laws.

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