New Jersey Federal Court Rules Costs Spent To Obtain a "No Further Action" Letter Are Not Recoverable Cleanup Costs

On August 13, 2009, the federal district court in New Jersey dismissed a site owner's claim against an abutting property owner, seeking to recover costs under federal Superfund. In Champion Laboratories Inc. v. Metex Corp., D.N.J., No. 02-5284, 2009 U.S. Dist. LEXIS 71200 August 13, 2009, the court concluded that the site owner's environmental site investigation costs were incurred to further the company's efforts to shift liability to the abutting property owner, not for cleanup consistent with the National Contingency Plan.
 

In the Champion case, both parties' properties had groundwater contamination. Champion Laboratories, Inc. had investigated its property (the "Interlee Site") pursuant to New Jersey's Industrial Site Recovery Act. During the period of 1984 through 1995, Champion's environmental investigation of its onsite contamination included sampling sludge from an onsite septic tank, installation of groundwater monitoring wells, and preparation of a proposal to install and operate a pump and treat system to mitigate groundwater impacts. In 2002, Champion filed a CERCLA cost recovery action against Metex Corp., alleging that Metex's property (the "Metex Site") was the source of the contamination on the Interlee Site.

To impose Section 107(a) liability under CERCLA, a site owner must prove the following four elements: (a) that the defendant is a CERCLA potentially responsible party; (b) that there was a release or a threatened release of the hazardous substances from the facility into the environment; (c) that the release or threatened release caused the plaintiff to incur response costs; and (d) that the costs were consistent with the National Contingency Plan. The court concluded that Champion did not demonstrate that its costs were necessary response costs consistent with the National Contingency Plan. The court found that Champion's efforts were not in response to the perceived threat from the potential migration of the plume from the Metex Site.

Champion argued that its expenses were proper response costs, noting that the United States Supreme Court has recognized that costs incurred in tracking down other responsible parties may be recoverable if such costs ultimately benefit, for example, a clean up effort. The New Jersey court rejected Champion's argument, finding that Champion had identified Metex as the alleged cause of the contamination of its site before it incurred the costs at issue. The court stated that none of Champion's expenses had furthered a clean up of the Interlee Site or contained the contamination allegedly migrating from the Metex Site.

The court also dismissed Champion's CERCLA Section 113 contribution claim against Metex because the settlement for which Champion sought contribution only addressed the liability arising from discharges at the Interlee Site and did not include any alleged contribution from offsite sources, such as the Metex site.

In summary, the Champion decision held that a party seeking CERCLA cost recovery must demonstrate those costs were in furtherance of site clean up and consistent with the federal National Contingency Plan.