|September 25, 2013|
Previously published on September 23, 2013
On August 23, 2013, the New Jersey Appellate Division held that the general six-year statute of limitations for property damage applies to a private claim for contribution under the Spill Compensation and Control Act, N.J.S.A. § 58:10-23.11, et seq. (Spill Act). In Morristown Associates v. Grant Oil Co., No. A-01313-11T3, 2013 N.J. Super (App. Div.), the court held that the six-year time limit runs from the time that a contribution plaintiff discovers or should have discovered the grounds for its claims. Significantly, the court rejected plaintiff’s argument that actual sample results or notice from an environmental authority is necessary to establish notice, instead emphasizing that the question is whether there are enough indications of environmental contamination to put plaintiff on reasonable notice of a need for further investigation.
New Jersey’s discovery rule may extend the six-year time limit based on when plaintiff discovers or, through the exercise of reasonable diligence and intelligence, should have discovered the basis of a claim.
Spill Act Contribution Claim
The Spill Act strictly prohibits the discharge of hazardous substances. The Act defines a discharge as “any intentional or unintentional action or omission resulting in the releasing, spilling, leaking, pumping, pouring, emitting, emptying or dumping of hazardous substances into the waters or onto the lands of the State, or into waters outside the jurisdiction of the State when damage may result to the lands, waters or natural resources within the jurisdiction of the State.” N.J.S.A. § 58:10-23.11b. The Act imposes broad liability for a discharge and sets forth that “any person who has discharged a hazardous substance, or is in any way responsible for any hazardous substance, shall be strictly liable, jointly and severally, without regard to fault, for all cleanup and removal costs no matter by whom incurred.” N.J.S.A. § 58:10-23.11g. The Act provides a discharger with a private right of action for recovery of cleanup and removal costs. N.J.S.A. § 58:10-23.11f.
The Act does not contain a statute of limitations for a private contribution claim, which prior to Morristown Associates had been the subject of controversy. Federal courts in New Jersey took the position that the general six-year statute of limitations for property damage applied. See, e.g., Reichhold, Inc. v. U.S. Metals Refining Co., (2009). However, New Jersey state courts had not decided the issue.
In 1994, the Appellate Division held that the 10-year statute of repose did not apply to a private contribution claim but did not address a time limit specifically in the context of a statute of limitations. Pitney Bowes v. Baker Industries, Inc. (1994). Thereafter, in an unpublished opinion, the Appellate Division held that no statute of limitations applied to a private contribution claim. Mason v. Mobil Oil Corp., (1999). However, unpublished opinions do not constitute precedent in New Jersey and, accordingly, the question of whether a statute of limitations defense could be asserted remained unanswered until the Appellate Division’s opinion in Morristown Associates, which has been approved for publication.
Impact of Appellate Division’s Opinion in Defending Spill Act Contribution Claim
In Morristown Associates, plaintiff owner of a shopping center filed suit against its tenant dry cleaners and heating oil companies for contribution of cleanup and removal costs for groundwater and soil contamination arising from a leaking underground oil storage tank. Defendants moved for summary judgment, dismissing the claim on the ground that it was barred by the statute of limitations. Plaintiff alleged that it received notice of the underground storage tank (UST) and contamination in 2003 - less than six years prior to the filing of its lawsuit. The trial court concluded that plaintiff should reasonably have discovered the contamination by 1999 - more than six years prior to the filing of the lawsuit - when plaintiff was made aware of another leaking UST that was removed from plaintiff’s shopping center. Agreeing with the trial court, the Appellate Division affirmed dismissal of the claim and held that plaintiff should have exercised due diligence and supervision over its property to investigate whether any other USTs existed and whether they were functioning properly. The court noted the numerous oil deliveries that must have been made prior to 1999 as well as clearly visible evidence of fill and vent pipes for the leaking UST.
Plaintiff may further appeal the decision to New Jersey’s Supreme Court, and Wilson Elser will continue to monitor for updates. However, until a reversal, if any, or other high court decision on the issue, Morristown Associates remains the binding authority in New Jersey.
How Does Morristown Associates Impact Private Spill Act Contribution Claims?
The statute of limitations defense is now a viable defense to a private Spill Act contribution claim. The most compelling evidence of plaintiff’s notice of the alleged contamination are groundwater/soil sample results and/or express notice of a contamination/discharge from the New Jersey Department of Environmental Protection (NJ DEP), a remediation consultant and/or other environmental authority. In the absence of same, further investigation regarding plaintiff’s records of purchase and/or sale of the subject property may also reveal the environmental status of the property. In short, upon receipt of the claim, investigation of plaintiff’s notice of the environmental status of its property may establish a viable statute of limitations defense.