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New Jersey Spill Compensation and Control Act Burdens Clarified by the U.S. District Court

The State of New Jersey is involved in a major lawsuit seeking natural resource damages from large petroleum and chemical companies on account of Methyl Tertiary Butyl Ether (MTBE) contamination. In November 2017 the U.S. District Court for New Jersey made an important ruling on the burdens of proof required for success under the New Jersey “Spill Act.” [New Jersey Department of Environmental Protection v. Amerada Hess Corp., ___F.Supp.3d___, Case No. 15-6468 (D. N.J. Nov. 1, 2017).]

 

Background

Under the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 et seq. (the “Spill Act”), and otherwise, there had already been agreement upon a remedial action that would restore the quality of groundwater. The defendants contended that as a matter of law the state could not seek a form of natural resource damages called primary restoration damages for what was essentially a temporary condition already being repaired. Defendants argued that under “controlling” New Jersey state case law, plaintiffs may recover primary restoration damages for such expedited remediation efforts only where the groundwater contamination at issue gives rise to “an injury or threat to human health, flora, or fauna.” Defendants also sought leave to file a summary judgment motion that was opposed by the state due to there being issues of fact inappropriate for summary dismissal decision-making.

After setting out important details of the dispute, including that “primary restoration damages” was a monetary compensation for loss of pre-contamination, i.e. pristine conditions not showing evidence of human impact on groundwater. Among the issues presented was the relevance of certain New Jersey case law, its meaning for the present case, and whether there was a factual dispute or battle of experts creating controversy that made summary judgment ill-suited for fair resolution.

Physically, there were several areas that were already under remediation. At these so-called “trial sites” one question was whether the remediation would or would not return offsite groundwater both to the necessary state standard and also to even better nearly pristine conditions. The state contended it had a relatively low burden of proof of what it claimed is the “practicability” of further remediation the Spill Act required. Defendants said that since the state standards for groundwater quality were reached within the trial sites and that natural attenuation would take care of off-site reduction, no special or primary damages were possible as a legal matter.

 

The District Court’s Ruling

District Judge Freda L. Wolfson went through a thorough analysis to reach a decision that likely has something in it for both sides. But first, the court summarized the dispute as follows:

 

  • Defendants contend that because it is undisputed that, once Defendants’ existing, NJDEP-approved remediation plans are completed, the contaminated groundwater at and around the Trial Sites will, eventually, through the process of natural attenuation, reach pre-discharge concentrations of MTBE, Plaintiffs’ claims for primary restoration damages should be interpreted as seeking ‘expedited remediation.’ Defendants argue that under ‘controlling’ New Jersey state case law, Plaintiffs may recover primary restoration damages for such expedited remediation efforts only where the groundwater contamination at issue gives rise to ‘an injury or threat to human health, flora, or fauna.’ Defendants contend that because Plaintiffs cannot meet this burden on the undisputed facts, Defendants should be granted leave to move for summary judgment on Plaintiffs’ claims for primary restoration damages.

 

 

It All Came Down to ‘Practicability’

As to the meaning of what “practicability” means in the Spill Act, the court cited primarily the case of New Jersey Dep’t of Envtl. Prot. v. Exxon Mobil Corp., Case No. UNN-L-3026-04, slip op. (N.J. Super., Law Div. Aug. 25, 2015) that she referred to as “the Bayway decision.” Curiously originally neither the state nor any defendant had briefed the meaning of that case, perhaps because the decision was not viewed as totally favorable to one of the sides of the dispute in the present case. The judge required the parties to brief its import nevertheless.

The Bayway case was instructive to the judge, since in part, her duty was to discern and apply state law as New Jersey courts would interpret he statute. The court noted:

 

  • The Bayway court held that. . .[u]nder N.J.S.A. 58:10-23.11u.b(4), the state has the burden of demonstrating, by a preponderance of the evidence, that any restoration plan is ‘practicable.’ Id. at 50.

Under this standard, the state:

 

  • . . .must take sites as it finds them when seeking to conduct primary restoration. This means that if certain site-specific realities make primary restoration non-practicable, the state may not conduct primary restoration.”

The Bayway decision was really a ruling on whether there was a fair settlement of a disputed MTBE matter before that court. The trial judge had heard evidence from both sides before the litigation resulted in a settlement. Judge Wolfson observed that in analyzing the settlement before it the trial court had gone over the multiple points in dispute. The state had not taken account of numerous complexities, and its recommended approach was complicated, very time consuming and costly. It would involve third party rights and other governmental agencies.

Based on the multiple considerations cited in the Bayway decision, Judge Wolfson concluded that the proper way the Spill Act was to be interpreted was that showing “practicability” is a serious inquiry with numerous factors involved. In short, she ruled that the state has a complex road ahead of it to prove “practicability” in the matter before her.

 

Conclusion and Implications

Thus, the state’s contention it had an easy burden of proof was rejected and in its place Judge Wolfson held that under the Spill Act practicability determinations depend upon an evaluation of site-specific realities and circumstances.

However, she also rejected defendants’ contention that the state could not proceed unless it showed specific threat or injury. That did not comport with the plain language of the Spill Act, and the decisions defendants cited to reference special damages were deemed non-precedential.

Further, it is not surprising that Judge Wolfson rejected the parties’ motions concerning filing for summary judgment. There is simply too much in dispute to make the case suitable for a decision that does not involve cross examination and weighing of the credibility of witnesses. The District Court’s decision is accessible online at: https://scholar.google.com/scholar_case?case=655367165996573761&q=New+Jersey+Department+of+Environmental+Protection+v.+Amerada+Hess+Corp.&hl=en&as_sdt=2006&as_vis=1

(Harvey M. Sheldon)