New Jersey Law

N.J. App. Div. Holds that the Spill Act has a 6 Year Statute of Limitation in Private Cost Recovery Actions

On August 23, 2013, the Appellate Division handed down its decision in Morristown Associates v. Grant Oil Co. Plaintiff in that case, the owner of a shopping center in Morristown, brought claims against prior owners of a dry cleaning business located within the shopping center for contribution to environmental remediation costs caused by contamination on Plaintiff’s property. Plaintiff alleged that fill pipes to an underground storage tank (“UST”) underneath the dry cleaning business were corroded to the point that fuel would regularly leak into the ground before ever reaching the tank itself. Despite Plaintiff’s claims for contribution from entities who delivered fuel dating as far back as 1988, the trial court applied a six-year statute of limitations, barring all claims which would have accrued before that time. Plaintiff appealed on the basis that the Spill Act does not entail a statute of limitations, or in the alternative, that the “discovery rule” set forth in Lopez v. Swyer, 67 N.J. 267 (1973) would preserve all claims. The complaint alleged that the corroded fill pipes leaked contaminants into the soil and groundwater from 1988 to 2003 (after which the owner converted the system to gas), and that the oil companies and prior owners of the business failed to inspect the pipes and adjoined UST to ensure they were not leaking. However, the trial court granted summary judgments limiting plaintiff’s claims to events of contamination occurring within six years of the date of its complaint. Plaintiff asserted that it first became aware of the UST under the dry cleaning facility in its shopping center in 2003, when it was informed about soil and groundwater contamination by an adjacent property owner that discovered oil in a monitoring well, and the dry cleaner on Plaintiff’s property was identified as the source. According to Plaintiff, prior to that point, it was unaware that any UST existed at that facility. When the UST was removed in 2004, the tank itself was fully intact, but the fill and vent pipes leading to it were corroded, which allegedly was caused by improperly designed air conditioning venting placed above the pipes in question. It was estimated that somewhere in the neighborhood of 9,500 to 11,500 gallons of oil had been spilled between 1988 and 2003. A former officer of the managing company that operated the shopping center testified that he never saw anything to indicate that there was a UST or any environmental problems at the dry cleaners. He only became aware of a possible environmental issue in 2003 when the company next to the cleaners identified oil in its monitoring well. However, documents revealed that in 1999 a different UST located under a supermarket in Plaintiff’s shopping center had leaked and required remediation. Plaintiff’s property management company at the time (different from the current management company) handled the problem by hiring a contractor to remove a 1,000-gallon UST. The current managing company, however, stated that its files contained no reference to the 1999 UST issue, nor anything from the DEP regarding environmental problems on the property. Despite the Appellate Division’s holding in Pitney Bowes v. Baker Inds., Inc., 277 N.J. Super. 484, 488-89 (App. Div. 1994), pertaining to the unavailability of a statute of repose defense to a Spill Act contribution claim, the Court here held that the policies underlying a statute of limitations justify application of the six-year period for “[e]very action at law for trespass to real property, for any tortious injury to real or personal property . . . [and] for any tortious injury to the rights of another not stated” elsewhere in that Title. N.J.S.A. 2A:14-1. The Court reasoned that [a] statute of repose is strictly applied to bar a claim without any regard to when the claimant discovered or could reasonably have discovered the harm. That is, the Lopez discovery rule is not available to relax application of a statute of repose. In contrast, the discovery rule is applicable to a statute of limitations, and it mitigates the harsh and unjust result that would follow by barring the door of the courthouse to a blameless, injured person who is unaware that he has suffered an injury. Applying a statute of limitations to a claim for private contribution under the Spill Act does not prevent a diligent plaintiff from recovering the costs of cleanup and remediation from other responsible parties [. . .] . It merely requires that a claimant file a timely action after it discovered or should have discovered the grounds for its claim. Unlike the statute of repose, the statute of limitations is not ‘patently repugnant or inconsistent’ with the purpose of the Spill Act. (quotations and citations omitted). Accordingly, although the court held that the “discovery rule” should apply to statute of limitations defenses under the Spill Act, that under the facts of this case Plaintiff should have discovered the presence of the contamination at issue in 1999, when the supermarket’s leaking UST was removed. Because the complaint was filed in 2006, the court limited Plaintiff’s claimed damages to those which occurred within six years of the date of the complaint. This decision presents numerous areas for conflicts among the various matters that relate to Spill Act cost recovery claims, including whether thre can be a contribution right until actual remedial costs are incurred, and whether the limitation of actions would apply to Spill Act claims that arise from condemnation proceedings where actions would not accrue until such time as the court determined escrow is exhausted. This decision also may conflict with the policy grounds upon which the Pitney Bowes decision was based: the need for those responsible for pollution to pay for its cure. DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum, PC is a full service law firm in New Jersey which provides a broad range of legal services, including the representation of clients in environmental and defense of toxic exposure matters. For additional information about the matters in this bulletin or in the firm’s environmental practice, please contactSteven A. Kunzman, Esq. who heads our Environmental and Latent Injury Litigation Department. The information contained in this blog is intended solely for informational purposes; it is a advertising publication of DiFrancesco, Bateman, Coley, Yospin, Kunzman, Davis, Lehrer & Flaum P.C.This publication is intended to alert recipients of developments in the law and is not intended to provide legal counsel, advice or opinion on any specific facts or circumstances. The contents are intended as general information only. You are urged to consult a member of this firm or your own attorney concerning your particular situation and any specific legal questions you might have.