Earlier this week, the New Jersey Supreme Court ruled that Spill Act contribution claims against the State of New Jersey for events prior to April 1, 1977 – the date the statute was enacted – are barred by the doctrine of sovereign immunity.  This ruling places the State on an unequal footing with private parties for historic environmental liability under the Spill Act, and in effect, creates an automatic orphan share for pre-1977 sites where the State would otherwise have liability. 

The case – NL Industries, Inc. v. State of New Jersey, Dkt. No. A-44-15 (N.J., Mar. 27, 2017) – involves contamination of the Laurence Harbor shoreline, part of the Raritan Bay in Old Bridge Township New Jersey, which has been declared a federal Superfund site.  In the 1960s, the State of New Jersey, along with the Army Corps of Engineers, built a levee and filled riparian land in an effort to combat beach erosion in the local area.  Then, the State approved a private developer’s construction of a seawall in the same area, which was constructed using slag, an industrial byproduct that contained lead.  The construction of the seawall project was completed in the early 1970s.  During the construction, a local township official informed NJDEP that slag material was being dumped directly into Raritan Bay.  In March 1973, the State, the Army Corps, and the local township met to discuss the slag issues, but no further action was taken at that time.  In 2007, NJDEP detected contamination along the seawall in Laurence Harbor, and in 2009, EPA placed the site on the National Priorities List.  In May 2013, EPA issued a Record of Decision and selected the cleanup and removal remedy for Raritan Bay, which is estimated to cost $79 million.  In January 2014, EPA issued a remediation demand to NL Industries, Inc., because NL’s factory in Perth Amboy was the source of the slag byproduct that was used to build the seawall. 

NL then filed an action in New Jersey state court seeking contribution under the Spill Act, alleging that the State of New Jersey caused or contributed to the Raritan Bay contamination, both in its role as a regulator of the activity that led to the building of the seawall, and also as an owner of the riparian land where the seawall was constructed.  The State filed a motion to dismiss, primarily arguing that the Spill Act contribution claim was barred by the doctrine of sovereign immunity, which generally precludes lawsuits against the government except when the government expressly consents to them. 

The trial court denied the State’s motion, holding that the Spill Act includes a clear and unambiguous waiver of the State’s sovereign immunity, because the State is expressly listed in the statue’s definition of a “person” that could be potentially liable for contamination.  The trial court further held that when the Spill Act was amended in 1991 to create a private cause of action for contribution against other responsible parties, the legislature did not “immunize or exclude” the State from the list of persons who could be subject to a contribution claim.  Lastly, the trial court pointed to the 1983 New Jersey Supreme Court Ventron case, which imposed liability for activities resulting in contamination that pre-dated the enactment of the Spill Act, because the legislative intent was that the Spill Act be applied retroactively.  The Appellate Division affirmed the trial court’s decision for substantially the same reasons. 

In an interesting twist, the New Jersey Supreme Court disagreed, and held that:

Based on careful review of the Act as enacted and as serially amended, we conclude that the Spill Act contains no clear expression of a legislative intent to waive the State’s sovereign immunity retroactively to cover periods of State activity prior to the Spill Act’s enactment.  Absent a clear and specific indication that the Legislature intended to impose a retroactive liability that could have profound impact on the fiscal affairs of the State, retroactive waiver of the State’s sovereign immunity for Spill Act contribution claims concerning pre-Act activities will not be inferred.  Therefore, on the fundamental issue in this appeal, we hold that the State’s sovereign immunity prevails against Spill Act contribution claims based on State activities that occurred prior to the original effective date of that Act.

The New Jersey Supreme Court held that in general, retroactive application of a statute is only appropriate where there is clear legislative intent, which is heightened when sovereign immunity is at play.  The Court held that “a legislative waiver of sovereign immunity must be expressed clearly and unambiguously, and a retroactive waiver of sovereign immunity requires the clearest of expression.” 

To determine whether the State clearly and expressly waived its sovereign immunity in the Spill Act, the Court walked through the Spill Act’s legislative history.  When the Spill Act was originally enacted, it did not address discharges of hazardous substances that pre-dated the Spill Act.  It was only in 1979, when the Spill Act was amended to allow NJDEP to use monies from the State’s Spill Fund to cleanup discharges that occurred prior to the Spill Act’s enactment, that the concept of retroactivity came into play.  This provision was coupled with a corresponding right for the State to seek contribution from private parties to reimburse NJDEP for the costs it was incurring in addressing pre-Spill Act discharges.  The Court determined that these amendments did not “establish[] any legislative intent whatsoever – let alone a clear or unambiguous intent – to abrogate sovereign immunity otherwise applicable to the State’s activities occurring before the Act became effective in 1977.”  Similarly, when the Spill Act was amended in 1991 to add language to the strict liability provision for cleanup costs “no matter by whom incurred,” this did not indicate an express legislative intent to waive the State’s sovereign immunity for pre-1977 activities.

Justice Albin wrote a vigorous dissent that sided with the underlying decisions of the trial court and Appellate Division, and pointed out the unfair treatment for the State and private entities for the same historic releases:

Under the majority’s reading of the statute, however, a private party cannot seek contribution from the State when the State has joint responsibility for a pre-Spill Act discharge. That interpretation leads to the absurd result that when the State and a private party are both responsible for a toxic discharge, the private party is on the hook for the entire cleanup cost.  And that is so, even when the State is ninety percent responsible for a discharge and the private party only ten percent responsible. The unfairness of this outcome is all the more flagrant because the NJDEP can select a site to be remediated where a private party is required to clean up a toxic spill primarily caused by the State.

What is now clear is that at a multi-party cleanup site where the State of New Jersey has historic liability, the State’s share will ultimately be borne by private parties.  How this will play out in practice remains to be seen, but it may lead to some creative arguments regarding when the State’s liability at a given site arose, with an effort to target that date to be after April 1, 1977.