Earlier this month, for the first time a New Jersey trial court applied the often pled, but seldom effective, laches defense to bar a private-party claim for contribution under the New Jersey Spill Compensation and Control Act (the “Spill Act”). Laches is an equitable principle that can be used to defend a claim that has become too “stale” by the plaintiff’s unreasonable delay in pursuing the claim, and where the defendant has suffered some harm from the delay. Laches can bar a claim even if the plaintiff initiates the lawsuit within the applicable statute of limitations, or where no statute of limitations exists – such is the case for private party contribution claims under the Spill Act, which last year the New Jersey Supreme Court affirmed in Morristown Assoc. v. Grant Oil Co., 220 N.J. 360 (2015) are not subject to any statute of limitations. In light of the Morristown decision, private claims for contribution under the Spill Act could therefore be brought decades after the discovery of contamination at a site.
Despite the seemingly open time frame for filing a private party Spill Act claim, in 22 Temple Ave., Inc. v. Audino, Inc., et al., Dkt. No. BER-L-9337-14 (Oct. 2016), Judge Rachelle L. Harz of the Superior Court of Bergen County admonished plaintiffs who wait too long to pursue their claims. Judge Harz granted summary judgment in favor of a former tenant who operated a dry cleaner at plaintiff’s property and who plaintiff alleged contributed to perchloroethylene (“PERC”) contamination, on the basis that laches barred plaintiff’s claim. The plaintiff waited over 10 years after discovering the potential contamination before initiating a Spill Act lawsuit or even placing the parties on notice of a potential claim.
Plaintiff, a closely-held corporation comprised of several members of the Lowell family, acquired the property in the late 1940s and thereafter began operating a dry-cleaning and laundry business at the location. In 1973, defendant Peter Audino and his brothers under the corporation Audino, Inc., purchased the business and leased the property from the plaintiff. The Audino brothers continued the dry cleaning operations until the early 1990s, when they sold the business to Elite Cleaners, which continued to operate the dry cleaner until 2011.
In 2004, plaintiff completed a Phase I of the property that revealed potential PERC contamination related to dry cleaning operations. Testimony from a Lowell family member revealed that at that time, the family made a “conscious decision” not to investigate the property’s environmental condition any further. Plaintiff ultimately performed a Phase II in 2008 that confirmed the property was contaminated with PERC. Then plaintiff still waited an additional five years to hire an environmental consultant to develop a cost estimate for the remediation, and remediation efforts eventually occurred from 2012 to 2014. Plaintiff then filed its Spill Act lawsuit seeking contribution towards the costs or the remediation in 2014 – ten years after the Phase I report had revealed the potential PERC contamination at the property.
In 2013, a year before the litigation was filed, defendant Peter Audino discarded all of Audino, Inc.’s records when he was having construction work done to the attic in his home, where he had been storing the business records since he and his brothers sold their dry cleaning business in the early 1990s. Peter is now 89 years old, legally blind, hard of hearing, had suffered a stroke in 2010, and is not healthy enough to participate in any eventual trial of the case. Two of Audino Inc.’s former employees who would have had firsthand knowledge of dry cleaning operations and disposal practices, died prior to the suit, respectively in 2006 and 2012. Peter Audino’s brother, Emanuel Audino, the President of Audino, Inc., who could have testified about the dry cleaning business and plaintiff’s operations at the time he acquired the business in 1973, had also died in 2005.
Judge Harz held that plaintiff’s delay in pursuing its Spill Act contribution claim was inexcusable and that the prejudice to the defendant was severe, given the lack of business records or competent witnesses to testify about the dry cleaning operations at the site. Judge Harz specifically admonished plaintiff’s delay, noting that had plaintiff contacted the defendants in 2004 at the time the Phase I report revealed potential contamination, putting these defendants on notice of a potential future Spill Act claim, they would have retained the business records and counsel would have done what was necessary to preserve witnesses’ testimony.
Even though the Morristown case held no statute of limitations applies to Spill Act claims, Judge Harz held that the laches defense must necessarily apply to such claims to prevent the inequitable scenario presented by litigants who wait too long to pursue their claims:
[P]laintiff’s conduct evidences an intent to avoid its legal responsibilities. Public policy implications are important to the Spill Act. Without the risk of encountering a laches defense, Spill Act litigants would be encouraged to do what the Lowells did – postpone investigation and cleanup – while other parties are harmed by their delay. Witnesses have died, memories have faded, and documents have been destroyed. The Lowells are seeking contribution from a defendant who does not have the ability to truly defend himself as his resources have been depleted by time.
Judge Harz therefore declared that it would be “inequitable and unjust” to let the lawsuit proceed against Peter Audino. Judge Harz also found there to be a lack of nexus between Mr. Audino’s alleged discharges at the property and the contamination that plaintiff had remediated, which under the New Jersey Dep’t of Envtl. Prot. v. Dimant, 212 N.J. 153 (2012) case, is a requirement for establishing Spill Act liability in private party contribution claims.