NL Industries, Inc. State of New Jersey

By: Joanne Vos, Esq. and Nathan Orr

In a case of first impression, a March 2017 New Jersey Supreme Court opinion held that the State cannot be held liable in a suit for contribution under the New Jersey Spill Compensation & Control Act (the “Act”) for actions that it took prior to the 1977 passage of the Act.

The pertinent facts are as follows: In 1968, after obtaining a riparian grant and building permit from the State, Sea-Land Development Corporation built a sea wall in the Lawrence Harbor in Old Bridge in order to protect it from further erosion. The wall was partially built on a jetty that was owned by the State and was constructed, in part, with slag from the NL Industries, Inc. plant which was located in Perth Amboy. The project was completed in the 1970s. In 2007, the New Jersey Department of Environmental Protection (NJDEP) notified the United States Environmental Protection Agency (USEPA) of certain contamination that it had detected along the sea wall. Upon review, the USEPA demanded that NL Industries, as the generator of the slag material, remediate the site. NL Industries asserted a contribution claim against the State, alleging that the State should be partially responsible for remediation costs under the Act which was passed in 1977. The contribution claim asserted that: (1) the sea wall was built upon land that was owned, in part, by the State and as such, the State is a party that is “responsible” under the Act; and (2) the State approved the construction of the sea wall as well as the slag materials from which it was to be built.

The State filed a Motion to Dismiss based, in part, upon the sovereign immunity that it is entitled to; also noting that the acts it took which formulated the basis for the Spill Act contribution claims were taken prior to the passage of the Act and as such, should not be permitted to stand. The Trial Court denied the Motion to Dismiss finding that: (1) the State is included in the Act’s definition of “person” and thus, is not entitled to immunity; and (2) in Ventron, a Spill Act contribution action was sustained against other parties whose acts which formulated the basis for a Spill Act contribution claim were similarly taken prior to the passage of the law. On appeal, the denial was affirmed. The State appealed to the Supreme Court.

The issue on appeal was whether the Spill Act retroactively strips the State of its immunity for pre-Spill Act activities? The Supreme Court responded in the negative, holding that the State is entitled to immunity for pre-Spill Act activities since the statute does not expressly waive the State’s immunity for those activities. The court reasoned that it will not infer retroactive waivers of immunity especially since the legislature had opportunities to so indicate a waiver of immunity when it amended the Spill Act in 1979 (allowing for retroactive liability generally) and in 1991. The court reiterated that the “State may not be sued in its own court without its consent.” Due to the absence of an express waiver of immunity, and the significant financial burden that a retroactive waiver would expose the State to, the Supreme Court ultimately reversed the Appellate Division and granted the State’s Motion to Dismiss.

This is an interesting outcome because (1) the State is clearly liable under the Spill Act for post-Spill Act activities; and (2) private parties may be held responsible for their pre-Spill Act activities.