Legal Update

At long last, the Court has determined that a statute of limitations does, in fact, apply to contribution claims brought under the New Jersey Spill Compensation & Control Act (the “Spill Act”). Prior to this determination, parties responsible for conducting a cleanup were not specifically subject to any limitations period when asserting claims against other responsible parties for their fair share of cleanup costs. The Appellate Division’s opinion in Morristown Associates v. Grant Oil Company establishes that such claims for contribution under the Spill Act are subject to the six (6) year property damage statute of limitations. Failure to bring these claims withing the appropriate statutory period could foreclose them forever.

In Morristown Associates, Plaintiff, the owner of a shopping center, brought Spill Act contribution claims against certain heating oil companies and prior owners of a dry cleaning business that operated in the shopping center, for their fair share of the costs associated with the remediation of contamination caused by a leaking underground storage tank (“UST”). The facts leading up to the assertion of Plaintiff’s contribution claim are as follows: Plaintiff purchased the shopping center in 1979. Prior to Plaintiff’s acquisition of the property, one of the tenants, a dry cleaning company, installed a 1,000 gallon heating oil UST beneath its leasehold. Beginning in 1999 and occurring through 2002, various heating oil delivery companies overfilled the UST, delivering more than 1,000 gallons of heating oil thereby surpassing its capacity. Plaintiff alleged that it was unaware of the existence of the dry cleaner’s UST until 2003, at which time a neighboring property owner advised Plaintiff that heating oil had migrated onto its property from Plaintiff’s property. Plaintiff alleged that it had relied upon a 1993 environmental audit which was completed as part of a refinance, and which failed to reveal the existence of any USTs upon the property, apparently in error. Plaintiff acknowledged that in 1999, it had become aware of and remediated contamination that had been caused by a discharge from a UST that was located elsewhere upon the property (i.e., not the dry cleaner’s UST). In short, Plaintiff’s realization in 1999 that the 1993 environmental audit was not reliable should have put Plaintiff on notice that other UST’s might have been located upon the property, including the dry cleaner’s UST.

Ultimately, Plaintiff remediated the contamination that was caused by the dry cleaner’s UST and in 2006, Plaintiff filed a complaint for Spill Act contribution, seeking to recover its cleanup costs from the other parties responsible for the discharges, including the dry cleaner and the heating oil delivery companies (“Defendants”).

In response to the complaint, Defendants filed for summary judgment arguing that since the discharges from the dry cleaner’s UST began in 1999, Plaintiff’s 2006 claims for contribution were barred by the six (6) year statute of limitations applicable to property damage. The trial court agreed with Defendants and dismissed Plaintiff’s complaint. On appeal, PLaintiff argued that no statute of limitations applied to its contribution claims because (1) its statutory claims for contributIon under N.J.S.A. 58:10-23.11(f)(2) were based upon the Defendants’ strict liability for the contamination; (2) the Legislature intended that contribution be available regardless of when the contamination occurred; and (3) the only defenses available to a Spill aCt claim for contribution are the statutory defenses referenced at N.J.S.A. 58:10-23.11(g)(d), none of which include a limitations period. The Appellate Division took the opportunity to squarely address the issue of whether a Spill Act contribution claim is subject to a statute of limitations and if so, which one.

In its decision, the Appellate Division notes that only one of its own decisions, and unpublished opinion that was delivered in 1999, addressed the very issue. In that case, it was determined that based upon the language of the Spill Act, no statute of limitations applied. However, in Morristown Associates, the Court opted to embrace an approach which has been taken by federal courts in similar cases (i.e., where a statute is silent on limitations, a limitations period for a similar or like cause of action is applied). In light of the nature of Plaintiff’s claim and the damage to the property, the Court held that the general six (6) year statute of limitations for property damage is still applicable to Spill Act contributions claims.

Additionally, the Court found that the “discovery rule” set forth in Lopez v. Swyer is also applicable to a Spill Act claim for contribution such that the limitations period does not begin to accrue until “the injured party discovers, or by an exercise of reasonable diligence and intelligence should have discovered that he may have a basis for an actionable claim.” The Morristown Associates Court applied the discovery rule and found that certain evidence should have put Plaintiff on adequate notice that the dry cleaner’s UST existed. Such evidence included: the property manager’s knowledge of the leaking UST in 1999; the property manager’s knowledge of certain pipes protruding from the dry cleaner’s leasehold, which would indicate the existence of a UST; that the environmental audit upon which Plaintiff relied was known to be incorrect as of 1999 since it failed to reveal the existence of that UST; and, most importantly, the fact that oil had been delivered to the property on numerous occasions between 1999 and 2002. Based upon all of this evidence, the Court opined that Plaintiff should have discovered the existence of the dry cleaner’s UST no later than 1999 and thus, the applicable limitations period of six (6) years began accruing at that time. Having been filed in 2006, or, seven (7) years after the time when Plaintiff should have discovered the dry cleaner’s UST, Plaintiff’s contribution claim was out of time.

In summary, Morristown Associates removes any remaining doubt that contribution claims brought under the Spill Act are subject to the six (6) year property damage statute of limitations. However, the question of when that limitations period begins to accrue is highly fact-sensitive since the analysis is subject to the discovery rule. Remediating parties should pinpoint the identification of other parties that are potentially responsible for a cleanup and assert claims for their fair share of the costs as early in the process as possible, in an effort to preserve contribution claims. Whether or not the applicable statute of limitations will be deemed to have accrued will depend upon certain evidence, including the types of the discharges at issue and when the parties became aware, or should have become aware, of certain facts related to the discharges.

Disclaimer: The information in this Legal Update is being provided to you solely for informational purposes and may not be applicable to all matters which involve the topic of the Update. This Update should not be construed as legal advise nor does it establish an attorney-client relationship.

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