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May 1, 2014 Ethics Seminar Material

 

 

New Jersey Supreme Court to Address Statute of Limitations for Contribution Claims under the Spill Act

 By George J. Tyler, Esq. and Matthew J. Krantz, Esq.

Under the Spill Compensation and Control Act (“Spill Act”), the owners of contaminated property in New Jersey who have expended funds to clean up their property are permitted to seek contribution from prior owners and other parties that were responsible for causing the contamination. However, there is an ongoing debate in New Jersey concerning whether owners are subject to a time limitation for making such claims. Previously, trial level and lower level appellate courts in New Jersey determined that there was no time limitation for seeking contribution from those responsible for contamination under the Spill Act. Thus, a business that sold a property decades earlier could still be liable for the cleanup despite having no remaining connection to the property.

However, in a recent Appellate Division decision in Morristown Associates v. Grant Oil Co., 432 N.J. Super. 287 (App. Div. 2013), the Court decided that the six-year statute of limitations that generally applies to all actions for trespass and tortious injury to real property also applies to contribution claims under the Spill Act. This decision brought the State courts in line with the United States District Court of New Jersey, which has also applied the six-year statute of limitations to Spill Act contribution claims.

The consequences of imposing a six-year statute of limitations to contribution claims are quite significant. Often, contamination is not discovered by a property owner until years after the discharge of a hazardous substance on the property. For those that discover the contamination more than six years after the discharge of a hazardous substance, a strict interpretation of the six-year statute of limitations may bar any action for contribution against the parties actually responsible for the discharge.

In order to soften the blow, the plaintiff in Morristown Associates sought to have the “discovery rule” applied, which would delay the running of the six-year clock until the property owner or other party conducting the remediation discovered, or should have discovered, the contamination. Although the Appellate Division considered the plaintiff’s request, it ultimately agreed with the trial court that the circumstances did not warrant the application of the discovery rule because the plaintiff should reasonably have discovered the contamination more than six years before the contribution claim was filed. In reaching this conclusion, the trial court found, and the Appellate Division agreed, that the plaintiff was not diligent in the investigation of potential contamination, and, therefore, could not rely on the discovery rule.

Given the importance of this issue to all property owners and the divergence in State court decisions over the years, the New Jersey Supreme Court has decided to hear the appeal of the Morristown Associates case. Non-parties to the case, such as the League of Municipalities and a group of property owners called the Innocent Landowners Group, are eagerly seeking to participate in the case. Although no date has been assigned for oral argument, the progress of this case should be monitored by who owns, buys or sells property that may be contaminated.