An Empty Seat at the Table: Sovereign Immunity Bars Pre-Spill Act Liability

Earlier this week, the New Jersey Supreme Court clarified in NL Industries, Inc. v. State of New Jersey, (A-44-15) (March 27, 2017), that the State of New Jersey retains its sovereign immunity under the New Jersey Spill Compensation and Control Act (Spill Act), N.J.S.A. 58:10-23.11 to 23.24, for discharges of hazardous substances that occurred prior to the 1977 enactment of that law.

In a Spill Act contribution claim against the State and several private parties for the costs to remediate parts of the Raritan Bay impacted by contaminated slag used in the early-1970s to construct a seawall, NL Industries alleged that the State was a liable “person” under the Spill Act and subject to a private party contribution claim.  The State had approved the construction of the seawall and the disposal of the contaminated slag in the Raritan Bay.

When the Spill Act was adopted in 1977, it created a Spill Fund to pay for the clean-up of hazardous substances discharged by “any person” after the law was enacted.  The Spill Act defined “person” to include the State.  In 1979, the Legislature amended the Spill Act to allow the State, but not private parties, to use the Spill Fund to remediate discharges that occurred prior to the enactment of the Spill Act.  In 1991, the Spill Act was amended again, imposing strict liability on any responsible “person” for cleanup costs “no matter by whom incurred,” and allowing private party contribution claims to recover costs from any such “person,” including for pre-Spill Act discharges.  NL Industries argued that these amendments worked together to allow private party contribution claims against the State for pre-Spill Act discharges.  NL Industries also agreed with the trial court’s conclusion that the State’s sovereign immunity for pre-Spill Act discharges was waived based on the Supreme Court’s decision in Department of Environmental Protection v. Ventron Corp., 94 N.J. 473 (1983), which applied Spill Act liability retroactively for pre-Spill Act discharges.

The Court rejected NL Industries’ argument and the trial court’s reliance on Ventron.  The Court began its analysis by affirming that the State’s sovereign immunity can be waived only by a clear and unambiguous expression of legislative intent.  While the Court acknowledged that it may be possible to construe the language of the 1991 amendments to the Spill Act to allow for contribution claims against the State for pre-Spill Act discharges, the Court explained that this was not enough.  Neither the 1991 amendments, nor any other provision of the Spill Act, contained the deliberate, clear and unambiguous expression by the Legislature required to strip the State of its sovereign immunity for pre-Spill Act discharges.  The Court also clarified that the retroactive application of the Spill Act in Ventron applied narrowly to only pre-Spill Act discharges that the State remediated with Spill Fund monies and sought reimbursement for from private parties, leaving the State’s sovereign immunity protection from liability for its own pre-Spill Act discharges in place.

Justice Albin, in his dissent from the Court’s majority opinion, wrote that the Court’s interpretation of the Spill Act “leads to the absurd result” of a private party being held on the hook for the entire cost to clean-up a pre-Spill Act discharge even when the State and the private party are both jointly responsible.  Given that discharges of hazardous substances can occur decades before contamination is discovered and that the State can easily be one of many, if not the primary, “person” responsible for pre-1977 discharges, it is worth watching how the Court’s decision impacts a private party’s remediation at such sites now that the State is immune from contributing to the cleanup of pre-Spill Act discharges.