Recent New Jersey Case Serves as Warning to Redevelopers of Contaminated Sites
A recent New Jersey Appellate Division case concerning spoliation of evidence in the context of a contribution action under the New Jersey Spill Compensation and Control Act (“Spill Act”) counsels caution on the part of redevelopers of contaminated sites. The case makes clear that owners of contaminated sites must endeavor to preserve physical evidence related to the contamination as soon as litigation becomes “probable” if they hope to rely on that evidence in a future contribution action.
In Pollitt Drive, LLC v. Engel, Docket No. A-4833-13T3, the owner of a former printing facility site in Fair Lawn, brought action under the Spill Act against several former owners seeking contribution for the costs of environmental remediation related to the site. After purchasing the site in 2006, the owner learned that the site was contaminated and engaged environmental consultants to investigate the extent of the contamination. Those investigations confirmed the presence of significant soil and groundwater contamination.
The matter came before the Appellate Division following the trial court’s finding that the owner’s actions with regard to certain items on the site resulted in spoliation of evidence warranting the dismissal of the complaint. The first item was a worn segment of pipe that had been located within the former printing facility at the site. Photographs were taken of the pipe and it was discarded roughly two years before the owner filed the original complaint. During the litigation, the owner’s expert relied on the photographs of the pipe and a sample of pipe taken from a different location on site to conclude that the discarded pipe had breached, resulting in contamination of the site. The defendants’ experts countered that the original pipe was needed to confirm that theory.
The owner also proffered expert reports concluding that waste materials were routed through a sump system and sewer piping beneath the former concrete floor in the printing facility building, which resulted in contamination beneath the building. However, the owner had excavated and destroyed the sump pit and concrete floor before the owner’s experts could examine them. The defendants’ experts lodged similar objections to these reports.
The defendants filed motions to dismiss the action on spoliation grounds related to both the pipe and the sump system/concrete floor. First, reasoning that it was a sophisticated investor with reliable environmental professionals and should have known litigation was possible, the trial court barred the owner from relying on evidence related to the pipe. A few months later, after considering a second motion related to the sump system and concrete floor, the trial court found that the owner destroyed the sump and flooring after it commenced litigation, and, thus, breached its duty to preserve that evidence. Ultimately, the trial court held that the owner could offer no alternative evidence to prove its claims and, thus, dismissed the complaint with prejudice.
On appeal, the Appellate Division agreed with the trial court as to the spoliation of evidence, stating that the owner should have anticipated litigation given its level of sophistication and access to experts in the field. The Court rejected the owner’s arguments that it had not planned to bring action when it destroyed the pipe and that the unavailability of the sump and flooring constrained the parties equally, noting that the duty to preserve is triggered when litigation is probable and the owner failed to comply with that duty. However, the Court held that the trial court failed to properly consider alternatives to dismissal, which should only be imposed as a spoliation sanction when a lesser sanction would not remedy the prejudice to the non-spoliating party, and remanded for further proceedings.
The decision is instructive for owners of contaminated or potentially contaminated properties and serves as a cautionary tale for redevelopers. Property owners should consult environmental professionals and take strides to preserve any tangible evidence that may be available if there is any possibility of litigation concerning the environmental condition of the property in the future. Failing to do so could be fatal to a claim for contribution, and result in owners and redevelopers being forced to bear the burden of remediation costs alone. Members of the Gibbons Real Property & Environmental Department are experienced in due diligence issues and environmental litigation and will be closely following any updates in this area of the law.