Proving Liability for Clean-Up Costs – Nexus; Circumstances and Experts – Lessons from Dimant and DVL

On May 18, 2011, the New Jersey Appellate Division upheld a trial court’s decision that the New Jersey Department of Environmental Protection had failed to establish sufficient “nexus” or connection between the operator of a dry cleaner and regional groundwater contamination. In New Jersey Department of Environmental Protection v. Dimant, et al., (Docket A-3180-09T2), the Appellate Division soundly rejected New Jersey’s claim that “the Spill Act must be interpreted and applied very broadly to find that any discharge at any time, even a de minimis one, imposes liability on all operators handling that product, and that a direct causal connection between the discharge and the damages need not be established.” This sort of argument which asks the court to overlook critical connections is all too common in environmental cases. Indeed, governmental plaintiffs often invoke policy reasons when asking for relaxed nexus requirements whereas private parties seeking contribution frequently call on the courts to shift the burden to the alleged dischargers.

However, in Dimant the Appellate Division reminded all potential plaintiffs seeking to impose liability for clean-up costs on former owners or operators that they must meet their burden by coming forward with a preponderance of the evidence sufficient to prove a “nexus” between the defendant and the discharge as well as connecting the damages to the contamination. Although plaintiffs may resort to circumstantial evidence and experts, any break in the chain of connections between a defendant and the discharge or the discharge and the alleged contamination (or the contamination and the plaintiff’s damages) should be fatal after Dimant.

Dimant involved the dry cleaning solvent perchloroethylene (PCE) which had impacted over 350 acres of groundwater in and around Bound Brook. Although there were no less than three dry cleaners in the neighborhood (each of which had several owners and operators), as well as two or three other possible sources of PCE, NJDEP’s investigations eventually focused on only one relatively short term operator of one of the dry cleaners. Using a combination of inspection reports that confirmed the presence of discharge pipes in and around dry cleaning operations, and sampling data, NJDEP’s expert concluded that one particular operator was the “primary source” of the groundwater contamination. However, the trial court took a critical look at the alleged connections between this dry cleaner’s operations and the PCE discharge as well as the nexus between any potential discharge and the probability that it caused such extensive contamination. After a non-jury trial, the court found that NJDEP failed to prove its case primarily because its expert failed to address the presence of older, weathered PCE which pre-dated defendant’s activities. NJDEP’s expert was further faulted for the failure to consider other possible sources of the PCE. Indeed, reading between the lines it appears that NJDEP probably cobbled together sufficient evidence to prove that defendant’s operations resulted in minor discharges into a paved parking area. However, it also appears that NJDEP utterly failed to establish that defendant’s discharge was of sufficient volume or duration to have permeated the pavement and entered the groundwater and then caused the contamination. Thus, the chain of connections between the dry cleaning operations and the contaminated groundwater was broken.

The decision in Dimant considered the Spill Act’s somewhat open ended “in any way responsible” standard for liability. However, the analysis, and especially the court’s reluctance to fill in any gaps connecting the defendant to the discharge, or the discharge to the contamination, is very similar to a recent CERCLA decision from the Northern District of New York. In an unpublished decision in DVL, Inc. v. General Electric (Docket No. 07-cv-1075, N.D.N.Y., December 6, 2010), the Federal District Court granted summary judgment based largely upon a private cost recovery plaintiff’s failure to establish that defendants disposed of PCBs on plaintiff’s property. The District Court acknowledged that CERCLA contains a “relaxed” causation requirement which can be satisfied by circumstantial (as opposed to direct) evidence. Nevertheless, in DVL the District Court found that testimony concerning historical practices at other nearby sites and mere proximity to a manufacturing operation which produced PCBs was insufficient to satisfy plaintiff’s burden of showing that defendants had disposed of PCBs at plaintiff’s site. As in Dimant, there was no doubt that defendant handled the chemical which caused the contamination. Nevertheless, the property owner could not recover because it failed to connect the defendants to the particular PCBs which drove the clean-up of its property.

Dimant and DVL show that defendants – even defendants that produced or handled the toxic chemical at issue – can prevail in clean-up cost recovery litigation. Despite the ambiguous nature of the liability provisions in New Jersey’s Spill Act and the relaxed proofs allowed by CERCLA, a plaintiff seeking to recover clean-up costs must meet its burden by proving causation at each step in the chain between the defendant and the contamination. The “nexus” requirement in both Spill Act and CERCLA require that plaintiffs connect the dots with evidence not mere speculation.