Sovereign Impunity?: State Cannot Be Sued Under New Jersey Spill Act for Pre-Enactment Discharges

Since its original enactment in 1976, New Jersey’s Spill Compensation and Control Act (commonly known as the Spill Act) has been amended no fewer than ten times. The New Jersey Supreme Court had to grapple with that complicated history in its recent decision in NL Industries, Inc. v. State of New Jersey, No. A-44-15. Reversing the 2015 opinion of the Appellate Division, on which we have already written, the Court held that while the original statute made New Jersey subject to Spill Act liability by including the State in the definition of a “person,” subsequent amendments that (among other changes) expanded some portions of the statute to cover pre-enactment discharges did not “clearly and unambiguously” abrogate the State’s sovereign immunity for pre-enactment activities. As a result, the State can never face Spill Act liability associated with its discharges that occurred before the statute’s effective date of April 1, 1977.

The case concerned the remediation of a contaminated site on the shoreline of Raritan Bay with an estimated cleanup cost of $79 million. Development plans for the area in the 1960s led to a proposal to construct a seawall. At least some of the material used in the seawall, which was completed in the early 1970s, allegedly consisted of furnace slag from a lead smelting facility operated by NL Industries. The State did not construct the seawall, but according to NL’s complaint, the State owned the land under the seawall, approved it, issued a riparian grant to the developer that sought to build it, and issued a permit for it.

In 2009, based on State studies that showed high levels of lead and other metals, the U.S. Environmental Protection Agency (EPA) designated the area as a Superfund site, and proceeded to develop a cleanup plan. In 2014, EPA ordered NL to perform the cleanup. NL sued the State, alleging that it bore most of the responsibility for the contamination in its roles as regulator and riparian landowner. The trial court denied the State’s motion to dismiss, and the Appellate Division affirmed. According to the lower courts, (1) the protections of the Tort Claims Act, such as the requirement that a potential plaintiff first file a notice of claim, do not apply to Spill Act claims; (2) the Spill Act’s legislative history and controlling case law showed that, contrary to the State’s position, the Legislature “consciously intended the State to be subject to the Act” in the same way as private parties, including retroactive liability for pre-enactment discharges; and (3) the State’s involvement in the project, as alleged by NL, was enough to make it “in any way responsible” for the contamination. The Supreme Court granted the State’s motion for leave to appeal.

The Supreme Court first dealt with what it called “the fundamental statutory question before us – whether the Spill Act retroactively strips the State of its sovereign immunity for pre-Spill Act activities,” and answered with a definitive “no.” Over a dissent by Justice Albin, Justice LaVecchia’s majority opinion performed a detailed analysis of the Spill Act’s complicated history. The statute did not originally encompass pre-enactment discharges, and when the Legislature amended it in 1979 to address such “ancient” spills (as an Assembly committee report described them), it did so only with respect to the State’s ability to expend funds to address spills. At the same time, the Legislature authorized the State to seek reimbursement from private parties via contribution actions. Critical to the Court’s opinion was the finding that nowhere in the 1979 amendments (or in a set of 1991 amendments that the Court also considered) did the Legislature alter the statute’s basic liability provision to mention pre-enactment discharges.

The plaintiff’s claim against the State was doomed by two fundamental canons of statutory construction: the presumption that a statute will have only prospective effect “unless there is an unequivocal expression of contrary legislative intent,” and the requirement that any legislative waiver of sovereign immunity must be expressed “clearly and unambiguously.” The 1979 and 1991 amendments to the Spill Act could not get over the daunting hurdle created by these principles. Thus, even though private parties can face Spill Act liability in contribution actions for pre-enactment discharges that the State cleans up, the State is immune from all liability for pre-enactment activities. The patchwork nature of the Spill Act is further illustrated by other lower court decisions that have held that the statute’s penalty provisions and the liability of the Spill Fund to private parties for cleanup costs are not retroactive.

The Supreme Court added two helpful (but, strictly speaking, unnecessary) points. First, it agreed with the Law Division and the Appellate Division that Spill Act claims against the State for post-enactment discharges are not subject to the procedural requirements of the Tort Claims Act. Finally, the Court added, in dicta, that it could not find any clear evidence that the Legislature intended to waive sovereign immunity for its discretionary acts as a regulator. Spill Act liability attaches to “dischargers” and to persons “in any way responsible” for a discharge. Issuing a permit, under the Court’s dicta, cannot make the State “in any way responsible” for a post-enactment discharge.

In his dissent, Justice Albin pointed out that the Court’s holding leads to “the absurd result” that a private party that is, say, ten percent responsible for a pre-enactment discharge can never sue the State, even if the State is responsible for the other ninety percent. In such a situation, in fact, the State can elect to remediate (or order a private party to remediate) a pre-enactment discharge for which it bears the lion’s share of responsibility and yet never make any financial contribution to the cleanup costs. Any correction of the unfairness of that situation will have to come from the Legislature.