Equitable Defenses for Spill Act Liability Other Than God, War or Sabotage

A New Jersey Supreme Court decision in 2015 settled the uncertainty regarding whether the statute of limitations was a valid defense to liability under the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11, et seq. (the “Spill Act”). The Court in Morristown Assoc. v. Grant Oil Co., 220 N.J. 360 (2015) concluded that the statute of limitations did not act to bar such claims. This was based upon the fact that the statute of limitations was not one of three permissible enumerated defenses to Spill Act liability set forth in the Act itself. N.J.S.A. 58:10-23.11g(d). The Spill Act specifies that the only permissible defenses to liability are: 1) an act of God, 2) war, and 3) sabotage. Id.

This Supreme Court decision gave parties seeking contribution for cleanup costs under the Spill Act a powerful weapon in that they could bring their contribution claim against other responsible parties at any time, even many years later. A recent trial court decision, however, provides hope that despite the limiting and strict language of the Spill Act, various equitable defenses may still be applied to defeat a claim for contribution under the Spill Act under certain circumstances. 22 Temple Ave., Inc. v. Audino, Inc., BER-L-9337-14, 2016 N.J. Super. UnPub. LEXIS 2226 (Law Div. Oct. 5, 2016).

In 22 Temple, the trial court ruled that the plaintiff’s Spill Act contribution claim against the defendant was barred by the doctrine of laches, notwithstanding the fact that laches is not one of the three permissible defenses enumerated in the Spill Act. Id. The doctrine of laches is an equitable defense that is a creation of the common law used to bar claims when the claimant has unreasonably delayed asserting its claim and that delay has prejudiced the defendant, most commonly by making it difficult or impossible for the defendant to mount a fair defense through the loss of evidence and/or witnesses.

In rendering its decision the 22 Temple court acknowledged and distinguished the Supreme Court’s decision in Morristown. The Morristown decision, it was reasoned, was focused only on the statute of limitations, which is a creation of the legislature. The Morristown court did not hold that traditional defenses created by the Rules Governing the Courts, such as defenses based on ineffective service of process and lack of subject matter jurisdiction, were precluded by the spill Act’s limitation on available defenses. Drawing from this analysis, the 22 Temple court found, despite the limiting language of the Spill Act, that equitable defenses, as creations of the court via common law, were available to any defendant in a Spill Act contribution claim.

This conclusion was made on the basis of fairness and equity and also drew upon the New jersey Supreme Court’s decision in New Jersey Dep’t of Envtl. Prot. V. Diamant, 212 N.J. 153 (2012). In the Diamant case, the Supreme Court held that it would be “fundamentally unfair” to impose Spill Act liability upon a defendant more than ten years after the discovery of a dripping pipe and without any intervening investigations of that pipe or notice to the defendant other than the filing of the lawsuit. Id. at 185.

Whether this decision will stand on appeal is yet to be seen, but it at least gives some hope to those faced with defending a lawsuit seeking to recover cleanup costs for something that happened many years ago.