Condominium Owner Spill Act Suit Dramatically Increases Potential for Litigation Over Environmental Investigation Costs

The New Jersey Appellate Division’s decision in Matejek v. Watson, issued on March 3, 2017, compelled the owners of condominium units to share in the cost of environmental investigation under the New Jersey Spill Compensation and Control Act (the Spill Act), without proving liability. This remedy, not previously available to private parties, will likely give rise to an increase in Spill Act litigation due to this advantage over the Comprehensive Environmental Response, Cleanup and Liability Act (CERCLA), which is the federal counterpoint to the Spill Act.

The environmental contamination in Matejek v. Watson dates from 2006, when oil was discovered on the surface of a tributary to Royce Brook in Hillsborough. In response, New Jersey Department of Environmental Protection (NJDEP) removed underground storage tanks from each of five adjoining condominium units that were near the location of the tributary. Other than visiting the site a few months after the removal of the underground tanks in order to confirm the absence of oil in the tributary, the NJDEP took no further action and its file remained open, leaving, as the trial judge later found, a cloud on the title to all five units, given that the presence of the oil would have to be disclosed if any of the properties were to be sold.

Seven years after the removal of the tanks, the owners of one of the impacted condominium units sued the owners of the other four units under the Spill Act, in order to require the owners of the impacted units to participate in and equally share in an investigation, and if necessary, remediation of the property. The Association was joined to the lawsuit in order to compel access to any portions of the common elements required for investigation, testing or remediation.

Leading up to the Matejek decision, a private party seeking contribution under the Spill Act was required to first incur investigation or cleanup costs prior to seeking reimbursement from other responsible parties. The Matejek court specifically found that this scenario leaves plaintiffs without an adequate remedy at law, laying the foundation for the court to provide an equitable remedy.

Going forward, private plaintiffs will no longer need to incur any remedial investigation or cleanup costs before seeking contribution from other potentially effected landowners. Future plaintiffs, relying on Matejek, will request that the court to use its equitable power to compel any party that may or may not be responsible for potential contamination to participate in the investigation to determine the presence of contamination and liability for remediation. Leading up to this decision, New Jersey’s State legislature had limited this remedy to regulatory authorities. The net result of the decision will provide private parties with substantially greater leverage in private remediation disputes, where the ultimate source of liability, and even contamination itself, is not clear.

The Matejek decision will impact condominium associations in terms of both environmental remediation activities, and potentially liable parties. Associations can and will be joined to lawsuits because investigation and remediation efforts will require access to the common elements of the association. Associations and property managers will be required to coordinate with entities on the ground conducting investigation and remediation actions.

The relatively insignificant expenditure of resources associated with providing access to common elements and coordinating with remediation professionals will be the least of an associations concern, if there is some potential for the association to bear responsibility for environmental contamination. For example, if a source of contamination is part of the association’s common elements, it would be possible for a court to determine that the association itself bears liability for the remediation costs. In order to prevent such a potentially devastating liability, associations should consider reviewing governing documents for potential sources of liability for environmental investigation and remediation costs, and making appropriate amendments, as needed.

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