In the 2012 case of New Jersey Schs. Dev. Auth. v. Marcantuone, 428 N.J. Super. 546 (App.Div. 2012), the New Jersey Appellate Division held that a passive landowner who purchased contaminated property prior to the enactment of the New Jersey Spill and Compensation Act (“Spill Act”) was a liable party under the Act even if the owner did not contribute to the contamination, unless it could meet the Spill Act’s definition of an “innocent purchaser.”  This decision gave rise to an entirely new wave of litigation against landowners who, previously, were not thought to be PRPs under the Spill Act.  Last week, however, the Appellate Division of the Superior Court of New Jersey returned some hope to these property owners when it affirmed a Superior Court decision holding that, while a passive landlord is a  liable party under the Spill Act, application of the equitable principles of allocation may result in a finding that such a landlord is nevertheless 0% responsible  for the costs of remediation.  

In Allwood Investment Company v. Jogam Corp., No. A-5439-13T4 (D.N.J. Sept. 18, 2015), both the trial and the appellate court relied upon the New Jersey Supreme Court’s 2012 decision in N.J. Dept. of Envtl. Prot. v. Dimant, 212 N.J. 153 (2012) to find, first, that  liability under the Spill Act was joint and several even in private party claims and, second, that a party seeking contribution bears the burden of establishing “some connection between the discharge complained of” and the actions of the alleged contributor.  The case involved remediation of perchloroethylene (PCE) contamination at a dry cleaning business.  Plaintiff, the owner of the property, sought to compel the defendant dry cleaner tenant to remediate the contamination.  The plaintiff alleged claims under the Spill Act as well as the lease and guaranty for the property, which specified that the defendant tenant would be responsible for discharges of hazardous waste as a result of its operations.  The tenant then counterclaimed against the landlord, seeking contribution under the Spill Act.    

The lower court first found that both the tenant and landlord were liable under the Spill Act, and that such liability was joint and several.  While the tenant argued that  Dimant’s finding on joint and several liability was only applicable in cases brought by the State, and not private party contribution claims, , the lower court rejected the argument.  A hearing was then conducted to determine the allocation of responsibility for the cleanup costs. 

At the hearing, the defendant tenant argued that the plaintiff landlord bore partial responsibility for the remediation since the plaintiff’s prior tenant, who also operated a dry cleaning operation, had discharges at the property, making the plaintiff landlord derivatively liable for the prior tenant’s discharges..  However, the defendant presented only circumstantial evidence and expert testimony that assumed, based on the amount of PCE handled, that the prior tenant contributed some percentage of the PCE contamination found at the property.

The lower court found the tenant 100% responsible for the remediation costs under the Spill Act as well as the lease and guaranty, and issued an extensive written opinion setting forth its reasoning.  Citing Dimant, the court reiterated that “the party alleging the Spill Act liability of another party must establish some connection between the discharge complained of and the alleged discharger.”  The court said the “greatest significance” in finding the defendant 100% liable was the defendant’s failure to show any actual documentation of PCE discharges from the prior dry cleaning operation.  The court held the defendant could not simply rely upon circumstantial evidence and expert testimony to establish a discharge.  

In affirming the lower court’s decision, the Appellate Division adopted, in full, the trial court’s reasoning, finding “no reason to disturb the trial judge’s factfinding, application of legal principles or allocation determination.”  What makes this appellate opinion most notable, then, is that although passive landlords are liable parties under  the Spill Act, so long as one or more other viable PRPs exists, only those PRP’s meeting the Dimant nexus requirement should be allocated any responsibility for clean-up costs.

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