Court Approves $225 Million Consent Judgment Settling the State’s NRD Claims Against ExxonMobil Corp.

On Tuesday, August 25, 2015, the Honorable Michael J. Hogan, J.S.C., ret. Recall, issued his much anticipated decision approving a $225 million consent judgment entered into between the NJDEP and ExxonMobil Corporation (“Exxon”) to resolve natural resource damages (“NRD”) claims. The proposed settlement caused much public outcry and opposition due largely to the fact that the State quantified NRDs at $8.9 billion. The settlement of the State’s NRD claims not only resolves litigation associated with Exxon’s former petroleum refinery and storage facility in Bayonne, but also pending NRD claims in New Jersey Department of Environmental Protection v. Exxon Mobil Corp. f/k/a GATX Terminals Corp., Docket No. L-1063-07, consolidated with Docket No. L-0563-03, as well as potential NRD claims against 15 other Exxon facilities and 1,768 retail gasoline stations.

In rendering its decision, the court made new law by applying, and thereby adopting, the federal CERCLA standard of review of consent decrees to consent judgments proposed pursuant to the Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 to -23.24 (“Spill Act”), to determine whether they are “fair, reasonable, in the public interest, and consistent” with the Act’s goals. Applying this standard of review, the court found that the settlement was both procedurally and substantively fair and reasonable based largely on each party’s relative litigation and appellate risk. Moreover, the court concluded that the $225 million settlement adequately compensated the public as the amount far outpaced the State’s previous wetlands settlement recoveries. Notably, the court recognized that the State may choose not to pursue NRDs at sites where the potential recovery does not outweigh the litigation risk.

In outlining the litigation and appellate risks, the court detailed the various pre-trial rulings which could have substantially affected the amount of NRDs recoverable should the State fail to meet its burden of proof at trial or the pre-trial rulings be overturned on appeal. Therefore, by approving the settlement, the court found that it was not only preserving the settlement amount, but also establishing as precedent three particular pre-trial rulings that will serve to advance the Spill Act’s objectives by aiding the State in future litigation and settlement negotiations. The three rulings included findings that: 1) “loss of use” is a “component of costs of mitigating damage to public natural resources”; 2) the Spill Act applies retroactively for NRDs that occurred before 1977; and 3) any lands, whether above or below the high-water mark and regardless of whether publicly or privately owned, could be subject to NRDs under the Spill Act. Similarly, the court recognized the prior determination in the case that natural resources subject to a prior physical modification may not be subject to recovery of NRD under the Spill Act. The court emphasized the critical nature of expert testimony to the case and the impact excluding an expert could have on damage calculations should the court grant any of the party’s pending Rule 104 Motions post-trial, as agreed by the parties.

The court’s decision upheld carving out surface water from the settlement which is preserved for future multi-party claims. The court also comments on how the settlement monies are to be appropriated based on the consent judgment’s proposed terms when compared to recently enacted budgetary provisions but cautioned that it was not asked to interpret said terms.

The court’s decision provides significant guidance as to how the State will now calculate NRDs. However, we anticipate that this guidance will be challenged in future NRD assessments and the subject of future litigation as it will greatly affect the amount of NRDs sought by the State. Parties who own or are considering purchasing contaminated property may now want to consider evaluating potential NRD issues.

Related Services