CSG Law Alert: NJ’s Appellate Division Confirms a Defense Spill Act Claims

In Terranova v. General Electric Pension Trust,  a decision approved for publication, the Appellate Division has confirmed that “[j]udicial estoppel is a defense to Spill Act claims for contribution . . .”  The matter arises out of two cases involving gasoline released from underground storage tanks (USTs) removed and replaced in or about 2000.  In the first case, the current property owner plaintiffs brought suit in 2010 solely against two former tenants seeking, inter alia, contribution under the Spill Act.  In that litigation, the current property owner plaintiffs took the position and obtained an expert opinion that any and all contamination associated with former USTs occurred exclusively during the former tenants’ occupancy.  The case proceeded to arbitration, whereby the arbitrator adopted the findings of plaintiffs’ expert and held the former tenants liable for the contamination and requiring them to take over the remediation.  The arbitrator’s decision was reduced to a final judgment in 2012.

In 2015, plaintiffs’ retained a new expert who opined that the former USTs were leaking prior to the former tenants’ occupancy.  With that information, plaintiffs filed a new suit seeking contribution from the owners and operators who preceded the plaintiff’s ownership and lease to the two former tenants named in the first litigation.* Prior to the end of discovery, defendants in the second litigation filed a motion for summary judgment seeking to have the matter dismissed pursuant to several equitable doctrines, including judicial and collateral estoppel, as well as the entire controversy doctrine.  The trial court granted the motion based on judicial estoppel and plaintiffs appealed.

Citing Morristown Assocs. v. Grant Oil Co., 220 N.J. 360 (2015), plaintiffs argued that the defenses to Spill Act claims are expressly limited to “an act or omission cause solely by war, sabotage, or God, or a combination thereof,” N.J.S.A. 58:10-23.11g(d)(1).  Because the doctrine of judicial estoppel is not a listed defense, plaintiffs maintained it simply is not available.  In affirming the trial court’s decision, the Appellate Division disagreed.

Again citing Morristown Associates, the Appellate Division pointed out that while the Supreme Court concluded that the Legislature intended that individuals are limited to the Spill Act’s subsection (d) defenses, it explicitly rejected an argument that the exclusion of defenses in the Spill Act’s contribution provision “deprives a defendant of other unlisted defenses that should presumably be maintained, such as challenges to venue, service of process, and subject matter jurisdiction.  Such defenses are established by court rules under the jurisdiction of the Supreme Court and are not subject to overriding legislation.”  Id. at 382.  Accordingly, “judicial estoppel is not a defense subject to any overriding legislation and, as such, it may be maintained against a Spill Act claim.”  Applying the equitable principles of judicial estoppel, the Appellate Division affirmed the court below, finding that plaintiffs were precluded from taking a position in the second litigation contrary to the one upon which they prevailed in first litigation.  Because plaintiffs took the position in the first case that any and all contamination associated with former USTs occurred exclusively during the former tenants’ occupancy and prevailed, they were precluded from asserting liability against the defendants in the second case.

The Appellate Division reasoned that the “[a]pplication of the doctrine does not preclude property owners from seeking contribution from dischargers under the Spill Act. It simply compels owners to pursue, in a single action, dischargers which are known or reasonably knowable from the circumstances.”  Acknowledging that judicial estoppel is an extraordinary remedy, the Appellate Division emphasized that the circumstances of the case compelled its application.

While the Appellate Division affirmed on the basis of judicial estoppel, it made clear that the integrity of the judicial process is dependent upon compliance with the equitable principles of not only judicial estoppel, but also collateral estoppel and the entire controversy doctrine.  Therefore, it appears likely that all three equitable doctrines will apply to a claim for contribution pursuant to the Spill Act.

*CSG’s David J. Mairo and Michael K. Plumb represented a defendant in the second litigation.

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