NJ Supreme Court Rules on Causation Nexus Standard in NJDEP V. DIMANT

Last week, the New Jersey Supreme Court issued a decision that clarified the level of causation needed to find a party liable for environmental cleanup costs under the New Jersey Spill Compensation and Control Act (the “Spill Act”).  In New Jersey Dept. of Environmental Protection v. Dimant, the court ruled that in an action to obtain damages and costs under the Spill Act, there “must be shown a reasonable link between the discharge, the putative discharger, and the contamination at the specifically damaged site.”  The court explained that an alleged discharger must be shown to have “committed a discharge that was connected to the specifically charged environmental damage . . . in some real, not hypothetical, way.  A reasonable nexus or connection must be demonstrated by a preponderance of the evidence.”

In Dimant, the State investigated Sue’s Clothes Hanger (“Sue’s”), a laundromat and dry cleaning business, related to groundwater contamination in Bound Brook, New Jersey.  Other parties, including other dry cleaning facilities, settled prior to trial.  Although Sue’s had only been in operation for about fifteen months – from December 1987 to early 1989 – the property operated by Sue’s had used dry cleaning machines intermittently since the 1950s.  In 1988, DEP investigators discovered an external pipe that was slowly dripping perchlorethylene (PCE), a chemical liquid commonly used in dry cleaning operations, onto an asphalt driveway outside of Sue’s facility.

The DEP argued that this discharge of PCE provided a sufficient nexus with the PCE-contaminated groundwater in the area to trigger Spill Act liability and warrant cleanup costs and damages against Sue’s.  However, the court rejected this argument because DEP failed to prove by a preponderance of the evidence that the observed discharge – which was only sampled and observed on one day in 1988 – actually caused the contamination.  The court stated, “[T]he circumstances are devoid of the critical factor that triggers Spill Act liability, namely that defendant must be in any way responsible for the discharge that caused the contamination.” (emphasis in original). “[T]he DEP’s proofs failed to connect the discharge from the pipe, during Sue’s operation, to the soil or groundwater damage at the heart of this contamination case.”  (emphasis in original).  Without such “requisite connection showing how the dripping PCE at Sue’s reasonably could have made its way into the groundwater,” the court could not find a basis to shift liability for cleanup costs and compensatory damages to Sue’s.

In dicta, the court distinguished the Spill Act from the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) – the federal counterpart to the Spill Act, which until now New Jersey courts have largely relied on for guidance on proof of nexus in Spill Act cases.  Notably, the court explained that although CERCLA requires only “some connection” between a release and the incurrence of response costs, such a causation standard should not be applied in Spill Act cases.  Rather, “the focus in the Spill Act remains on proof of a connection between the discharge complained of and the resultant Spill Act response.”

In sum, although the court held that proof of the existence of a discharge alone can provide for injunctive relief, it held that in order to obtain damages, authorized costs, and other similar relief under the Act, there must be shown a reasonable link between the discharge, the putative discharger, and the contamination at the specifically damaged site.

The New Jersey Supreme Court’s ruling has strong implications for business owners in New Jersey and their potential liability for environmental cleanup costs and damages.  NJDEP (or another private party suing for contribution) must actually prove that the charged contamination was reasonably linked to the conduct of the alleged discharger; the mere observation or presence of a hazardous substance being discharged from a facility – even if composed of similar substances – does not alone provide the sufficient nexus of proof required under the Spill Act to allow DEP to seek contribution costs from the site owner or operator.   Notwithstanding the Spill Act’s strict liability standard, plaintiffs are still required to prove a reasonable – not hypothetical – nexus between the offending discharge and the site for which cleanup and related costs are incurred.