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Village of Ridgewood v. Shell Oil Co.

April 1, 1996

VILLAGE OF RIDGEWOOD, PLAINTIFF-RESPONDENT,
v.
SHELL OIL COMPANY, A DELAWARE CORPORATION, SUN REFINING & MARKETING COMPANY, *FN1 A PENNSYLVANIA CORPORATION, CHEVRON U.S.A. INC., A PENNSYLVANIA CORPORATION, F/K/A/ GULF OIL CORP., DEFENDANTS-RESPONDENTS, AND JOSEPH H. FERGUSON & SONS, INC., *FN2 JOSEPH H. FERGUSON, ANTHONY BOLT, ROBERT FERGUSON, CRETE EQUIPMENT CORPORATION, PETER SOLDANO, AND STATE OF NEW JERSEY, DEPARTMENT OF TRANSPORTATION, DEFENDANTS-APPELLANTS, AND SUN OIL COMPANY, A DELAWARE CORPORATION, GULF OIL CORPORATION, A PENNSYLVANIA CORPORATION, GLADYS HAND SIMPSON LIGHT TRUST, *FN3 JAMES E. SIMPSON, MARGUERITE HOST, JAMES BIRMINGHAM, CUMBERLAND FARMS, INC., A DELAWARE CORPORATION, AND HERBERT ROTHSTEIN, DEFENDANTS.



On appeal from Superior Court of New Jersey, Law Division, Bergen County.

Approved for Publication April 1, 1996. As Corrected.

Before Judges Baime, Villanueva and Kimmelman. The opinion of the court was delivered by VILLANUEVA, J.A.D.

The opinion of the court was delivered by: VILLANUEVA

The opinion of the court was delivered by VILLANUEVA, J.A.D.

On January 21, 1992, the Village of Ridgewood through its counsel, Stoldt & Horan, instituted suit (the litigation) against various parties, including Shell Oil Company (Shell), Chevron U.S.A. Inc. (Chevron) and Sun Refining & Marketing Company (Sun) (collectively the oil company defendants); Joseph H. Ferguson & Sons, Inc., Anthony Bolt, Robert Ferguson and Joseph H. Ferguson *fn4 (Ferguson defendants); and Crete Equipment Corporation and Peter Soldano (Crete defendants) (collectively the remaining defendants) which owned, operated, and/or franchised gas stations in Ridgewood. *fn5 These causes of action included negligence, trespass, private and public nuisance, and strict liability under N.J.S.A. 58:10-23.11. Ridgewood sought to recover compensatory and punitive damages in excess of $2 million from the defendants, jointly and severally, for alleged contamination of the Twinney and Walthery wells (the wells), two drinking-water wells in Ridgewood. Sun and the Gladys Hand Light Trust filed third-party complaints against the State of New Jersey, Department of Transportation (DOT).

All parties answered Ridgewood's complaint and amended complaint and asserted cross-claims against each other for indemnity and contribution. These cross-claims are still pending. *fn6 On March 19, 1993, Ridgewood filed a second amendment to the complaint adding DOT as a direct defendant. The litigation was subsequently placed on the inactive list pending the outcome of two claims filed with the Administrator of the New Jersey Spill Compensation Fund.

The New Jersey Spill Compensation Fund Arbitration

In October 1990, Ridgewood had filed two claims (Spill Fund claims) with the Administrator of the New Jersey Spill Compensation Fund for reimbursement of costs incurred and damages related to remediation of contamination of the wells pursuant to N.J.S.A. 58:10-23.11g to q. *fn7 In 1993, each oil company defendant and each of the remaining defendants filed a demand for arbitration of the Spill Fund claims (the arbitration). On June 14, 1994, Ridgewood and the oil company defendants entered into a settlement agreement (Agreement) in which they settled only their respective claims.

The firm of Wilentz, Goldman & Spitzer (Wilentz) represented Chevron in the arbitration proceedings in the Office of Administrative Law. Stoldt & Horan and co-counsel Goldshore, Wolf & Lewis represented Ridgewood.

The Oil Company Defendants' Settlement of Ridgewood's Claims Against Them

Under the terms of the Agreement, the oil companies, while denying liability, paid Ridgewood $825,000 "in full settlement of all legal claims as set forth in the Spill Fund claims, Arbitration and the Litigation." Ridgewood released the oil company defendants from liability and withdrew all claims against the Spill Fund, with prejudice. In addition, Ridgewood designated the oil company defendants as its subrogees and assigned to the oil company defendants all its legal rights against all parties potentially responsible for the well contamination.

Under the terms of the Agreement, the oil company defendants were authorized to file a substitution of attorney for Ridgewood, thereby replacing Ridgewood's attorneys. Thus, on June 15, 1994, the Wilentz firm replaced Stoldt & Horan as attorneys for Ridgewood in the litigation. Thereafter, the Wilentz firm advised the attorneys for the Ferguson and Crete defendants as follows:

Under the assignment and subrogation from Ridgewood, the litigation will proceed in the name of Ridgewood but with the proceeds of any judgment going to the Oil Companies. We will handle the representation of Ridgewood. If a settlement is reached with your clients, a stipulation of dismissal will be provided dismissing Ridgewood's claims as well as the crossclaims of the Oil Companies. . . .

With respect to a settlement demand, the Oil Companies will accept $1 million from all remaining defendants in full settlement of the claims against them. This represents the settlement paid to Ridgewood plus environmental expenses of the Oil Companies. The offer will remain open only until September 19, 1994. Thereafter, the Oil Companies intend to seek recovery of the full amount complained by Ridgewood, in the neighborhood of $2 plus million.

Initial Motion for Summary Judgment By Remaining Defendants

In December 1994 the remaining defendants filed a joint motion for summary judgment to dismiss Ridgewood's complaint, asserting that Ridgewood, pursuant to the Agreement, had received full compensation for its claims and had no further interest in the litigation. According to the remaining defendants, the motion *fn8 also sought declaratory relief from the trial court that (1) Ridgewood did not have the ability to assign its underlying tort claims to the oil company defendants; (2) the oil company defendants, as settling tortfeasors, could not assert any right of subrogation against the remaining defendants; and (3) any potential claims that the oil company defendants might have had for contribution under common law and the Joint Tortfeasors Contribution Law, N.J.S.A. 2A:53A-1 to -24, were extinguished by their settlement with Ridgewood without a final judgment of liability.

The Wilentz firm, in its capacity as counsel for Ridgewood, Chevron, and lead counsel for the other oil company defendants, opposed the motion and filed a cross-motion on behalf of the oil company defendants for leave to file amended cross-claims against the remaining defendants for contribution under the Spill Compensation and Control Act (Spill Act), N.J.S.A. 58:10-23.11. This cross-motion was granted.

The trial court denied the remaining defendants' motion in its entirety, finding Ridgewood's assignment of its tort claim to be proper. The trial court explained that the settlement provided an efficient and prudent means of facilitating the cleanup and that "the Remaining Defendants should not be permitted to reap an unearned windfall to the extent that they caused contamination but failed to remediate." The trial court did not address whether the oil company defendants could be subrogated to the rights of Ridgewood against the remaining defendants.

The Motion to Disqualify the Wilentz Firm

On April 18, 1995, counsel for the Ferguson defendants requested from the governing body of Ridgewood copies of "all Closed Session Minutes pertaining to the Village of Ridgewood v. Shell Oil Co. case, damages, and settlement." John Horan of Stoldt & Horan, counsel for Ridgewood, replied:

Please note that we cannot comply with your request. First of all, you are requesting minutes of a closed session meeting that directly concerns [sic] pending litigation. Those minutes are confidential. Secondly, and more important, the very substance of the ...


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