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New Jersey Department of Environmental Protection v. Occidental Chemical

April 24, 2012

NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, THE COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, AND THE ADMINISTRATOR OF THE NEW JERSEY SPILL COMPENSATION FUND, PLAINTIFFS-RESPONDENTS,
v.
OCCIDENTAL CHEMICAL CORPORATION, MAXUS INTERNATIONAL ENERGY COMPANY, REPSOL YPF, S.A., YPF, S.A., YPF HOLDINGS, INC., YPF INTERNATIONAL S.A. (F/K/A YPF INTERNATIONAL LTD.), AND CLH HOLDINGS, DEFENDANTS, AND MAXUS ENERGY CORPORATION AND TIERRA SOLUTIONS, INC., DEFENDANTS/THIRD-PARTY PLAINTIFFS-RESPONDENTS,
v.
3M COMPANY, ET AL.,*FN1 THIRD-PARTY DEFENDANTS, AND DELEET MERCHANDISING CORPORATION, THIRD-PARTY DEFENDANT/ APPELLANT. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, THE COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION AND THE ADMINISTRATOR OF THE NEW JERSEY SPILL COMPENSATION FUND, PLAINTIFFS-RESPONDENTS,
v.
OCCIDENTAL CHEMICAL CORPORATION, MAXUS INTERNATIONAL ENERGY COMPANY, REPSOL YPF, S.A., YPF, S.A., YPF HOLDINGS, INC., YPF INTERNATIONAL S.A. (F/K/A YPF INTERNATIONAL LTD.), AND CLH HOLDINGS, DEFENDANTS, AND MAXUS ENERGY CORPORATION AND TIERRA SOLUTIONS, INC., DEFENDANTS/THIRD-PARTY PLAINTIFFS-RESPONDENTS,
v.
3M COMPANY, ET AL., THIRD-PARTY DEFENDANTS, AND CLEAN EARTH OF NORTH JERSEY, INC., HEXION SPECIALTY CHEMICALS, INC., MACE ADHESIVES & COATINGS COMPANY, INC., AND R.T. VANDERBILT COMPANY, INC., THIRD-PARTY DEFENDANTS/ APPELLANTS. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, THE COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION AND THE ADMINISTRATOR OF THE NEW JERSEY SPILL COMPENSATION FUND, PLAINTIFFS-RESPONDENTS,
v.
OCCIDENTAL CHEMICAL CORPORATION, MAXUS INTERNATIONAL ENERGY COMPANY, REPSOL YPF, S.A., YPF, S.A., YPF HOLDINGS, INC., YPF INTERNATIONAL S.A. (F/K/A YPF INTERNATIONAL LTD.), AND CLH HOLDINGS, DEFENDANTS, AND MAXUS ENERGY CORPORATION AND TIERRA SOLUTIONS, INC., DEFENDANTS/THIRD-PARTY PLAINTIFFS-RESPONDENTS,
v.
3M COMPANY, ET AL., THIRD-PARTY DEFENDANTS, AND TIFFANY & CO., THIRD-PARTY DEFENDANT/ APPELLANT. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, THE COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, AND THE ADMINISTRATOR OF THE NEW JERSEY SPILL COMPENSATION FUND, PLAINTIFFS-RESPONDENTS,
v.
OCCIDENTAL CHEMICAL CORPORATION, MAXUS INTERNATIONAL ENERGY COMPANY, REPSOL YPF, S.A., YPF, S.A., YPF HOLDINGS, INC., YPF INTERNATIONAL S.A. (F/K/A YPF INTERNATIONAL LTD.), AND CLH HOLDINGS, DEFENDANTS, AND MAXUS ENERGY CORPORATION AND TIERRA SOLUTIONS, INC., DEFENDANTS/THIRD-PARTY PLAINTIFFS-RESPONDENTS,
v.
3M COMPANY, ET AL., THIRD-PARTY DEFENDANTS, AND BORDEN & REMINGTON CORP., ITT CORPORATION, ET AL., THIRD-PARTY DEFENDANTS/ APPELLANTS. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, THE COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, AND THE ADMINISTRATOR OF THE NEW JERSEY SPILL COMPENSATION FUND, PLAINTIFFS-RESPONDENTS,
v.
OCCIDENTAL CHEMICAL CORPORATION, MAXUS INTERNATIONAL ENERGY COMPANY, REPSOL YPF, S.A., YPF, S.A., YPF HOLDINGS, INC., YPF INTERNATIONAL S.A. (F/K/A YPF INTERNATIONAL LTD.), AND CLH HOLDINGS, DEFENDANTS, AND MAXUS ENERGY CORPORATION AND TIERRA SOLUTIONS, INC., DEFENDANTS/THIRD-PARTY PLAINTIFFS-RESPONDENTS,
v.
3M COMPANY, ET AL., THIRD-PARTY DEFENDANTS, AND PHARMACIA CORPORATION, THIRD-PARTY DEFENDANT/APPELLANT.



On appeal from Superior Court of New Jersey, Law Division, Essex County, Docket No. L-9868-05.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 7, 2012

Before Judges Fuentes, Koblitz and Haas.

In these back-to-back and consolidated interlocutory appeals, we are asked to determine the viability of contribution claims brought under the New Jersey Spill Compensation and Control Act, N.J.S.A. 58:10-23.11 to -23.24 (Spill Act), and The Joint Tortfeasors Contribution Law (JTCL), N.J.S.A. 2A:53A-1 to -5. The New Jersey Department of Environmental Protection (DEP), the Commissioner of the DEP, and the Administrator of the New Jersey Spill Compensation Fund (collectively plaintiffs) filed environmental cleanup suits against nine business entities for discharging toxic chemicals from a chemical manufacturing plant located at 80 and 120 Lister Avenue in Newark (Lister sites).

Plaintiffs alleged that for at least twenty years, these companies, and/or their predecessors, intentionally polluted the Passaic River with hazardous substances, including a particularly potent form of DDT*fn2 called TCDD.*fn3 This caused substantial environmental and economic damage to the Newark Bay Complex, which is comprised of the lower seventeen miles of the Passaic River, the Newark Bay, the lower reaches of the Hackensack River, the Arthur Kill, the Kill Van Kull and adjacent waters and sediments.

Two defendants, Maxus Energy Corporation (Maxus) and Tierra Solutions, Inc. (Tierra), filed third-party complaints against approximately 300 public and private entities, alleging that they had contributed to the contamination described in plaintiffs' complaint. Maxus/Tierra thus sought contribution from these third-party defendants under both the Spill Act and the JTCL.

A number of these third-party defendants filed motions to dismiss under Rule 4:6-2(e), arguing that the claims asserted by Maxus/Tierra were barred by various consent decrees they had previously entered into with DEP. Others contended that Maxus/Tierra failed to establish a common liability with regard to the allegations contained in the primary complaint.

The trial court denied all of the motions for dismissal brought under Rule 4:6-2(e). By leave granted, these third-party defendants are now before us seeking the relief denied to them by the trial court. We affirm. Given the number of appeals and the complexity of the record, we will first describe the procedural history leading to the court's decision under review here. We will then briefly summarize the measures taken by the trial court to manage this complex case. Finally, we will address the merits of the arguments raised by the parties.

I

Procedural History

On November 22, 2005, plaintiffs filed suit pursuant to the Spill Act against Occidental Chemical Corporation (Occidental), Tierra, Maxus, Maxus International Energy Company (MIEC), Repsol YPF, S.A. (Repsol), YPF, S.A. (YPF), YPF International S.A. (YPFI), YPF Holdings, Inc. (YPFH) and CLH Holdings, Inc. (CLHH). Although plaintiffs amended their initial complaint several times, they have consistently alleged that, for at least twenty years, defendants and/or their predecessors intentionally polluted the Passaic River with hazardous substances, including a particularly potent form of DDT called TCDD.

Plaintiffs allege that defendants entered into administrative consent orders with the United States Environmental Protection Agency (EPA), through which defendants agreed to determine the extent of the contamination and to perform the work needed to remedy the problem. Instead, plaintiffs claim that defendants deliberately delayed the contamination cleanup, shifting blame for the TCDD-related pollution to unrelated entities, and attempted to evade liability through a complicated series of corporate transactions with each other and with other affiliated companies.

Plaintiffs seek, among other things, past and future damages, and reimbursement of all incurred and anticipated cleanup and remediation costs. Although plaintiffs did not seek natural resource damages, they requested that defendants underwrite the cost to conduct a natural resource damage assessment, and specifically reserved their right to bring a future action to recover natural resource damages for the Passaic River and Newark Bay Complex.

Defendants Maxus/Tierra filed an answer and a counterclaim in October 2008. In February 2009, Maxus/Tierra filed four third-party actions for contribution against approximately 300 public and private parties. On February 4, 2009, these third-party actions were denominated A, B and C, under docket number L-9868-05; complaint D, filed the following day, was assigned docket number L-9869-05. With plaintiffs' and defendants' consent, the court appointed a special master on February 24, 2009.

These appeals encompass over 150 private entities named as third-party defendants in complaint B, including Borden & Remington Corporation (Borden), Deleet Merchandising Corporation (Deleet), ITT Corporation (ITT), Pharmacia Corporation (Pharmacia), and Tiffany & Co. (Tiffany). Clean Earth of North Jersey, Inc. (Clean Earth), Hexion Specialty Chemicals, Inc. (Hexion), Mace Adhesives & Coatings Company, Inc. (Mace), and R.T. Vanderbilt Company, Inc. (R.T.), collectively the Drum parties, are also named as third-party defendants.

Maxus/Tierra alleged that the third-party defendants should be held liable for a proportionate share of any damages because they had also discharged hazardous chemicals into the impacted areas. Maxus/Tierra seek contribution pursuant to the Spill Act and the JTCL. Borden, Tiffany, Deleet, ITT, the Drum parties, and the Joint Defense Group (JDG)*fn4 filed responsive pleadings to the third-party complaint.*fn5

Pursuant to case management order XII (CMO XII), the trial court authorized the special master to issue recommendations on all motions filed by third-party defendants pursuant to Rule 4:6-2(e). The court directed the special master to rule on such motions as if she were a Judge of the Superior Court deciding a Motion to Dismiss or for Judgment on the Pleadings pursuant to Rule 4:6-2.

Within thirty (60) [sic] days of the issuance of the ruling and/or recommendation from the Special Master, the aggrieved party may appeal the ruling to this [c]court.

On August 24, 2011, the court granted plaintiffs' motion for partial summary judgment against Tierra, finding this defendant strictly, jointly and severally liable for discharges from the plant property located at 80 Lister Ave. At this point, a number of third-party defendants filed motions to dismiss Maxus/Tierra's claims. The court's disposition of those motions comprise the basis of this appeal.

II

Factual Background

As noted in Diamond Shamrock Chemicals Co. v. Aetna Casualty & Surety Co., 258 N.J. Super. 167 (App. Div. 1992), certif. denied, 134 N.J. 481 (1993), it is undisputed that the owners or users of the Lister Avenue sites "knew about the release of dioxins from [their] plant and the migration of these substances to surrounding areas." Id. at 213. The Lister Avenue sites have had a complicated ownership history. Between 1940 and 1951, Kolker Chemical Works, Inc. (Kolker) acquired 3.4 acres of the site to produce DDT and phenoxy herbicides. Diamond Alkali Company acquired Kolker in 1951, and later became known as the Diamond Shamrock Chemicals Company (DSC).

Under the direction of DSC and its successors, which include the nine businesses named as defendants here, the site continued to host manufacturing operations throughout the 1980s. Those operations involved DDT, TCDD and other hazardous substances such as 2,4-D*fn6 and 2,4,5-T*fn7 . Plaintiffs allege that defendants discharged TCDD and "various other pesticides and chemicals" into the Passaic River and the Newark Bay Complex. The TCDD contamination of the Lister site and the Newark Bay Complex is widely known and has prompted an executive order and responses from the DEP, the EPA and other federal agencies. Plaintiffs allege that defendants have failed to cooperate with authorities to remedy this situation. Plaintiffs view defendants as "dischargers" under the Spill Act, and seek to hold them responsible for the ill-effects of their discharges into the Newark Bay Complex, particularly those related to TCDD.

III

Third-Party Complaint

In their counterclaim and third-party complaint B, Maxus/Tierra claim that the contamination of the Newark Bay Complex is the result of a century's worth of pollution, and accused plaintiffs of using defendants as "scapegoats." They seek contribution from the State and a number of third-party defendants whom they claim also polluted the Newark Bay Complex. The following facts summarize Maxus/Tierra's underlying claims and third-party defendants' respective denials of liability.

Deleet, Docket No. A-4620-10

In their third-party complaint, Maxus/Tierra allege that Deleet is liable for hazardous discharges from an area known as the Ottilio Landfill Site. This site consists of two lots located southwest of the Passaic River, and is designated on Newark's tax maps as block 5001, lots twelve and sixteen. Deleet acquired lot twelve in 1970 and used a portion of it as a landfill. Lot sixteen connects to a tributary of the Passaic River called "Lawyers Ditch" or "Lawyers Creek," and is currently owned by the City of Newark.

Maxus/Tierra allege that from 1951 to the mid-1970s Ottilio & Sons Demolition, Inc. (Ottilio) used both lots as an illegal landfill. It is generally undisputed that the Ottilio site has been the subject of numerous environmental studies, DEP directives and legal actions. In 1974, the DEP brought suit against Ottilio, Deleet and other parties for improperly disposing of solid wastes and chemicals on the lots without approval. In 1976, oil was reportedly leaking from lot sixteen into the Passaic River via the Lawyers Ditch.

Although land-filling activities ceased in 1979, numerous 55-gallon corroded drums filled with liquid waste remained buried in both Ottilio lots. Studies of the area revealed the presence of a wide array of hazardous substances in the site's groundwater, sediments, surface soil and waters, such as pesticides, 1,1-dichloroethane, trichloroethene and 4,4-DDT. The third-party complaint did not specifically reference the chemicals identified in the primary complaint.

Maxus/Tierra allege that the contamination from the Ottilio site discharged into the Passaic River through the Lawyers Ditch and Newark's storm water system, rendering the site's owners liable for the damages alleged in the State's primary complaint. Deleet denies responsibility based on settlements and a release it entered into with DEP.

More specifically, on August 8, 1996, the DEP ordered Deleet and Ottilio to fund the remediation of the Ottilio site. In response, Deleet filed suit against a variety of defendants including DEP, Ottilio and several insurers. On May 17, 2000, Deleet and DEP entered into a stipulation and order of settlement addressing all claims and counterclaims. The stated purpose of the stipulation was to expedite the remediation of the Ottilio site.

In this stipulation, the DEP agreed to settle its "past cleanup and removal costs," "future cleanup and removal costs," and "natural resource damages" for the "Site." Those costs purportedly totaled $20,742,519.*fn8 The stipulation defined "Site" as "the Ottilio Landfill Site"; it did not reference the Newark Bay Complex, the Lawyers Ditch or the Passaic River. Future and past cleanup and removal costs meant all "direct and indirect costs paid by DEP for the remediation of the [Ottilio site]." (Emphasis added). Finally, the term "natural resource damages" encompassed natural resources "damaged or destroyed by the contamination at and from the [Ottilio site]." (Emphasis added).

In exchange for certain acts to be performed by Deleet, DEP agreed in paragraph 19 that it would not sue or take administrative action against Deleet for the remediation of lot twelve, or for the recovery of future and past cleanup and removal costs, and natural resource damages. However, under paragraph 21, DEP reserved its rights to proceed against Deleet in the event:

a. DEP discover[ed] conditions on, at, or from Lot 12, previously unknown to DEP; or

b. DEP receive[d] information relating to Lot 12, previously unknown to DEP, in whole or in part; and

c. [Those] previously unknown conditions or information, together with any other relevant information, indicate[d] to DEP that the Lot 12 Remediation [was] not protective of human health and safety, and the environment.

Likewise paragraph 25 provided in pertinent part:

The covenants contained in Paragraph 19 do not pertain to any matters other than those expressly stated. DEP further reserves, and this Stipulation is without prejudice to, DEP's right to sue or take administrative action against Deleet with respect to all other matters, including . . . liability arising from the past, present, or future discharge, or threat of discharge, of any hazardous substance outside the Site. [(Emphasis added).]

Following the stipulation, DEP intervened in Deleet's suit, and brought claims against Ottilio, its predecessors and affiliates, and Ottilio's insurer, to recover cleanup and removal costs the DEP had incurred in connection with the Ottilio site. The parties resolved the matter on January 11, 2006, by executing a final settlement agreement and release.

Paragraph 2.01 of that document defined the Ottilio Landfill Site to mean the former landfill encompassing approximately six acres of real property located at 18-60 Blanchard Street, Newark, Essex County, New Jersey, including portions of those properties designated as Block 5001, Lots 10, 12, 16, 18, 80 and 90 on the Tax Map of the City of Newark, and an undesignated triangular lot located between Lots 10 and 12, and any other area where any hazardous substance discharged there has come to be located.

This document specifically excluded the portion of lot 12 that had not been used as part of the landfill. In paragraphs 6.01 and 6.02 of the settlement, DEP agreed that it would not sue or take administrative action against Deleet for any acts taken in connection with its remediation of the Ottilio Landfill Site, or for the recovery of any past and future cleanup and removal costs "related to the Ottilio Landfill Site," or natural resource damages "related to the Ottilio Landfill Site . . . ." Under paragraph 6.04, DEP reserved its rights to proceed against Deleet with regard to the "disposal, depositing or dumping of additional ('new') waste materials" after the effective date of the settlement.

With respect to protection from future contribution claims, paragraph 8.01 provided that Deleet would be entitled to protection from any contribution claims "that [arose] out of or relate[d] to matters addressed in paragraphs 6.01 or 6.02 of [the settlement]."

Here, prior to submitting its motion to dismiss to the special master, Deleet asked DEP to provide it with protection against Maxus/Tierra's contribution claims in accordance with the stipulation and settlement. By letter dated August 18, 2010, the Attorney General's Office noted, on behalf of DEP, that "it is not certain that the claims asserted by Maxus and Tierra in the Passaic River Litigation are matters covered by either the Stipulation or the Agreement." According to DEP, the Agreement did not address the Newark Bay Complex.

Despite the position taken by DEP, Deleet argued in its motion to dismiss that the settlement materials precluded Maxus/Tierra's contribution claims. According to Deleet, Maxus/Tierra were not entitled to recovery under the Spill Act because they had neither cleaned up the contamination in the Newark Bay Complex nor received approval to perform such a cleanup. In Deleet's view, because Maxus/Tierra failed to establish a "nexus" with the relief sought by DEP, they could not establish a claim for contribution.

The special master recommended that the trial court deny Deleet's motion to dismiss because the documents relied on by Deleet could not be read as protecting it from Maxus/Tierra's contribution claims. The scope of the stipulation and settlement did not encompass the entire Newark Bay Complex. According to the special master, the array of damages DEP seeks in the primary complaint pertain solely to the contamination in the Newark Bay Complex. These damages are dissimilar to the damages included under the Deleet settlement documents because the latter referenced only damages arising at the Ottilio site.

Mindful of the standard of review applicable to a motion to dismiss brought under Rule 4:6-2(e), the special master noted that the factual assertions made by Maxus/Tierra had to be considered as valid. In this light, because the third-party complaint alleged that "Deleet discharged hazardous substances that found their way into the Newark Bay Complex, and because Maxus and Tierra may be liable to DEP for cleanup and removal of that contamination . . . a contribution claim under the Spill Act arises."

The trial court agreed with the special master's recommendations and ultimate conclusions. The court found that the stipulation and settlement were ambiguous as to what the parties intended by the phrase "related to the Ottilio site."

Additional discovery was thus needed to resolve this ambiguity. Like the special master, the court underscored the fact that the damages sought by plaintiffs in the primary complaint were dissimilar to the damages addressed in the stipulation and settlement.

Drum Parties, Docket No. A-4623-10

Maxus/Tierra allege that the Drum parties and Borden are liable for hazardous discharges from the Bayonne Barrel and Drum (BBD) site and the Central Steel Drum (CSD) site, collectively the Drum sites. The BBD site is located at 150-154 Raymond Boulevard in Newark. From 1932 through 1983, the Bayonne Barrel and Drum Co. and its predecessors operated a drum reconditioning facility on the BBD site. A portion of the site was also used as a sanitary landfill from 1934 through the 1950s. The CSD site is located at 704-738 Doremus Avenue in Newark; it also hosted various drum reconditioning businesses from 1951 to 1994.

The drum reconditioning process involved here entailed cleaning and reconditioning drums with strong chemicals that typically produced "hazardous sludges, solutions and [incinerator] ashes." The BBD and CSD sites have a long history of spills, leaks, and mechanical failures resulting from poor housekeeping practices. Those sloppy practices have purportedly caused the soil, groundwater, and surface waters at both sites to be contaminated with an array of hazardous substances that included TCDD.

The CSD site is approximately 2,300 feet east of the Newark Bay, and for a time the Harrison Creek ran through the BBD site and emptied into the Passaic River, which was located approximately 2,000 feet away. According to Maxus/Tierra, the discharge from these sites has contaminated the Newark Bay and Passaic River.

Maxus/Tierra allege that the Drum parties are liable because they sent drums containing unidentified hazardous substances to the sites for disposal. Maxus/Tierra specifically assert that Clean Earth's predecessor sent several containers filled with hazardous wastes to the BBD site for disposal, and was therefore a "discharger" under the Spill Act. They make similar allegations against Borden, Hexion, Mace and R.T. because each had shipped containers filled with hazardous substances to the CSD site for reconditioning.

Maxus/Tierra also argue that Conopco was liable because it sold drums to the owners of the BBD site.*fn9 Conopco argued before the trial court that merely selling drums to a polluter was insufficient to trigger liability under the Spill Act. The Drum parties joined in Conopco's argument.*fn10

The special master agreed with Conopco that merely selling containers was insufficient to trigger liability because there was no indication that the drums they sold contained hazardous substances or that Conopco had ever actually disposed of drums at the sites. She therefore recommended that the trial court grant Conopco's motion to dismiss the third party action without prejudice, subject to Maxus/Tierra's right to amend their pleadings.

However, the special master found that the factual allegations against the Drum parties were "materially different" from those asserted against Conopco. Unlike the allegations against Conopco, the third-party complaint alleges that the Drum parties sent containers containing hazardous substances to the BBD and CSD sites. The special master gave the following explanation in support of her findings:

Third Party Complaint "B" does not allege that the specific drums disposed of by these parties leaked, but it does allege that waste from the sites to which these drums were delivered discharged into the Newark Bay Complex . . . .

Granted, the language is not perfect. But in its most favorable light, it suggests that each of the [Drum] parties sent barrels of hazardous waste to disposal sites, where the waste found its way into the Newark Bay Complex. This states a claim under the Spill Act.

The trial court agreed with the special master. The court found a factual issue as to whether the Drum parties sent the containers to the sites with an intent to dispose of hazardous substances, knowing that the BBD and CSD ...


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