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New Jersey Municipal Environmental Risk Management Fund As Subrogee of v. Killam Associates Consulting Engineers

September 7, 2012

NEW JERSEY MUNICIPAL ENVIRONMENTAL RISK MANAGEMENT FUND AS SUBROGEE OF AND BAYSHORE REGIONAL SEWERAGE AUTHORITY, PLAINTIFFS-APPELLANTS,
v.
KILLAM ASSOCIATES CONSULTING ENGINEERS, CHU & GASSMAN CONSULTING ENGINEERS, P.C. AND MIDWEST MECHANICAL CONTRACTORS OF NEW JERSEY, DEFENDANTS-RESPONDENTS, AND ATLAS CONSTRUCTION COMPANY AND ROBBINS ELECTRICAL COMPANY, INC., DEFENDANTS.



On appeal from Superior Court of New Jersey, Law Division, Monmouth County, Docket No. L-484-09.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued September 26, 2012

Before Judges Grall, Alvarez and Skillman.

The Bayshore Regional Sewer Authority (Bayshore) and its subrogee, the New Jersey Municipal Environmental Risk Management Fund (Fund), commenced this litigation to recover costs incurred to address a leak in an underground fuel pipeline and remediate the resulting contamination of soil and groundwater. The defendants are the professionals and contractors who designed and installed the pipeline. Plaintiffs appeal from an order dismissing the entire complaint as a remedy for spoliation of evidence.*fn1 Concluding that the record was inadequate to permit dismissal of all of plaintiffs' claims, we reverse and remand for further proceedings.

In January 1991, Bayshore retained defendant Killam Associates Consulting Engineers (Killam)*fn2 to design and oversee the construction of a pipeline to carry fuel from an aboveground storage tank to a generator. By subcontract with Killam, defendant Chu & Gassman Consulting Engineers, P.C. (C&G) agreed to design and install the pipeline, prepare the contract specifications and drawings, conduct special and final inspections and judge the acceptability of the work. Defendant Atlas Construction Company, the general contractor, subcontracted the pipe installation to defendant Midwest Mechanical Contractors of New Jersey and the electrical work to defendant Robbins Electrical Company, Inc. The work on the pipeline was completed before 1998.

The fuel-pipe system has two lines of pipe, one carrying fuel to and one away from the generator. Each line consists of primary steel piping enclosed in secondary fiberglass piping. The specifications require the lines to slope down from the generator to an "accessible containment sump." One purpose of the secondary fiberglass piping is to carry any fuel leaking from the primary steel pipe to the containment sump; another is to protect the steel pipe from corrosive conditions. The containment sump is equipped with leak-detection equipment designed to sound an alarm when fuel enters the containment sump.

The alarm first sounded in May 2004. Bayshore promptly took the pipeline out of service. A pressure test of the primary line was performed, and it indicated a problem in the primary supply line. Accordingly, Bayshore accessed the containment sump and found a "considerable amount" of fuel. To locate the leak, Bayshore excavated along the pipeline for a "few days." On May 11, Bayshore found "a small rupture on the supply line along with a diesel spill." The rupture was in the primary, steel pipeline. On May 12, employees of PMK Group, an environmental consultant obtained by the Fund, visited the Bayshore site. Due to the "considerable volume of petroleum" in the soil and groundwater, PMK concluded that the secondary fiberglass piping had also failed. Scientists from PMK reported their findings to Bayshore's executive director, Robert G. Fischer, on May 17 and 25, 2004 and provided photographs "depicting the location of the spill" that accompanied the reports. At a public meeting on May 17, Bayshore adopted an emergency resolution awarding Independence Constructors (IC) a contract to repair the pipeline and remediate the environmental damage as recommended by PMK and the Fund, and at a public meeting on May 24, Fischer gave a status report on the remediation and explained that the next "course of action" would depend on test results. The minutes of these meetings reflect that an engineer employed by Killam attended the May 24 meeting to address a different project, but they do not reflect any discussion of Killam's involvement with the pipeline at any point in time.

IC commenced work on May 21, 2004. There is, however, no evidence that plaintiffs contacted any defendant to inform them of the leak or otherwise give them notice of or an opportunity to observe the work.

The record we have includes photographs of an exposed primary and secondary line apparently taken while IC's work was in progress, but there are no certifications or transcripts of deposition testimony from employees of Bayshore, IC or PMK explaining when the pictures were taken or describing what they depict. The pipeline shown is in an opened pit, but there is nothing in the record describing how the excavation was done. The photos also show that portions of the secondary piping were removed so as to expose the run of the primary line and the lower half of the couplings that join sleeves of the secondary piping. Again, there is no evidence indicating how the upper- half of the secondary pipe was removed to expose the primary line.

Plaintiffs were considering litigation against defendants as early as September 2004. That month, their attorney asked PMK to provide or recommend an expert witness, explaining that he would need one "to be successful in any type of subrogation against the contractor."

In addition to contemplating litigation against the contractors, plaintiffs worked with New Jersey's Department of Environmental Protection (DEP) from the time the spill was detected. By September 2006, Bayshore applied for a memorandum of agreement that would result in DEP issuing a "No Further Action" letter defining the limits of Bayshore's obligations for the environmental damage. DEP approved that application in November 2006, reserving its right to terminate the agreement for non-compliance, and in February 2008, DEP sent Bayshore a deficiency notice warning that the agreement would be terminated if Bayshore did not correct the problems identified.

Defendants first received notice of plaintiffs' intention to litigate after the complaint was filed, which was done in January 2009. By that time, no portion of the pipeline removed from the failed line was available. Plaintiffs have not offered any explanation for their inability to locate the piping, and there is nothing in the record or briefs suggesting that defendants sought to depose employees of Bayshore, PMK or IC, who might have information as to how that evidence was lost.

According to plaintiffs, some of the initial piping remains intact and in use. By letter of July 27, 2010, Bayshore advised defendants of its existence:

I am pleased to advise that it has come to our attention that portions of the underground piping in this matter remain intact at the Bayshore Regional Sewerage Authority and is available for your inspection. The piping located at the Authority will allow the Defendants to inspect the improper installation and design of the primary and secondary piping.

Plaintiffs have an expert report on liability and damages that was prepared in 2010 by an expert who did not have access to the pipes or witness the work done to excavate and repair the pipeline. That expert, Joyce A. Rizzo, of JD2 Environmental, Inc., did not consider the "intact" portion of the pipeline.

Rizzo based her opinions on a review of: bid documents and contract for the initial project; Killam's and C&G's plans and drawings; correspondence between Atlas and the engineering firms; documents generated during the initial construction such as field notes, change orders, punch lists and test results; and three batches of photos. Rizzo identified the photos as follows: "Photos (12) of piping install & AST (not sure which building)", "Photos (7) of Piping (not identified)" and "Photos (12) (not identified)." She also identified the standards, industry reports and regulations she consulted in ...


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