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NL Industries Inc. v. State

Supreme Court of New Jersey

March 27, 2017

NL INDUSTRIES, INC., Plaintiff-Respondent,
v.
STATE OF NEW JERSEY, Defendant-Appellant.

          Argued October 26, 2016

         LaVecchia, J., writing for a majority of the Court.

         In this appeal, the Court determines whether the New Jersey Spill Compensation and Control Act (Spill Act), N.J.S.A. 58:10-23.11 to -23.24, retroactively abrogated the State's sovereign immunity for state action taken prior to the Act's 1977 effective date.

         In September 1968, Sea-Land Development Corporation (Sea-Land) notified the State of its plans to protect Laurence Harbor from future erosion by the construction of a seawall, which would be made partly with "slag, " an industrial byproduct. Sea-Land received a riparian land grant and building permit for the seawall, and completed the project during the early 1970s. During the construction, an Old Bridge Township official informed the NJDEP that slag was being dumped into Raritan Bay. At the time, the State acknowledged ownership of some of the land on which Sea-Land built the seawall; from the record, it does not appear that further action was taken at the time.

         In 2007, the NJDEP detected contamination along the seawall in Laurence Harbor and reported its findings to the United States Environmental Protection Agency (EPA) in June 2008. In 2014, the EPA demanded that NL Industries, Inc. (NL), which had operated a factory in Perth Amboy that created slag as a byproduct, remediate the site based on the assertion that Sea-Land had obtained from NL slag used in the Laurence Harbor projects.

         NL filed a complaint seeking contribution from the State under the Spill Act, alleging that the State caused or contributed to the Raritan Bay contamination in its roles as regulator and riparian landowner. The State filed a motion to dismiss based on: (1) sovereign immunity; (2) the immunities and procedural protections in the New Jersey Tort Claims Act (TCA), N.J.S.A. 59:1-1 to 12.3; and (3) NL's failure to state a claim.

         The trial court denied the State's motion. 442 N.J.Super. 428 (Law Div. 2014). Combining the Spill Act's abrogation of sovereign immunity with its interpretation that this Court recognized a legislative intent that the Act be applied retroactively in Department of Environmental Protection v. Ventron Corp., 94 N.J. 473 (1983), the trial court concluded, first, that sovereign immunity for pre-Act discharges was waived. Second, the trial court found that the Spill Act and the TCA "were enacted at different times for demonstrably different reasons" and declined to graft onto the Spill Act the immunities and procedural protections of the TCA. Finally, the trial court rejected the State's argument that the complaint failed to state a claim.

         On leave to appeal, the Appellate Division affirmed the denial of the motion substantially for the reasons set forth by the trial court. 442 N.J.Super. 403. The Court granted the State's motion for leave to appeal.

         HELD: The Spill Act contains no clear expression of a legislative intent to waive the State's sovereign immunity retroactively to cover periods of State activity prior to the Spill Act's enactment. Therefore, the State's sovereign immunity prevails against Spill Act contribution claims based on State activities that occurred prior to the original effective date of that Act.

         1. In 1976, the New Jersey Legislature enacted the Spill Act. From its origin, the Act provided that "any person" responsible for a discharge of a hazardous substance into State waters or onto lands leading to those waters "shall be strictly liable . . . for all cleanup and removal costs, " and defined "any person" to include "the State of New Jersey." The inclusion of the State in the definition of "person" signaled the Legislature's clear intention to include the State as a party responsible for its hazardous discharges and the waiver of sovereign immunity. Significantly, the Act's definition of "person" as inclusive of the State has never been altered. (pp. 9-13)

         2. In 1979, the Legislature amended the Spill Act in several important ways. The Legislature opened up the Fund's use for remediation of spills that occurred before the Spill Act was enacted and coupled that action with the expansion of NJDEP authority to seek contribution from non-public funding sources: namely, parties in any way responsible for the discharge that the NJDEP removed or was removing. In that pointed way, liability was expanded to permit the State to seek contribution from persons responsible for, among other discharges, those pre-Spill Act enactment discharges that the NJDEP chose to address. In that manner, retroactivity found express authorization in the Act, but only under N.J.S.A. 58:10-23.11f(b)(3). (pp. 14-18)

         3. It is debatable from the combination of amendments to the Act in 1991, and accompanying legislative statements, whether the change in the first sentence of N.J.S.A. 58:10-23.11g(c)(1)-to "no matter by whom incurred"- signaled a broadly intended opening-up of contribution actions against any and all dischargers, including the State, for hazardous discharges that preceded enactment of the Spill Act. (pp. 18-20)

         4. It is an essential aspect of sovereignty to be free from suit by private citizens seeking money damages unless the State has given its consent, which requires a clear legislative expression of intent to be subject to suit. A legislative waiver of sovereign immunity must be expressed clearly and unambiguously, and a retroactive waiver of sovereign immunity requires the clearest of expression. (pp. 20-23)

         5. The inclusion of the State in the definition of "person" subject to the Act when first enacted did not render the State liable for any pre-enactment activities. The Act, as originally passed, did not address discharges that predated enactment. Although the Legislature did not subsequently alter the definition of "person" to exclude the State despite the amendment to permit private contribution actions for pre-Act discharges, that failure does not provide any convincing answer to the question of retroactive abrogation of sovereign immunity. (p. 24)

         6. The question is not whether it is arguable that the Legislature passed an amendment that could be construed to provide a pathway to imposing liability on the State in a private contribution action based on the State's pre-Act activities; rather, the Court must be able to conclude that the Legislature clearly and unambiguously expressed its intention for that result to obtain. The Court does not find the deliberate clarity necessary to reach that conclusion and therefore parts ways with the decisions reached by the trial court and Appellate Division. (pp. 24-27)

         7. Ventron underscored the Court's awareness that the Act's retroactivity was conditioned-it pertained only to those pre-Act discharges that the State cleaned up and sought reimbursement for from private parties. Far from supporting the position taken in this action, Ventron highlights the limited nature of the retroactivity permitted under the 1979 amendment. Post-Ventron, other courts of this State have recognized that not all of the Act's provisions are intended to be retroactive. (pp. 27-30)

         8. Amendments made to the Spill Act in 1993 do not shore up NL's position. That the Legislature chose to add to the State's defenses for discharges on property that the State subsequently acquired does not address legislative intent regarding a retroactive stripping of the State's sovereign immunity for pre-1977 liability. (pp. 30-31.)

         9. The trial court, affirmed by the Appellate Division, discerned no evidence that the Legislature intended to require the State's liability under the Spill Act to be harmonized with the procedural protections provided for claims under the TCA. The Court agrees. Further, in response to the State's argument that it should not be held liable when exercising its regulatory responsibilities or for its role as a sovereign, the Court finds no clear evidence that the Act was intended to strip the State of immunity for the discretionary governmental activities of a sovereign. (pp. 31-33)

         The judgment of the Appellate Division is REVERSED. The matter is REMANDED to the trial court for further proceedings consistent with the holding of the Court.

         JUSTICE ALBLIN, DISSENTING, expresses the view that, because there is no ambiguity about how the Legislature defined the term "person, " there can be no doubt that the Legislature intended the Spill Act to apply retroactively to the State, and sovereign immunity is a non-issue. Exonerating the State from retroactive liability for remediating a pre-Act toxic discharge, while all others remain jointly and severally liable, does not accord with the Legislature's carefully crafted scheme of allocating fault equitably, in Justice Albin's view.

         On appeal from the Superior Court, Appellate Division, whose opinion is reported at 442 N.J.Super. 403 (App.Div. 2015).

          David S. Frankel, Deputy Attorney General, argued the cause for appellant (Christopher S. Porrino, Attorney General of New Jersey, attorney; Melissa H. Raksa, Assistant Attorney General, of counsel).

          Christopher R. Gibson argued the cause for respondent (Archer & Greiner, attorneys; Mr. Gibson and Patrick M. Flynn, on the briefs).

          CHIEF JUSTICE RABNER AND JUSTICES PATTERSON, FERNANDEZ-VINA, SOLOMON, AND TIMPONE join in JUSTICE LaVECCHIA's opinion. JUSTICE ALBIN filed a separate, dissenting opinion.

          OPINION

          LaVECCHIA JUSTICE.

         Plaintiff NL Industries, Inc. (NL), filed a claim against the State of New Jersey seeking contribution under the New Jersey Spill Compensation and Control Act (Spill Act), N.J.S.A. 58:10-23.11 to -23.24, for environmental-contamination cleanup costs for a site in the Laurence Harbor region of Old Bridge Township. The claim is based on State activity that occurred prior to enactment of the Spill Act. NL alleges that the State was responsible for pollutant discharge for two reasons: first, because the State was the owner of riparian land that became contaminated and polluted the Laurence Harbor shoreline; and second, because the State, acting as a regulator through the New Jersey Department of Environmental Protection (NJDEP), approved action related to the property of a third party that similarly is alleged to be responsible for the Laurence Harbor contamination.

         The State unsuccessfully sought dismissal of NL's claim. This appeal is before us based on our grant of the State's motion for leave to appeal raising novel questions. The fundamental issue is whether the Spill Act retroactively abrogated the State's sovereign immunity for state action taken prior to the Act's 1977 effective date. If we determine that the State can be liable for its activities during the pre-Spill Act time period, then we must decide two other questions that are presented in this appeal: whether the State can be liable under the Spill Act for actions taken as a regulator; and whether State liability under the Spill Act must be harmonized with the New Jersey Tort Claims Act (TCA), N.J.S.A. 59:1-1 to 12.3, which, among other things, provides the State with immunity from tort claims for certain categories of discretionary activities.

         There is no dispute in this appeal that, effective with enactment of the Spill Act, the State is responsible under the Act for its discharges because the State is included in the Spill Act's definition of a "person" potentially liable. N.J.S.A. 58:10-23.11b. The contest here centers on whether a series of subsequent amendments made to the Spill Act, which allowed the Act some retroactive application and which created opportunities for private contribution actions, have rendered the State liable for activities that occurred before the Act became effective.

         Based on careful review of the Act as enacted and as serially amended, we conclude that the Spill Act contains no clear expression of a legislative intent to waive the State's sovereign immunity retroactively to cover periods of State activity prior to the Spill Act's enactment. Absent a clear and specific indication that the Legislature intended to impose a retroactive liability that could have profound impact on the fiscal affairs of the State, retroactive waiver of the State's sovereign immunity for Spill Act contribution claims concerning pre-Act activities will not be inferred.

         Therefore, on the fundamental issue in this appeal, we hold that the State's sovereign immunity prevails against Spill Act contribution claims based on State activities that occurred prior to the original effective date of that Act. The judgment of the Appellate Division is reversed, and this matter is remanded to the trial court for proceedings consistent with the holding of this Court.

         I.

         Because this case comes before us on interlocutory appeal from the denial of the State's motion to dismiss plaintiff's complaint, we rely on facts gleaned from the pleadings.[1] This matter is factually and procedurally complex; we recite those facts and procedural steps that are necessary to place the legal issue in context.

         A.

         The case concerns the contamination of the Laurence Harbor shoreline, a part of Raritan Bay, in Old Bridge Township (Township). In the early 1960s, the State of New Jersey, along with the Township, retained the services of the United States Army Corps of Engineers (Army Corps of Engineers) to build structures to protect the Laurence Harbor beach from erosion. One such protective measure included the building of a levee and the placement of beach fill on riparian land owned by the State. The Army Corps of Engineers completed the project in 1966.

         In September 1968, Sea-Land Development Corporation (Sea-Land), which had earlier acquired land in Laurence Harbor for development, notified the State of its plans to protect Laurence Harbor from future erosion by the construction of a seawall, which would be made partly with "slag, " an industrial byproduct. Sea-Land needed a grant of riparian land from the State in order to construct its wall.

         In December 1969, the Natural Resources Council of the NJDEP approved a riparian land grant to Sea-Land subject to several conditions, including that Sea-Land build a beach, consistent with Army Corps of Engineers regulations, and allow public access to the beach. At around the same time, acting through the NJDEP, the State, with the approval of the Township and the Army Corps of Engineers, issued a permit to Sea-Land to build the seawall. Sea-Land accepted the conditions of the riparian grant in 1970 and, thereafter, began construction.

         Sea-Land completed the project during the early 1970s, using slag on both the seawall and an existing jetty that the Army Corps of Engineers had constructed during the 1880s. The seawall was situated on land owned by Sea-Land as well as land owned by the State, and the State held, and still retains, an ownership interest in the jetty.

         During the construction, a Township official informed the Chief of the NJDEP Bureau of Solid Waste Management that slag was being dumped into Raritan Bay. During the fall of 1972, various divisions of the NJDEP examined the reported information and, in March 1973, the State, the Township, and the Army Corps of Engineers met to discuss the slag issue. At the time, the State acknowledged ownership of some of the land on which Sea-Land built the seawall; from the record, it does not appear that further action was taken at the time.

         In 2007, the NJDEP detected contamination along the seawall in Laurence Harbor. The NJDEP reported its findings to the United States Environmental Protection Agency (EPA) in June 2008. The EPA investigated and then, in 2009, placed Laurence Harbor on a national list of contaminated sites. In May 2013, the EPA issued a Record of Decision on the matter, selecting a cleanup and removal remedy for the hazardous material in Raritan Bay, including the Laurence Harbor seawall and jetty, that was estimated to cost $79 million overall.

         In January 2014, the EPA[2] demanded that NL, which had operated a factory in Perth Amboy that created slag as a byproduct, remediate the site based on the assertion that Sea-Land had obtained from NL slag used in the Laurence Harbor projects. NL thereafter filed a state court complaint seeking contribution from the State under the Spill Act, alleging that the State caused or contributed to the Raritan Bay contamination in its roles as regulator and riparian landowner.

         B.

         Procedurally, NL's claim unfolded through motion practice. With discovery not yet completed, the State filed a motion to dismiss NL's claim based on: (1) sovereign immunity; (2) the common law immunities codified in the TCA, as well as the TCA's procedural protections; and (3) NL's failure to state a claim against the State.[3]

         The trial court denied the State's motion. NL Indus., Inc. v. State,442 N.J.Super. 428, 449 (Law Div. 2014), aff'd, 442 N.J.Super. 403 (App.Div. 2015). First, the court determined that the Spill Act provided a clear and unambiguous waiver of the State's sovereign immunity. Id. at 442. The court noted that the State is listed as a potentially liable "person, " and that the Legislature did not "immunize or exclude" the State from the list of "persons" from whom a discharger may seek contribution when amending the Act in 1991 to allow for contribution actions. Ibid. For further support, the trial court relied on Department of Environmental Protection v. Ventron Corp.,94 N.J. 473 (1983), in which Spill Act liability was imposed for the pre-enactment activities of private responsible parties sued by the NJDEP to recover costs expended by the Spill Fund to clean up those private parties' pre-Act discharges. Id. at 441. The trial court cited Ventron for the proposition that this Court has recognized a legislative intent that the Act be applied ...


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