Editor: Please tell us about your professional background.
Hogan: I am a member of Norris McLaughlin and co-chair of our Environmental Practice Group. I have been practicing environmental law for over 30 years, almost entirely in New Jersey. I have my bachelor’s degree from Saint Peter’s University in Jersey City, my master’s degree from Yale University’s School of Forestry and Environmental Studies, and my law degree from Georgetown University. I am licensed to practice in New Jersey, New York, Pennsylvania and the District of Columbia.
Editor: NJDEP v. Dimant was decided on September 26, 2012. Please describe the facts of this case.
Hogan: In the late 1980s the drinking water in wells in the vicinity of Bound Brook was determined to be contaminated with various types of organic compounds, both chlorinated solvents (perchloroethylene (PCE), tetrachloroethylene, dichloroethylene, common dry cleaning solvents also used for other industrial and automotive applications) and non-chlorinated, gasoline-related contaminants (benzene, xylene, ethylbenzene). An investigation was conducted and several suspect sources identified. A dry cleaning business occupied one location since the 1950s. It was run as Sue’s Clothes Hanger for one year, a decade before the Department of Environmental Protection (“DEP”) brought its cost recovery action. The DEP settled with all parties except for Sue’s. During the time that Sue’s was operating a dry cleaning machine, a sample was taken from its condensate discharge pipe, which was dripping out onto the asphalt parking lot. This was the one and only time that any sampling was done at this site. That material contained PCE at 3,000 times the DEP’s clean-up standard. By looking at groundwater samples, DEP’s hydrologist concluded that Sue’s was a source. However, in the intervening years, the DEP did not do any additional sampling. There was no notation as to whether the asphalt provided an impermeable surface from which this drip would flow to storm water and eventually surface water, or whether it permeated into the soil and groundwater. The Court’s ruling was no surprise: the state simply had not proven its case, having shown no “fate and transport,” and therefore Sue’s was not liable.
Editor: The New Jersey Supreme Court found it “fundamentally unfair” to force Sue’s to undertake an investigation of contamination 12 years after the sample was taken. Are parties now likely to raise equitable defenses – and by extension, laches or perhaps statute of limitations defenses – to Spill Compensation and Control Act (the “Spill Act”) claims by the government?
Hogan: This is perhaps one of the most interesting aspects of the case. The New Jersey Supreme Court could have reached its conclusion without challenging the DEP’s lack of diligence as “fundamentally unfair.” It is unclear as to whether there is a statute of limitations under the Spill Act and whether laches also shortens any relevant time period for DEP to bring an action. Interestingly, many of these cases under the Spill Act are also brought by private parties seeking contributions from other responsible parties. The case law has been confusing, adding to the possibility that equitable issues, particularly laches, may well apply to similar cases whether the government is the plaintiff or private parties are trying to allocate responsibility among themselves. In that respect it is fascinating that the New Jersey Supreme Court found it necessary to call the DEP’s inaction “fundamentally unfair.”
Editor: The court found the testimony of the hydrogeologist called by DEP insufficient because his opinion was so narrow. What kinds of experts might best serve plaintiffs and/or defendants in a Spill Act case?
Hogan: This surely emphasizes the need for plaintiffs to prove, and for defendants to challenge, the connection between the discharge and the damage. Highlighted here was a hydrogeologist’s observation of the empirical data, projecting same forward over 12 years, and concluding that there must be a connection – a methodology somewhere between speculation and bad science. There should have been a determination of the “fate and transport,” i.e., how the discharge resulted in contamination – whether by some combination of review of soil sampling by soil scientists/geologists or by hydrologists doing a much better job of relating the discharge source to groundwater contamination. In some respects it sounds quite sophisticated, but boils down to basics: there cannot be liability without causation. Proof of causation is the central issue.
Editor: How might you advise a client to have a property investigated before purchase to head off Spill Act claims?
Hogan: Due diligence is absolutely necessary. Any purchaser needs to know that the property is clean, and if not, whether it can be bought at a discount whereupon the buyer might bring a contribution suit. Compliance with the American Society for Testing and Material Standards for Due Diligence (ASTM) (Standard E1527-05), the standard practice and procedure for the preparation of an environmental site assessment, and a New Jersey Preliminary Assessment is absolutely necessary, but not entirely adequate. These reviews have been sold to buyers as providing innocent purchaser protection, but that often proves to be illusory.
Most importantly, any investigation must comply with the relevant standards. Frequently the timing of a transaction results in deviations and omissions. Moreover, if some contamination is found, the federal bona fide purchaser protection might apply, but there is no New Jersey law equivalent.
From the seller’s perspective, contractual negotiations to ensure that buyers appropriately waive their recovery rights after they have had an adequate opportunity to investigate are by far some of the best practices. However, contractually this cannot always occur. For a seller there really is no mechanism to ensure that a future tenant or a future buyer is not going to assert a claim.
Editor: The Site Remediation Reform Act (SRRA) was implemented in 2010. How has the program worked thus far? Have site remediations occurred more timely, as promised?
Hogan: Ninety percent of the cases are relatively straightforward, and the process is working as it should. The LSRPs (Licensed Site Remediation Professionals) are making their decisions and eliminating the delays associated with proposals, DEP review, and implementation. The remainder of cases, those of greater complexity, highlights the tension that results from the changing role of DEP and the new role of the LSRP. LSRPs have as their highest priority the protection of public health, safety and the environment. Their responsibilities to their clients are not defined in statute and are thus contractual. Of note is that the LSRPs are individuals, not the consulting firms.
Some special issues have arisen because of DEP’s new, more limited role. For example:
Editor: Is ADR ever used in these kinds of disputes?
Hogan: There is going to be a lag time for disputes among the parties to be filed. We expect to see greater use of ADR between buyers and sellers, between responsible parties and their LSRPs, and between the LSRPs and their consulting firms. There will be a role for ADR.
Editor: Please tell us about NJDEP’s Waiver Rule, passed in August 2012. How useful will the new rule be in practice for your clients?
Hogan: The Waiver Rule was an initiative of Governor Christie’s Red Tape Review Commission. DEP promulgated a mechanism to seek a waiver of strict compliance if defined criteria were met: conflicting rules exist; strict compliance would be unduly burdensome; there would be a net environmental benefit; or there is a public emergency. The environmental groups were very upset, suggesting this was going to be a gutting of environmental regulations with a flood of waiver requests resulting. Since the rule went into effect in August, there have been fewer than a dozen submissions made. The waiver process prevents the implementation of totally counterproductive, illogical and unreasonable remedies. We think it’s going to be an important component of allowing businesses to realize that there is some logic to environmental regulations.