ELR Citation: ELR 21193
No(s). 87-462 (D.N.J. Feb 14, 1990)

The court, in a private Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) cost recovery action, holds that the "as is" clause in the landowners' deed bars contractual theories of recovery based on implied representations about the allegedly contaminated property, but does not extinguish all tort claims. Defendant landowners leased land to various entities in part for the storage and recycling of oil from 1974 through 1981, when hazardous substances were discovered at the site. Subsequently, the Environmental Protection Agency (EPA) notified approximately 91 parties that it was assuming the chief responsibility for control and cleanup of the site under CERCLA, but offered the parties an opportunity to enter into an administrative consent order whereby the parties would take control of the cleanup. Plaintiff Allied and other parties entered into the order and subsequently sued the nonsettling landowners, who in turn brought the third-party complaints against their tenants and other generators of the hazardous waste. The court first holds that the "as is" clause in the contract on which the landowners' deed is based precludes any cause of action in contract based on implied representations as to the condition of the property. However, the "as is" clause does not extinguish all tort theories, since New Jersey law provides that a predecessor landowner is absolutely liable under common-law principles to a successor in title for environmental damage to the property caused by the predecessor. This liability may not be altered by contract unless the purchaser knowingly accepts that burden, and there is little, if any, evidence that the landowners knew of the consequences of the coal tar processing activities taking place on their land. The court next dismisses defendants' nuisance claims, holding that New Jersey case law establishes that the proper tort theory to be applied in conflicts between successive landowners is strict liability. Moreover, the court holds that defendants' negligence and gross negligence claims fail to state a legally cognizable duty because the evidence establishes that the defendants were not precluded from determining the existence of contamination through examining the site, and their failure to do so limits plaintiff's liability.

The court next holds that defendants' third-party claims for tortious injury to real property are not barred by the statute of limitations, since genuine issues of material fact exist as to when defendants knew or should have known that third-party defendants were potentially liable to landowners for tortious injury to their property. A cause of action accrues in New Jersey when a plaintiff knows or reasonably should know of his or her cause of action and of the identity of a party or parties who may be responsible for the injury, including dumping hazardous substances on land. Thus, even though defendants did not bring their third-party complaint as expeditiously as possible, the court holds that the third-party defendants have not been prejudiced, and for purposes of the limitations period, the filing of the third-party complaint relates back to the filing of defendants' original complaint in the state court.

The court next finds that the disposal of petroleum recycling by-products is abnormally dangerous and the theory of strict liability is available to defendants. In light of today's knowledge about the pernicious effects of carcinogens such as polychlorinated biphenyls (PCBs), the disposal of such compounds is abnormally dangerous. However, the evidence leaves unclear whether defendants were witting accomplices to PCB dumping or innocent third parties, and dismissal of defendants' strict liability claims is inappropriate where questions of material fact exist. As to defendants' nuisance claims against third-party defendants, the court holds that since defendants may maintain their strict liability claim, resort to a remedy grounded on nuisance would be duplicative and not in accord with New Jersey's narrow application of private nuisance theory. While nuisance, by definition, involves acts by a defendant occurring off the land owned by a plaintiff, defendants' nuisance claims allege only activities that occurred on the land in question.

The court next holds that defendants are not barred from asserting claims for subsurface contamination under New Jersey's Environmental Rights Act (ERA). The record reveals that EPA discovered subsurface contamination by phenol, toluene, naphthalene, benzene, dimethyl phenol, and ethyl benzene, and thus defendants are not collaterally estopped from asserting claims for subsurface contamination under the New Jersey Spill Compensation and Control Act through New Jersey's ERA. The court holds that the ERA may be used as a supplement to actions that the government has already taken. The court observes that if a state and EPA decline to lead the cleanup of subsurface contamination, this case may be a perfect example of how an ERA action may be used to supplement governmental actions. Thus, ERA relief may be available in this case. Moreover, the court holds that defendants are suitable parties to bring an ERA action. ERA empowers any person to bring an action to enforce environmental statutes such as the Spill Act, even if that person failed to cooperate with the state or EPA and would benefit from the removal of the contamination. The court next holds that CERCLA §114(b) does not bar defendants from receiving compensation for removal costs or damages or claims under the Spill Act because any increase in the value of their property resulting from plaintiff Allied's cleanup efforts under CERCLA were for surface contamination, not for contamination at the subsurface level. Thus, defendants' claims for subsurface removal are not claims for the same removal costs that they presumably received compensation for under CERCLA in the form of increased property value. However, since neither the state nor EPA has completed its removal actions at the site, defendants' ERA claims are premature. If, when both the state and EPA have completed their activities, the subsurface contamination has still not been remediated, defendants may refile their ERA claims to enforce the Spill Act.

Finally, the court holds that defendants are not barred from seeking contribution from third-party defendants for liability outside the scope of the EPA administrative consent order. While defendants may not recover any sums expended by plaintiff Allied for tasks enumerated in the order, defendants' contribution claim against third-party defendants for any amount plaintiff Allied may recover from defendants is valid for costs recovered from them that are inconsistent with the consent order or for non-CERCLA liability. However, the court holds that settling third-party defendants are entitled to summary judgment to the extent defendants' contribution claim seeks to hold them liable for comparative negligence. One purpose of CERCLA is to encourage settlement by extinguishing settlors comparative liability. Finally, the court holds that defendants are not entitled to indemnification from third-party defendants because they have not established that a special relationship exists with third-party defendants sufficient to give rise to an implied right to indemnification.

[A prior decision in this litigation is published at 19 ELR 20624.]

Counsel for Plaintiff
George W. C. McCarter, Richard L. Hertzberg
McCarter & English
Four Gateway Ctr., 100 Mulberry St., Newark NJ 07102-4096
(201) 622-4444

Counsel for Defendants/Third-Party Plaintiffs
Edward N. Fitzpatrick, John A. Avery, Robert J. Rohrberger
Clapp & Eisenberg
80 Park Plaza, Newark NJ 07102
(201) 642-3900

Counsel for Third-Party Defendants
Mitchell H. Bernstein, Michele A. Guisiana
Skadden, Arps, Slate, Meagher & Flom
1440 New York Ave. NW, Washington DC 20005-2107
(202) 371-7113

Jonathan R. Lagarenne
Shanley & Fisher
131 Madison Ave., Morristown NJ 07962-1979
(201) 285-1000

John J. Carlin Jr., Martin Cronin
30 Vreeland Rd., P.O. Box 751, Florham Park NJ 07932
(201) 377-3350