New Jersey’s Brownfield and Contaminated Site Remediation Act (the “Brownfield Act”) provides that a “person” who owns contaminated property may be entitled to a Hazardous Discharge Site Remediation Fund Innocent Party Grant (“innocent party grant”) to pay for remediation of the property so long as that person meets two requirements: (i) the person acquired the property prior to December 31, 1983 and continued to hold it until the innocent party grant is approved, and (ii) the person did not contribute to the contamination at the property.  N.J.S.A. 58:10B-6(a)(4).

In a decision issued last week, the New Jersey Superior Court, Appellate Division, held that Cedar Knolls 2006, LLC (“Cedar Knolls”) was eligible for an innocent party grant for the remediation of its property even though Cedar Knolls was not technically the same “person” that acquired the property before the statutory deadline. (Cedar Knolls 2006, LLC v. NJDEP, Dkt. No. A-1405-15T3 (N.J. Super. Ct. Sept. 20, 2017)).  In doing so, the Superior Court explained that, with respect to owners eligible for innocent party grants, the Brownfield Act was more concerned with the “substance of ownership and continuity than the technicalities of the legal form.”

Cedar Knolls sought an innocent party grant to cover remediation costs associated with contaminated property that it had acquired through a series of transfers among family members that extended before the December 31, 1983 deadline. Specifically, in 1977, Robert Higginson purchased the property, which then passed to his wife, Evelyn.  She divided and transferred her interest in the property to two trusts that she transferred to her son, William.  In 2006, William transferred the interests from the trusts to a new entity he controlled, Cedar Knolls, which then owned a 100% interest in the property. 

In 2015, Cedar Knolls applied to NJDEP for an innocent party grant. Although it was uncontroverted that Cedar Knolls had not contributed to the contamination at issue, NJDEP denied the application because Cedar Knolls was not a “person” who had “acquired the property prior to December 31, 1983.”  Cedar Knolls appealed the decision and the Superior Court reversed.

The Superior Court concluded that there was no “change in ownership” for purposes of the Brownfield Act from the time that Robert Higginson acquired the property in 1977 to the present, despite the transfers among the family members. In arriving at this conclusion with respect to the Brownfield Act, the Superior Court looked to the related Industrial Site Remediation Act (“ISRA”), which also pertains to the remediation of contaminated sites.  ISRA, the Court explained, is triggered upon “any transaction or proceeding through which an industrial establishment undergoes a change in ownership.”  But the definition of “change in ownership” under ISRA does not include a transfer “where the transferor is the sibling, spouse, child, parent, grandparent, child of a sibling, or sibling of a parent of the transferee.” See N.J.S.A. 13:1K-8.  The Superior Court relied on this language in ISRA to conclude that the New Jersey legislature intended for innocent party grants to extend to an innocent owner so long as there is “a basic continuity of beneficial ownership between the entities.” 

Accordingly, the Superior Court’s decision establishes at least one instance in which an owner may still be entitled to an innocent party grant even though it is not necessarily the same “person” that acquired the property before 1983.

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