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New Jersey Appellate Division Holds Judicial Estoppel as Available Defense to Spill Act Claims for Contribution

On January 4, 2019, the Superior Court of New Jersey, Appellate Division, affirmed a Middlesex County trial court order holding that judicial estoppel is a valid defense to contribution claims under the New Jersey Spill Compensation and Control Act (the “Spill Act”), at N.J.S.A. 58:10-23.11 to 23.24. The case, Terranova et al., v. Gen. Elec. Pension Trust et al., N.J. Super. App. Div. Docket No. A-5699-16T3, involved a dispute between Plaintiffs Matthew and Karen Terranova and their company New Land Holdings, LLC, the current landowners of a contaminated gas station property, against Defendants General Electric Pension Trust, Atlantic Richfield Co., Amerco Real Estate Company, Charles Boris, Jr., Carol Boris, and Edward Wilgucki, former owner-operators at the site. Plaintiffs sought contribution for costs to remediate impacts from leaking gasoline underground storage tanks (“USTs”).

However, back in 2010, before this action was initiated, Plaintiffs brought Spill Act claims for contribution of cleanup costs against other former lessees of the property, Keith Friedman and Michael Puccio, who leased the property and operated the gas station between 1981 and 2008. The case proceeded to arbitration, and in 2012 Plaintiffs were ultimately awarded $45,000 for expended remediation costs, and Friedman and Puccio were ordered to take over the then-remaining remediation process. In so holding, the arbitrator adopted the findings of Plaintiffs’ expert, who determined that the pollution occurred only during Friedman and Puccio’s occupancy, as well as Plaintiffs’ testimony to that effect.

Friedman and Puccio, however, did not satisfy the judgment so in 2015, Plaintiffs retained a new expert to further assess the contamination, who opined that impacts to soil and groundwater at the site could date back as far as 1963, prior to Puccio and Friedman’s occupancy, and continued until the tanks were removed in 2000. Relying on the new report, Plaintiffs then brought this action against the Defendants, who owned and operated the site between 1960 and 1980, alleging that Defendants were liable for contribution of cleanup costs as dischargers under the Spill Act. 

The Defendants promptly moved for summary judgment, claiming that equitable doctrines, including judicial and collateral estoppel, as well as the entire controversy doctrine, barred Plaintiffs’ suit. In essence, Defendants argued that Plaintiffs could not now assert that Defendants were responsible for the pollution at the property, when during the prior arbitration proceedings, they asserted evidence that the property was only contaminated during Puccio and Friedman’s occupancy. The trial court agreed and granted summary judgment, finding that judicial estoppel, which prohibits a party from maintaining conflicting positions at different points in litigation, indeed barred Plaintiffs’ Spill Act claims.

Plaintiffs appealed the ruling, arguing that the trial court erred in granting the motions because judicial estoppel is not a defense to Spill Act claims, “due to the complexities of environmental investigation [regarding discharges] and the broad remedial purposes” of the Act. Relying on the Supreme Court of New Jersey’s opinion in Morristown Associates v. Grant Oil, 220 N.J. 360 (2015), which we reported on here, Plaintiffs’ posture was that defenses to Spill Act claims are expressly limited to those set forth in the statute at N.J.S.A. 58:10-23.11g(d)(1), and since judicial estoppel is not a listed defense, it was unavailable to Defendants.

On appeal, the Appellate Division rejected Plaintiffs’ argument and affirmed the trial court’s grant of summary judgment on the basis of judicial estoppel. The appeals court first noted that the Morristown Associates Court did not conclude that the Spill Act’s exclusion of defenses would deprive a defendant of other unlisted defenses, and instead held that challenges to subject matter jurisdiction, venue, and service of process, for example, were defenses that should be maintained, as they were established by court rules and thus not subject to overriding legislation. Although judicial estoppel is not created by court rules, it is required by the rules to be affirmatively pled, thus it “is not a defense subject to any overriding legislation, and, as such, it may be maintained against a Spill Act claim,” the appeals court stated.

Finding that judicial estoppel was indeed available to Defendants as a defense to the Spill Act claims, the appeals court also affirmed the trial court’s application of it in this case. The Appellate Division agreed that because Plaintiffs prevailed in their 2010 litigation, where they asserted that all contamination associated with the USTs occurred only during Friedman and Puccio’s lease, they could not now assert liability for the same contamination against the Defendants in this case. The Appellate Division also noted that back in 2010, Plaintiffs ignored contentions in the initial expert report cautioning that there could have been other contributors to the contamination beyond Friedman and Puccio, and thus they affirmatively chose to disregard the possibility of other claims. Such stance, the appeals court found, is the “type of practice that plays fast and loose with the judicial system.”

Further justifying its application of the judicial estoppel doctrine, the Appellate Division also noted how Plaintiffs waited over five years between suits, and that the testimony from the arbitration proceedings was not recorded: both factors which would present hardships upon Defendants in litigating the case.

In sum, the appeals court agreed that Plaintiffs’ litigation tactics showed the type of inconsistent practice that necessitates the application of the judicial estoppel doctrine, which as applied to the Spill Act, simply compels owners to pursue all possible dischargers in a single action. While this case focused on judicial estoppel as a defense under the Spill Act, the Appellate Division’s opinion suggested that other equitable principles like collateral estoppel and the entire controversy doctrine would also apply to claims for contribution under the Spill Act, stating that the “integrity of the judicial process depends on compliance with those principles.” Following this decision, future Spill Act litigants defending contribution claims should be sure to examine these available defenses. Those litigants seeking contribution, on the other hand, would be wise to ensure bringing in all parties that could potentially have caused the contamination at issue.