New Jersey State Court Dismisses NRD Claim Against Essex Chemical Corp.

August 8, 2010
Client Alert Newsletter August 2010

On July 23, 2010, the New Jersey Superior Court issued findings of fact and conclusions of law in the matter of NJDEP v. Essex dismissing, in its entirety, the New Jersey Department of Environmental Protection's ("NJDEPs") complaint against Essex Chemical Corporation ("Essex"). After a full trial on the merits, in which Essex did not dispute liability but objected to the calculation of damages, the Court found, inter alia, that NJDEP did not meet its burden to prove its claim for primary and compensatory restoration damages (collectively, "natural resource damages" or "NRD"), brought pursuant to the New Jersey Spill Compensation and Control Act (the "Spill Act"). In reaching its decision, the Court agreed with Essex that: (1) NJDEP ignored the knowledge, expertise, and judgment of the Site Remediation Program ("SRP"), (2) NJDEP's experts prepared their reports hastily and proposed a remediation plan that ignores the history of remediation efforts at the site, and (3) that NJDEP's compensatory restoration claim ignores lost services due to contamination of the groundwater at the site.

As to the first point, NJDEP sought to require Essex to undertake a remedy proposed by NJDEP’s Office of Natural Resource Restoration ("ONRR"), the estimated cost of which was magnitudes higher than the cost of the remedial action Essex was already implementing at the site under the approval of SRP personnel. The Court agreed with Essex finding that there was a long history of cooperation between Essex and the SRP which was not considered by the ONRR in proposing a different remedy. Indeed, the Court remarked that "[t]o allow the ONRR to mandate a remediation plan above and beyond what has been approved by the SRP sends mixed messages to defendants, such as Essex, and may discourage other companies from working with the NJDEP" which the Court reasoned "could not be the intention behind the development of the two departments." As to Essex' second argument, the Court again agreed with Essex finding that NJDEP's experts issued their reports without ever visiting the site, talking to SRP personnel for input as to what had been done at the site, or even considering alternative technologies and cost effectiveness.

Lastly, while the Court reiterated its previous decision that compensatory restoration claims are not limited solely to loss of use damages but could be awarded for a non-use related harm or loss, the Court took great issue with NJDEP's approach to computing such loss in this case. Specifically, the Court rejected NJDEP's expert's use of Resource Equivalency Analysis in this case for calculating the compensation allegedly required to offset the injured groundwater (proposed by NJDEP as the purchase of 15.4 acres of land) because NJDEP's experts failed to explain how values were assigned to things that are normally invaluable.

While the Court's decision is significant on several grounds, it is perhaps most pertinent to parties facing NRD claims seeking to impose different remedial obligations than those already being implemented by the party under SRP oversight and/or approval.