New Jersey Court Creates Additional Burden of Proof Under Spill Act

New Jersey Court Creates Additional Burden of Proof Under Spill Act

The New Jersey Spill Compensation and Control Act (the Spill Act) continues to make legal headlines.

The latest case, New Jersey Schools Development Authority v. Marcantuone, creates an additional burden of proof for Spill Act defendants who are former owners of property acquired before September 14, 1993.

The case involved condemned property acquired by the City of East Orange. The New Jersey Schools Development Authority, which funded the acquisition, later filed suit against the prior owners, Joseph Marcantuone and Robert Gieson, to recover approximately $212,000 spent to remediate the site. Relying on White Oak Funding, Inc. v. Winning, the trial court dismissed the complaint. The decision held that a property owner is not liable if the discharges took place prior to acquisition and the new owner did not contribute to the contamination.

On appeal, the New Jersey Schools Development Authority argued that the White Oak decision was in part implicitly superseded by the 2001 amendments to the Spill Act, which created the "innocent purchaser" defense for property acquired on or after September 14, 1993. To take advantage of the defense, “the person must have undertaken, at the time of acquisition, all appropriate inquiry into the previous ownership and uses of the property.” The Spill Act amendments became effective roughly one week after the White Oak Funding decision was issued.

The Appellate Division agreed that the White Oak Funding decision was superseded by the Spill Act amendments. “Although it may seem counterintuitive to infer liability from legislation establishing an affirmative defense, logic dictates that that is the case. The ‘innocent purchaser’ defense … applicable to those who acquired contaminated land before September 14, 1993, read in pari materia with N.J.S.A. 58:10-23.11g(d)(2), which provides a similar defense to those who acquired contaminated land after September 14, 1993, reveal the Legislature's acknowledgment of the underlying liability these affirmative defenses were intended to counteract,” the court stated in its opinion.

Therefore, under this decision, Spill Act defendants that acquired property prior to September 14, 1993 must meet all of the requirements of the innocent purchaser defense to avoid liability. This includes showing that, at the time of acquisition, they conducted all appropriate inquiry on the previous ownership and uses of the property “based upon generally accepted good and customary standards.” To meet this new burden of proof, discovery will now include expert testimony about the “generally accepted good and customary standards” for due diligence at the time of acquisition.


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AboutWilliam Sullivan

William Sullivan concentrates his practice in the areas of environmental law, land use law, redevelopment law and renewable energy law.Full Biography

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New Jersey Court Creates Additional Burden of Proof Under Spill Act

New Jersey Court Creates Additional Burden of Proof Under Spill Act
Author: William Sullivan

The latest case, New Jersey Schools Development Authority v. Marcantuone, creates an additional burden of proof for Spill Act defendants who are former owners of property acquired before September 14, 1993.

The case involved condemned property acquired by the City of East Orange. The New Jersey Schools Development Authority, which funded the acquisition, later filed suit against the prior owners, Joseph Marcantuone and Robert Gieson, to recover approximately $212,000 spent to remediate the site. Relying on White Oak Funding, Inc. v. Winning, the trial court dismissed the complaint. The decision held that a property owner is not liable if the discharges took place prior to acquisition and the new owner did not contribute to the contamination.

On appeal, the New Jersey Schools Development Authority argued that the White Oak decision was in part implicitly superseded by the 2001 amendments to the Spill Act, which created the "innocent purchaser" defense for property acquired on or after September 14, 1993. To take advantage of the defense, “the person must have undertaken, at the time of acquisition, all appropriate inquiry into the previous ownership and uses of the property.” The Spill Act amendments became effective roughly one week after the White Oak Funding decision was issued.

The Appellate Division agreed that the White Oak Funding decision was superseded by the Spill Act amendments. “Although it may seem counterintuitive to infer liability from legislation establishing an affirmative defense, logic dictates that that is the case. The ‘innocent purchaser’ defense … applicable to those who acquired contaminated land before September 14, 1993, read in pari materia with N.J.S.A. 58:10-23.11g(d)(2), which provides a similar defense to those who acquired contaminated land after September 14, 1993, reveal the Legislature's acknowledgment of the underlying liability these affirmative defenses were intended to counteract,” the court stated in its opinion.

Therefore, under this decision, Spill Act defendants that acquired property prior to September 14, 1993 must meet all of the requirements of the innocent purchaser defense to avoid liability. This includes showing that, at the time of acquisition, they conducted all appropriate inquiry on the previous ownership and uses of the property “based upon generally accepted good and customary standards.” To meet this new burden of proof, discovery will now include expert testimony about the “generally accepted good and customary standards” for due diligence at the time of acquisition.