New Jersey Appellate Division Upholds Application of Judicial Estoppel Defense to Spill Act Liability

Environmental Law Alert

January 16, 2019

Katie C. Gannon

Katie C. Gannon

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In Terranova v. General Electric Pension Trust, Docket No. A-5699-16T3 (Jan. 4, 2019), the New Jersey Appellate Division affirmed the trial court’s grant of summary judgment to the defendants, holding that judicial estoppel precluded plaintiffs’ Spill Act claims. Judicial estoppel is an equitable doctrine that precludes a party from taking a position contrary to another position upon which the party prevailed in a prior proceeding.

Prior to commencing the present action, the plaintiff property owners had sued and obtained a judgment in 2012 against the individuals who operated a gas station at the property from 1981 until 2008. Despite the entry of a final judgment in 2012, the defendants in the first litigation did not fulfill the financial and remedial obligations imposed by the judgment.

In 2015, the plaintiffs retained the services of a new environmental consultant, which conducted further studies and concluded that the soil and groundwater contamination at the property began on or before 1963, well before the defendants in the first case began operating at the property in 1981. As a result, the plaintiffs filed the instant action against the pre-1981 owners and operators of the property.

During the course of discovery, the Terranova defendants became aware of the first litigation and filed motions for summary judgment on the basis of judicial estoppel. In opposition, the plaintiffs argued that judicial estoppel is not a defense to Spill Act liability because such defenses are limited to those enumerated in the statute – i.e., “an act or omission caused solely by war, sabotage, or God, or a combination thereof.” See N.J.S.A. 58:10-23.11g(d). The plaintiffs supported their position by relying on the New Jersey Supreme Court’s rejection of a statute of limitations defense in Morristown Assocs. v. Grant Oil Co., 220 N.J. 360 (2015).

Agreeing with the trial court, the Appellate Division rejected the plaintiffs’ argument, noting that Morristown Associates held that the enumeration of defenses in the Spill Act does not deprive a defendant of other unlisted defenses, such as defenses established by court rules and not subject to overriding legislation. Because statutes of limitations are created by the Legislature, and the Spill Act contains no such defense, the Court in Morristown Associates found that there is no statute of limitations defense to Spill Act liability. The Terranova court held that, unlike a statute of limitations defense, judicial estoppel is not a defense subject to overriding legislation but rather an equitable principle designed to prevent parties from playing “fast and loose” with the judicial system.

The Appellate Division held that, because the plaintiffs contended that the defendants in the first litigation were the sole culpable dischargers, it could not now take the position that the defendants in the second litigation were also responsible. The court found that the plaintiffs’ decision to ignore evidence of other possible dischargers known or reasonably knowable in the first litigation, despite the Spill Act’s imposition of joint and several liability and expansive definition of responsible parties, was particularly troubling. It resulted in hardships to the defendants from the passage of time and impaired the court’s “truth-seeking” mission. Thus, while noting that judicial estoppel is an extraordinary remedy to be applied only in limited circumstances, the court held that the plaintiffs’ conduct is the type of practice that warrants application of the judicial estoppel doctrine.

The court concluded that “plaintiffs are precluded from floating a lazy cast toward one discharger and then shooting a second line toward others, seeking contribution for clean-up of the same property.” The Appellate Division’s decision in Terranova is an important reminder to Spill Act plaintiffs to conduct a thorough investigation of potentially responsible parties prior to filing a Spill Act action and to name as defendants all parties that potentially could have contributed to the contamination at issue, as they may not have a second bite at the apple in a subsequent proceeding.