NJ Supreme Court Reverses Decision About Source of Bayonne Pollution

Tom Johnson | July 30, 2019 | Energy & Environment
Court holds that Australian real estate developer improperly blocked from using state Spill Fund to clean up polluted flooding following Sandy

Credit: Creative Commons
The New Jersey Supreme Court yesterday overturned a decision preventing a real estate fund from using state money to clean up property damaged by flooding that polluted its property after Hurricane Sandy.

The 4-3 court ruling remanded a dispute back to an arbitrator over whether the New Jersey Spill Fund could be used to clean up environmental contamination from the storm. Allegedly, the flooding left a discharge of petroleum products and other hazardous substances on property in Bayonne.

In this case, the US Masters Residential Property Fund sought to use the Spill Fund to address the problem, but its claim was denied by the state Department of Environmental Protection. Initially, the department based its denial on lab results the indicated the contamination was caused by historic fill, not the storm surge.

In response, the claimant, an Australian trust fund that invests in property in the New York metropolitan region, filed an appeal that triggered an arbitration process established by the Spill Fund law.

What’s the holdup?

The arbitration is meant to resolve disputes over the Spill Fund quickly and fairly, to speedily address environmental problems caused by a discharge. In this instance, it appeared to stray far from that goal, the court said in a 27-page decision.

“Invocation of that system for claim review was neither swift nor, we fear, fair to the claimant in this instance,’’ Justice Jayne LaVecchia said in her decision joined by three others.

In the decision, the court noted that neighboring properties in Bayonne also affected by the storm’s toxin-laden waters were afforded Spill Fund relief. “The process followed in this instant matter took a different course,’’ the court noted dryly.

The DEP originally denied the claim, saying the damage to the property was the result of non-oil causes, such as floodwaters, a fire, and a rupture in a water pipe, making it ineligible for compensation under the Spill Act.

Dating the discharge

US Masters appealed in 2014, but the arbitration case was not heard until two years later, according to the court. Arbitration continued with disputes over the source of the contamination and whether US Masters had failed to meet its burden of proof whether the discharge occurred post-Spill-Act.

Eventually, the arbitrator’s decision to deny the claim was affirmed by an appellate court, saying there was substantial credible evidence to support the arbitrator’s findings.

In its review, however, the Supreme Court agreed, however narrowly, that the arbitrator’s decision was based, in part, on a misunderstanding of the evidence. The court also found troubling the arbitrator’s decision to exclude expert testimony from US Masters contesting new scientific testimony submitted on behalf of the state to advance its own arguments about the source of the contamination.

“We are unpersuaded that there was no way to fairly permit US Masters to respond with its own scientific proof — the merits of which we do not address — to counter that theory,’’ the majority found.

In dissent, Justice Faustino Fernandez-Vina essentially argued US Masters had failed to meet the burden of proof demonstrating the discharge had occurred after the enactment of the Spill Act, not before.