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206-36th Street, LLC v. Wick

A-4520-07T2 (N.J. Super. App. Div. 2009) (Unpublished)

ISRA — It is a seller’s responsibility to comply with the Industrial Site Recovery Act and if the seller fails to clean up its industrial property or fails to shift the burden of cleanup to its buyer by way of a written contract, the seller is strictly liable for all remediation costs and direct or indirect damages resulting from its lack of compliance.

A buyer agreed to purchase industrial property in need of environmental remediation. The land was subject to the Industrial Site Recovery Act (ISRA). In the purchase contract, the seller agreed to tender a “No Further Action” letter (NFA) from the New Jersey Department of Environmental Protection (DEP) on or before closing. At the closing, the seller’s attorney made a representation that the NFA would be available in about a week or two. This was not the case. The DEP thereafter imposed a fine on the seller for transferring the property without either an approved Remedial Action Report or an NFA letter. After the seller failed to do so, the buyer paid the fine. Because of the delay caused by seller’s failure to provide a NFA at closing, construction could not begin for eighteen months. The buyer sued to recover damages resulting from the transfer in violation of ISRA and the project’s delay.

The lower court entered judgment in favor of the buyer, holding that it was the seller’s responsibility to comply with ISRA. It ruled that if a seller fails to cleanup its industrial property or fails to shift the burden of such to its buyer by way of a written contract, the seller is strictly liable for all remediation costs and direct and indirect damages resulting from its lack of compliance. Here, the Court found that there was no evidence that the parties had agreed orally or in writing that the buyer would assume the responsibility of ISRA compliance. Accordingly, it awarded damages in the amount of those incurred in satisfying the DEP’s concerns and for the direct and indirect damages that the buyer sustained due to the delay in the project. The seller appealed.

The Appellate Division affirmed, holding that the lower court correctly found that ISRA requires owners of industrial establishments to demonstrate that their property is environmentally sound as a precondition to its transfer or the closure of its business. It also agreed with the lower court that, since non-compliance with ISRA had been found, strict liability attached to the seller for all remediation costs and for direct and indirect damages resulting from the failure to implement a remedial action report. It also rejected the contention that ISRA requirements relating to DEP approval could be satisfied post-closing. It stated that the statute mandates that such requirements be complied with on or before closing. In addition, it noted that ISRA authorizes a buyer to maintain an action for money damages, as was the case here. It distinguished this matter from a prior case calling for a contrary result because the other case involved the Spill Compensation and Control Act and involved damages that were not the subject of the present litigation. Finally, the Court concluded that the proofs presented by buyer and the undisputed facts amply supported the lower court’s damage award.


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