NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION VS. OCCIDENTAL CHEMICAL CORPORATION (L-9868-05, ESSEX COUNTY AND STATEWIDE) (CONSOLIDATED) ( 2021 )

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION
This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.
SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NOS. A-2036-17
A-2038-17
NEW JERSEY DEPARTMENT OF
ENVIRONMENTAL PROTECTION,
THE COMMISSIONER OF THE
NEW JERSEY DEPARTMENT OF
ENVIRONMENTAL PROTECTION,
and THE ADMINISTRATOR OF
THE NEW JERSEY SPILL
COMPENSATION FUND,
Plaintiffs,
v.
OCCIDENTAL CHEMICAL
CORPORATION,
Defendant-Appellant,
and
MAXUS INTERNATIONAL ENERGY
COMPANY, YPF, S.A., YPF HOLDINGS,
INC., YPF INTERNATIONAL S.A. (f/k/a
YPF INTERNATIONAL LTD.) and
CLH HOLDINGS,
Defendants,
and
REPSOL, S.A.,
Defendant-Respondent,
and
JOSEPH J. FARNAN, JR., as Liquidating
Trustee for the Maxus Liquidating Trust,
Defendant/Intervenor-Appellant,
and
MAXUS ENERGY CORPORATION and
TIERRA SOLUTIONS, INC.,
Defendants-Third-Party
Plaintiffs,
v.
3M COMPANY, A.C.C., INC., ACH
FOOD COMPANIES, INC., ACTIVE
OIL SERVICE, ADCO CHEMICAL
COMPANY, AGC CHEMICALS
AMERICAS, INC., ALDEN-LEEDS,
INC., ALLIANCE CHEMICAL, INC.,
ALUMAX MILL PRODUCTS, INC.,
AMCOL REALTY, INC., AMERICAN
INKS AND COATINGS CORPORATION,
APEXICAL, INC., APOLAN INTERNATIONAL,
INC., ARKEMA INC., ASHLAND, INC.,
ASHLAND INTERNATIONAL, HOLDINGS
INC., ASSOCIATED AUTO BODY
& TRUCKS, INC., ATLAS REFINERY,
INC., AUTOMATIC ELECTRO-PLATING
A-2036-17
2
CORP, AKZO NOBEL COATINGS, INC.,
BASF CATALYSTS, LLC, BASF
CONSTRUCTION CHEMICALS, INC.,
BASF CORPORATION, BAYER CORPORATION,
BEAZER EAST, INC., BELLVILLE INDUSTRIAL
CENTER, BENJAMIN MOORE & COMPANY,
BEROL CORPORATION, B-LINE TRUCKING,
INC., BORDEN & REMINGTON CORP., C.S.
OSBORNE & CO., CAMPBELL FOUNDRY
COMPANY, CASCHEM INC., CBS CORPORATION,
CELANSE, LTD, CHEMICAL COMPOUNDS, INC.,
COSMOPOLITAN GRAPHICS CORPORATION,
CIDA CORPORATION, COLTEC INDUSTRIES
INC., COLUMBIA TERMINALS, INC., COMO
TEXTILE PRINTS, INC., CONAGRA PANAMA,
INC., CONOPCO, INC., CONSOLIDATED RAIL
CORPORATION, COOK & DUNNPAINT
CORPORATION, COSAN CHEMICAL CORPORATION,
COVANTA ESSEX COMPANY, CRODA, INC.,
CRUCIDLE MATERIALS CORPORATION,
CURTIS WRIGHT CORPORATION, CWC INDUSTRIES,
INC., DARLING INERNATIONAL, INC., DAV ANNE
REALTY CO., DELEET MERCHANDISING
CORPORATION, DELVAL INK AND COLOR,
INCORPORATED, DILORENZO PROPERTIES
COMPANIES, L.P., E.I. DU PONT DE NEMOURS
AND COMPANY, EASTMAN KODAK COMPANY,
EDEN WOOD CORPORATION, ELAN CHEMICAL
COMPANY, INC., EM SERGEANT PULP & CHEMICAL,
CO., EMERALD HILTON DAVIS, LLC, ESSEX
CHEMICAL CORPORATION, EXXON MOBIL,
F.E.R. PLATING, INC., FINE ORGANICS CORPORATION,
FISKE BROTHERS REFINING COMPANY, FLEXON
INDUSTRIES CORPORATION, FLINT GROUP
INCORPORATED, FORT JAMES INCOPORATED,
FOUNDRY STREET CORPORATION,
FRANKLIN-BURLINGTON PLASTICS, INC.,
GARFIELDMOLDING COMPANY, INC.,
GENERAL CABLE INDUSTRIES, INC.,
A-2036-17
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GENERAL DYNAMICS CORPORATION,
GENERAL ELECTRIC COMPANY, GENTEK
HOLDING LLC, GIVAUDAN FRAGRANCES
CORPORATION, G.J. CHEMICAL CO.,
GOODY PRODUCTS, INC., GORDON TERMINAL
SERVICE CO., OF N.J., INC., HARRISON SUPPLY
COMPANY, HARTZ MOUNTAIN CORPORATION,
HAVENICK ASSOCIATES, L.P., HEXCEL
CORPORATION, HEXION SPECIALTY CHEMICALS,
INC., HOFFMAN-LA ROCHE INC., HONEYWELL
INTERNATIONAL, INC., HOUGHTON INTERNATIONAL,
INC., HUDSON TOOL & DIE COMPANY, INC.,
HY-GRADE ELECTROPLATING CO., ICI AMERICAS
INC., INNOSPEC ACTIVE CHEMICALS LLC,
INX INTERNATIONAL INK CO., ISP CHEMICALS
INC., IT CORPORATION, KEARNY SMELTING
& REFINING CORP., KAO BRANDS COMPANY,
KOEHLER-BRIGHT STAR, INC., LINDDE, INC.,
LUCENT TECHNOLOGIES, INC., MACE ADHESIVES
& COATINGS COMPANY, INC., MALLINCKRODT INC.,
MERCK & CO., INC., METAL MANAGEMENT
NORTHEAST, INC., MI HOLDINGS, INC., MILLER
ENVIRONMENTAL GROUP, INC., MORTON
INTERNATIONAL, INC., N L INDUSTRIES, INC.,
NAPPWOOD LAND CORPORATION, NATIONAL
FUEL OIL, INC., NATIONAL-STANDARD, LLC,
NELL-JOY INDUSTRIES, INC., NESTLE U.S.A., INC.,
NEW JERSEY TRANSIT CORPORATION, NEWS
AMERICA INC., NEWS PUBLISHING AUSTRALIA
LIMITED, NORPAK CORPORATION, NOVELIS
CORPORATION, ORANGE AND ROCKLAND
UTILITIES, INC., OTIS ELEVATOR COMPANY,
PASSAIC PIONEERS PROPERTIES COMPANY,
PFIZER INC., PHARMACIA CORPORATION,
PHELPS DODGE INDUSTRIES, INC., PHILBRO,
INC., PITT-CON SOL CHEMICAL COMPANY,
PIVITAL UTILITY HOLDINGS, INC., PPG
INDUSTRIES, INC., PRC-DESOTO INTERNATIONAL,
INC., PRAXAIR, INC., PRECISION MANUFACTURING
A-2036-17
4
GROUP, LLC, PRENTISS INCORPORATED, PROCTOR
& GAMBLE MANUFACTURING COMPANY,
PRYSMIAN COMMUNICATION CABLES AND
SYSTEMS USA LLC, PSEG FOSSIL LLC, PUBLIC
SERVICE ELECTRIC AND GAS COMPANY,
PURDUE PHARMA TECHNOLOGIES, INC., QUALA
SYSTEMS, INC., QUALITY CARRIERS, INC.,
RECKITT BENCKISER, INC., REICHOLD, INC.,
REVERE SMELTING & REFINING CORPORATION,
REXAM BEVERAGE CAN COMPANY, ROMAN
ASPHALT CORPORATION, ROYCE ASSOCIATES,
A LIMITED PARTNERSHIP, R.T. VANDERBILT
COMPANY, INC., RUTHERFORD CHEMICALS LLC,
S&A REALTY ASSOCIATES, INC., SCHERING
CORPORATION, SEQUA CORPORATION, SETON
COMPANY, SIEMENS WATER TECHNOLOGIES
CORP., SINGER SEWING COMPANY, SPECTRASERV,
INC., STWB, INC., SUN CHEMICAL CORPORATION,
SVP WORLDWIDE, LLC, TATE & LYLE INGREDIENTS
AMERICAS, INC., TEV A PHARMACEUTICALS USA, INC.,
TEVAL CORP., TEXTRON, INC., THE DIAL CORPORATION,
THE DUNDEE WATERPOWER AND LAND COMPANY,
THE NEWARK GROUP, INC., THE OKONITE COMPANY,
INC., THE SHERWIN-WILLIAMS COMPANY, THE
STANLEY WORKS, THE VAL SPAR CORPORATION,
THIRTY-THREE QUEEN REALTY, INC., THREE
COUNTY VOLKSWAGEN CORPORATION, TIDEWATER
BALING CORP., TIFFANY & CO., TIMCO, INC.,
TRIMAX BUILDING PRODUCTS, INC., TROY
CHEMICAL CORPORATION, UNIVERSAL OIL
PRODUCTS COMPANY, V. OTTILIO & SONS, INC.,
VELSICOL CHEMICAL CORPORATION, VEOLIA
ES TECHNICAL SOLUTIONS, L.L.C., VERTELLUS
SPECIALTIES, INC., VITUSA CORP., VULCAN
MATERIALS COMPANY, WAS TERMINALS
CORPORATION, WAS TERMINALS, INC., W.C.
INDUSTRIES, WHITTAKERCORPORATION,
WIGGINS PLASTICS, INC., ZENECA INC.,
AMERICAN CYANAMID, BAYER CORPORATION,
A-2036-17
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BAYONNE INDUSTRIES, INC., BP MARINE AMERICAS,
INC., CHEMICAL WASTE MANAGEMENT, INC.,
DOW CHEMICAL COMPANY, DURAPORT REALTY
ONE LLC, DURAPORT REALTY TWO LLC, EPEC
POLYMERS, INC., GAESS ENVIRONMENTAL SERVICES
INC., GATX TERMINALS CORPORATION, GOODRICH
CORPORATION, HESS CORPORATION, IMTT-BAYONNE,
KINDER MORGAN ENERGY, PARTNERS, L.P.,
MCKESSON CORPORATION, MCKESSON ENVIROSYSTEMS,
CO., SAFETY-KLEEN CORPORATION, SHULTON,
INCORPORATED, USA, SUN PIPELINE CO.,
SUN REFINING & MARKETING CO., SUN OIL CO.,
SUPERIOR MPM LLC, THOMAS & BETTS CORP.,
WASTE MANAGEMENT, INC., WYETH TRMI-H LLC,
POWER TEST REALTY CO., GETTY PROPERTIES, CORP.,
GENERAL MOTORS CORP., CYTEC INDUSTRIES,
INC., LEGACY VULCAN CORP., BAYONE MUNICIPAL
UTILTIES AUTHORITY, BOROUGH OF CARTERET,
BOROUGH OF EAST NEWARK, BOROUGH OF EAST
RUTHERFORD, BOROUGH OF ELMWOOD PARK,
BOROUGH OF FAIR LAWN, BOROUGH OF FANWOOD,
BOROUGH OF FRANKLIN LAKES, BOROUGH OF
GARWOOD, BOROUGH OF GLEN RIDGE, BOROUGH OF
GLEN ROCK, BOROUGH OF HALEDON, BOROUGH OF
HASBROUCK HEIGHTS, BOROUGH OF HAWTHORNE,
BOROUGH OF KENILWORTH, BOROUGH OF LODI,
BOROUGH OF MOUNTAINSIDE, BOROUGH OF NEW
PROVIDENCE, BOROUGH OF NORTH ARLINGTON,
BOROUGH OF NORTH CALDWELL, BOROUGH OF
NORTH HALEDON, BOROUGH OF PROSPECT PARK,
BOROUGH OF ROSELLE PARK, BOROUGH OF
RUTHERFORD, BOROUGH OF TOTOWA,
BOROUGH OF WALLINGFORD, BOROUGH OF
WEST PATERSON, BOROUGH OF WOOD-RIDGE,
CITY OF BAYONNE, CITY OF CLIFTON, CITY OF
EAST ORANGE, CITY OF ELIZABETH, CITY OF
GARFIELD, CITY OF HACKENSACK, CITY OF
JERSEY CITY, CITY OF LINDEN, CITY OF NEWARK,
CITY OF ORANGE, CITY OF PASSAIC, CITY OF
A-2036-17
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PATERSON, CITY OF RAHWAY, CITYOF SUMMIT,
CITY OF UNION CITY, HOUSING AUTHORITY
OF THE CITY OF NEWARK, JERSEY CITY
MUNICIPAL UTILITIES AUTHORITY, JOINT MEETING
OF ESSEX AND UNION COUNTIES, LINDEN ROSELLE
SEWERAGE AUTHORITY, PASSAIC VALLEY
SEWERAGE COMMISSIONERS, PORT AUTHORITY OF
NEW YORK AND NEW JERSEY, RAHWAY VALLEY
SEWERAGE AUTHORITY, THE NEW JERSEY
DEPARTMENT OF AGRICULTURE, THE NEW JERSEY
DEPARTMENT OF TRANSPORTATION, THE STATE OF
NEW JERSEY, TOWNSHIP OF BELLEVILLE, TOWN
OF HARRISON, TOWN OF KEARNY, TOWN OF
NUTLEY, TOWN OF WOODBRIDGE, TOWNSHIP
OF BERKELY HEIGHTS, TOWNSHIP OF BLOOMFIELD,
TOWNSHIP OF CEDAR GROVE, TOWNSHIP OF CLARK,
TOWNSHIP OF WESTFIELD, TOWNSHIP OF CRANFORD,
TOWNSHIP OF HILLSIDE, TOWNSHIP OF IRVINGTON,
TOWNSHIP OF LITTLE FALLS, TOWNSHIP OF
LIVINGSTON, TOWNSHIP OF LYNDHURST,
TOWNSHIP OF MAPLEWOOD, TOWNSHIP OF MILLBURN,
TOWNSHIP OF MONTCLAIR, TOWNSHIP OF ORANGE,
TOWNSHIP OF SADDLE BROOK, TOWNSHIP OF SCOTCH
PLAINS, TOWNSHIP OF SOUTH HACKENSACK, TOWNSHIP
OF SOUTH ORANGE VILLAGE, TOWNSHIP OF SPRINGFIELD,
TOWNSHIP OF UNION, TOWNSHIP OF WEST ORANGE,
TOWNSHIP OF WINFIELD PARK, TOWNSHIP OF WYCOFF,
VILLAGE OF RIDGEWOOD,
Third-Party Defendants.
Argued December 16, 2020 – Decided December 27, 2021
Before Judges Fuentes, Rose and Firko.
On appeal from the Superior Court of New Jersey, Law
Division, Essex County, Docket No. L-9868-05.
A-2036-17
7
Kathy D. Patrick (Gibbs & Bruns, LLP) of the Texas
and District of Columbia bars, admitted pro hac vice,
argued the cause for appellant Occidental Chemical
Corporation (Archer & Greiner, Kathy D. Patrick,
Anthony N. Kaim (Gibbs and Bruns, LLP) of the Texas
bar, admitted pro hac vice, Denise L. Drake (Gibbs and
Bruns, LLP) of the Texas and California bars, admitted
pro hac vice, and Ashley McKeand Kleber (Gibbs &
Bruns, LLP) of the Texas bar, admitted pro hac vice,
attorneys; Kathy D. Patrick and William J. Stack, of
counsel and on the brief; Anthony N. Kaim, Denise L.
Drake, Ashley McKeand and John J. McDermott, on the
briefs).
J. Christopher Shore (White & Case, LLP) of the New
York and Rhode Island bars, admitted pro hac vice,
argued the cause for appellant Joseph J. Farnan, Jr., as
liquidating trustee for the Maxus Liquidating Trust,
(Pashman Stein Walder Hayden, and J. Christopher
Shore, attorneys: Michael S. Stein, of counsel and on
the briefs; David Cinotti and Timothy P. Malone on the
briefs).
Diane P. Sullivan argued the cause for Repsol, S.A.,
(Weil, Gotshal & Manges LLP, attorneys; Diane P.
Sullivan and Edward Soto, (Weil, Gotshal & Manges
LLP) of the Florida and New York bars, admitted pro
hac vice, on the briefs).
The opinion of the court was delivered by
FUENTES, P.J.A.D.
We consolidate these back-to-back appeals because they represent a
continuation of the long-running environmental litigation concerning hazardous
pollution in the Passaic River and Newark Bay Complex from a chemical
A-2036-17
8
manufacturing facility in Newark. In 2005, plaintiffs, the Department of
Environmental Protection (DEP) and other State agencies, filed suit against
several corporate entities under the Spill Compensation and Control Act (Spill
Act), N.J.S.A. 58:10-23.11 to -23.24, other statutory schemes, and common law.
These corporate entities in turn filed crossclaims, counterclaims, and third-party
complaints. All defendants and third-party defendants eventually settled with
plaintiffs.
At issue in these consolidated appeals are: (1) the crossclaims defendant
Occidental Chemical Corporation (OCC) filed against defendant Repsol, S.A.
(Repsol or Repsol-YPF, S.A.), alleging Repsol was an alter ego of its
subsidiary -- defendant Maxus Energy Corporation (Maxus Energy) and its
various affiliates (collectively, Maxus, unless individually named) -- upon
which these defendants were found liable to OCC for environmental remediation
and contract indemnification; and (2) the counterclaim Repsol filed against
OCC, seeking contribution under the Spill Act.
The trial court ultimately found (i) Repsol, which settled with the
government plaintiffs for $65 million, was not a Spill Act discharger or alter ego
of Maxus; and (ii) OCC, which settled with the government plaintiffs for $160
million, was a discharger and, therefore, was jointly and severally liable to
Repsol for $65 million in Spill Act contribution. Because Maxus filed for
A-2036-17
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federal bankruptcy, OCC's crossclaims against Maxus's affiliates and other
defendants were transferred to the United States Bankruptcy Court for the
District of Delaware. The bankruptcy court thereafter approved a plan of
liquidation calling for a Liquidating Trust owned by the creditors of Maxus
(Trust), and appointed Joseph J. Farnan, Jr., as the Maxus Liquidating Trustee
(Trustee or intervenor).
In docket number A-2036-17, OCC argues the trial court erred when it
granted summary judgment to Repsol on its Spill Act contribution counterclaim,
and when it denied OCC's motion for leave to file a supplemental crossclaim
against Repsol. In docket number A-2038-17, the Trustee, who intervened
before the Law Division, argues the court erred when it dismissed OCC's
crossclaims alleging alter ego liability against Repsol. The Trustee also seeks
that we vacate the trial court's order dismissing OCC's fraudulent transfer
crossclaims or, alternatively, to stay the execution of the order.
We reverse the trial court's holdings on alter ego liability in docket number
A-2038-17 and on Spill Act contribution in docket number A-2036-17, and
remand both cases. Although the court properly ruled on Delaware's alter-ego-
liability law and necessary sequential veil piercing of a complex corporate
organization, there are genuine issues of material fact that preclude summary
judgment to Repsol on alter ego liability, especially with respect to the necessary
A-2036-17
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element of fraud. We reach the same conclusion on Repsol's contribution.
Although the trial court properly determined the legal standard of liability for
contribution under the Spill Act, there are genuine issues of material fact that
preclude any grant of summary judgment to Repsol on contribution. The court
also erred when it failed to consider the issue of contractual indemnification.
Finally, we remand to allow OCC to make an appropriate application to the trial
court to supplement its crossclaim in docket number A-2036-17.
I.
Historical Perspective
Between 1940 and 1951, Kolker Chemical Works purchased or leased a
chemical plant located on Lister Avenue, in the City of Newark (Lister site),
where it manufactured insecticides and herbicides. In 1951, Diamond Alkali
Company purchased Kolker, including the Lister site. Diamond Alkali used the
Lister site to manufacture chemicals, including DDT and Agent Orange.
In 1967, Diamond Alkali merged with Shamrock Oil and Gas Company.
The then-newly formed company, Diamond Shamrock Company (old-DSC),1
created the following divisions that were not separately incorporated: (1) a
1
The parties referred to this company as "old-DSC." They also used similar
appellations for other entities. We decided to adopt this approach in the interest
of clarity.
A-2036-17
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chemical manufacturing division, which operated the Lister site until 1969; (2)
an oil and gas exploration and production division; (3) an oil refining and
marketing division; and (4) a coal production division.
In 1971, old-DSC sold the Lister site to a third party, Chemicaland Corp.
Between November 22, 1976, and February 24, 1977, however, a predecessor to
appellant OCC (old-OCC), assumed temporary management and operation of
the Lister site's plant facilities. According to old-OCC's eastern division vice
president and general manager, "all costs and expenses associated with the
management of the plant which were incurred [during that time would] be settled
by [OCC]." The Lister site was abandoned in February 1977. In April 1982,
old-OCC changed its name to Occidental Chemical Agricultural Products, Inc.
From 1983 through 1984, old-DSC went through a corporate
reorganization resulting in a new Delaware-incorporated parent holding
company, also named Diamond Shamrock Corporation (DSC). DSC's
management decided to form separate, wholly owned, operating subsidiaries for
each of its business assets: (1) Diamond Shamrock Chemicals Company
(DSCC), which conducted all of DSC's and old-DSC's chemical concerns; (2)
Diamond Shamrock Refining and Marketing Company, which conducted DSC's
refining and marketing; (3) Diamond Shamrock Coal Company; and (4)
A-2036-17
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Diamond Shamrock Corporate Company, which provided oversight and control
of the Lister site.
In September 1984, the Lister site and surrounding properties were listed
as federal superfund sites together with the Passaic River and Newark Bay . As
noted by the courts in New Jersey Department of Environmental Protection v.
Occidental Chemical Corp., No. A-0067-11 (App. Div. Apr. 24, 2012) (slip op.
at 13), and Diamond Shamrock Chemicals Co. v. Aetna Casualty & Surety Co.,
258 N.J. Super. 167, 213 (App. Div. 1992), it is undisputed that the owners or
users of the chemical manufacturing site on Lister Avenue knew about the
release of hazardous materials from the plant and the migration of these
substances to the surrounding areas.
The Stock Purchase Agreement - Creation of Corporations
DSCC reacquired ownership of the abandoned Lister site in August 1986
and transferred it to Diamond Shamrock Chemical Land Holdings, Inc., an
insolvent land holding company. Pursuant to a stock purchase agreement (SPA)
dated September 4, 1986, DSC sold all its outstanding stock in DSCC and its
chemical-related subsidiaries to Oxy-Diamond Alkali Corporation (Oxy-
Diamond), a subsidiary of Occidental Petroleum Corporation (OPC). This
agreement did not include sale of the Lister site.
A-2036-17
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The SPA was governed by Delaware's laws. It contained an
indemnification clause whereby DSC agreed to indemnify, defend, and hold
harmless the buyer for all losses, including any environmental remediation
liabilities, arising out of a list of "Inactive Sites," which included the Lister site.
Section 9.03(a) of the SPA stated:
Seller [DSC] shall indemnify, defend and hold harmless
each of OPC, [Occidental Chemical Holding Corp.],
Buyer [Oxi-Diamond], each of the DSCC Companies
and each Pass-Through Purchaser, each of their
respective subsidiaries and affiliates and each of their
respective directors, officers, agents and
representatives, from and against any and all claims,
demands or suits (by any Entity, including, without
limitation, any Governmental Agency), losses,
liabilities, damages, obligations, payments, costs and
expenses, paid or incurred, whether or not relating to,
resulting from or arising out of any Third Party
Claim . . . and whether for property damage, natural
resource damage, . . . governmental fines or
penalties . . . , pollution, threat to the environment,
environmental remediation, or otherwise (individually
and collectively "Indemnifiable Losses") relating to,
resulting from or arising out of any of the following:
....
(iv) the "Inactive Sites" (which for purposes of this
Agreement, shall mean those former chemical plants
and commercial waste disposal sites listed on Schedule
9.03(a)(iv) and all other properties which were
previously, but which, as of the Closing Date, are not,
owned, leased, operated or used in connection with the
business or operations of any Diamond Company,
including, without limitation, any DSCC Company, or
A-2036-17
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any predecessor-in-interest thereof), including, without
limitation, any matter relating to any of the Inactive
Sites for which (A) any Diamond Company (including,
without limitation, any DSCC Company) on or prior to
the Closing Date agreed to indemnify, defend or hold
harmless any Entity, or (B) any Diamond Company
may otherwise be held liable;
....
(viii) the Historical Obligations and any other
obligations or liabilities (absolute or contingent) of any
Diamond Company (including, without limitation, any
DSCC Company prior to the Closing) or any
predecessor-in-interest thereof or of any DSCC
Company unrelated to the Chemicals Business,
including, without limitation, obligations and liabilities
arising out of, resulting from or incurred in connection
with, any ownership, use or operation of the business
or assets of any Diamond Company other than a DSCC
Company, whether before or after the Closing
Date . . . .
....
(b) Buyer shall indemnify, defend and hold harmless
each of the Diamond Companies (other than the DSCC
Companies) and each of their respective subsidiaries
and affiliates . . . from and against any and all
Indemnifiable Losses relating to, resulting from or
arising out of any of the following:
....
(ii) any obligations or liabilities of Buyer or any
subsidiary of Buyer (other than any DSCC Company)
prior to the Closing Date . . . .
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Also, Section 12.11 of the SPA required the seller, DSC, to use "its best
efforts" to obtain a release from liability for each of the DSCC companies in any
litigation involving sites covered by indemnification.
Finally, Section 12.03 (Successors) stated:
This Agreement and all of the provisions hereof shall
be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted
assigns, but neither this Agreement nor any of the
rights, interests or obligations hereunder shall be
assigned by any of the parties hereto without the prior
written consent of the other parties, except (a) that
without any such prior written consent, Buyer may
assign any or all of its rights, interests and obligations
hereunder to any directly or indirectly wholly owned
subsidiary of OPC, provided, however, that, any such
subsidiary agrees in writing to be bound by all of the
terms, conditions and provisions contained herein and
that each of Buyer, OPC and Oxy Chem shall remain
liable under its respective obligations set forth in this
Agreement . . . .
After the stock purchase in November 1987, DSCC changed its name to
Occidental Electrochemicals Corp., and merged with Oxy-Diamond, forming
OCC, a corporation organized under New York's laws with its principal place of
business in Texas. Seven months earlier, in April 1987, DSC spun off the
outstanding stock to its subsidiary, Diamond Shamrock Refining and Marketing
Co., and changed its name to Maxus Energy, a corporation organized under the
laws of Delaware with its principal place of business in Texas. DSC's Diamond
A-2036-17
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Shamrock Corporate Company thereafter changed its name to Maxus Corporate
Company in 1988 and later merged into Maxus Energy.
At that time, Maxus shared the continuity of management, personnel,
physical locations, assets, and general business operations with old-DSC, as well
as a continuity of ownership and shareholders. Maxus operated as an
independent international oil and gas exploration and production company from
1987 to 1995.
In the interim, Diamond Shamrock Chemical Land Holdings, Inc., owner
of the Lister site, had changed its name to Chemical Land Holdings, Inc., and
then to defendant Tierra Solutions, Inc. (Tierra), a corporation created by and
affiliated with Maxus, a corporate entity organized under laws of Delaware, with
its principal place of business in New Jersey. Tierra currently owns the Lister
site. Maxus Energy and Tierra originally "spent nearly $240 million in projects
associated with the investigation and remediation of the Lister Site . . . ." and its
surrounding waterways.
In March 1995, defendant YPF, S.A., an Argentinian state-owned oil
company, and its affiliates (collectively YPF, unless individually named),
purchased Maxus in a cash tender sale with Maxus funding its own acquisition
through a series of loan transactions owed to YPF. At that time, Maxus was a
A-2036-17
17
"huge oil and gas exploration and production company with over $2.9 billion in
total assets . . . and $860 million in stockholder equity."
Following its acquisition in 1996, Maxus underwent an internal global
reorganization and began selling the common stock in its international oil and
gas divisions to defendant YPF Holdings, Inc. (YPF Holdings), a new
corporation created that year by YPF, S.A., and organized under the laws of
Delaware. Three senior YPF executives sat on Maxus's eight-member board of
directors. YPF Holdings then created a new Delaware corporation, defendant
CLH Holdings, Inc. (CLH Holdings), which bought and held Tierra.
YPF, S.A., thereafter, replaced Maxus's commercial debt with $1.4 billion
in YPF-held loans. Between 1996 and 1997, YPF, S.A., conducted a global
restructuring, transferring Maxus's most valuable international exploration and
production assets, including its assets in Bolivia, Venezuela, Ecuador, and
Indonesia, to its own subsidiary holding company, defendant YPF International,
Ltd. (YPF Int'l), incorporated in the Cayman Islands. These transfers decreased
Maxus's assets from $2.9 billion to less than $1 billion and significantly reduced
Maxus's revenue streams. YPF employed Maxus's personnel to manage the
transferred assets through a new subsidiary, Maxus Management Group.
Repsol was created in 1987, when Spain merged two state-controlled oil
companies and incorporated their divisions regarding exploration, refining,
A-2036-17
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petrochemicals and natural gas. Repsol was fully privatized in 1997. In 1999,
Repsol purchased full control of YPF's stock. At that time, Maxus had $961
million in assets. The union of Repsol and YPF was named Repsol-YPF, S.A.
After the sale, Repsol caused YPF to direct Maxus to sell its remaining
assets, including its interest in Crescendo Resources, Stormy Monday, and
Tiger/North Bronto. This caused a ninety-eight percent decline in Maxus's total
revenues. By 2009, Maxus consisted of: (1) Maxus Energy, whose only
business operations were to collect revenue from its remaining onshore oil and
gas royalty interests, comply with environmental remediation obligations,
provide general and administrative services for its subsidiaries, and manage
litigation on behalf of itself and OCC; (2) Tierra, whose business consisted
solely of managing Maxus Energy's and its own environmental liabilities; and
(3) various related special purpose entities, such as Maxus (U.S.) Exploration
Company, which held a non-operating interest in the Neptune prospectus, a large
European exploration and production company, and Gateway Coal Company,
whose business was limited to the administration of retiree benefits for its
former employees and their dependents.
From 2009 through early 2016, Maxus and Tierra became entirely
dependent on Repsol for financial support to meet their daily obligations and
environmental liabilities. Despite its inactivity, Maxus Energy met its
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19
environmental liability obligations under the SPA during this time. This ended
in 2012, when the government of Argentina expropriated Repsol's interest in
YPF.
II.
Underlying Environmental Litigation
In November 2005, plaintiffs brought this civil action against OCC,
Repsol, YPF, Maxus, and Tierra pursuant to the Spill Act, the Water Pollution
Control Act, N.J.S.A. 58:10A-1 to -73, the New Jersey Uniform Fraudulent
Transfer Act, N.J.S.A. 25:2-20 to -36, and New Jersey's common law. Plaintiffs
amended their complaint multiple times thereafter. Plaintiffs alleged DSC, its
predecessors and successors, including OCC and/or Maxus, deliberately
discharged hazardous chemicals from the Lister site into the surrounding
waterways, and that Maxus, Tierra, YPF, and Repsol orchestrated and
implemented a strategy to delay and impede the clean-up and strand the
associated liabilities in Maxus and Tierra.
Plaintiffs further alleged Maxus and YPF devised a scheme, which was
orchestrated and implemented through their subsidiaries and affiliated
companies, and later by Repsol and its subsidiaries, "all acting as alter egos of
one another," to transfer Maxus's valuable and most profitable assets and
holdings to affiliated companies outside of Maxus's chain of ownership, thereby
A-2036-17
20
leaving no independent ability to satisfy their environmental liabilities and
causing damage to human health and the environment.
In October 2008, OCC filed a responsive pleading denying liability and
asserting several affirmative defenses and crossclaims. Maxus and Tierra filed
their own answers denying liability and asserting counterclaims, and four third-
party complaints against approximately 250 public and private parties seeking
contribution and other forms of relief pursuant to the Spill Act and the Joint
Tortfeasors Contribution Law (JTCL), N.J.S.A. 2A:53A-1 to -5. They alleged
the named third-party defendants also made hazardous discharges into the
impacted areas and were thus liable in contribution to pay a proportionate,
equitable share of damages. The third-party defendants filed answers denying
liability and asserting various affirmative defenses.
The judge assigned to manage these complex, multifaceted cases
organized the action into various phases and tracks, issued numerous case
management orders, and appointed a special master. On July 19, 2011, the judge
granted, in part, plaintiffs' motions for summary judgment against OCC and
Maxus. The judge held only OCC was "strictly, jointly and severally liable
under the [Spill Act] for all past cleanup and removal costs incurred by
[p]laintiffs associated with the discharges of hazardous substances . . ." and "for
all future cleanup and removal costs . . . ." In his oral decision, the judge found
A-2036-17
21
undisputed that old-DSC and DSCC had discharged hazardous substances and
were strictly liable to plaintiffs under the Spill Act, and OCC was "the
undisputed legal . . . successor by merger with DSCC, [and] . . . they [were]
responsible for the liabilities of [old-DSC]." However, the judge did not make
any determinations concerning the types or quantities of hazardous substances
that were discharged into the waterways, causation, or whether there was a nexus
between releases from the Lister site and any contamination detected in the
sediments or nearby waterways.
On August 24, 2011, the court granted OCC's motion for partial summary
judgment against Maxus. The motion judge held Maxus was required to
indemnify OCC "for any costs, losses and liabilities that may be incurred by
[OCC]" as a result of its "acquisition of [DSCC]." In his oral decision, the judge
found it was undisputed that OCC was the "successor" to DSCC's environmental
Spill Act liability, which "would be the amount of indemnification" OCC could
receive from Maxus, and that Tierra was also "strictly liable" for
indemnification.
On May 21, 2012, the court: (1) denied summary judgment motions by
plaintiffs and OCC seeking to establish that Maxus was a successor at law or in
equity to Diamond Alkali, old-DSC, and/or DSCC; (2) granted plaintiffs'
summary judgment motion, holding "Maxus [was] the alter ego of Tierra" and,
A-2036-17
22
as a result, both were "a person in any way responsible under the Spill Act . . ."
based solely on Tierra having acquired ownership of the Lister site in 1986; (3)
denied plaintiffs' summary judgment motion seeking to establish that they had a
direct claim against Maxus as third-party beneficiaries of the SPA or as the
"bond, insurer or any other person providing evidence of financial
responsibility" pursuant to N.J.S.A. 58:10-23.11s; (4) held that plaintiffs had
"standing to enforce Maxus' indemnity obligations to OCC under the SPA"; and
(5) granted plaintiffs' and OCC's summary judgment motions, holding that
Maxus was a person "in any way responsible under the Spill Act" because it was
the alter ego of Tierra.
OCC filed a second amended crossclaim in September 2012, seeking
contractual and common law indemnification from all crossclaim defendants
under the SPA pursuant to alter ego liability. It sought indemnification from
Maxus under the same theories of liability because, as alter egos of each other,
all crossclaim defendants constituted "a Cohesive Economic Unit." OCC sued
Repsol and YPF for tortious interference, fraudulent transfers with contract, and
unjust enrichment. OCC also sought contribution under the Spill Act against all
crossclaim defendants, along with statutory contribution under the JTCL and the
Comparative Negligence Act, N.J.S.A. 2A:15-5.1 to -5.8. OCC further alleged
a civil conspiracy stemming from Maxus's transfer of substantially all its assets
A-2036-17
23
to YPF affiliates, and later to Repsol affiliates. According to OCC, all
crossclaim defendants contrived to isolate the environmental liabilities owed to
OCC under the SPA. Finally, OCC claimed the crossclaim defendants breached
their fiduciary duty, and included a derivative claim on behalf of insolvent
Maxus against Repsol, YPF, YPF Holdings and YPF Int'l.
III.
In December 2013, plaintiffs settled their causes of action and damage
claims against Repsol, YPF, Maxus, Tierra, YPF Holdings, and YPF Int'l. As
part of the court-approved settlement agreement, both Repsol and Maxus/YPF
each agreed to pay $65 million, while preserving their statutory rights to seek
contribution from OCC. That same year, plaintiffs also settled their claims
against third-party defendants. In July 2014, OCC filed its third and fourth
amended crossclaims, which were struck by the court in October 2014.
In December 2014, one year after plaintiffs settled with Repsol, YPF, and
Maxus/Tierra, OCC entered into a consent judgment through which OCC agreed
to pay $190 million.2 The settlement did not provide OCC with any contribution
protection. On December 14, 2014, the court approved the settlement and
2
The $190 million settlement was payable in three installments: $70 million
by January 15, 2015; $60 million by March 15, 2015; and $60 million by June
15, 2015.
A-2036-17
24
dismissed plaintiffs' action against OCC. By 2015, all parties had settled with
plaintiffs without admitting any fact, fault, or liability. Specifically, in addition
to OCC, Repsol settled for $65 million; Maxus and/or YPF settled for $65
million; and the third-party defendants settled for tens of millions collectively.
On January 29, 2015, the court dismissed all of OCC's second amended
crossclaims against Repsol, except the counts based on indemnification, alter
ego liability, and contractual indemnification through alter ego liability . The
indemnification count remained because the court granted OCC's motion for
partial summary judgment on this claim in August 2011, and held Maxus was
required to indemnify OCC. The court also found OCC's claims of breach-of-
contract and indemnification, based on alter ego liability, had been sufficiently
pleaded. The court, however, dismissed OCC's other crossclaims as untimely.
In February 2015, Repsol filed an answer to OCC's second amended
crossclaim denying liability, raising affirmative defenses, and including two
counts of counterclaims. Repsol alleged in its counterclaims: OCC owed
Repsol contribution of $65 million under N.J.S.A. 58:10-23.11f(2)(a) of the
Spill Act; and OCC was unjustly enriched when Repsol paid the $65 million
settlement to plaintiffs.
On November 2, 2015, OCC moved for partial summary judgment on its
indemnification crossclaim against Maxus, and for summary judgment to
A-2036-17
25
dismiss Repsol's two-count counterclaim. Repsol responded and filed its own
cross-motion to dismiss OCC's claims based on the alter ego of Maxus. OCC
also sought leave to file a supplemental crossclaim against codefendants for
tortious interference with Maxus's contractual obligation under the SPA to use
its "best efforts" to obtain settlement releases for OCC.
Based on the recommendations of the special master, on April 5, 2016,
the trial court: (1) granted OCC's motion for partial summary judgment against
Maxus, holding OCC was entitled to indemnification from Maxus for its own
conduct at the Lister site before it signed the SPA; (2) granted in part OCC's
motion for summary judgment, dismissed Repsol's unjust enrichment
counterclaim, and found Repsol was entitled to proceed with its Spill Act
contribution claim; (3) granted Repsol's motion for summary judgment against
OCC, dismissed the claims of alter ego liability, and held Repsol was not the
alter ego of Maxus as a matter of law; (4) denied YPF's motion for summary
judgment against OCC, declined to dismiss OCC's claims of alter ego liability
against YPF in OCC's second amended crossclaim; and (5) denied OCC's motion
for leave to file its supplemental crossclaim against codefendants. On
May 27, 2016, Repsol moved for summary judgment on its Spill Act
contribution counterclaim against OCC.
A-2036-17
26
On June 17, 2016, the last business day before trial was scheduled to
begin, Maxus, Tierra, and their subsidiaries and affiliates, filed for Chapter 11
bankruptcy. In re Maxus Energy Corp., 560 B.R. 111, 114-15 (Bankr. D.
Del. 2016). On June 20, 2016, OCC moved in the bankruptcy court to transfer
venue of the environmental litigation from the New Jersey court. At that point,
the environmental litigation consisted of: (1) OCC's second amended crossclaim
against YPF and Repsol, alleging they were alter egos of Maxus; and (2)
Repsol's counterclaim against OCC for Spill Act contribution. On
June 26, 2016, the bankruptcy court granted OCC's motion. On November 16,
2016, the bankruptcy court granted Repsol's motion to remand to the Law
Division its contribution counterclaim against OCC and OCC's alter ego
crossclaim against it. Id. at 129On May 22, 2017, the bankruptcy court approved Maxus’s Amended Plan
of Liquidation with an effective date of July 14, 2017, and created the Trust to
represent the interests of Maxus's creditors. In August 2017, the bankruptcy
court ruled on all rights to pursue the claims belonging to Maxus and its
affiliated debtors. OCC's crossclaims against Repsol were an asset of Maxus's
bankruptcy estate and passed to the Trust as of the date of bankruptcy . Thus,
the Trust had standing to sue on those claims.
A-2036-17
27
On October 19, 2017, the court granted Repsol's motion for summary
judgment on its Spill Act contribution counterclaim against OCC and ordered
OCC to pay Repsol $65 million as a matter of law. On November 17, 2017, the
judge granted the Trustee's motion to intervene in the environmental litigation
remanded from the bankruptcy court.
On November 22, 2017, the judge entered a final judgment awarding
Repsol $65 million in damages and costs against OCC and incorporating his
previous orders. On January 8, 2018, OCC filed its notice of appeal from the
judge's final judgment, docket number A-2036-17. Intervenor filed his notice
of appeal on the same day, docket number A-2038-17.3
IV.
Intervenor argues the motion judge erred when he granted summary
judgment to Repsol on OCC's alter ego liability claims in its second amended
crossclaim. Intervenor thus urges us to vacate the judgment of the trial court
and remand for further proceedings on OCC's alter ego crossclaims. Although
3
On June 13, 2018, the Trust filed a complaint in the bankruptcy court against
Repsol, YPF, CLH, and their affiliates, seeking $14 billion for claims asserting
alter ego liability and corporate veil piercing, actual and constructive fraudulent
transfers and conveyances to avoid Maxus's environmental liability obligations,
unjust enrichment, and civil conspiracy. On March 15, 2019, the bankruptcy
court denied Repsol's motion to abstain from deciding those claims or abstain
due to lack of jurisdiction. In re Maxus Energy Corp., 597 B.R. 235, 240, 248
(Bankr. D. Del. 2019).
A-2036-17
28
the motion judge correctly ruled on Delaware's alter ego liability law, we are
satisfied there are genuine issues of material fact concerning Respol's alter ego
liability to preclude the resolution of this issue via summary judgment. As the
Supreme Court has reaffirmed, "appeals are taken from orders and judgments
and not from opinions, oral decisions, informal written decisions, or reasons
given for the ultimate conclusion." Hayes v. Delamotte, 231 N.J. 373, 387
(2018) (quoting Do-Wop Corp. v. City of Rahway, 168 N.J. 191, 199 (2001)).
We are thus compelled to reverse.
The trial court's decision to grant a motion for summary judgment is
strictly based on the standard the Supreme Court codified in Rule 4:46-2(c),
which provides summary judgment should be granted "if the pleadings,
depositions, answers to interrogatories and admissions on file, together with the
affidavits, if any, show that there is no genuine issue as to any material fact
challenged and that the moving party is entitled to a judgment or order as a
matter of law." Because the trial court's decision to grant summary judgment is
purely a legal determination, our standard of review is de novo. We thus give
"no special deference to the legal determinations of the trial court." Templo
Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189,
199 (2016) (citing Manalapan Realty, L.P. v. Twp. Comm. of Manalapan, 140
N.J. 366, 378 (1995)).
A-2036-17
29
A.
In its second amended crossclaim, OCC alleged YPF "devised the
scheme" to deplete Maxus's assets, and Repsol had "condoned and continued
this [fraudulent] scheme" after acquiring a controlling interest in YPF. OCC
claimed all the crossclaim defendants were "alter egos of each other and together
constitute[d] a Cohesive Economic Unit" responsible for Maxus's obligations.
They had "the same contractual obligations as Maxus under the SPA, including,
but not limited to, the obligations to defend, indemnify, and hold harmless
[OCC] pursuant to and in accordance with the SPA." If those entities were found
to be alter egos or part of a cohesive economic unit with Maxus, OCC argued
all of the crossclaim defendants would be contractually liable to pay any
judgment or other relief OCC obtained against Maxus.
None of the parties object to the application of Delaware law. However,
"[w]hen New Jersey is the forum state, its choice-of-law rules control." Fairfax
Fin. Holdings Ltd. v. S.A.C. Cap. Mgmt., LLC, 450 N.J. Super. 1, 34
(App. Div. 2017). Our courts generally look to the laws of the state of
incorporation when deciding internal corporate disputes. O'Brien v. Virginia-
Carolina Chem. Corp., 44 N.J. 25, 39 (1965); Brotherton v. Celotex Corp., 202
N.J. Super. 148, 154 n.1 (Law Div. 1985).
A-2036-17
30
In November 2015, OCC moved for summary judgment on Repsol's
contribution counterclaim. Repsol responded and filed a cross-motion arguing
it was not the alter ego of Maxus. Repsol asserted: (1) OCC did not meet the
standards under Delaware law for piercing the corporate veil and holding Repsol
liable for Maxus's environmental liabilities; and (2) the statute of repose barred
OCC's alter ego claims for the alleged fraudulent transfers forming the basis of
those claims. Repsol argued OCC could not prove Maxus was a sham, existing
as a vehicle for Repsol to cause fraud or injustice, or that Repsol had any control
over Maxus in 1996 or 1997, when OCC alleged it was harmed from fraudulent
transfers. According to Repsol, OCC "cannot show Repsol's alleged dominance
and control in any way contributed to an injury that happened years before
Repsol was even there." Stated differently, OCC cannot get past YPF.
OCC argued Repsol, after it purchased YPF, had directly stripped the
remaining assets of Maxus and YPF Int'l, which harmed OCC's chances for
indemnification or contribution. It asserted Repsol had completely dominated
those entities and forced them to sell Maxus's last assets in sham transactions.
OCC maintained: "[T]here's not a factual dispute really that once Repsol
acquired Maxus, Maxus went from having nearly a billion dollars in assets and
positive shareholder equity to hav[ing] less than $100 million in assets and being
way underwater." OCC argued it did not have to pierce the veil of any
A-2036-17
31
intermediary companies to hold Repsol liable as an alter ego of Maxus; any
possibility YPF could pay for Maxus's contractual liabilities under the SPA did
not absolve Repsol from its own alter ego liability. OCC also maintained there
would be a disputed issue of fact for trial if the court insisted it prove Repsol
had abused the corporate form of every intermediary to Maxus.
On April 5, 2016, the judge granted summary judgment and dismissed
OCC's alter ego crossclaims against Repsol. He based his ruling on the special
master's January 14, 2016 recommendation. The special master recommended
the court grant Repsol's motion because, despite resolving all factual disputes in
OCC's favor, OCC had failed to meet the legal requirements for establishing
Repsol had any "alter ego liability," which extended to Maxus. She thus found
no need to reach Repsol's second argument predicated on the statute of repose.
The special master made two preliminary "procedural" determinations:
(1) she would resolve "all factual disputes in OCC's favor"; and (2) she would
assume, "without deciding, that Maxus and YPF[] [Int'l] (sister corporations)
[were] alter egos of one another" under YPF's umbrella.
The special master found Delaware's law was "similar to that in New
Jersey." As she explained: "A plaintiff is entitled to pierce the corporate veil
by establishing (1) that the subsidiary is a mere instrumentality dominated by
the parent company, and (2) that the parent abused the corporate form in a
A-2036-17
32
manner that caused a fraud or injustice." Although an "alter ego liability"
determination is "typically a jury question," the special master found the
following "key legal question" had to be answered first:
Must OCC pierce the corporate veils of each corporate
entity in the chain between Repsol and Maxus? In its
papers, OCC does not set out any basis to pierce the
corporate veils of each corporate entity in the chain
between Repsol and YPF. The question, then, is
whether it must.
In the absence of controlling precedent, the special master noted courts
have reached different decisions. She thus compared cases decided by North
Dakota, New York, and Delaware federal bankruptcy courts. She found each
jurisdiction required the party seeking to pierce the corporate veil do so at each
level or layer of ownership within the corporate structure. The special master
pointed to In re Heritage Organization, LLC, 413 B.R. 438, 514-15 (Bankr. N.D.
Tex. 2009), wherein the bankruptcy court applied Delaware law and found the
party seeking to pierce the corporate veil could not simply collapse the corporate
empire's chain and perform the veil piercing test on one entity. It had to do so
at each layer of ownership.
In this light, the special master rejected OCC's reliance on In re Moll
Industries, Inc., 454 B.R. 574, 587 (Bankr. D. Del. 2011), in which the court
declined to apply the veil-piercing requirement to each level of the corporate
A-2036-17
33
structure. She explained the party seeking to apply alter ego liability in Moll
was "not seeking to hold any of the intermediaries liable," that is, was not
seeking "global collapse of the corporate structure."
Here, OCC was asking the court "to collapse the entire corporate structure
and make multiple intermediaries responsible for Maxus's liabilities." The
special master found OCC "present[ed] little basis for doing so." She
determined there was insufficient evidence to justify disregarding the corporate
form. She explained:
Nothing in the evidence suggests that Repsol created a
series of shell corporations to make it more difficult for
OCC to recover. Nor does OCC present evidence that
YPF would be unable to meet Maxus's indemnity
obligations. Moreover, OCC fails to present any
authority for the proposition that Delaware law would
allow a party seeking to pierce the corporate veil to skip
over a solvent corporation in the corporate chain, or for
that matter, that Delaware law would condone veil
piercing on a global basis.
The special master concluded:
Despite the heavy burden for piercing the corporate
veil, OCC asks the Court to ignore corporate
separateness without providing any equitable basis for
doing so. Nor does it provide an equitable basis for
departing from the traditional rule, which requires veil
piercing at each level. For example, OCC provides no
evidence that YPF is insolvent or that it would not be
in a position to pay Maxus's indemnity obligations. Nor
does it point to any basis for collapsing the corporate
structure that separates Repsol and Maxus. Given the
A-2036-17
34
exceptional nature of the veil-piercing remedy, OCC
was obliged to show some type of inequity. It fails to
do so. Therefore[,] Repsol is entitled to summary
judgment on this issue. There is simply no basis to
disregard the general rule requiring parties to satisfy the
veil-piercing requirements at each level of the
corporate ladder.
The court followed this line of reasoning and dismissed OCC's alter ego
claims against Repsol.
B.
Intervenor argues the court erred when it held sequential veil piercing is
the general rule required under Delaware law. Intervenor explains OCC opposed
Repsol's motion for summary judgment on theories that do not require the
collapse of the entire corporate structure. Although OCC alleged the crossclaim
defendants were all alter egos of each other, it also pleaded Repsol had directly
stripped assets from Maxus and stole assets from YPF Int'l, Maxus's alter ego.
According to intervenor, the relevant question is whether Repsol and Maxus
were alter egos of one another because Repsol used its control over Maxus to
cause a fraud or injustice to OCC.
Intervenor further argues OCC was not required to prove YPF's assets
were insufficient to satisfy a judgment. Quoting Verni ex rel. Burstein v. Harry
M. Stevens, Inc., intervenor claims alter ego liability in New Jersey is an issue
of fact for the jury "unless there is no evidence sufficient to justify disregard of
A-2036-17
35
the corporate form." 387 N.J. Super. 160, 199 (App. Div. 2006). Consequently,
there was sufficient disputed evidence in the record to show triable issues of fact
as to whether Repsol's stripping of Maxus's assets prevented OCC from fully
enforcing its indemnification rights.
Under Delaware law, "alter ego claims are common law claims," In re
Verizon Ins. Coverage Appeals, 222 A.3d 566, 577 (Del. 2019) (citations
omitted), and veil piercing is a doctrine of equity, Sonne v. Sacks, 314 A.2d 194,
197 (Del. 1973) (holding piercing the corporate veil could only be done in
Delaware's Court of Chancery). Where a subsidiary corporation is found to be
a mere instrumentality of the parent corporation for liability purposes, "the alter
ego doctrine is used to pierce the corporate veil when a corporation has created
'a sham entity designed to defraud investors and creditors.'" Verizon, 222 A.3d
at 577 (quoting Crosse v. BCBSD, Inc., 836 A.2d 492, 497 (Del. 2003)).
To establish alter ego liability under Delaware law, OCC must prove two
elements: (1) the parent and subsidiary operated as a single economic entity as
shown by exclusive domination and control; and (2) the corporate structure
caused a fraud, contravention of law or contract, public wrong, or similar
injustice. Wallace ex rel. Cencom Cable Income Partners II, Inc., L.P. v. Wood,
752 A.2d 1175, 1183 (Del. Ch. 1999). However, equitable "standards are not
carved in stone for all cases because a court of equity must necessarily have the
A-2036-17
36
flexibility to deal with varying circumstances and issues." Nixon v.Blackwell,
626 A.2d 1366, 1378 (Del. 1993).
"To state a 'veil-piercing claim,' the plaintiff must plead facts supporting
an inference that the corporation, through its alter ego, has created a sham entity
designed to defraud investors and creditors." Crosse, 836 A.2d at 497 (footnote
omitted); see also Wallace, 752 A.2d at 1184 (holding, to pierce corporate veil
under alter ego theory, "the corporation must be a sham and exist for no other
purpose than as a vehicle for fraud."). The plaintiff, nonetheless, need not prove
that the corporation was created with fraud or unfairness in mind; it is sufficient
to prove that it was so used.
Delaware's state courts, however, have not squarely decided the issue of
sequential veil piercing of a multi-level corporate structure for alter ego liability
purposes. In Outokumpu Engineering Enterprises., Inc. v. Kvaerner
EnviroPower, Inc., 685 A.2d 724, 729 (Del. Super. Ct. 1996), the court endorsed
sequential veil-piercing among subsidiaries for personal jurisdictional purposes.
Here, the parties in their briefs and the special master's recommendation
cite extensively to various other jurisdictions to prove their respective positions
and to report a nationwide consensus on sequential veil piercing. Most of the
cases cited are unpublished opinions which this court cannot consider as a matter
of law. R. 1:36-3. Despite the absence of controlling precedent from the
A-2036-17
37
Delaware state courts, we agree with intervenor in this respect. To hold Repsol
liable under an alter ego theory, OCC only needs to show (1) the parent and
subsidiary operated as a single economic entity, as shown by exclusive
domination and control after 1999, and (2) there was fraud or contravention of
law or contract or similar injustice during that time. YPF's own alter ego
liability between 1995 and 1999 would not enter that analysis. There are
genuine issues of material fact, which preclude the grant of summary judgment
on the alter ego liability of Repsol. Because the motion judge did not properly
consider these facts, we reverse.
The judge relied only on whether OCC could prove YPF was insolvent
and found OCC had not provided any "equitable basis" for ignoring the
corporate separateness between Repsol and Maxus. Under Delaware law,
however, insolvency is just one of the relevant factors in veil piercing cases.
Moreover, the motion court did not conduct a fact-specific inquiry to determine
whether Maxus was entirely dominated by Repsol after its 1999 purchase or
whether it existed independently at any time. He did not consider evidence
regarding the companies' operations, adherence to other corporate formalities,
maintenance of corporate records, or capital. These are the factors Delaware's
courts consider in determining dominance and control. Equally problematic, the
judge did not address the element of fraud or injustice.
A-2036-17
38
When considered in the light most favorable to OCC, the record shows
genuine issues of material fact exist. The factfinder must determine: (1) whether
Repsol dominated and controlled Maxus; and (2) whether there was fraud from
an inequitable use of the corporate form to avoid liability under the SPA's
indemnification clause for the hazardous discharges of Maxus's predecessor .
Based on this decision on alter ego, we also reverse the judge's decision to
allocate one hundred percent contribution liability to OCC. The trial court's
allocation analysis was premised on its finding Repsol was not Maxus's alter
ego. If a factfinder determines Repsol is Maxus's alter ego, and Maxus owes
indemnification to OCC under the SPA, Repsol cannot maintain a contribution
action against OCC as a matter of law.
While OCC and Repsol would be separately liable parties to plaintiffs in
a Spill Act recovery action, and to the other settling defendants in a Spill Act
contribution action, they are co- or joint tortfeasors to each other as they are
both successors under DSC's corporate umbrella, thus sharing DSC's common
liability. OCC's predecessor, DSCC, purchased DSC's chemical businesses
stock under the SPA while the remainder of DSC's stock, along with its oil and
gas concerns, changed their name to Repsol's predecessor, Maxus. Maxus
agreed in the SPA to indemnify DSCC.
A-2036-17
39
V.
For the first time on appeal, Intervenor petitions this court to vacate the
trial court's order dismissing OCC's fraudulent transfer crossclaim against
Repsol as moot or, alternatively, to stay the order. Intervenor does not challenge
the merits of the order. Instead, he asserts OCC cannot appeal the ruling, since
those fraudulent transfer crossclaims were lost as of the date of Maxus's
bankruptcy, precluding OCC's standing to assert them on appeal. Accordingly,
intervenor asks this court to prevent an unfair prejudice by asserting original
jurisdiction and exercise our equity powers to fashion an equitable remedy by
either vacating as moot the court's order or staying the appeal of that order.
We decline to take such extraordinary measures. To understand the basis
of our decision, a brief recitation of the background of this issue is warranted.
Effective November 18, 2002,4 N.J.S.A. 25:2-31 provides:
A cause of action with respect to a fraudulent transfer
or obligation under this article is extinguished unless
action is brought:
a. Under subsection a. of [N.J.S.A.] 25:2-25,
within four years after the transfer was made or the
obligation was incurred or, if later, within one year after
the transfer or obligation was discovered by the
claimant;
4
Although this statute was again amended by L. 2021, c. 92, § 12, effective
August 10, 2021, the 2002 amendments were controlling at the time of the
instant controversy.
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40
b. Under subsection b. of [N.J.S.A.] 25:2-25 or
subsection a. of [N.J.S.A.] 25:2-27, within four years
after the transfer was made or the obligation was
incurred; or
c. Under subsection b. of [N.J.S.A.] 25:2-27,
within one year after the transfer was made or the
obligation was incurred.
[(L. 2002, c. 100, § 1).]
Prior to this date, N.J.S.A. 25:2-31(a) stated: "Under subsection a. of
[N.J.S.A.] 25:2-25, within four years after the transfer was made or the
obligation was incurred or, if later, within one year after the transfer or
obligation was or could reasonably have been discovered by the claimant."
L. 1988, c. 74, § 1 (effective Jan. 1, 1989) (emphasis added).
On January 29, 2015, relying on the special master's January 13, 2015
recommendation, the court granted in part a motion to dismiss most of the counts
in OCC's second amended crossclaim against Repsol, including OCC's fifth
count alleging fraudulent transfers against Repsol and YPF. 5
The special master previously recommended the trial court find the
allegations in OCC's fifth count to be untimely. She concluded "any retroactive
application of the [2002] amendment to N.J.S.A. 25:2-31 should be eschewed."
5
The judge incorporated this decision into the final judgment.
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41
Thus, the question was whether OCC filed its claims "within four years after
each transfer" and, if it did not, whether it filed them "within one year after the
transfer or obligation was or could reasonably have been discovered" by OCC.
The special master explained:
The operative date for filing OCC’s claims is
June 29, 2007, the date it filed its motion to amend the
complaint. The transfers themselves took place
between 1995 and 1999, and the last one was
announced publicly on June 2, 2000[,] in an SEC filing.
There should be no dispute that OCC did not file its
[crossclaims] within four years of the transfers
themselves, because it would have had to file them in
2003 rather than in 2007.
....
OCC did not act as a reasonable creditor would have.
If it acted as a reasonably [sic], it would have learned
about the transfers at issue when they were announced
in SEC filings, and it would have brought its claims
within one year. It did not. As a result, the claims are
barred by the statute of repose in N.J.S.A. 25:2-31.
In this appeal, intervenor does not challenge the merits of the order
dismissing OCC's fifth count of its second amended crossclaim. Despite the
court's finding of untimeliness, intervenor asserts the Trust's own bankruptcy
claims for fraudulent transfer do not depend on OCC's having timely filed its
claims. Intervenor makes clear the Trust is not stepping into OCC's shoes. It
has filed its "own, much broader fraudulent-transfer claims in federal
A-2036-17
42
bankruptcy court that are unaffected by the ruling that OCC's claims were
untimely." Rather, intervenor seeks to prevent Repsol from using the court's
timeliness dismissal "as res judicata" in the bankruptcy action against Maxus's
creditors.
The Supreme Court has acknowledged our discretion to use broad
equitable powers to fashion a remedy. Rutgers Cas. Ins. Co. v. LaCroix, 194
N.J. 515, 531-32 (2008). It is also well-settled that a dismissal for mootness is
not an adjudication on the merits. Transamerica Ins. Co. v. Nat'l Roofing, Inc.,
108 N.J. 59, 64 (1987). "An issue is 'moot' when the decision sought in a matter,
when rendered, can have no practical effect on the existing controversy."
Greenfield v. N.J. Dep't of Corrs., 382 N.J. Super. 254, 257-58 (App. Div. 2006)
(quoting New York S. & W.R. Corp. v. State Dep't of Treasury, Div. of Taxation,
6 N.J. Tax 575, 582 (Tax Ct. 1984)). However, "an appeal will not be moot
when 'a party still suffers from the adverse consequences . . . caused by [the
prior] proceeding.'" In re N.J. Dep't of Env't Prot. Conditional Highlands
Applicability Determination, 433 N.J. Super. 223, 234 (App. Div. 2013)
(alteration in original) (quoting N.J. Div. of Youth & Fam. Servs. v. A.P., 408
N.J. Super. 252, 262 (App. Div. 2009)). Here, Repsol properly asserts OCC
continues to be subject to the dismissal of its fraudulent transfer crossclaims,
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43
and therefore, still suffers from the consequences of losing its right to recover
for those claims.
We are unpersuaded by intervenor's allegation that he needs this court to
vacate as moot the judge's order or stay the appeal of that order to prevent Repsol
from using the dismissal "as res judicata" in the bankruptcy action. A finding
of res judicata or collateral estoppel barring intervenor's claims in the
bankruptcy action, most likely will not be sustained by that court.
The doctrine of res judicata
"contemplates that when a controversy between parties
is once fairly litigated and determined it is no longer
open to relitigation." Where the second action is no
more than a repetition of the first, the first lawsuit
stands as a barrier to the second. "The rule precludes
parties from relitigating substantially the same cause of
action."
[Culver v. Ins. Co. of N. Am., 115 N.J. 451, 460 (1989)
(citations omitted).]
To benefit from this doctrine:
(1) the judgment in the prior action must be valid, final,
and on the merits; (2) the parties in the later action must
be identical to or in privity with those in the prior
action; and (3) the claim in the later action must grow
out of the same transaction or occurrence as the claim
in the earlier one.
[Watkins v. Resorts Int'l Hotel & Casino, Inc., 124 N.J.
398, 412 (1991).]
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44
Here, there was no "valid and final adjudication on the merits" of OCC's
fraudulent transfer crossclaims. See Velasquez v. Franz, 123 N.J. 498, 506
(1991). Decisions that turn on timeliness are not decisions on the merits. As
we noted in Personal Service Insurance Co. v. Relievus, when "our decision
turns on the timeliness of the application, and not its merits, we need not dwell
on the parties' underlying dispute." 455 N.J. Super. 508, 510 (App. Div. 2018).
Intervenor emphasizes the fraudulent transfer claims it filed in the
bankruptcy action are "much broader" than OCC's crossclaims. Thus, like res
judicata, Repsol, more likely than not, will not benefit from raising collateral
estoppel in that proceeding. To benefit from collateral estoppel, the party
asserting it must demonstrate:
(1) the issue to be precluded is identical to the issue
decided in the prior proceeding; (2) the issue was
actually litigated in the prior proceeding; (3) the court
in the prior proceeding issued a final judgment on the
merits; (4) the determination of the issue was essential
to the prior judgment; and (5) the party against whom
the doctrine is asserted was a party to or in privity with
a party to the earlier proceeding.
[First Union Nat'l Bank v. Penn Salem Marina, Inc.,
190 N.J. 342, 352 (2007) (quoting Hennessey v.
Winslow Twp., 183 N.J. 593, 599 (2005)).]
A-2036-17
45
We therefore decline Intervenor's request to vacate the trial court's order
dismissing OCC's fraudulent transfer crossclaims against Repsol as moot or,
alternatively, to stay the appeal of that order.
VI.
OCC contends the trial court erred when it granted summary judgment to
Repsol on its Spill Act contribution counterclaim and held OCC liable for
contribution to Repsol of $65 million. Although the trial court properly
determined the legal standard of liability for contribution under the Spill Act,
we hold the motion judge erred when he granted summary judgment to Repsol
on its Spill Act contribution counterclaim. This case is not only about whether
Repsol can recover contribution from OCC under the Spill Act. This is a case
about the comparative negligence of joint tortfeasors, OCC and Repsol, both
successors to DSC, the company that discharged the hazardous substances.
A contribution recovery for Repsol cannot be decided without also
considering both its alter ego liability with Maxus and OCC's right to
indemnification under the SPA. More importantly, these considerations present
genuine issues of material fact that preclude any grant of summary judgment on
contribution.
The Spill Act is "remedial legislation designed to cast a wide net over
those responsible for hazardous substances and their discharge . . ." on New
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46
Jersey's land and waters. Morristown Assocs. v. Grant Oil Co., 220 N.J. 360,
383 (2015). It provides two statutory private causes of action for persons,
including dischargers, who clean up and remove hazardous contamination: one
action to recover damages from DEP or from the Spill Compensation Fund,
N.J.S.A. 58:10-23.11k (cost recovery action); and one action to recover cleanup
costs from all other dischargers and persons in any way responsible for the
discharged hazardous substance or other persons who are liable for the cost of
the cleanup and removal of that discharge, N.J.S.A. 58:10-23.11f(a)(2)
(contribution action). N.J. Dep't of Env't Prot. v. Exxon Mobil Corp., 453 N.J.
Super. 272, 292 (App. Div. 2018) (citing Bonnieview Homeowners Ass'n v.
Woodmont Builders, L.L.C., 655 F. Supp. 2d 473, 503 (D.N.J. 2009)). These
Spill Act remedies "are in addition to existing common-law or statutory
remedies," subject only to the prohibition against double recovery for the same
damages or cleanup costs. Dep't of Env't Prot. v. Ventron Corp., 94 N.J. 473,
493 (1983) (citing N.J.S.A. 58:10-23.11v).
For contribution actions, N.J.S.A. 58:10-23.11f(a)(2)(a) states:
Whenever one or more dischargers or persons cleans up
and removes a discharge of a hazardous substance,
those dischargers and persons shall have a right of
contribution against all other dischargers and persons
in any way responsible for a discharged hazardous
substance or other persons who are liable for the cost of
the cleanup and removal of that discharge of a
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47
hazardous substance. In an action for contribution, the
contribution plaintiffs need prove only that a discharge
occurred for which the contribution defendant or
defendants are liable pursuant to [N.J.S.A. 58:10-
23.11g(c)], and the contribution defendant shall have
only the defenses to liability available to parties
pursuant to [N.J.S.A. 58:10-23.11g(d) not applicable
here]. In resolving contribution claims, a court may
allocate the costs of cleanup and removal among liable
parties using such equitable factors as the court
determines are appropriate. Nothing in this subsection
shall affect the right of any party to seek contribution
pursuant to any other statute or under common law.
[(Emphasis added).]
N.J.S.A. 58:10-23.11g(c)(1) attaches broad liability as follows:
[A]ny person who has discharged a hazardous
substance or is in any way responsible 6 for any
hazardous substance, shall be strictly liable, jointly and
severally, without regard to fault, for all cleanup and
removal costs no matter by whom incurred. Such
person shall also be strictly liable, jointly and severally,
without regard to fault, for all cleanup and removal
costs incurred by the [DEP] or a local unit [7] pursuant
to subsection b of . . . [N.J.S.A.] 58:10-23.11f.
[(Emphasis added).]
6
The exceptions in N.J.S.A. 58:10-23.11g(12) are not applicable here.
7
"'Local unit' means any county or municipality, or any agency or other
instrumentality thereof, or a duly incorporated volunteer fire, ambulance, first
aid, emergency, or rescue company or squad . . . ." N.J.S.A. 58:10-23.11b.
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48
"Spill Act liability must be proven by a preponderance of the evidence."
N.J. Dep't of Env't Prot. v. Dimant, 212 N.J. 153, 182 (2012). That is, "[a]
reasonable nexus or connection" between the use or discharge of a substance
and its contamination of the surrounding area "must be demonstrated by a
preponderance of the evidence." Ibid. "Discharge" is defined by the Act as
any intentional or unintentional action or omission
resulting in the releasing, spilling, leaking, pumping,
pouring, emitting, emptying or dumping of hazardous
substances into the waters or onto the lands of the State,
or into waters outside the jurisdiction of the State when
damage may result to the lands, waters or natural
resources within the jurisdiction of the State.
[N.J.S.A. 58:10-23.11b.]
Nevertheless, "[a] party even remotely responsible for causing contamination
will be deemed a responsible party under the Act." In re Kimber Petroleum
Corp., 110 N.J. 69, 85 (1988).
In resolving contribution claims, N.J.S.A. 58:10-23.11f(a)(2)(a)
authorizes the court to "allocate the costs of cleanup and removal among liable
parties using such equitable factors as the court determines are appropriate. "
Indeed, "a claim for contribution, unlike one for indemnification, requires a
factfinder to apportion fault among defendants." Mettinger v. Globe Slicing
Mach. Co., 153 N.J. 371, 389 (1998). "The Legislature went further to ensure
private entity dischargers were not prevented from seeking other recourse in the
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49
courts, dictating that '[n]othing in [N.J.S.A. 58:10-23.11f(a)(2)(a)] shall affect
the right of any party to seek contribution pursuant to any other statute or under
common law.'" Magic Petroleum Corp. v. Exxon Mobil Corp., 218 N.J. 390,
403-05 (2014) (alterations in original) (quoting N.J.S.A. 58:10-23.11f(a)(2)).
As guidance to aid in the equitable allocation of Spill Act contribution
costs, our courts have often looked to the so-called "Gore factors." Ibid. The
Gore factors were proposed, but never passed, as an amendment to the
Comprehensive Environmental Response, Compensation, and Liability Act of
1980 (CERCLA), 42 U.S.C. §§ 9601-675, by then-Congressman Al Gore.
Lenox Inc. v. Reuben Smith Rubbish Removal, 91 F. Supp. 2d 743, 747
(D.N.J. 2000). These factors include the following considerations:
(1) the ability of the parties to demonstrate that their
contribution to a discharge, release or disposal of a
hazardous waste can be distinguished;
(2) the amount of the hazardous waste involved;
(3) the degree of toxicity of the hazardous waste
involved;
(4) the degree of involvement by the parties in the
generation, transportation, treatment, storage, or
disposal of the hazardous waste;
(5) the degree of care exercised by the parties with
respect to the hazardous waste concerned, taking into
account the characteristics of such hazardous waste;
and
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50
(6) the degree of cooperation by the parties with the
Federal, State or local officials to prevent any harm to
the public health or the environment.
[Ibid.]
In Hatco Corp. v. W.R. Grace & Co., 836 F. Supp. 1049, 1090
(D.N.J. 1993), modified on reconsideration on other grounds, 849 F. Supp. 987(D.N.J. 1994), the United States District Court applied similar factors as in
Lenox, but also mentioned such considerations as "acquiescence" in or
knowledge of the contamination, the parties' degrees of care, and any financial
benefit to the parties from the remediation.
OCC raises three main arguments involving the Spill Act and challenging
the trial judge's decisions on: (1) contribution liability; (2) allocation of
contribution liability; and (3) how the judge's holding on alter ego affects the
contribution award to Repsol. We will address these arguments in the order
presented.
OCC first argues the judge erred when he found joint and several liability
applies in a Spill Act contribution action. OCC asserts the judge confused the
scope of liability in a cost recovery action (strict, joint and several) with the
standard of liability in a contribution action because the Spill Act only requires
the application of joint and several liability as the standard for contribution.
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OCC relies on the plain language of the Spill Act, its legislative history, and
Spill Act and federal CERCLA caselaw.
Contribution is a principle of liability sharing. The Legislature's "basic
purpose in creating the right of contribution [in the Spill Act] was to achieve 'a
sharing of the common responsibility [among tortfeasors] according to equity
and natural justice.'" Rowe v. Bell & Gossett Co., 239 N.J. 531, 553 (2019)
(second alteration in original) (quoting Magic Petroleum, 218 N.J. at 403). As
our Supreme Court explained in Magic Petroleum:
The purpose of the contribution amendment to the Spill
Act was to encourage prompt and effective remediation
by those parties responsible for contamination who
might otherwise be reluctant to cooperate in the
remediation efforts for fear of bearing the entire cost of
cleanup when other parties were also responsible for
the creation and continuation of the discharge.
[218 N.J. at 403 (citations omitted).]
We were unable to find a published opinion that directly addresses the
specific standard of liability for contribution actions under the Spill Act. Here,
however, the judge correctly noted N.J.S.A. 58:10-23.11f(a)(2)(a)
unequivocally states what is required: "In an action for contribution, the
contribution plaintiffs need prove only that a discharge occurred for which the
contribution defendant or defendants are liable pursuant to [N.J.S.A. 58:10 -
23.11g(c)]." N.J.S.A. 58:10-23.11g(c)(1) states "any person who has discharged
A-2036-17
52
a hazardous substance, or is in any way responsible for any hazardous substance,
shall be strictly liable, jointly and severally, without regard to fault, for all
cleanup and removal costs no matter by whom incurred." Based on the plain
language of these statutes, the judge correctly held the standard for contribution
purposes was joint and several liability amongst the dischargers and those
responsible in any way for the discharge.
Thus, pursuant to N.J.S.A. 58:10-23.11g(c)(1), OCC and Repsol are both
liable to each other and to all other dischargers and persons "in any way
responsible" and "shall be strictly liable, jointly and severally, without regard to
fault, for all cleanup and removal costs no matter by whom incurred." Those
seeking contribution, such as Repsol, must prove the required nexus between
the parties and the pollution. N.J.S.A. 58:10-23.11f(a)(2)(a). In resolving
contribution claims between all the liable entities, the court could allocate the
costs of cleanup and removal by "using such equitable factors as the court
determines are appropriate[,]" including the Gore factors. N.J.S.A. 58:10-
23.11f(a)(2)(a); Magic Petroleum, 218 N.J. at 403-05.
OCC next argues the judge erred by allocating only the relative liabilities
of OCC and Repsol and finding OCC was one hundred percent liable and Repsol
was zero percent liable. OCC contends the judge should have considered the
fault of the hundreds of other settling defendants in the underlying action. In
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53
this approach, OCC rejects Repsol's reliance on caselaw in which the courts have
equitably allocated contribution responsibility to one person after considering
the liability of all parties involved.
OCC also argues the judge erred in finding it liable for more than its fair
share of the contamination and for allowing Repsol to arbitrarily select its victim
out of the hundreds of other responsible parties. OCC maintains the judge must
apply the Gore factors to determine an ultimately fair and equitable sharing of
the remediation burden among all responsible parties. OCC urges us to reverse
the trial court and remand to allow the judge to make the necessary factual
findings on a full record to determine OCC's several share of liability among all
responsible parties.
OCC also urges us to reverse the judge's allocation of liability because
there are genuine issues of material fact in dispute. OCC alleges the judge made
at least two factual errors concerning defendant's cooperation with plaintiffs and
the distinguishability of the discharges. According to OCC, the judge
erroneously found: (1) OCC refused to participate in settlement negotiations
with plaintiffs, and (2) Maxus settled with plaintiffs only on its own behalf.
Although OCC was not part of the Repsol and Maxus/Tierra settlement, there is
evidence to show it participated and ultimately settled with plaintiffs. Maxus
also resolved certain damage claims brought by plaintiffs against OCC.
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54
We do not have to reach, however, the issues of whether the court should
have considered all the settling defendants' percentages of fault for the
contamination or applied the Gore factors. As successors under the corporate
umbrella of DSC, both OCC and Repsol would be separately liable parties in
any way responsible to plaintiffs in a Spill Act recovery action and to the other
settling defendants in a Spill Act contribution action. They are also co- or joint
tortfeasors to each other by sharing DSC's common liability. OCC's
predecessor, DSCC, purchased DSC's stock in its chemical businesses under the
SPA, while the remainder of DSC's stock and oil and gas concerns changed their
name to Repsol's predecessor, Maxus, which agreed in the SPA to indemnify
DSCC.
The JTCL provides for contribution between co- or joint tortfeasors.
Under that statutory scheme, "joint tortfeasors" are "two or more persons jointly
or severally liable in tort for the same injury to person or property, whether or
not judgment has been recovered against all or some of them." Krzykalski v.
Tindall, 232 N.J. 525, 534 (2018) (quoting N.J.S.A. 2A:53A-1). The statute
provides:
Where injury or damage is suffered by any person as a
result of the wrongful act, neglect or default of joint
tortfeasors, and the person so suffering injury or
damage recovers a money judgment or judgments for
such injury or damage against one or more of the joint
A-2036-17
55
tortfeasors, either in one action or in separate actions,
and any one of the joint tortfeasors pays such judgment
in whole or in part, he shall be entitled to recover
contribution from the other joint tortfeasor or joint
tortfeasors for the excess so paid over his pro rata
share . . . .
[N.J.S.A. 2A:53A-3.]
Therefore, contrary to OCC's arguments, the judge did not need to
consider the other "responsible parties," such as third-party defendants, to
allocate fault and contribution between OCC and Repsol. Furthermore, since
OCC purchased DSC's chemical "discharging" assets, and Repsol inherited the
rest of DCS's non-discharging assets, OCC would be liable to Repsol for
contribution. That is, OCC could not show the required "reasonable link " or
nexus between the discharge of hazardous substances, Repsol, and the
contamination. See Dimant, 212 N.J. at 182.
The hurdle to granting summary judgment is indemnification.
Indemnification is a principle of liability shifting. The judge held Maxus had to
indemnify OCC for all its past liability under the Spill Act, regardless of fault.
This includes DSC's liability, the liability of DSC's predecessors, and OCC's
own liability during the Chemicaland era. Under the JTCL, "no person shall be
entitled to recover contribution under this act from any person entitled to be
indemnified by him in respect to the liability for which the contribution is
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56
sought." N.J.S.A. 2A:53A-3. Thus, by applying the JTCL, Maxus, and possibly
its successors, cannot recover contribution from OCC.
VII.
OCC contends the court erred by denying its motion for leave to amend
or supplement its second amended crossclaim by adding an allegation against
Repsol for tortious interference with the SPA's indemnification clause. We
decline to address this matter here. OCC must make an appropriate application
to file its supplemental pleadings upon remand to the trial court.
Conclusion
We reverse the trial court's holdings on alter ego liability in the appeal
under docket A-2038-17 and on Spill Act contribution in the appeal under docket
A-2036-17, and remand both cases to the Law Division. Although the trial court
correctly ruled on Delaware's alter-ego-liability law and necessary sequential
veil piercing of a complex corporate organization, there are genuine issues of
material fact that preclude the grant of summary judgment to Repsol on alter
ego liability, especially as to the necessary element of fraud. Furthermore,
although the court properly determined the legal standard of liability for
contribution under the Spill Act, there are genuine issues of material fact that
preclude any grant of summary judgment to Repsol on contribution. The trial
court also erred by not considering contractual indemnification. Finally, since
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57
we remand in each appeal, OCC must make an appropriate application to the
trial court to supplement its pleadings.
Reversed and remanded. We do not retain jurisdiction.
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