N.J. towns can’t face contract suits over contaminated water, court rules

Judges find the provision of water is a government service and not a contract, barring claims of breach. (Photo by New Jersey Monitor)

New Jersey residents cannot sue public water suppliers for breach of contract when the utilities supply contaminated water, a panel of appellate judges ruled Friday.

The three-judge panel’s decision unifies decades of divergent case law that, at first, considered municipal and county water suppliers as parties to a contract with their residents but later found water distribution is a government service that is shielded from some civil liabilities.

“Considering both the developing caselaw and the current pertinent statutes, we conclude that running water is not a commercial product but rather a public resource held in trust for residents,” the ruling says.

The judges ruled the structure of the County and Municipal Water Supply Act does not reflect a contractual relationship, noting it allows public water suppliers to set rates unilaterally and lacks any description of a contractual relationship between a government and its residents.

The 1989 law allows municipalities and counties to levy liens on unpaid water bills, a fact the judges said shows the relationship between a public water supplier and their customer is not commercial in nature.

Earlier decisions that predate the Water Supply Act allowed breach of contract claims against governments, but the judges noted such decisions were non-existent after its signing.

“We deem it especially significant that no judicial precedent issued since the adoption of the WSA has characterized a water service dispute involving municipalities and residents as a contract dispute,” they wrote.

The decision in the consolidated appeal upholds a trial court ruling in one case but reverses it in another.

In both underlying class action cases, residents sued their towns after the municipalities reported their water systems contained more perfluorononanoic acid than allowed by state law. That acid is a chemical that can harm the liver and reproductive and immune systems and stunt development.

In both cases, plaintiffs sought economic damages, alleging the municipalities — Gloucester City and Brooklawn — made a contractual breach by selling them contaminated water and continuing to do so after they learned of the contamination.

Though the judge in the Gloucester City case rejected plaintiffs’ arguments that water metering distinguished drinking water services from other governmental functions, the Brooklawn judge found the Water Supply Act and the Tort Claims Act — which allows civil suits against governments in limited circumstances — were silent on whether governments and residents had a contractual relationship.

Lewis Adler, who represented the plaintiffs, did not return a request for comment.

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