Environmental Liability

1.     CERCLA – strict liability statute for the cleanup of hazardous wastes.  There
used to be an exception for holders of a security interest if they did not participate in the management.  This changed with the 11th Circ. Fleet Factors Corp. case which said that a secured creditor will be liable if its involvement with the management of the facility is sufficiently broad to support the inference that it could affect hazardous waste disposal decision if it chose.  This concerned mortgagees because the “capacity to influence” a mortgaor’s environmental management could cause it to lose its CERCAL liability exemption even if it chose not to exercise that capacity.
2.    After a mortgagee acquires actual ownership of the mortgaged real estates either through purchasing at the foreclosure sale or through a deed in lieu, should it be continued to be protected under the “security interest” exemption?
3.    The 1992 EPA Lender Liability Regulation
–    Pre-loan activities of the mortgagee would not lead to liability unless it was predicated on some ground other than the loan.
–    No liability after a foreclosure purchase or a deed in lieu so long as the mortgagee attempted to sell or divest itself of the real estate in a reasonably expeditious manner.

This Regulation was invalidated by the SC because the EPA exceeded its authority in promulgating it.

4.    1996 Congressional Amendments to CERCLA
–    If hold a security interest and not participating in management, not an “owner or operator”.
–    Codified the 1992 Regulation, essentially.

5.    If sufficient due diligence, the innocent landowner defense may be asserted.
6.    Phase I assessment: Document and Surface Site Inspection
–    Need to know the purpose of the assessment and the standards/parameters to apply in making the assessment.
–    Look at the history of the property (ownership, operations, water supply, waste), federal agency documents (permits, citations, etc.), records kept within the facility.
7.    Phase II assessment
–    Sampling of soil or groundwater
–    ASTM standard – for use solely on commercial property, not industrial property (which would want a greater standard than ASTM).  It does not address non-CERLA liability (ex. asbestos).
8.  Report
1. Introduction – identifies site and location, purpose of inspection specifically
stated.
2.  Discussion of Methodology – chain of custody and analytical methods used
to evaluate.  Pursuant to EPA guidelines often (referred to in the report).
3.  Results Statement – summarizes and concludes statistical accuracies,
potential environmental risks, limitations as to who can rely on the report (often limited so much that it is meaningless – if see this, strike it).