Presenting a live 90-minute webinar with interactive Q&A CERCLA Bona Fide Prospective Purchaser Defense: Securing and Maintaining Liability Protection Strategies for Overcoming BFPP Defense Challenges and Restrictions TUESDAY, MARCH 28, 2017 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Bradley R. Sugarman, Partner, Krieg DeVault , Indianapolis Charles S. Warren, Partner, Kramer Levin Naftalis & Frankel , New York The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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CERCLA Liability and the Bona Fide Prospective Purchaser Bradley R. Sugarman Charles S. Warren bsugarman@kdlegal.com cwarren@kramerlevin.com (317) 238-6265 (212) 715-9387
Comprehensive Liability – 107(a) 1. Current owner or operator of a vessel or facility; 2. Past owners and operators at the time of disposal; 3. Any person who by contract, agreement, or otherwise arranged for disposal or treatment of hazardous substances 4. Any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities 6
Comprehensive Liability The case law interpreting CERCLA has enlarged this catalog of liable parties to include: successor corporations, lessees of current and former owners, corporate officers who were active in site operations, active shareholders, parent corporations, lenders, and trustees. 7
Comprehensive Liability – Strict and Retroactive • CERCLA liability is strict and does not require proof of negligence or wrongdoing. Harley-Davidson, Inc. v. Minstar, Inc ., 41 F.3d 341, 343 (7th Cir. 1994). • CERCLA liability is not dependent upon any showing of causation or fault. Farmland Indus., Inc. v. Morrison-Quirk Grain Corp ., 987 F.2d 1335, 1339 (8th Cir. 1993). • “Often, liability is imposed upon entities for conduct predating the enactment of CERCLA, and even for conduct that was not illegal, unethical, or immoral at the time it occurred. We recognize . . . that CERCLA, as a strict liability statute that will not listen to pleas of ‘no fault,’ can be terribly unfair in certain instances in which parties may be required to pay huge amounts for damages to which their acts did not contribute.” Matter of Bell Petroleum Servs., Inc. 3 F.3d 889, 897 (5th Cir. 1993). 8
Comprehensive Liability – Joint & Several Responsible parties are jointly and severally liable unless they can prove a reasonable basis for apportionment exists. Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 1881 (2009). United States v. Capital Tax Corp., 545 F.3d 525, 534 (7th Cir. 2008). United States v. NCR Corp, 688 F.3d 833 (7th Cir. 2012). “Divisibility is a legal defense to joint and several liability under CERCLA in which a party makes ‘a causation based argument that the cleanup costs at a single CERCLA facility should be divided between [a defendant] and [other] responsible part[ies ].’” Ashley II v. PCS Nitrogen, Inc ., 791 F.Supp.2d 431, 481 (D.S.C. 2011). 9
Comprehensive Liability – Joint & Several A party seeking to avoid joint and several liability bear the burden of proving that a reasonable basis for apportionment exists . United States v. Chem – Dyne Corp., 572 F. Supp. 802, 810 (S.D. Ohio 1983) Restatement (Second) of Torts § 433B (1976)) (placing burden of proof on party seeking apportionment). • “The practical effect of placing the burden on defendants has been that responsible parties rarely escape joint and several liability, courts regularly finding that where wastes of varying (and unknown) degrees of toxicity and migratory potential commingle, it simply is impossible to determine the amount of environmental harm caused by each party.” O’Neil v. Picillo , 883 F. 2d 176, 178-79 (1st Cir. 1989). 10
Only Limited Defenses An act of God; An act of war; An act or omission of a third party – except those acts or omissions that “occur[] in connection with a contractual relationship”; Or any combination of these. 11
Petroleum Exclusion Definition of “hazardous substance” does not include “petroleum, including crude oil or any fraction thereof.” Blake Memorandum : 1987 memo from EPA’s General Counsel stating that the agency considers individual constituents of petroleum (BTEX) to be hazardous substances unless they are found in refined petroleum fractions or when they are present at levels which do not exceed these fractions. Implication . CERCLA often does not apply to gas stations or other petroleum facilities. 12
Release Reporting CERCLA § 103(a). Any person who operates or has control over a vessel or facility must notify EPA’s National Response Center as soon as there is a release equal to or greater than a “reportable quantity.” CERCLA § 102 establishes reportable quantities. Beware of state-specific requirements! 13
Bona Fide Prospective Purchaser Background CERCLA defines a brownfield site as “real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant. ” 14
Small Business Liability Relief and Brownfields Revitalization Act, Pub. L. No. 107-118, 115 Stat. 2356 (2002). 1. De Micromis Exemption 2. Municipal Solid Waste Exemption 3. Contiguous Property Owner Exemption 4. Bona Fide Prospective Purchaser Exemption 15
How to Qualify - BFPP To meet the statutory criteria for liability protection, a landowner must meet certain threshold criteria and satisfy certain continuing obligations. 16
Threshold Criteria (1) Disposal Occurred Prior to Acquisition (2) Performed “All Appropriate Inquiry” (3) No Affiliation 17
Disposal Broadly defined and interpreted. “The discharge, deposit, injection, dumping, spilling, leaking, or placing of any solid waste or hazardous waste into on any land or water so that such solid waste or hazardous waste or any constituent thereof may enter the environment or be emitted into the air or discharged into any waters, including ground waters.” 18
Disposal – Secondary Disposal “ Disposals are not limited to one-time occurrences, but instead include times when hazardous materials are moved or dispersed.” Ashley II v. PCS Nitrogen, Inc ., 791 F.Supp.2d 431, 499 (D.S.C. 2011). A disposal may occur when a party disperses contaminated soil. Id . “Secondary disposal” is the dispersal of already- once-disposed hazardous substances through earthmoving or construction activities. PCS Nitrogen Inc. v. Ashley II , 714 F.3d 161, 177 (4th Cir. 2013). 19
Disposal – Secondary Disposal “[ CERCLA’s] definition of disposal does not limit disposal to a one-time occurrence — there may be other disposals when hazardous materials are moved, dispersed, or released during landfill excavations and fillings. ” Tanglewood E. Homeowners v. Charles – Thomas, Inc., 849 F.2d 1568, 1573 (5th Cir.1988). “Disposal” includes passive acts, such as leaking or spilling. Nurad, Inc. v. William E. Hopper & Sons Co. , 966 F.2d 837, 844 – 46 (4th Cir. 1992). 20
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