Maintaining Liability Protection Strategies for Overcoming BFPP - PowerPoint PPT Presentation

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 WEDNESDAY, MARCH 23, 2016 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Frank J. Deveau, Partner, Taft Stettinius & Hollister , Indianapolis Thomas J. P . McHenry, Partner, Gibson Dunn & Crutcher , Los Angeles 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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Limiting Superfund Liability An Overview of the CERCLA Bona Fide Prospective Purchaser (BFPP) Defense Frank J. Deveau fdeveau@taftlaw.com 317-713-3520

WHO IS LIABLE?  Subject to certain defenses, the following categories of individuals are strictly, jointly, and severally liable:  Present owners and operators at a facility;  Former owners and operators at a facility at the time of disposal;  Any person who arranged for disposal or treatment of hazardous substances at a facility; and  Any person who transported hazardous substances to a facility 42 U.S.C. § 9607 6

Limiting Liability  Bona Fide Prospective Purchaser Defense ( “ BFPP defense ” )  Prospective Purchaser Agreements ( “PPAs” ) 7

BFPP Defense To meet the statutory criteria for liability protection, a landowner must meet certain threshold criteria and satisfy certain continuing obligations. 8

INITIAL OBLIGATIONS (1) Disposal Occurred Prior to Acquisition (2) All Appropriate Inquiry (3) Affiliation 9

DISPOSAL OCCURRED PRIOR TO ACQUISITION Requirement #1 10

Disposal Prior to Acquisition A landowner must prove that all disposal of hazardous substances occurred pre-acquisition. CERCLA 101(40)(A) 11

ALL APPROPRIATE INQUIRY (“AAI”) Requirement #2 12

All Appropriate Inquiry  Interviews with past and present owners, operators, and occupants;  Reviews of historical sources of information;  Reviews of federal, state, tribal, and local government records;  Visual inspections of the facility and adjoining properties;  Commonly known or reasonably ascertainable information; and  Degree of obviousness of the presence or likely presence of contamination at the property and the ability to detect contamination CERCLA §§ 101(40), 101(35) 40 C.F.R. 312 Mem. from EPA on Interim Guidance Regarding Criteria Landowners Must Meet in Order to Qualify for Bona Fide Prospective Purchaser, Contiguous Property Owner, or Innocent Landowner Limitations on CERCLA Liability (Mar. 6, 2003) , at 4 – 5. 13

All Appropriate Inquiry • Inquiries must be conducted or updated within one year of the date of acquisition. • Certain aspects on the inquiry must be updated if AAI’s are conducted more than 180 days prior to the acquisition date. 40 C.F.R. § 312 14

ASTM E1527-13 for Phase I AAI Noteworthy changes to AAI via ASTM E1527-1 3 Revised definitions to align with CERCLA Clearer definition of REC, HREC New category – controlled REC (CREC) Revised file review requirements Vapor migration risk analysis clarified 15

Coppola v. Smith, 2015 WL 224730 (E.D. Cal.2015) • Innocent landowner/AAI decision (buyer/M&M was unaware of contamination at time of purchase) • Downgradient landowner sued upgradient owner of former dry cleaner • M&M sought summary judgment as innocent landowner Court held: (1) M&M LLC could rely on pre-purchase inquiry of Martin LP; (2) other parties were sole cause of release of PCE; and (3) M&M exercised due care post-closing; i.e.,reasonable steps. 16

Coppola v. Smith, 2015 WL 224730 (E.D. Cal.2015) Court also held: insufficient evidence of AAI or due diligence because no evidence of accepted commercial standards in 1995 in Visalia area. Note: compliance with 1993 ASTM standard was not necessary. • Five statutory factors for pre-May 31, 1997, purchase reviewed (42 USC 9601(35)(B)(iv)(I). 17

AFFILIATION Requirement #3 18

Affiliation  Party must not be potentially liable or affiliated with any person who is potentially liable for response costs  “ affiliation ” is not explicitly defined, but appears to be broadly interpreted.  Direct and indirect familial relationships  Many contractual, corporate, and financial relationships CERCLA § 101(40)(H) Mem. from EPA on Interim Guidance Regarding Criteria Landowners Must Meet in Order to Qualify for Bona Fide Prospective Purchaser, Contiguous Property Owner, or Innocent Landowner Limitations on CERCLA Liability (Mar. 6, 2003) , at 5 - 6. 19

Affiliation  Focus is on relationships created to avoid CERCLA liability.  EPA will consider:  Whether or not the BFPP is otherwise a potentially responsible party (“PRP”)  Whether the BFPP is in fact the same entity as a PRP;  Whether the BFPP is the result of a reorganization of a liable party through bankruptcy or other corporate restructuring; and  Whether a party with whom the BFPP is associated is an actual PRP. CERCLA § 101 (40)(H) Mem. from EPA on Interim Guidance Regarding Criteria Landowners Must Meet in Order to Qualify for Bona Fide Prospective Purchaser, Contiguous Property Owner, or Innocent Landowner Limitations on CERCLA Liability (Mar. 6, 2003) , at 5 - 6. 20

Affiliation  Exceptions  Instruments by which title to the facility is conveyed or financed  Contracts for the sale of goods or services  Generally exempt relationships include:  Relationships at other properties  Post-acquisition relationships  Relationships created during title transfer  Relationships established between a tenant and owner during leasing process CERCLA § 101(40)(H) Mem. from EPA on Interim Guidance Regarding Criteria Landowners Must Meet in Order to Qualify for Bona Fide Prospective Purchaser, Contiguous Property Owner, or Innocent Landowner Limitations on CERCLA Liability (Mar. 6, 2003) , at 5 - 6. Mem. from EPA on Enforcement Discretion Guidance Regarding the Affiliation Language of CERCLA’s Bona Fide Prospective Purchas er and Contiguous Property Owner Liability Protections (Sep. 21, 2011), at 6. 21

Continuing Obligations (4) Complying with Restrictions & Controls (5) Reasonable Steps (appropriate care) (6) Cooperation, Assistance, and Access (7) Compliance with Information Requests (8) Providing Legally Required Notices 22

COMPLYING WITH RESTRICTIONS & CONTROLS Requirement #4 23

Complying with Restrictions and Controls  Must be in compliance with any land use restrictions established or relied on in connection with a response action. CERCLA § 101(40)(F) Mem. from EPA on Interim Guidance Regarding Criteria Landowners Must Meet in Order to Qualify for Bona Fide Prospective Purchaser, Contiguous Property Owner, or Innocent Landowner Limitations on CERCLA Liability (Mar. 6, 2003) , at 6 – 8. 24

Complying with Restrictions and Controls  Institutional Controls:  Administrative and legal controls that minimize the potential for human exposure to contamination, and  Protect the integrity of remedies by limiting land or resource use and/or providing information to modify behavior CERCLA § 101(40)(F) Mem. from EPA on Interim Guidance Regarding Criteria Landowners Must Meet in Order to Qualify for Bona Fide Prospective Purchaser, Contiguous Property Owner, or Innocent Landowner Limitations on CERCLA Liability (Mar. 6, 2003) , at 6 – 8 25