Presenting a live 90-minute webinar with interactive Q&A New Developments in Brownfield Redevelopment Navigating Recent Challenges in the Remediation of Contaminated Sites TUESDAY, MARCH 19, 2013 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: David J. Freeman, Director, Gibbons , New York Nicholas W. Targ, Partner, Holland Knight , San Francisco Peter H. Weiner, Partner, Paul Hastings , San Francisco 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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BONA FIDE PROSPECTIVE PURCHASER REQUIREMENTS AFTER ASHLEY II Strafford Publications Webinar on “New Developments in Brownfields Redevelopment” March 19, 2013 David J. Freeman 212-613-2079 DFreeman@gibbonslaw.com 5 Newark New York Trenton Philadelphia Wilmington
Bona Fide Prospective Purchaser Requirements After Ashley II 1. What is a Bona Fide Prospective Purchaser (BFPP)? 2. Why is the BFPP concept important to brownfield transactions? 3. What did Ashley II actually decide? 4. What (if anything) has the Ashley II decision done to: a) BFPP jurisprudence b) Strategies for accomplishing brownfields transactions? 6 Newark New York Trenton Philadelphia Wilmington
What Is a BFPP? CERCLA § 107(a)(1) – makes current site owners strictly liable for site cleanup Overdeterrence – no one willing to buy contaminated sites 2001 – Small Business Liability Relief and Brownfields Revitalization Act (BRERA) § 101(40) • Entities that perform All Appropriate Inquiries (AAI) and comply with certain ongoing obligations relieved of site cleanup liability under CERCLA 7 Newark New York Trenton Philadelphia Wilmington
What Is a BFPP ? No disposal during period of ownership All Appropriate Inquiries • Phase I (and, possibly, Phase II) Environmental Site Assessment • EPA Rulemaking in 2005 • Regulations at 40 CFR § 312 • ASTM E 1527 8 Newark New York Trenton Philadelphia Wilmington
What Is a BFPP? Ongoing Obligations • Complying with land use restrictions and institutional controls; • Taking reasonable steps with respect to hazardous substance releases; • Providing full cooperation, assistance, and access to persons who are authorized to conduct response actions or natural resource restoration; • Complying with information requests and administrative subpoenas; and • Providing legally required notices. 9 Newark New York Trenton Philadelphia Wilmington
What Is a BFPP? No disqualifying affiliation with a PRP • No direct or indirect familial relationship • No contractual, corporate or financial relationship (other than that created by documents transferring title) • Not a reorganization of a PRP 10 Newark New York Trenton Philadelphia Wilmington
Significance of BFPP Status to Brownfields Transactions Contents of Brownfields Toolbox • Due diligence • Reps and Warrantees • Assignment of cleanup liability/responsibility • Indemnities • Financial assurances • Insurance 11 Newark New York Trenton Philadelphia Wilmington
Significance of BFPP Status to Brownfields Transactions — Why Do You Care? Assignment of responsibility/liability in PSA Doing cleanup anyway, usually under state supervision EPA overcalls of state-supervised cleanups very rare Potentially helpful vs. third-party claims for contribution (not personal injury or property damage) Can be helpful with lenders, insurers, joint venture partners 12 Newark New York Trenton Philadelphia Wilmington
Ashley II Ashley II of Charleston, LLC v. PCS Nitrogen, Inc., 2010 WL 4025885 (D.S.C.) • Ashley tries to assert the BFPP defense as a shield against CERCLA contribution claims • 43-acre Columbia Nitrogen Superfund Site in the Upper Peninsula area of Charleston, South Carolina • In 2003, Ashley purchases portions of the Site totaling approximately 30 acres • Ashley sues seeking cost recovery for $195K in response costs • Defendant, in turn, files a contribution action under CERCLA § 113 against Ashley and other defendants 13 Newark New York Trenton Philadelphia Wilmington
Ashley II 55-page ruling on summary judgment and allocation as among 7 group of parties 4 pages devoted to Ashley’s BFPP defense • Likely releases during Ashley’s ownership (spills from sumps during course of demolition) • Did conduct AAI • Did provide full cooperation, assistance and access to EPA • Did comply with institutional controls and land use restrictions (none) • Did comply with requests for information • Did not exercise appropriate care (failure to investigate and remove debris piles) 14 Newark New York Trenton Philadelphia Wilmington
Ashley II Release and indemnity to prior owners is a disqualifying affiliation Because of indemnity, Ashley urged EPA not to try to recover response costs from indemnities on the basis that doing so “would discourage Ashley’s future development efforts” “Just the sort of affiliation that Congress intended to discourage” (p. 53) 15 Newark New York Trenton Philadelphia Wilmington
Ashley II – What Is Wrong with This Picture? Indemnity given in connection with documents transferring title, so exempted from “affiliation” test No support in legislative history for Court’s statement of Congress’ views regarding indemnities Calls into question an essential tool in the brownfields toolbox Holding superfluous in light of other factors disqualifying Ashley from being BFPP 16 Newark New York Trenton Philadelphia Wilmington
Ashley II – What Is Wrong with This Picture? Court may have been swayed by what Ashley did as a result of the indemnity: asking EPA to withhold exercise of enforcement authority Statement that EPA’s actions, if pursued, would discourage Ashley’s future development efforts could be viewed as improper pressure Query as to whether, in light of these actions, Ashley “provided full cooperation” to EPA 17 Newark New York Trenton Philadelphia Wilmington
Ashley II – Current Status • Fourth Circuit Court of Appeals heard oral argument in early December 2012. Decision pending • 2011 EPA Guidance • In September 2011, EPA issued a guidance stating that it “generally does not intend” to treat indemnities contained in sales agreements as an impermissible affiliation barring BFPP status • No courts have yet followed Ashley II’s lead on this issue 18 Newark New York Trenton Philadelphia Wilmington
Ashley II – Significance to Brownfields Jurisprudence and Practice Holding on indemnification • Not good public policy • Indemnification is an essential element in many brownfields transactions • Unlikely that will be upheld on appeal, or be applied beyond specific facts of case • Warning to developers: don’t try to tell EPA that indemnity should effect exercise of enforcement discretion 19 Newark New York Trenton Philadelphia Wilmington
Ashley II – Significance to Brownfields Jurisprudence and Practice Holdings on continuing obligations • Timely reminder that can lose BFPP status post-closing • Need to exercise diligence in addressing contamination found at site • Need to make sure remedial activities don’t create potential for new releases 20 Newark New York Trenton Philadelphia Wilmington
Brownfields Redevelopment Vapor Intrusion Risk Management Nicholas Targ Holland & Knight LLP 415.743.6926 nicholas.targ@hklaw.com Strafford Publications New Developments in Brownfields Redevelopment March 19, 2013
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