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, SEPTEMBER 23, 2014 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
DISPOSAL OCCURRED PRIOR TO ACQUISITION Requirement #1
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
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 E1527-13 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
Vapor Intrusion and AAI IMPORTANT: E1527-13 expressly requires environmental professionals to account for vapor migration or encroachment in looking for Recognized Environmental Conditions ( RECs ). Also, EPA s 2013 (general) Vapor Intrusion Guidance includes two significant changes: 1. It recommends indoor air sampling instead of modeling; and 2. It seeks to extend EPA s authority to indoor air risks in commercial and industrial buildings traditionally governed by OSHA. www.epa.gov/oswer/vaporintrusion/documents/vaporintrusion-final-guidance-20130411-reviewdraft.pdf 16
AFFILIATION Requirement #3
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. 18
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. 19
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 Purchaser and Contiguous Property Owner Liability Protections (Sep. 21, 2011), at 6. 20
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
COMPLYING WITH RESTRICTIONS & CONTROLS Requirement #4
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. 23
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 24
Complying with Restrictions and Controls Required to comply even if restrictions have not been properly implemented Control is never, or has yet to be, implemented; Property owner or other using property impede the effectiveness of a control and the party responsible for enforcement neglects to take sufficient measures to bring those persons in compliance; or A court finds those controls unenforceable 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
Complying with Restrictions and Controls Must not impede the effectiveness or integrity of any institutional control. For example: EPA and state programs often use notices to convey information regarding site contamination rather than actually restricting land use. If an owner removes notices from land records, the removal would impede the effectiveness of an institutional control. 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. 26
REASONABLE STEPS Requirement #5
Reasonable Steps Will be a site-specific analysis aimed to: Stop continuing releases, Prevent threatened future releases, and Prevent or limit, human, environmental, or natural resource exposure to earlier hazardous substance release. CERCLA 101(40)(D) 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 9 12. 28
Reasonable Steps The pre-purchase inquiry will most likely inform the BFPP as to the nature and extent of contamination. Phase I RECs and Recommendations will become reasonable steps This requirement only relates to contamination for which the BFPP is not responsible. More than reasonable steps will likely be required from the landowner if there is new hazardous substance contamination for which he is responsible. CERCLA 101 (40)(A) 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 9 12 29
Reasonable Steps Comfort Letters EPA or state agency may provide a comfort/status letter addressing reasonable steps at a specific site. Generally limited to sites with significant federal involvement such that the agency has sufficient knowledge to form a basis for suggested reasonable steps. Most likely given where: It may facilitate the cleanup and redevelopment process; There is a realistic probability of superfund liability; and There are no other means to adequately address the party s concerns. 62 Fed. Reg. 4,624 (1997) 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 9 12. Office of Enforcement and Compliance Assurances Policy on the Issuance of Comfort/Status Letters 30
Reasonable Steps Comfort Letters EPA has developed four sample comfort/status letters: 1. No Previous Federal Superfund Interest Letter 2. No Current Federal Superfund Interest Letter 3. Federal Interest Letter 4. State Action Letter Office of Enforcement and Compliance Assurances Policy on the Issuance of Comfort/Status Letters 31
Reasonable Steps Comfort Letters State Agency Comfort Letters Provides agency has reviewed AAI/Phase I and concludes buyer has complied with BFPP provisions (may be non-binding). May include reasonable steps RECS or Recommendations from Phase I s likely included. 32
Reasonable Steps Comfort Letters Why should you get a Comfort Letter? Clients and lenders like them. Courts will likely give deference to agency s determination that client is a BFPP. Provides a written record that client is a BFPP vs relying solely on defense where client has burden of proof. 33
Informal 2013 survey of states re comfort letters State Yes No Alternative Alaska x Prospective Purchaser Agreement California x Occasionally may issue letter, but frowned upon Colorado x Delaware x Georgia x Hawaii x Idaho x Illinois x Indiana x Iowa x Kentucky x Notice of Eligibility Louisiana x Maryland x Michigan x Baseline Environmental Assessment Mississippi x Brownfield Agreement Letter Missouri x Nevada x -Delaware issues a Brownfield Certification Letter. -Georgia issues a Limitation of Liability Certification. -Louisiana will issue a Comfort Letter if one is requested but tries not to issue these letters. -Maryland s Brownfields program is currently inactive. -At one time, Nevada did offer Comfort Letters but no longer does so. 34
Informal 2013 survey of states re comfort letters State Yes No Alternative New Hampshire x Covenant Not to Sue/Validation of Prospective Purchaser New Jersey x New Mexico x Voluntary Remediation Program/Covenant Not to Sue New York x Release from Liability North Carolina x North Dakota x Ohio x Voluntary Action Program Oklahoma x Oregon x Prospective Purchaser Agreement under State Law Pennsylvania x Buyer-Seller Agreement Rhode Island x Remedial Decision Letter/Remedial Agreement South Carolina x South Dakota x Tennessee x No Further Action Letter Texas x Utah x Enforceable Written Assurance Vermont x Virginia x Voluntary Remediation Program West Virginia x Wyoming x -Wyoming has not received any requests for a Comfort Letter but would likely issue one if asked. 35
COOPERATION, ASSITANCE, AND ACCESS Requirement #6
Cooperation, Assistance, and Access BFPP must provide full cooperation, assistance, and access to persons authorized to conduct response actions. CERCLA 101 (40)(E) 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 12. 37
COMPLIANCE WITH INFORMATION REQUESTS Requirement #7
Compliance with Information Requests In particular, EPA expects timely, accurate, and complete responses from all recipients of Section 104(e) information requests. CERCLA 101 (40)(G) 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 13. 39
PROVIDE LEGALLY REQUIRED NOTICES Requirement #8
Providing Legally Required Notice BFPP must provide all legally required notices with respect to the discovery or release of any hazardous substance at the facility. Ensures that EPA and others are made aware of hazardous substance release in a timely manner. BFPP has the burden of ascertaining what notices are legally required in a given instance. Regions may require landowners to self-certify that they have provided or will provide all legally required notices. CERCLA 101 (40)(C) 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 13. 41
PROSPECTIVE PURCHASER AGREEMENTS (PPAs) The Gold Standard
Prospective Purchaser Agreements EPA continues to believe prospective purchaser agreements are no longer necessary. However, the agency still recognizes that in limited circumstances, the public interest would be served by entering into agreements with purchasers of contaminated property. These agreements are intended to serve as the vehicle for providing a federal covenant not to sue and contribution protection for BFPPs who will perform removal work exceeding reasonable steps at sites of federal interest. Mem. from EPA on Issuance of CERCLA Model Agreement and Order on Consent for Removal Action by a Bona Fide Prospective Purchaser (Nov. 27, 2006), at 2. 43
What About RCRA? EPA and many state agencies believe all subsequent title holders remain subject to RCRA RCRA closure/corrective action and AAI?? RCRA not subject to BFPP defense Examples: flower shop at former interim status facility Airport at former CERCLA removal site Thompson Corners, LLC v. New York State Dep t of Environmental Conservation, 2014 WL 1924148 (N.Y. App. Div. May 15, 2014). 44
BFPP Defense as interpreted by the courts How has the BFPP Defense been construed by the courts in the past decade since it was enacted? What guidance can we derive from case law? Stay tuned for Tom s presentation! 45
Frank J. Deveau Frank is co-chair of Taft s Environmental Law Practice Group. He has practiced environmental law for over 30 years focused primarily in the Midwest, although he has advised clients throughout the United States. His practice includes environmental issues involving litigation, property transfers and compliance. He was selected as Environmental Lawyer of the Year for 2012 and 2015 in Indianapolis by Best Lawyers, co-edited ABA s 2012, book entitled Environmental Liability and Insurance Recovery and co-authored ABA s 2013, book entitled The Bona Fide Prospective Purchaser Defense: A Guide for Lawyers. fdeveau@taftlaw.com 317-713-3520 46
CERCLA Bona Fide Prospective Purchaser (BFPP) Defense: Recent Case Developments September 23, 2014 Strafford Webinar Thomas J.P. McHenry 333 South Grand Avenue Los Angeles, California 90071 TMcHenry@gibsondunn.com (213) 229-7135
<Presentation Title/Client Name> Overview Who wants to buy a contaminated site? Or, under what circumstances would you buy one? Small Business Liability Relief and Brownfields Revitalization Act of 2002 The Importance of Bona Fide Prospective Purchaser (BFPP) Defense Two Key Cases (2010 & 2011) Ashley II of Charleston, LLC v. PCS Nitrogen, Inc., 791 F. Supp. 2d 431 (D.S.C. 2011), aff d, 714 F.3d 161 (4th Cir. 2013) 3000 E. Imperial, LLC v. Robertshaw Controls Co., No. CV 08-3985 PA (Ex.), 2010 WL 5464296 (C.D. Cal. Dec. 29, 2010) One More Recent Case (2013) Voggenthaler v. Maryland Square, LLC, Nos. 10-17520/11-15174/11-15176/12-16409/12-16412, 2013 WL 3839330 (9th Cir. July 26, 2013) How to Maintain BFPP Status 48
<Presentation Title/Client Name> Summary Increased scrutiny of potential for vapor intrusion U.S. EPA (OECA) guidance on: Enforcement Discretion Regarding Affiliation Language (9/21/2011) Tenant BFPP Qualification under CERCLA (12/5/2012) Importance of meeting and documenting all 8 BFPP Elements BFPP Defense is burden-bearing, fact-specific & self-executing Process is time consuming and transaction costs remain high (19 Colo. J. Int l Envtl. L. & Pol y 259, 275 (2008) Difficult for small businesses to take advantage of BFPP defense without assistance of counsel and in absence of comfort letters 49
<Presentation Title/Client Name> Ashley: Background Case: 63 page decision with complex factual history -- primer on CERCLA liability generally and application of BFPP elements specifically Procedural Background: Plaintiff and current owner of Brownfield site (Ashley) brought suit under CERCLA 107 (42 U.S.C. 9607) to recover remediation costs from former site owners Defendant and former site owner (PCS Nitrogen) counterclaimed, seeking contribution from current owner (Ashley) contending owner had also contaminated site Ashley raised BFPP defense The Site: 43 acres in the upper peninsula area of Charleston, South Carolina, 50
<Presentation Title/Client Name> 51
<Presentation Title/Client Name> Ashley: Relevant Timeline 1906 1985: Site occupied and contaminated by phosphate fertilizer manufacturing: low ph and lead and arsenic in soil 1985 2003: Holcombe and Fair purchase land with intent to develop and subdivide 1989 2008: Allwaste buys 3 acres from Holcombe 52
<Presentation Title/Client Name> Ashley: Key Facts (1 of 3) Ashley acquires 27.62 acres from Holcombe and Fair in 2003 for development In the purchase contract, Ashley indemnifies Holcombe and Fair for environmental liabilities -- Ashley manager testified that the intent of indemnity claim was to prevent Ashley from suing Holcombe and Fair for any environmental contamination claims Environmental investigations conducted in September 2003 EPA information requested in 2004 Ashley collected 452 soil samples 2006: Ashley discovers stained soil and trash pile on Site Tests for soil, but only for lead and arsenic Fails to remove trash pile 53
<Presentation Title/Client Name> Ashley: Key Facts (2 of 3) Ashley also acquires 2.99 acres from Allwaste in 2008: Environmental investigations continue in 2007 Updated environmental assessment in 2008 - identifies sumps as recognized environmental conditions (RECs) Soil and sediment samples discover contaminated soil Demolition of above-ground buildings -- runoff collects in pads, sumps and trench Investigation of sumps in 2009: Investigators observe water level and analyze depth of cracks in sumps, but do not take underground samples Ashley had a protocol in place requiring it to look under slabs to ensure no environmental concerns did not follow protocol on Allwaste parcel Conclude water loss due to evaporation not subsurface leaks 54
<Presentation Title/Client Name> Ashley: Key Facts (3 of 3) On September 3, 2008, Ashley wrote a letter to the EPA acknowledging that Holcombe and Fair may be liable for response costs As it had indemnified Holcombe and Fair from all environmental liabilities, Ashley then asked the EPA to refrain from enforcement Should EPA pursue the claim against Holcombe and Fair, Ashley argued it would discourage Ashley s future development efforts 55
<Presentation Title/Client Name> Applicability of Eight BFPP Defense Elements: 1. Disposal occurred prior to acquisition No (accumulation in sumps, failure to test) 2. All Appropriate Inquiry Yes 3. Affiliation No (discouragement of EPA enforcement against prior owner) 4. Compliance with Continuing Obligations and Requests Yes 5. Reasonable Steps (Care) No (failure to clean and fill sumps) 6. Cooperation, Assistance, and Access Yes 7. Compliance with Information Requests Yes 8. Provided Legally Required Notices Yes 56
<Presentation Title/Client Name> What Ashley Did Right 1. All Appropriate Inquiries (AAI) Complied with interim AAI standard (ASTM Standard E1527 00) for Holcombe and Fair purchase in 2003 Complied with final AAI standard (40 C.F.R. 312) for Allwaste purchase in 2008 Ashley acted reasonably; it hired an expert to conduct an AAI and relied on that expert to perform its job properly. (791 F. Supp. 2d at 500) 2. Compliance with Continuing Obligations and Requests (Institutional Controls) Environmental engineer, qualified as an expert, testified that no land use restrictions or unusual controls in place at Site Ashley was in compliance with controls in place (791 F. Supp. 2d at 501) 3. Cooperation, Assistance, and Access Ashley immediately notified EPA of its ownership and asked EPA to advise Ashley if EPA desired Ashley to take specific action. (791 F. Supp.2d at 501) The record demonstrates that Ashley s cooperation with EPA has been ongoing since it purchased the site. (Id.) 57
<Presentation Title/Client Name> Ashley: What Ashley Did Right (Continued) 4. Compliance with Information Requests Environmental engineer testified that Ashley complied with all information requests and subpoenas issued by EPA (791 F. Supp. 2d at 501-02) 5. Provided Legally Required Notices The record does not establish that any releases occurred on the Site subsequent to Ashley acquiring ownership. The court finds that Ashley has met its burden of proving that it made all legally required notices. (791 F. Supp. 2d at 500) 58
<Presentation Title/Client Name> Ashley: What Ashley Did Wrong (1 of 3) 1. Disposal Prior to Acquisition Ashley must prove all disposals occurred before acquisition. (791 F. Supp. 2d at 499) Ashley did not conduct testing to determine whether disposals occurred on the Allwaste parcel during its ownership period. (Id.) Concern that Ashley s demolition activities contributed to contamination by allowing water to accumulate in sumps Ashley did not test under the concrete pads, sumps or trenches to determine if contaminated Expert testimony stating no disposal occurred after acquisition was inadmissible because Ashley did not properly disclose the opinion before the trial (Id.) Lesson: Do not conduct activity on the property that might lead to or result in further leaking or contamination 59
<Presentation Title/Client Name> Ashley: What Ashley Did Wrong (2 of 3) 2. Affiliation Must prove: 1) not responsible through familial or contractual relationships, 2) not affiliated with responsible persons, and 3) not the result of business reorganization of liable party. Ashley is potentially liable for response costs at the Site due to contractual relationships because Ashley released Holcombe and Fair and Allwaste from environmental liability for contamination at the Site. (791 F. Supp. 2d at 502) Ashley attempted to persuade EPA not to take enforcement action to recover for any harm at the Site caused by the Holcombe and Fair Parties. (Id.) Ashley s efforts to discourage EPA from recovering response costs from the Holcombe and Fair Parties reveals just the sort of affiliation Congress intended to discourage. (Id.) Lesson: Don t discourage EPA from enforcing against prior owners 60
<Presentation Title/Client Name> Ashley: What Ashley Did Wrong (3 of 3) 3. Reasonable Steps (Appropriate Care) Must prove: 1) stop any continuing release, 2) prevent any threatened future release, 3) prevent or limit human, environmental or natural resource exposure to any previously released hazardous substance (CERCLA Due Care Standard). Pre-purchase AAI will inform as to reasonable steps. When Ashley demolished all of the above-ground structures but failed to clean out and fill the sumps, leaving them exposed to the elements, it may have exacerbated these conditions. (791 F. Supp. 2d at 501) [L]ater action to test, clean, and fill the sumps with concrete came too late to prevent possible releases. (Id.) [F]ailure to 1) prevent such debris from accumulating on the Site, 2) investigate the contents of the debris pile, and 3) remove the debris pile for over a year indicates a lack of appropriate care. (Id.) Lesson: Site activities will be examined closely under appropriate care standard 61
<Presentation Title/Client Name> Ashley: Result Ashley failed to prove 3 of the 8 elements of BFPP defense Ashley held liable for equitable share of response costs Court determined Ashley would be responsible for 5% of these costs Ashley also held liable for Holcombe and Fair s share of the response costs (16%) Ashley also responsible for Allwaste s share of the response costs (3%) Adds up to almost one-quarter (24%) of the response costs! 62
<Presentation Title/Client Name> Ashley: Fourth Circuit Appeal (2013) Court of Appeals affirmed lower court finding that Ashley failed to establish all eight elements required to obtain BFPP status. (714 F.3d 161, 180 (4th Cir. 2013)) Ashley failed to demonstrate that it exercised appropriate care at the site. Failure of this one factor enough to deny Ashley BFPP status. (714 F.3d at 181) Declined to address two other BFPP elements: Improper affiliation due to indemnification of PRPs and plea to EPA to not prosecute Proof that no disposal of hazardous substances occurred after Ashley acquired the site. Lesson: Must satisfy every one of the 8 BFPP elements. 63
<Presentation Title/Client Name> Imperial: Background Case: Much simpler and much less analysis analysis hinges on timing of removal of USTs Procedural History Plaintiff and current owner of property sought declaratory relief and compensation costs under, among other claims, under CERCLA Defendants counterclaimed under CERCLA seeking contribution and cost recovery Plaintiff raised BFPP defense The Site: Rectangular lot in Lynwood, California 64
<Presentation Title/Client Name> Imperial: Timeline 1955 1963: Predecessor-in-interest to defendant manufactured aircraft and missile valves underground storage tanks (USTs) leaked and contaminated soil Post 1963: Property used by various furniture manufacturers 2006: Imperial (Plaintiff and current owner) purchases Property Aware of chemical contamination Hired environmental consulting firm to investigate, take soil and water samples Discovers benzene and trichloroethylene (TCE) in the soil and groundwater Demolishes above-ground buildings used by Imperial (similar to Ashley?) 65
<Presentation Title/Client Name> Imperial: Key Facts Imperial discovered contaminated USTs, emptied contents and eventually excavated USTs May 2007: Sampled USTs Sept. 2007: Discovered chemicals in samples Oct. 2007: Emptied contents from USTs and removed from Property 2009: Excavated USTs and discovered oily substance Defendant argued that Plaintiff unreasonably delayed removal of USTs for 2 years. Plaintiff already classified by state agency as bona fide purchaser under Cal. Health & Safety Code 25395.69 (Imperial, 2010 WL 5464296, at *10) Defendant s Argument: Waiting 2 years to excavate USTs was unreasonable delay 66
<Presentation Title/Client Name> Imperial: BFPP Defense: Eight BFPP Requirements: 1. Disposal occurred prior to acquisition Yes 2. All Appropriate Inquiry Yes 3. Affiliation Yes 4. Compliance with Continuing Obligations and Requests Yes 5. Reasonable Steps (Care) Yes 6. Cooperation, Assistance, and Access Yes 7. Compliance with Information Requests Yes 8. Provided Legally Required Notices Yes 2002 Brownfield Amendment to CERCLA 107(r) 67
<Presentation Title/Client Name> Imperial: What Imperial Did Right Reasonable Steps (focus of the opinion) Plaintiffs took reasonable steps to prevent further release of hazardous substances. (2010 WL 5464296, at *11) Since Plaintiff had the USTs emptied soon after learning that they contained a hazardous substance, the Court finds that the Plaintiff took reasonable steps to stop any continuing leak or to prevent any future leaks of TCE from the USTs. (2010 WL 5464296, at *10) Disposal prior to acquisition: No apparent concern about demolition exacerbating contamination Affiliation: No mention of any contractual releases that would create a concern about affiliation 68
<Presentation Title/Client Name> Subsequent Interpretation & Application of BFPP Defense BFPP defense only applies to property purchased after Brownfield Amendments passed on January 11, 2002 Haskins v. Cherokee Grand Ave., LLC, No. C 11 05142 YGR, 2012 WL 1110014, at *4 (N.D.CA. April 12, 2012) The Court believes that the defense contained in CERCLA 101(40) & 107(r) is clear and, on its face, is unavailable to Defendants based on their purchase dates. When must all appropriate inquiries be completed? November 1, 2005: EPA promulgates rule setting forth AAI requirements. All appropriate inquiries must be conducted within one year prior to the buyer acquiring the property. Date of acquisition is date on which a person received title to the property. 69
<Presentation Title/Client Name> Subsequent Interpretation & Application of BFPP Defense Voggenthaler v. Maryland Square, LLC, No. 2:08 cv 1618 RCJ GWF, 2012 WL 1815651, at *6 (D. Nev. May 17, 2012), vacated in part, Nos. 10-17520/11-15174/11-15176/12-16409/12-16412, 2013 WL 3839330 (9th Cir. July 26, 2013) [Defendant] provides no evidence of any kind supporting its argument that it is a bona fide prospective purchaser. As such, [Defendant] fails to establish a genuine issue of material fact as to its liability under CERCLA 107(a). Saline River Props., LLC v. Johnson Controls, Inc., 823 F. Supp. 2d 670, 686 (E.D. Mich. 2011) Here, [Plaintiff] has not even referenced the above essential elements of the defense let alone presented evidence on each of the numerous elements. 70
<Presentation Title/Client Name> Voggenthaler: Ninth Circuit Appeal Contaminated site home to dry cleaning facility that used and spilled PCE, hazardous substance under both CERCLA and state codes Nevada DEP sued under CERCLA to recover clean-up costs. District court granted summary judgment in favor of NDEP on all claims Prior owners and operators during contamination period Herman Kishner Trust (owner) from 1969-2002 Shapiro Bros. Investment Co. (operator) from 1969 to 1984 DCI USA, Inc. (operator) from 1984 to 2000 Current owner and defendant: Maryland Square LLC Maryland Square asserted BFPP defense. 71
<Presentation Title/Client Name> Voggenthaler: Ninth Circuit Appeal District court did not consider content of Maryland Square s BFPP defense due to a formal deficiency submission not notarized. Ninth Circuit stated that submission was woefully insufficient Submission did not specify how Maryland Square meets all eight elements required to establish BFPP defense Submission only stated that Maryland Square purchased site with knowledge of contamination, demolished a building on site, followed progress of previous owners in drafting and submitting plans to clean up site, and had some (mainly undescribed) correspondence with NDEP. (2013 WL 3839330, at *8) Vacated district court s grant of summary judgment in favor of NDEP so Maryland Square may cure the formal and substantive deficiencies of its prior submission and establish that it has met the statutory and regulatory requirements to qualify as a [BFPP]. (2013 WL 3839330, at *9) 72
<Presentation Title/Client Name> Affiliation Considerations USEPA Enforcement Discretion Guidance Regarding the Affiliation Language of CERCLA s BFPP and Contiguous Property Owner (CPO) Liability Protections Fact-specific guidance where parties meet all BFPP elements except for affiliation with any other person that is potentially liable EPA emphasizes that burden of proof remains on the party seeking liability protection. Exceptions from affiliation for: (1) instruments by which title is conveyed or financed and (2) contract for sale of goods and services Considerations in applying affiliation language Indemnities? 73
<Presentation Title/Client Name> Tenant liability under CERCLA Pre-December 2005: Tenants must show (a) sufficient indicia of ownership and (b) landowner is BFPP for tenant to qualify as BFPP. Post-December 2005: Tenant s BFPP status not contingent upon whether landowner qualifies for BFPP exemption. Tenant may obtain BFPP status even if owner never becomes BFPP. In addition to the eight BFPP elements, tenant must also prove it conducted AAI prior to execution of lease. 74
<Presentation Title/Client Name> Tenant liability under CERCLA: Post-December 2005 A tenant may maintain BFPP status even if, by no fault of tenant, the landlord loses BFPP status. The tenant must prove the following: All disposal of hazardous substances at facility occurred prior to lease execution; Provide legally required notices; Takes reasonable steps with respect to hazardous substance releases; Provides cooperation, assistance, and access; Complies with land use restrictions and institutional controls; Complies with information requests and administrative subpoenas; Not potentially liable for response costs at facility or affiliated with any such person (other than through lease with owner); and Does not impede any response action or natural resource restoration. 75
<Presentation Title/Client Name> I Want to Be a BFPP Lessons Learned Keep the Eight (8) Requirements for a BFPP Defense in mind Know your site Hire a good consultant, conduct appropriate AAI diligence, review agency files, etc. Be careful about indemnifying former site owners Maintain adequate records of diligence and on-site activities Address any unexpected contamination swiftly and in accordance with good practice Maintain positive relations with the regulatory agency may be a witness in your defense If a tenant, subject to similar BFPP requirements 76
<Presentation Title/Client Name> Thomas McHenry Tom is a partner in Gibson Dunn s Los Angeles office and a member of the firm's Environment and Natural Resources practice. He practices general environmental law with an emphasis on air quality, hazardous waste, environmental diligence, land use and energy issues. Contact: 333 South Grand Avenue Los Angeles, CA 90071-3197 Tel: 213.229.7135 tmchenry@gibsondunn.com 77