Lessons Learned from BFPP Caselaw and Lessons Learned from BFPP Caselaw and Implications for Brownfield DevelopmentImplications for Brownfield Development

Lawrence SchnapfLawrence SchnapfLawrence SchnapfLawrence SchnapfSchnapf LLCSchnapf LLC

New York, NY 10128New York, NY 10128Larry@SchnapfLaw.comLarry@SchnapfLaw.com

www.SchnapfLaw.comwww.SchnapfLaw.com212212--876876--31893189

Elements for CERCLA Liability

Release

Includes disposal

Passive migration vs active disposal

Hazardous Substance Hazardous Substance

Facility

Response Costs

Remedial or Removal

Consistency with NCP

CERCLA Liable Parties

Current and Former Owners

Former at time of disposal

Current and Former Operators

Control Control

Former at time of disposal

Generators

Transporters

CERCLA Defenses

Third Party

Innocent Landowner (ILO)

Bona Fide Prospective Purchaser (BFPP)

Contiguous Property Owner (CPO)

Third Party Defense

Release Solely Caused by TP

No direct and indirect contractual relationship

ILO Exception to this element

Due care Due care

Precaution against forseeable acts or omissions

Innocent Landowner

Did not know or have reason to know

Exercise appropriate inquiry into past use and ownership

Due Care Due Care

Precautions

Continuing Obligations

BFPP

Pre-Existing Release

No Affiliation

AAI

Post-Closing Continuing Obligations

Appropriate Care

Cooperation

Compliance

Notification

Allocation

Exercise of Due Care Element of Gore Factors

Recent Due Care Caselaw

500 Associates, Inc v Vt American Corp., 2011 U.S. Dist. LEXIS 11724 (W.D.KY 2/4/11)

New York v Adamowicz, 2011 U.S. Dist. LEXIS 102988 (E.D.N.Y. 9/13/11)102988 (E.D.N.Y. 9/13/11)

NYSEG v First Energy Corp, 2011 U.S. Dist. LEXIS 74216 (N.D.N.Y. 7/11/11)

Sisters of Notre Dame De Namur v. Garnett-Murray, 2012 U.S. Dist. LEXIS 78747 (N.D. Cal. 6/6/12)

500 Assoc v Vermont American Corp

1986 Purchase- Cursory ESA detects metals (chromium)

1991ESA detects metals and VOCs No disclosure

Sale falls through

1998 Enforcement Action

2002 KY ALJ Finds Joint Liability

2006 Ky Ct Appeal Holds No Due Care no precautions when demolishing buildings

Left exposed soils

Failure to secure property

No disclosure to state

New York v Adamowicz

1985 County orders discharges to leaching pools to cease

managing partnership spends $1MM to clean-out pools and investigateout pools and investigate

1990- prtship takes title after T files bankruptcy

1994- declines DEC request to remediate site

DEC $4MM response costs

Ct finds no due care. LL had rt to access pty and not new owner

NYSEG

Two MGP Sites

Cortland site- No due care

Owner engages in protracted negotiations with NYSEG to sell property to remove gas holders.

Delays PRAP and cleanup

allows contamination to migrate.

$179K in past costs and pay 6.72% of future costs

Elmira-satisfied due care

Protracted negotiations but provided access to NYSEG and cooperated

Significant BFPP Caselaw

Voggenthaler v Maryland Square LLC, 2013 U.S. App. LEXIS 15307 (9th Cir. 7/26/13)

Ashley II of Charleston V PCS Nitrogen, 2013 U.S. App. LEXIS 6815 (4th Cir. 4/4/13)U.S. App. LEXIS 6815 (4th Cir. 4/4/13)

3000 E. Imperial, LLC v Robertshaw Controls, 2010 U.S. Dist. LEXIS 138661 (C.D. Cal. 12/29/10)

Saline River Properties v Johnson Controls, 2011 U.S. Dis. Lexis 119516 (E.D. Mi. 10/17/11)

The Ashley Players

Planter Fertilizer & Phosphate Company/ Ross Development (1906 to 1966)

Columbia Nitrogen Corp/PCS (1966 to 1972)

Holcombe and Fair (1987-2002) Holcombe and Fair (1987-2002)

Robin Hood II (1992 to present)

Allwaste Tank Cleaning (1989-2008)-2.99 acres

Ashley II (2003- 27.62 acres)

Ashley II(2008-2.99 acres)

Ashley Players Contd

Joint Venture Partners Cherokee Investment Partners ($51MM)

Greenhawk Partners Craig Briner

Jim Lumsden

Robert Clement

$28MM Line of Credit Lender- Bank of America

Invoices issued to Cherokee Investment Partners/Ashley II and submitted to NC HQ

Site Operations

sulfuric acid manufactured in acid chambers and piped to southern portion of facility to react with phosphate rock

Pyrite ore used as fuel stock for sulfuric acid Pyrite ore used as fuel stock for sulfuric acid

Acid chambers lined with lead with hole in bottom for cleanouts

Site Operations Contd

Pyrite slag used for road stabilization

Lead sludge from acid chambers rinsed onto land and washed into ditches and marsh

Sulfuric acid leaks from piping Sulfuric acid leaks from piping

Fluorosilic acid and lead effluent discharged to ditches

1963 fire destroyed portion of acid plant

1971 storm damaged roof of new acid plant

Allwaste rinse water from cleaning bays held in sumps and trenches prior to treatment and discharge

Environmental Conditions

Widespread lead and arsenic

Carcinogenic PAHs

Low pH conditions throughout site that mobilized metalsmobilized metals

Site covered with limestone run of crusher (ROC) in phases

Environmental Investigations

GEL 1990 Report detects metals in test pits and potential for contaminated stormwater. Disclosed to RHCE but not DHEC

1992 H&F design detention plans w/o DHEC 1992 H&F design detention plans w/o DHEC approval

1993-98 EPA PA/SI identifies need for remedial actions

1996-2000 Ross begins selling assets and distributes proceeds to shareholders

Environmental Contd

1999 H&F implement surface water management plan to avoid removal action. Not submitted to EPA for approval but EPA says improved conditions

1999-2001 EPA RI

2002 EPA FS

8/2003 GEL Phase 1 incorporates FS

11/2003 Ashley notifies EPA of pending sale and requests if EPA desires any cooperation

Environmental Contd

2004 GEL pre-design and characterization

2004 Responds to EPA Information Request

2006 Scott Freeman walks Allwaste site and observes staining and debris piles

2007 Ashley grants EPA access 2007 Ashley grants EPA access

2007 GEL Investigation of Allwaste parcel

2008 GEL update

2008 PCS expert observes eroded ROC

2008 Ashley demolishes structures at Allwaste parcel

Environmental Contd

2008 Ashley does not follow its protocols for concrete slabs

2008- Ashley removes debris piles

2008- Ashley sends letter to EPA on Cherokee 2008- Ashley sends letter to EPA on Cherokee letterhead that:

pursuing claim agst H&F would discourage future development

Emphasized its resources

Cost recovery action by Ashley should provide adequate consideration to secure release of H&F

Environmental Contd

2009 evaluation of sumps and cracks of concrete pads is later found to be insufficient by court

2009 Ashley removal action estimate is $8.021MM $8.021MM

District Court Findings of Law

Court rejects divisibility argument

Ashley response actions found consistent with NCP despite absence of formal agreement with EPA or stateEPA or state

Current operators do not need to direct operations related to pollution to be liable for response costs

Exercise of due care includes informing authorities of discovery of contamination

Allocation

Ross 45% ($87.4K to Ashley)

PCS 30% ($58.3K to Ashley)

H & F 16%

RHCE 1% ($2K to Ashley) RHCE 1% ($2K to Ashley)

Allwaste 3%

Ashley 5%

Ashley BFPP defense

Investigation satisfied AAI

Ashley did not exercise appropriate care for

sumps,

debris pile debris pile

maintenance of ROC

Removal of pumps exacerbated conditions

Satisfied cooperation, compliance with requests and access

Ashley is PRP

Ashley did not prove that no disposals occurred after its acquisition

Effort to discourage EPA from pursuing H & F was improper affiliationwas improper affiliation

Voggenthaler Cast

Herman Kishner Trust (1968 to 2002)

Shapiro Bros. Investment Co. (1968-1984)

DCI USA, Inc (1984-2000)

Clark County School District (2001-2005)

PCE detected in the soil and groundwater PCE detected in the soil and groundwater

Off-site plume detected in 2003

Maryland Square LLC acquires 2005 and demolished dry cleaner in 2006

PRP notices 2006

Residents lawsuit 2008

Voggenthaler Contd

Unnotarized affidavit that County had disclosed PCE contamination.

AAI not required since contamination was in public records

9th Cir says unnotarized affidavit not establish the BFPP 9th Cir says unnotarized affidavit not establish the BFPP Consultant reviewed files, prepared report but not if the

consultant was EP or description of assessment

did not identify any steps to remove the contaminated soil or limit the spread of PCE

NDEP forced to remediate contamination 6 years after building demolished

Remanded

Lessons

LLPs are legal defenses

State VCPs

Recommendations in Phase 1 Reports

DisclosureDisclosure

Self-Implementing Nature of BFPP

Look For Sensitive Receptors

Exercise Extreme Care For Grading Actions

Discuss Remedial Schedule With Lender

Impact of Due Care on Apportionment

EPA Guidance

Revise Common Elements Guidance

What is Due Care/Appropriate Care

Meaning of No Affiliation

Revise BFPP Guidance Revise BFPP Guidance

Bring Back PPAs?

Phase 1 Recommendations

ASTM E1527

Opinion and Conclusion On RECs

RECs vs BERs

Sensitive Receptors Sensitive Receptors

Recommendations

Not Required

Make Sure Implement Recommendations

Coordinate Schedule With Lender

Brownfield Development Brownfield Development Implications: Project ScheduleImplications: Project Schedule

Site Control vs. Site OwnershipSite Control vs. Site Ownership

Lead time for assemblageLead time for assemblage

How long before constructionHow long before construction

Phased constructionPhased construction Phased constructionPhased construction

BFPP IssuesBFPP Issues

No disposals No disposals

Appropriate CareAppropriate Care

Phase 1 Recommendations Phase 1 Recommendations

Diligence IssuesDiligence Issues--examine examine assumptionsassumptions

Historic operationsHistoric operations

Chemical and waste handling areasChemical and waste handling areas

SumpsSumps

SeparatorsSeparatorsSeparatorsSeparators

PipingPiping

Illegal or unknown disposalIllegal or unknown disposal

RailyardsRailyards

FiresFires

Riverfront property (NRD?)Riverfront property (NRD?)

Various Environmental IssuesVarious Environmental Issues

Asbestos in soilAsbestos in soil

Pipe Under Loading DockPipe Under Loading Dock

External sumpExternal sump

Interior sumpInterior sump

Sump pump outSump pump out

Abandoned drainage Abandoned drainage

Illegal discharge PointIllegal discharge Point

Broken Pipe Discharging To RiverBroken Pipe Discharging To River

Exterior Pit Exterior Pit

Open PitOpen Pit

Floor DrainFloor Drain

Boiler With Friable AsbestosBoiler With Friable Asbestos

Drums hidden in weedsDrums hidden in weeds

Buried DrumsBuried Drums

Abandoned Building IssuesAbandoned Building Issues

Drums, tanks, transformersDrums, tanks, transformers

UtilitiesUtilities

WinterizingWinterizing Bursting pipes and drumsBursting pipes and drums Bursting pipes and drumsBursting pipes and drums

SecuritySecurity Exterior lights, interior cameras, guards, Exterior lights, interior cameras, guards,

boardupsboardups

InspectionsInspections

Moisture (roof and windows)Moisture (roof and windows)

Unsecured BuildingUnsecured Building

Skate board rampSkate board ramp

Gang GraffitiGang Graffiti

Copper piping vandalismCopper piping vandalism

Broken Window with Friable ACM and Broken Window with Friable ACM and DrumsDrums

Snow in building from collapsed roofSnow in building from collapsed roof

Ice in buildingIce in building

Frozen chemical vatFrozen chemical vat

Drums sitting in rainwaterDrums sitting in rainwater

Drums in snowDrums in snow

Corroding tanksCorroding tanks

Overflowing Sump and Caustic Waste Overflowing Sump and Caustic Waste DrumsDrums

Not Snow but corrosion from leaking ASTNot Snow but corrosion from leaking AST

Leaking Battery acid Leaking Battery acid

Vacant Land Becomes Dumping GroundVacant Land Becomes Dumping Ground

Demolition/Construction Demolition/Construction IssuesIssues

Contaminated Debris (e.g., PCBs in concrete)Contaminated Debris (e.g., PCBs in concrete) LBP/ACMLBP/ACM M/E liquidationM/E liquidation Drums and waste disposalDrums and waste disposal Animals Squatters (e.g., bats, endangered Animals Squatters (e.g., bats, endangered Animals Squatters (e.g., bats, endangered Animals Squatters (e.g., bats, endangered

species)species) Waste Aggregators (destruction/disposal Waste Aggregators (destruction/disposal

certificate)certificate) Waste Brokers (nonWaste Brokers (non--owned site coverage)owned site coverage) RecyclingRecycling--remember remember Burlington NorthernBurlington Northern Phased ConstructionPhased Construction Fill MaterialFill Material

Asbestos building debrisAsbestos building debris

Dust SuppressionDust Suppression

PCBPCB--contaminated Concrete Debriscontaminated Concrete Debris

PCBs From Drained TransformersPCBs From Drained Transformers

Other Significant Brownfield Other Significant Brownfield CaselawCaselaw

AMCAL MultiAMCAL Multi--Housing v Pacific Clay ProdsHousing v Pacific Clay Prods, , 457 F. Supp. 2d 1016 (C.D. Ca. 2006)457 F. Supp. 2d 1016 (C.D. Ca. 2006)

U.S. v HoneywellU.S. v Honeywell, 542 F. Supp. 2d 1188 (E.D. , 542 F. Supp. 2d 1188 (E.D. Ca. 2008)Ca. 2008)Bonnieview Homes Assoc v Woodmont Bonnieview Homes Assoc v Woodmont Bonnieview Homes Assoc v Woodmont Bonnieview Homes Assoc v Woodmont BuildersBuilders, 655 F. Supp. 2d 473 (D. N.J. 2009), 655 F. Supp. 2d 473 (D. N.J. 2009)

Ford Motor Co v Edgewood PropsFord Motor Co v Edgewood Props., 2012 U.S. ., 2012 U.S. Dist. LEXIS 125197 (D. N.J. 8/31/12Dist. LEXIS 125197 (D. N.J. 8/31/12))