As always, nothing in this blog is intended as legal advice for a specific situation or for general application; and it should not be used or relied upon in that manner. Good legal advice can only be provided with respect to a specific situation. My blog is an opportunity to share my views on various generic issues which I have encountered, and as such, are intended solely as “food for thought”.
This blog series features short answers to a number of common questions I have encountered pertaining to scope of Phase I investigations, and potential liabilities for historic UST contamination or other site contamination. For anyone interested in diving into the issues in more detail, we will begin a related 90 minute Zoom Roundtable series, in mid-June ( 2021), covering each of the FAQ areas covered in the blogs. If you would be interested in participating, just send me an email at MitchellBurack@BurackEnvironmentalLaw.com.
1. Question: A Buyer’s Phase I report indicates that historic industrial areas on the property reportedly had “RCRA Closure” several decades ago, before it was bought by the current owner. Does either the Seller or the buyer need to worry?
Answer—Maybe…
· All RCRA closures are not equally thorough. It is common for closure of areas such as pits below equipment, to be closed by cleaning and filling, without extensive sampling. This is especially true in the early to mid 1980s, when the RCRA program was starting up.
· An important value point for RCRA closure documentation, can be the documentation indicating the location of historic operational areas involved with hazardous substances. Detailed evaluation of any such information can be critical for assessing the need for follow up sampling; but such evaluation will not necessarily be considered as part of the original Phase I investigation scope of work.
· If there is a continuing contamination issue, the current owner can be liable to address it despite not having caused it; once they no longer own the property, liability would become less clear. A new owner would inherit the same no-fault liability that the seller had.
2. Question: We are purchasing a property as part of the business assets of Seller’s operations there. Do we need indemnity for any liability as a “successor” for future property damage claims by a neighboring resident? Health injury claims due to historic vapor intrusion?
Answer--Yes—because any future claimant will undoubtedly take the legal position that you are a successor; and the cost of legal defense of such claims can be substantial—regardless of outcome in court.
· Such claims also frequently arise when Superfund site notice letters are issued to 1980s-era customers of a landfill or drum recycler, and/or their presumed successors.
· Predicting final legal outcome is not an exact science—but there are several cases which illustrate the possibility of being held liable, based on perceived “continuation” of Seller’s business, or absorption of a business in a manner which is perceived as a “de facto merger”.
· When relying on a contractual indemnity it is always wise to consider the the likely future resources of the Seller, as well as the likelihood of future environmental claims, based on due diligence information.
3. Question: We received a demand letter from the owner of a former drum reclamation plant property, which we have never heard of, m, being remediated under a CERCLA settlement, which we have never even heard of. They say we are a liable party as the successor to the company who owned and operated our property 35 years ago and sent “RCRA-empty” drums to the reclamation facility. Can they do that?
Answer-- That is a common tactic reflecting claimants’ strategy of roping everyone possible into a PRP group, regardless of factual uncertainties and possible legal defenses.
· EPA and private settling PRPs frequently create a list of PRPs from available customer lists and receipts from 35 years ago, and do a quick check to see if the company is still in business , if any other company is at that address, or if any other company looks like a possible successor. They assume that any letter recipient having a plausible objection to characterization as successor, will make that known; and if their argument is very convincing, perhaps they can be dleted argue the point and submit appropriate documentation.
· As for the ultimate liability result—many clients are surprised to hear that environmental law applies a somewhat broader standard of successor liability than the traditional rules applicable to a purchase of “assets only”. It is extremely common to see companies who purchased a business in its entirety, including all related real estate, and continued similar operations there, using the business name and invoice stationery , and employing many of the same managers, all without (or despite) counsel advice. If substantially all of the assets of the company have been acquired, there is a potentially strong case for successor liability, under such facts; and it may be challenging to prove otherwise.