In 1980, Congress enacted the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), frequently referred to as Superfund. This legislation was passed in response to mounting concerns regarding releases or threatened releases of hazardous substances that harm the general public. This legislation consisted of policies, procedures, and mandates for entities to clean-up contaminated sites, while providing a liability framework for current and past owners of contaminated sites. CERCLA was amended in 1986 and again in 2002 to create affirmative defenses for owners and operators of contaminated land to encourage environmental remediation. To incentivize companies to purchase and redevelop contaminated properties, the following defenses for landowners and purchasers were created:
- Bona fide prospective purchaser (BFPP): This defense allows entities to acquire property knowing, or having reason to know, of contamination on the property if they: (a) acquire property after January 11, 2002, (b) do not impede the performance of a response action or natural resource restoration, and (c) and meet the threshold criteria and ongoing obligations outlined in the statute;
- Innocent landowner: Similar to the BFPP, the innocent landowner defense allows purchasers who acquire property without knowledge of contamination and who have no reason to know about the contamination; and
- Contiguous property owner: This defense protects landowners who own property that is or may be contaminated, but who are not the original source of the hazardous substance contamination. This protects parties who are victims of contamination from a neighboring property.
It is highly advisable for entities to obtain BFPP status and in order to do so, entities must comply with the All Appropriate Inquiries Rule, also known as the AAI Rule. This rule requires, at a minimum, entities seeking liability defense to conduct a Phase I Environmental Site Assessment (ESA). ESAs are conducted by environmental consultants and must rigorously comply with the requirements of the American Society for Testing and Materials, known as the ASTM E 1527-13. Historically, some companies have failed to conduct thoroughly complaint ESAs, but companies have been reminded once again—thanks to a recent decision by the U.S. District Court for the Southern District of Indiana—that ASTM compliance is of paramount importance.
In Von Duprin LLC v. Moran Elec. Serv., Inc., No. 116CV01942TWPDML, 2020 WL 1501876 (S.D. Ind. Mar. 30, 2020), the district court grappled with multiple attempts by defendants to claim BFPP protections. The plaintiff, Von Duprin LLC, owned multiple properties that had been contaminated by various chemical substances. Plaintiff attempted to remedy the contamination and, in response, sued the current owners and operators of the properties to recover the cost of the remediation effort. The defendants sought BFPP status, but the court denied it. In two different decisions the court drove home the point that it is imperative that any entity relying on BFPP status as a defense must not take an ESA at face-value and should ensure that each ESA is analyzed critically on a case-by-case basis.
Anyone that retains an environmental consultant for the purpose of producing ESAs should have legal counsel review it to ensure that the ESAs are AAI compliant in every manner.