Practice and Ethical Issues for Environmental Lawyers

Practice and Ethical Issues for Environmental Lawyers Alan J. Knauf, Esq. Knauf Shaw LLP 1400 Crossroads Bldg. 2 State Street Rochester, NY 14614 (585) 546-8430 aknauf@nyenvlaw.com

Practice and Ethical Issues Representing clients who have a spill found on their property plan to purchase or develop contaminated property

Spill Reporting Requirements

CERCLA 103(a) Requires immediate reporting by any person in charge of a vessel or an offshore or onshore facility... as soon as he or she has knowledge, to the National Response Center at (800) 424-8802. Must report any release of a reportable quantity within a 24- hour period of a CERCLA hazardous substance as listed at 40 C.F.R. 302.4. Exemptions include: federally-permitted releases, reported continuous releases, exposure to persons solely within a workplace, normal application of fertilizer.

CERCLA 103(c) Report to EPA was required by June 9, 1981 by any person who owns or operates or who at the time of disposal owned or operated a facility at which hazardous substances... are or have been stored, treated, or disposed of, with no RCRA permit. Deadline has long since passed, and in spite of EPA interpretations to the contrary, district courts have held this to be a one-time reporting requirement. Any person who knowingly fails to provide the notice shall not be entitled to any limitation of liability or to any defenses to liability set out in CERCLA 107.

SARA Title III Owner or operator of a facility must immediately report a release or spill of a reportable quantity of a CERCLA hazardous substance or an extremely hazardous substance designated by 40 C.F.R. 355.40(a) to state and local officials. In New York call DEC spill hotline at (800) 457-7362. For local officials normally call 911. Does not apply to: exposure to persons solely within the boundaries of the facility. federally-permitted releases. Reported continuous release.

RCRA Facility Reporting If a hazardous waste TSDF has a release, fire or explosion by which a hazardous waste could threaten human health or the environment outside the facility, federal and state regulations require that its emergency coordinator must immediately: Notify local authorities. Call the National Response Center or the federal on-scene coordinator designated under NCP. Call DEC spill hotline.

Clean Water Act 311(b)(5) Any person in charge of a vessel or of an onshore facility or an offshore facility shall, as soon as he has knowledge of any discharge of oil or a hazardous substance from such vessel or facility of a harmful quantity must immediately notify the appropriate federal agency. Hazardous substances and their reportable quantities are designated by 40 C.F.R. Part 116. For oil, must report a quantity that violates an applicable water quality standard, or which causes a sheen on the water must be reported to the National Response Center.

Storage Tank Spills

Federal UST Regulations 40 C.F.R. Part 280 covers USTs of at least 110 gallons that store petroleum or any CERCLA hazardous substance, but not hazardous wastes. Owners and operators of the UST system must report spill of petroleum of either >25 gallons or causing a sheen, or RQ of a CERCLA hazardous substance, within 24 hours to EPA and DEC. Must report spills <25 gallons of petroleum that cannot be cleaned up within 24 hours.

New York Petroleum Bulk Storage Regulations Applicable to all above-ground and underground petroleum storage facilities with a combined storage capacity of over 1,100 gallons. Any person with knowledge of a spill, leak or discharge of petroleum must report the incident to the department within two hours of discovery (including results of any inventory record, test or inspection) by calling DEC spill hotline.

New York Oil Spill Act Any person responsible for causing a discharge shall immediately notify the department pursuant to rules and regulations established by the department, but in no case later than two hours after the discharge. Navigation Law 175. Includes [a]ny person responsible for causing a discharge, the owner or operator of any facility from which petroleum has been discharged, and any person who has actual or constructive control of such petroleum immediately prior to such discharge. 17 N.Y.C.R.R. 32.3. Not limited to storage tanks.

ECL 17-1743 Any person who is the owner of or in actual or constructive possession or control of more than 1,100 gallons, in bulk, of any liquid, including petroleum, which if released, discharged or spilled would or would be likely to pollute the lands or waters of the state, including the groundwaters thereof shall, as soon as he has knowledge of the release, discharge or spill of any part of such liquid in his possession or control onto the lands or into the waters of the state including the groundwaters thereof immediately notify the department.

6 N.Y.C.R.R. Part 595 Must report to DEC spill hotline releases of designated quantities of hazardous substances listed at 6 N.Y.C.R.R. Part 597 within two hours if: an owner or operator of a storage facility, any person in a contractual relationship with an owner or operator who inspects, tests, or repairs any portion of a storage facility which is or was used for the storage of hazardous substances, any person in actual or constructive control or possession of a hazardous substance prior to its release, any employee, agent or representative of such persons.

Historic Spills

Historic Spills Retroactivity not clear but safe to assume. Petroleum UST or bulk storage tanks regulations may not apply, but Oil Spill Act requirement probably does. Hazardous Substances CERCLA 103(c) could still apply. RCRA TSDF requirements apply to emergency coordinator. While CERCLA RQs measured within 24 hours, Part 597 RQs are not, so probably must report RQ.

Who Must Report a Spill? Most spill reporting requirements apply to owner or operator, not apply their attorney. RCRA requirement only applies to emergency coordinator. Persons in actual or constructive possession or control, ECL 17-1743, or contractor who inspects, tests or repairs, 6 N.Y.C.R.R. 595.3(a)(2), may include environmental consultant or tank tester, but not attorney.

Do I need to report a client s spill? Attorney may be: any person with knowledge of a spill who is required to report a release of petroleum from a bulk storage facility under 6 N.Y.C.R.R. 613.8. an agent or representative of an owner or operator required to report a release of hazardous substances under 6 N.Y.C.R.R. 595.3(a)(1).

Middleton, Kontokosta Associates Donald Middleton acted on behalf of friend at bank who held mortgage. Watched soil borings near a UST. Smelled petroleum in dirt.

Commissioner s Decision Middleton was required to report under 6 N.Y.C.R.R. 613.8. The term any person in 613.8 should be given a broad, not limited or restrictive, interpretation. The reporting duty is on everyone with knowledge of the spill. Purpose is to enable stoppage of ongoing contamination as quickly as possible after detection of a spill.

Commissioner s Decision Middleton is not a professional engineer, and therefore cannot claim that he is under a professional obligation not to disclose under the Code of Ethics for Engineers. Nor is Mr. Middleton an attorney, and therefore the attorney-client privilege could not be asserted as a basis for his nondisclosure.

Final Outcome Signed Consent Order for $1,000 fine What about the contractor? The bank? Commissioner Cahill wanted to make a precedent, and he did!

Draft New Regulations A facility must report every spill to the Department s Spill Hotline (518-457-7362) within two hours. 613-2.4(d)(1). Any provision of this Part that imposes a requirement on a facility imposes that requirement on every operator and every tank system owner at the facility, unless expressly stated otherwise. 613-1.2(d). Reportable quantities limited to 24 hours. 597.4.

Rule 1.6 Prohibits attorneys from revealing confidential information of a client, Defined as information gained during or relating to the representation of a client, whatever its source, that is (a) protected by the attorney-client privilege, (b) likely to be embarrassing or detrimental to the client if disclosed, or (c) information that the client has requested be kept confidential. Encompasses secrets and confidences.

Rule 1.6(b) Exceptions May reveal or use confidential information to the extent that the lawyer reasonably believes necessary, (2) to prevent the client from committing a crime. (6) when permitted or required under these Rules or to comply with other law or court order. May is not mandatory, and there is no affirmative burden... to disclose. Nassau Co. 2001-07. Does not relieve an attorney from an independent obligation to comply with the law.

Required under law - Rule 1.6(b)(6) Under Middleton, the spill reporting by a lawyer may be required by law. Social Services Law 413 requires social service professionals to report suspected child abuse. N.Y. City 1997-2, lawyer employed by social services organization, who provided legal services to minor clients, had a duty to report abuse without authorization by the client. If the lawyer concludes that the law requires the lawyer to report suspected child abuse or mistreatment in certain classes of cases, the lawyer may make such a report when the law so requires. If the lawyer is not certain that he has a legal obligation to disclose otherwise confidential information, however, the lawyer should take available legal steps to seek clarification of the law before making disclosure.

Intention to commit crime - Rule 1.6(b)(2) People v. DePallo, 96 N.Y.2d 437 (2001) - attorney acted properly in revealing the intent of his client to commit perjury after counseling his client not to perjure himself. People v. Andrades, 4 N.Y.3d 355 (2005) - after failing to convince his client not to perjure himself, attorney advised judge that he had an ethical dilemma about his client s upcoming testimony, without explicitly revealing client s plan to lie.

Continuing Violation N.Y. City 2002-1 no requirement to report client s continued possession of stolen property. [M]ay not disclose even though the effects may be continuing where that criminal act is the very subject on which the client is consulting the attorney and the client's completed conduct has satisfied all elements of the crime. We conclude a different balance, and outcome, exists for emergencies which involve the prevention of imminent serious bodily injury or death. In these situations, which the Committee anticipates will be rarely encountered, client confidentiality must yield to the lawyer's decision to protect human life.

Rule 1.2(d) Rule 1.2(d) states that [a] lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is illegal or fraudulent. N.Y. State 781 - where a lawyer certified a submission in a litigated matter, and later learned it was fraudulent, required to seek to withdraw it, and could reveal the basis to the extent necessary.

What is a Lawyer to Do? Is a petroleum spill an emergency so a continuing crime can be reported? How do you get a ruling in two hours? Do you tell NYSDEC about an unspecified problem and withdraw? Best to try to convince client to report. Put your cell phone number on access agreements so you get immediate notice. Malpractice for reporting a spill unnecessarily?

My View If the lawyer learns about either a petroleum spill covered by 6 N.Y.C.R.R. 613.8, or a release of hazardous substances at their client s facility covered by 6 N.Y.C.R.R. 595.3(a)(1), and the client refuses to report, the lawyer falls under the class of persons ( any person or an agent ) required to report, and cannot merely keep secret.

General Duty to Disclose Under State Law [C]riminalizing a citizen s mere failure to report a crime to the police is incongruous with our nation's system of justice. People v. Williams, 20 A.D.3d 72 (1st Dep t 2005). New York has never recognized common law crime of misprision (the failure to report a crime).

18 U.S.C. 4 - Misprision of a Felony Whoever, having knowledge of the actual commission of a felony cognizable by a court of the United States, conceals and does not as soon as possible make known the same to some judge or other person in civil or military authority under the United States, shall be fined under this title or imprisoned not more than three years, or both.

Elements of Misprision 1) the principal committed and completed the alleged felony; 2) defendant had full knowledge of that fact; 3) defendant failed to notify the authorities; and 4) defendant took steps to conceal the crime. U.S. v. Cefalu, 85 F.3d 964 (2d Cir. 1996).

Is Assisting a Client Concealment? Failure to report a spill may be a felony. Must affirmatively conceal the felony committed by another. Mere silence, without some affirmative act, is insufficient. Lawyer who assists client that does not report may be concealing.

Accounting Requirements Companies subject to SEC rules must report environmental liabilities under GAAP. Smaller companies still need accurate certified financials for their bank. Fraud cases for misstating environmental liabilities: ConArga Foods - $45 million fine, $700,000 for CFO. Safety-Kleen CFO guilty of securities and bank fraud. Ashland cease and desist order from SEC.

Mothballed Sites

Bottom Line Lawyer should strive to convince their client to report a spill. If they refuse, the lawyer probably should make a report unless clearly exempt. Do we have a duty to help protect the environment?

Report That Spill? A consultant is doing a Phase II study for a potential purchaser. She finds benzene and xylene in a groundwater sample at a location near a historic gasoline station where the tanks were reportedly closed in 1979.

Report That Spill? A worker digging to remove a sidewalk at a factory finds discolored soil. The plant manager arranges for a lab test, which detects perc.

Materials Subject to Discovery Privileges Experts Data

Attorney/Client Privilege CPLR 4503 protects those communications made in confidence to an attorney for the purpose of seeking professional advice. Matter of Jacqueline F., 47 N.Y.2d 215, 219, 417 N.Y.S.2d 884, 887 (1979). FRE Rule 501 - federal common law governs these privileges (except that for state claims/defenses) but generally same.

Attorney Work Product CPLR 3101(c) exempts the work product of an attorney from disclosure, which includes memoranda, correspondence, mental impressions and personal beliefs conducted, prepared or held by the attorney. M&T Trust Co. v. Servotronics, Inc., 132 A.D.2d 392, 522 N.Y.S.2d 999, 1002 (4 th Dep t 1987). Not if material could have been prepared by a lay person.

Material Prepared for Litigation CPLR 3101(d)(2) shields materials prepared in anticipation of litigation unless undue hardship and substantial need. Includes non-party witness statements. CPLR 3101(g) allows discovery of accident reports, but not investigation or accident reports prepared in the ordinary course of business. FRCP Rule 26(b)(3) provides similar protection in federal court.

Expert Disclosure State Court CPLR 3101(d) - must disclose: the subject matter on which each expert is expected to testify the substance of the facts and opinions on which each expert is expected to testify qualifications of each expert witness summary of the grounds for each expert s opinion, Does not require expert report

Expert Disclosure Federal Court FRCP Rule 26(a)(2)(B) requires testifying experts to reports, including a complete statement of all opinions the witness will express and the basis and reasons for them, the data or other information considered by the witness in forming them, any exhibits that will be used to summarize or support them.

Expert Disclosure Federal Court Rule 26(b)(4)(B) now provides that draft expert reports are not discoverable. Communications between a lawyer and expert are privileged, except for facts, data or assumptions given by the lawyer, or matters related to compensation. Rule 26(b)(4)(C). Non-testifying experts generally shielded absent exceptional circumstances, Rule 26(b)(4)(D)(ii).

Discovery of Data Data is presumed discoverable. If federal court expert relies upon it, it is clearly discoverable under FRCP Rule 26(a)(2)(B)(ii). Dunning v. Shell Oil Co., 57 A.D.2d 16, 393 N.Y.S.2d 129 (3d Dep t 1977). Occidental Chemical Corp. v. Ohm Remediation Services Corp., 45 ERC 1821 (W.D.N.Y. 1997). Forensic testing interpretations not data.

Spoliation Destruction of evidence that will fatally compromise the defense or leave the defendants without the means to defend the action. Ifraimov v. Phoenix Industrial Gas, LLC, 4 A.D.3d 332, 333, 772 N.Y.S.2d 78, 79 (2d Dep t 2004).

Sanctions for Spoliation Dismiss Pleadings. Even for mere negligence. Even if not yet a party in litigation. Negative Inference.

Innis Arden Innis Arden Golf Club v. Pitney Bowes, Inc., 257 F.R.D. 334 (D. Conn. 2009) Soil samples not preserved Precluded admission of the data or other evidence plaintiff gained from the soil samples Duty to preserve evidence arose by the time counsel was actively involved in the investigation and preparation for a cost recovery action Expert opinion struck, case dismissed, attorneys fees awarded.

Evidence Preservation Preserve samples and tanks/pipes Invite PRPs to test Forensic testing before too late

Site Access Access Agreements Discovery Warrantless Entry Unauthorized Entry

Access Agreements Parties should enter into site access agreement (if not in a purchase and sale contract) that addresses: Liability for accidents Confidentiality Spill reporting (call attorney s cell phone first!) Insurance coverage Split samples and data and report sharing Utilities/subsurface conditions Restoration of site Defense and indemnity for work

Discovery Federal Court FRCP Rule 34(a)(2) allows entry onto designated land or other property possessed or controlled by the responding party, so that the requesting party may inspect, measure, survey, photograph, test, or sample the property or any designated object or operation on it. Nonparties may be compelled by subpoena. FRCP Rule 34(c).

Discovery State Court CPLR 3120(1)(ii) permit[s] entry upon designated land or other property in the possession, custody or control of the party or person served for the purpose of inspecting, measuring, surveying, sampling, testing, photographing or recording by motion pictures or otherwise the property or any specifically designated object or operation thereon. Pre-action discovery allowed to preserve information. CPLR 3102(c).

Access by Statutory Authority CERCLA 104(e)(4)(A) authorizes entry by EPA if there is a reasonable basis to believe there may be a release or threat of release of a hazardous substance or pollutant or contaminant. ECL 27-1309(3) allows entry by NYSDEC onto State Superfund site and nearby to inspect and sample wastes, soils, air, surface water, and groundwater. Town Law 32-a allows entry by town engineers to make surveys, examinations or investigations, including the making of test pits and test borings.

U.S. and N.Y. Constitutions 4th Amendment and NY Constitution Article 1, 12 prohibit warrantless searches, and require probable cause prior to the issuance of a warrant. Agencies generally cannot enter without a warrant. Marshall v. Barlow s, Inc., 436 U.S. 307 (1978). Administrative search warrant if reasonable standards satisfied. Camara v. Municipal Court, 387 U.S. 523 (1967).

Warrantless Entry Warrantless entry may be justified in an emergency. Warrantless inspections may be allowed for closely regulated industries where there is a reduced expectation of privacy. Less expectation of privacy in open fields.

Unauthorized Entry Unauthorized entry for testing is a trespass. May recover damages for resulting response costs. Benderson v. Ulrich/34 Chestnut Street, LLC, 57 A.D.3d 1417, 871 N.Y.S.2d 547 (4 th Dep t 2008).

Insurance General liability policies normally have pollution exclusions, although typically between about 1972 and 1987 covered sudden and accidental pollution, and early absolute pollution exclusions leave openings. May obtain environmental impairment liability insurance at the time of closing. If contamination is identified, cost cap insurance may be obtained.

Notice to Insurers Best to give immediate notice to all carriers that may provide coverage. Client s insurer Landowner s insurer Potentially responsible parties Late notice fatal even if no prejudice. Insurance Law 3420(a)(5) eliminates no prejudice rule for policies issued after 1/16/09

Malpractice Issue If you don t notify insurers of client and PRPs, notify your insurer!

Evidence of Coverage An insured must prove, by a preponderance of the evidence, the existence and terms of a lost insurance policy. Gold Fields American Corporation v. Aetna Casualty and Surety Co., 173 Misc.2d 901, 661 N.Y.S.2d 948 (Sup. Ct. N.Y. Co. 1997). May accomplish by secondary evidence: Documentation Witnesses Specimen policies

Claims Against PRP s Insurer Navigation Law 190 allows claims against insurer of discharger. Snyder v. Newcomb, 194 A.D.2d 53, 603 N.Y.S.2d 1010 (4th Dep t 1993). Insurance Law 3420(a)(2) allows claim where judgment unsatisfied for 30 days. Notice may be given to injured party and is not subject to same standards as first party coverage. Disclaimer for late notice by insured doesn t cover injured party. Henner v. Everdry, 74 A.D.3d 1776, 902 N.Y.S.2d 765 (4 th Dep t 2010).

NYSDEC Environmental Audit Policy CP-59 October 16, 2013

Environmental Audit Policy Offers regulated entities opportunity to reduce or waive penalties for violations discovered and disclosed voluntarily, or discovered during pollution prevention ( PP ) or compliance assistance. Incentives to evaluate and incorporate PP and Environmental Management Systems ("EMS"). Discretionary and does not create any rights. Applies to state violations discovered by eligible entities during environmental audit, or by NYSDEC or other agencies during PP or compliance assistance.

Procedure Disclosure must be made to NYSDEC Region, and be: (1) voluntary, (2) written, (3) expeditious, (4) consistent with applicable time frame prescribed by law or regulation. If no time frame is specified, disclosure must be within 30 days of discovery. Corrections must be made within 60 days, unless NYSDEC agrees otherwise or other applicable time frame.

Incentives Penalty Reduction or Waiver Gravity component" of a penalty will be waived. May qualify for a waiver of the economic benefit component if engaged in audits and EMS Up to $5,000, and above that to the extent invest in PP not otherwise required by law. Environmental Audit Agreement Commit to improve compliance through the audits, or to reduce impacts by EMS or PP Public recognition, low priority for inspection

Eligibility Parties Excluded Excludes entities that within the past 5 years, received a notice of Violation, Environmental Conservation Appearance Ticket, Notice of Hearing and Complaint, or an administrative or judicial order, or were subject to a penalty demand and were uncooperative in remedying past violations.

Eligibility Violations Excluded Cited within past five years. Already received a penalty waiver under the Policy within past five years. Administrative or judicial orders. Written agreement. Alleged criminal conduct Discovered through NYSDEC inspection. Reported by public or employee whistle blower" Required to be self-reported. Resulting in a natural resources damage claim, serious actual harm or imminent and substantial endangerment. Significant Non-Compliance by the NPDES or RCRA.

Audit Policy New Owners New owners are eligible for additional penalty reductions and are not negatively affected by the previous non-compliance of prior owners. Given 60 days from the acquisition of the entity or 30 days from discovery, whichever is later, to report.

Environmental Due Diligence Limiting Liability Defenses to CERCLA, ECL and Oil Spill Act claims Contractual Devices Agency Determinations Due Diligence Process Phase I ESAs Access Agreements

Malpractice Issue A lawyer represented a property owner in litigation against several parties in an attempt to recover costs paid to clean settlement, client sued lawyer, claiming that the lawyer failed to pursue all relevant parties in the cleanup lawsuit, failed to conduct necessary discovery, and failed to submit sufficient evidence to avoid summary judgment. Pitsch v. Blandford, 690 N.W.2d 120 (2004), rev. 704 N.W.2d 695 (Mich. 2005).

CERCLA 107(b)(3) Third Party Defense an act or omission of a third party other than one whose act or omission occurs in connection with a contractual relationship including land contracts, deeds, easements, leases, or other instruments transferring title or possession," if: exercised due care with respect to the hazardous substance concerned and took precautions against foreseeable acts or omissions of any such third party and the [foreseeable] consequences Also ECL 27-1323(4), Navigation Law 181(4)(a).

CERCLA 101(35) Innocent Purchaser Defense Innocent purchasers eligible for third party defense since not a "contractual relationship if purchaser: "did not know and had no reason to know" about hazardous substances at the site; or is a government entity which acquired property by involuntary transfer or condemnation; or acquired facility "by inheritance or bequest. Similar defense at ECL 27-1323(4) but not under Oil Spill Act.

CERCLA Innocent Purchaser Requirements Cooperate with governmental response. Comply with relevant land use restrictions. Do not impede institutional controls. To show did not know and had no reason to know" prior to acquisition, must have carried out all appropriate inquiries into the previous ownership and uses of the facility in accordance with generally accepted good commercial and customary standards. All appropriate inquiry means ASTM Standard E1527-05 or E1527-13, or the regulatory standard at 40 C.F.R. Part 312. In the case of residential property a facility inspection and title search that reveal no basis for further investigation.

CERCLA 101(40), 107(r) Bona Fide Prospective Purchaser Can avoid liability for contaminated property All disposal of hazardous substances occurred prior to acquisition. Conduct all appropriate inquiries Cooperate with response actions. Can have knowledge of contamination, but potential windfall lien. EPA has extended to tenants. No state law equivalent.

BFPP Ashley II PCS Nitrogen, Inc. v. Ashley II of Charleston LLC, 714 F.3d 161 (4th Cir. 2013), cert. den d 134 S.Ct. 514 (2013). Ashley unable to use BFPP defense because failed to exercise appropriate care with respect to hazardous substances found at the facility by taking reasonable steps required, including: failures to clean out and fill sumps when related aboveground structures were demolished to monitor and adequately address conditions related to a debris pile and limestone cover

BFPP Ashley II Based upon Ashley II, it may not be easy to qualify for this defense. To be sure, PCS presented no direct evidence that Holcombe and Fair moved or dispersed any contaminated soils. However, CERCLA does not require a smoking gun. Instead, CERCLA liability may be inferred from the totality of the circumstances [and] need not be proven by direct evidence.

Contiguous Property Defense CERCLA 107(q) Not liable if land is contaminated by another property that is "contiguous to or otherwise similarly situated with respect to" property "did not cause, contribute, or consent to the release or threatened release," meet requirements similar to Bona Fide Prospective Purchaser Probably not liable in first place since not an owner or operator. Niagara Mohawk Power Corp. v. Jones Chemical Inc., 315 F.3d 171 (2d Cir. 2003).

CERCLA Municipal Liability Defense for state and local governments that acquire title involuntarily by bankruptcy, tax delinquency, abandonment, or other circumstances, provided they did not cause or contribute to the problem. CERCLA 101(20)(D), 42 U.S.C. 9601(20)(D). Innocent purchaser defense available to government entities that acquired property by involuntary transfer or condemnation. CERCLA 101(35)(A), 42 U.S.C. 9601(35)(A). Defense at ECL 27-1323(2) for public corporations that do not participate in site development, but not in RCRA or Oil Spill Act.

CERCLA Lender Liability An exception from liability is provided under CERCLA 101(20)(A), 42 U.S.C. 9601(20)(A), for persons who hold indicia of ownership principally to protect his security interest. Lender who does not participate in management of the facility is not even considered an owner. CERCLA 101(20)(E)(i), 42 U.S.C. 9601(20)(E)(i). Lenders who take title after foreclosure may also be protected if they seek to sell at the earliest practicable, commercially reasonable time. CERCLA 101(20)(E)(ii), 42 U.S.C. 9601(20)(E)(ii). Similar defenses are at ECL 27-1323(1) but not under Oil Spill Act.

Common Law Under the common law, a purchaser of contaminated property may be liable for cleanup of environmental contamination, even if they did not cause the situation, if upon learning of the nuisance and having a reasonable opportunity to abate it the purchaser fails to do so. New York v. Shore Realty Corp., 759 F.2d 1032, 1050 (2d Cir. 1985). Seller's liability may shift to the buyer if, after a reasonable time after the transfer of title, the new owner fails to take steps necessary to remediate the continuing environmental problem. N.Y. Telephone Co. v. Mobil Oil Corp., 99 A.D.2d 185, 473 N.Y.S.2d 172 (1st Dep't 1984).

Brownfield Cleanup Program Brownfield site includes real property, the redevelopment or reuse of which may be complicated by the presence or potential presence of a contaminant. ECL 27-1405(2). Statute means what it says. Lighthouse Pointe Property Associates LLC v. NYSDEC, 14 N.Y.3d 161, 897 N.Y.S.2d 693 (2010). NYSDEC is looking closely at exceptions to eligibility, classifying applicants as participants liable for off-site contamination not volunteers. Tax credit program sunsets if a COC not received by December 31, 2015.

Brownfield Cleanup Program Upon receipt of COC landowner shall not be liable to the state upon any statutory or common law cause of action, arising out of the presence of any contamination in, on or emanating from the brownfield site that was the subject of such certificate." ECL 27-1421(1). Reopeners where no longer protective of public health or the environment," noncompliance with BCA, fraud, change of use, or failure to develop within five years.

Brownfield Cleanup Program

BCP Governor s Bill Effective 7/1/14 separate BCP eligibility from tangible property credit eligibility so only tangible property credits if properties vacant for at least 15 years or vacant and tax delinquent for 10 years or more; "upside down" properties; and priority economic development projects. Bonus" credits for affordable housing, En Zone or conforming to BOA plan. Need to exceed SCOs or other standards. Not from off-site or prior NYSDEC determination

BCP Governor s Bill Limit site preparation costs to cleanup costs, but include asbestos, lead and PCBs in buildings. BCP EZ - fast-track voluntary cleanup option with liability relief but no tax credits. Terminate sites with BCA before 6/23/08 with no COC by 12/31/15, 6/23/08-7/1/14 that don t get COC by 12/31/17. 5-year time limit to claim tangible property tax. No credits for related parties. Limitation on oversight costs. Repeal insurance remediation tax credit and the real property tax credit.

Malpractice Issue Dixon Ticonderoga Co. v. Estate of William F. O'Connor, 248 F.3d 151 (3d Cir. 2001). After contract signed, New Jersey enacted cleanup law that imposed significant new responsibilities on owners. Client sued the lawyer for the cleanup costs it would incur, because lawyer failed to inform them. Why Do Environmental Lawyers Get Sued for Malpractice? What Can They Do to Avoid a Malpractice Claim? 44 ER 3279 (11/1/13).

Other Agency Determinations Stipulation Agreement for Spills Closure/No Further Action Letter Reopeners No release Consent Orders State Superfund sites EPA Status/Comfort Letters

Contractually Limiting Liability Contingencies Merger As Is Releases and Indemnities Representations and Warranties Asset Purchase Subdivision Mortgages

Contingencies Buyer should ask for pre-closing environmental inspection to conduct Phase I and Phase II Buyer wants ability to cancel for any or no reason, or at least if contamination revealed Seller wants to limit ability to cancel, such as if expected costs do not exceed a set value or exceed cleanup levels Discovery of contamination may trigger reporting. Seller should ensure work meets all appropriate inquiry standards and get work product.

Merger The doctrine of merger is generally a bar to claims arising out of a purchase and sale contract. Deed provisions survive. Must make releases, indemnities, representations and warranties survive. Not a bar to fraud or mistake. Contamination is not a breach of the warranties of the deed.

As Is Clause Only a bar to warranty claims. Not a defense to a statutory claim for environmental contamination like under CERCLA. Umbra U.S.A., Inc. v. Niagara Frontier Transportation Authority, 262 A.D.2d 980, 693 N.Y.S.2d 371 (4th Dep t 1999).

Duty to Clients Barnett v. Schwartz, 47 A.D.3d 197, 848 N.Y.S.2d 663 (2d Dep t 2007). Purchaser of commercial property got verdict against their lawyer because he never informed them of environmental violations or the consequence of the as is clause.

Representations and Warranties Buyer may ask for reps and warranties surviving closing like: Lack of any contamination in excess of applicable and relevant standards No pending or threatened enforcement actions Compliance with environmental laws and regulations. Seller has disclosed all reports and information Reaffirmed at closing, and survive closing. Should not be too broad, so may want exceptions for de minimis or no material adverse effect. Seller may only want to represent to the best of its knowledge.

Releases and Indemnities Buyer wants broad promises to indemnify that survive closing and are assignable with personal guarantees and security. Seller wants to avoid, or limit to material adverse effects that do not survive closing or have a sunset. Seller wants a release of liability that survives or in deed to run with land and put all on notice. Contract assignment might not make the assignee liable without a direct promise. An indemnification, hold harmless or similar agreement is not effective to absolve a responsible party from liability. CERCLA 107(e), 42 U.S.C. 9607(e).

Asset Purchase In State of New York v. National Services Industries, Inc., 352 F.3d 682 (2d Cir. 2003), the Second Circuit abandoned the "substantial continuity" doctrine so that an arms' length sale of assets that does not include real estate may not result in CERCLA or other environmental liability.

Subdivision May be able to subdivide land so only acquire clean portion. Subdivide vertically? Must comply with local subdivision regulations. Planning Boards may not allow subdivision. Might still be owner of facility.

Sole Purpose Entity Sole-purpose LLC or other entity should purchase property that might have environmental issues No guarantee that the principals behind the entity will not have personal liability. New York v. Shore Realty Corp., 759 F.2d 1032 (2d Cir. 1985).

Assignment of Rights to Buyer Normally owner s rights and remedies run with the land. Should provide for any assignment of cost recovery claims against responsible parties or insurers, including who pays attorneys fees and costs. May do Joint Prosecution Agreement. If litigation is pending, can substitute parties. CPLR 1018, FRCP Rule 25(c).

Mortgages Typically require environmental compliance Negotiate unrealistic promises (e.g.no use of any hazardous substance). Can indemnity survive discharge? Yes. Bero Family Partnership v. Elardo, Index No. 13548-09 (Sup. Ct. Monroe Co., August 8, 2013, Taddeo, J.) (on appeal)

Liens Under CERCLA 107(l), 42 U.S.C. 9607(l), EPA can file a lien for its response costs for which a PRP is liable on properties that (A) belong to such person; and (B) are subject to or affected by a removal or remedial action. Navigation Law 181-a allows lien on land: (a) owned by a person liable to the fund for such costs under section one hundred eighty-one of this part at the time a notice of environmental lien is filed; and (b) upon which the discharge occurred. Not superliens that take priority over previously recorded mortgages or perfected liens, beware of unrecovered response costs! In bankruptcy, the government may be able to use secured assets to pay future response costs necessary to address an imminent environmental hazard. 6A Norton Bankruptcy Law and Practice 2d 149:20; Matter of Environmental Waste Control, Inc., 125 B.R. 546 (N.D. Ind. 1991).

Phase I ESA Phase I must be completed within one year of closing, with certain aspects updated within 180 days of closing. 40 C.F.R. 312.20. Must meet ASTM Standard E1527-05 or as of 12/31/13 new Standard E1527-13, or the requirements set forth at 40 C.F.R. 312.20-312.31. Avoid data gaps like FOIL, title search. Must certify to actual purchaser. Ridge Seneca Plaza LLC v. BP Products North America Inc., 2013 U.S. App. LEXIS 21999 (2d Cir. 2013).

Phase I ESA ASTM E1527-13 defines RECs as presence or likely presence of any hazardous substances or petroleum products in, on or at a property: (1) due to any release to the environment; (2) under conditions indicative of a release to the environment; or (3) under conditions that pose a material threat of future release to the environment. May identify an historic recognized environmental condition ("HREC"), or a controlled recognized environmental condition ("CREC").

Conflicts Current Clients Prohibited if representation will involve the lawyer in representing differing interests or significant risk that professional judgment will be adversely affected by the lawyer s own personal interests. Rule 1.7(a). Written waiver allowed if provide competent and diligent representation to each affected client, not prohibited by law, no claims between clients. Rule 1.7(b).

Conflicts - Former Clients Prohibited if same or a substantially related matter where interests are materially adverse to the interests of the former client unless written consent. Rule 1.9(a). Can t use confidential information learned from former representation.

Conflicts Government Lawyers Can t participate in matter handled as a private lawyer. Rule 1.11(d). Can t use public position to obtain advantage for private clients against the public interest. Rule 1.11(f). Public Officers Law 73(8)(a)(i) - for two years after termination as state agency officer or employee appear or practice before such state agency or compensation related to any case, proceeding or application or other matter before such agency.

Malpractice Issues Prudential Insurance Co. of America v. Anodyne Inc., 60 ERC 1346 (S.D. Fla. 2005) conflict later identified. American Special Risk Insurance Co. v. Centerline, 69 F.Supp.2d 944 (E.D. Mich. 1999) waiver by PRPs.

No-Contact Rule Lawyer shall not communicate or cause another to communicate about the subject of the representation with a party the lawyer knows to be represented by another lawyer in the matter, unless the lawyer has the prior consent of the other lawyer or is authorized to do so by law. Rule 4.2. N.Y. State 812 (2007) - Communications with Planning Board trumped by First Amendment right to petition, so could directly communicate with board members, provided that counsel for the planning board is given reasonable advance notice that such communications will occur.

Petroleum Spills Symposium April 29 afternoon Albany Be There!