Environmental Law Insight - Updates and Analysis from Taft's Environmental Trial Lawyers

After losing a nearly three-month trial to the tune of $236 million, Exxon Mobil Corp. (“Exxon”) will appeal the jury verdict issued in the New Hampshire Superior Court.  After a speedy deliberation, the jury found Exxon negligent in its use of methyl tertiary butyl ether (“MTBE”), a chemical Exxon added to its gasoline.  

Although MBTE was added to gasoline to reduce smog, it had the unintended consequence of migrating in groundwater more rapidly and further than gasoline not containing MTBE.  This fact, and a volume of other evidence, convinced the jury that Exxon had created a defective product and that Exxon negligently failed to warn distributors and consumers about MTBE’s hazardous qualities.

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The Fourt Circuit Court of Appeals has ruled that an owner of real property claiming the bona fide prospective purchaser (BFPP) defense under Section 107(r)(1) of CERCLA has the burden of establishing all eight criteria to be protected by the defense. PCS Nitrogen Incorporated v. Ashley II of Charleston LLC, -- F.3d --, 2013 WL 1340018 (4th Cir. 2013).

The decision of the Fourth Circuit in Ashley II serves notice that a party satisfying the all appropriate inquiries standard to qualify as a BFPP must continue post-closing to abide its continuing duty of appropriate care with respect to hazardous substances located at the facility in order to maintain the BFPP defense.

I recently published an article about this ruling, providing more detail on the arguments and decision

I recently contributed an article to Taft's Construction Insight March 2013 newsletter. In the article, I discuss how environmental due diligence is changing in the commercial real estate market in 2013. I believe the following are the top three things to watch in this year's market:

1. Tenants Conducting Environmental Due Diligence to Qualify for Bona Fide Prospective Purchaser Protection For Contaminated and Formerly-Contaminated Properties
2. Changes Coming to ASTM E-1527 Phase I Environmental Site Assessments
3. More Lenders Following SBA’s Environmental Risk Management Guidance

 
I invite you to learn more about these changes in environmental due diligence to the commercial real estate market by attending a webinar on June 4 at 10:00 a.m. EST. I will be presenting on this topic, along with Kent Johnson of August Mack Environmental, Inc.

Nothing serves as a death knell for lawsuits in federal court more often than exaggerated claims propped up by wobbly expert testimony.  This rang true for the City of San Diego’s lawsuit seeking approximately $250 million in damages from Kinder Morgan and its predecessor companies for the contamination of approximately 166 acres of City-owned land surrounding and underlying Qualcomm Stadium (the “Property”).  On January 25, 2013, the United States District Court for the Southern District of California entered summary judgment in favor of Kinder Morgan against all of the City’s claims.  California v. Kinder Morgan Energy Partners, L.P., et al., 2013 WL 314825 (Jan. 25, 2013)

The facts giving rise to City’s lawsuit showed that Kinder Morgan and its predecessors operated the Mission Valley Terminal, located next to the Property, since the 1960s.  The Mission Valley Terminal serves as the central hub for distributing gasoline in San Diego County.  As early as 1992, the City was on notice that Kinder Morgan and its predecessors released petroleum products into the soil, contaminating the Property and groundwater.  In 1992, the California Regional Water Quality and Control Board (“Water Board”) ordered the investigation and remediation of the contamination at the Mission Valley Terminal.  To comply with this order, Kinder Morgan and its predecessors spent approximately $60 million addressing the contamination.

Unhappy with the progress of the remediation, in 2007, the City sued Kinder Morgan and its predecessor alleging the petroleum releases from the Mission Valley Terminal contaminated the Property and damaged the City.  The City claimed approximately $250 million in damages, including $126 million in damages to remediate its water supply and $120 million in real estate “loss of use” damages.

To learn more about this lawsuit, please read Bill Wagner's recent blog post on Commonground.

Lawsuits for personal injuries, medical monitoring, and remediation claims resulting from historic environmental contamination often involve successor liability claims, where the corporation that caused the pollution no longer exists, but there appears to be a successor corporation operating the same or a similar business. Below is a general summary of the legal rules pertaining to successor liability claims, with the caveat that the common law in your jurisdiction may vary.

Under traditional common law, when a corporation purchases another corporation’s assets, the assets are typically bought free and clear of any unrecorded liens, and the buyer is generally not liable for the seller’s debts or other liabilities. However, under the successor liability doctrine, a buyer of another corporation’s assets may be held liable to answer for the seller’s debts or other liabilities where:

     (1) the buyer expressly or impliedly agrees to assume them;

     (2) the transaction amounts to a de facto merger or consolidation of the buyer and the seller;

     (3) the buyer is a mere continuance of the seller corporation; or

     (4) the transaction is fraudulent to escape such obligations.

To learn more, I invite you to read my recent blog post on Commonground.