A Tale of Two Environmental Cautions
Tale 1. In October 2018, the United States Court of Appeals for the Third Circuit ruled that a buyer was liable for all the costs of remediation (just under a million dollars) for land that it had bought for $20,000. The buyer knew that the land had been contaminated, but also understood that the State of Pennsylvania and the United States Environmental Protection Agency had cleaned up the property. So, the buyer thought it was getting good land at a cheap price when it bought from the prior owner who had defaulted on its real-estate taxes.
After the transaction closed, the new landowner was sued by Pennsylvania for $818,000 that the State had previously spent cleaning up the site as well as another $100,000 that had been spent after the new owner took the title. The lower court ruled that the State could only sue the new owner for the money it spent after the new owner bought. The Third Circuit reversed. The statute says that the current owner is strictly liable for “all costs” of remedial or removal actions. And “all costs” the Court ruled means “all costs” no matter when incurred. (There are steps under the statute that an innocent prospective buyer of previously contaminated land can take to minimize those risks, but the buyer apparently failed to take them.)
Tale 2. In June 2018, a publicly held Italian corporation that bills itself as a world leader in the energy and telecom systems industry bought all the outstanding shares of a major US producer of wire and cable. The buyer was represented by a superb New York law firm that specializes, among other things, in cross border M&A work.
In making the acquisition, the acquirer inherited a pending lawsuit against the US wire and cable producer but apparently failed to understand the magnitude of the risk. In 2018 the new owner found that it may be on the hook for as much as $36 million for sediment contamination in a water body downgradient of a former facility of the acquired company that was closed in the late 1970s. It also may be on the hook for another $2 million for previously done work cleaning property upgradient of the water body and for ongoing sediment studies. The newly acquired company now has four law firms defending it. Perhaps if it had better understood the risk, the acquirer might have taken steps to protect itself.
The moral of the two tales is simple, it makes sense to talk with a law firm that specializes in environmental work before buying land in the U.S. or before taking ownership of a U.S. company that may have historic environmental risks.
N.W. Bernstein & Associates, LLC is the exclusive IR Global law firm for the environment in the United States – New York. The firm is also part of IR Global’s U.S. – East Coast Working Group, and Mr. Bernstein is a Trustee at three hazardous waste sites, two in Indiana and one in New Jersey.