A recent ruling by the Indiana Court of Appeals could expand liability under Indiana's Environmental Legal Action statute ("ELA"). The ruling in JDN Properties, Inc. v. VanMeter Enterprises, Inc., 2014 WL 4656543 (Ind. App. Sept. 19, 2014), potentially extends ELA liability to landlords who have knowledge that their tenants have created pollution, even if the landlords had no involvement in "causing" the contamination.

Purchasing commercial real estate requires buyer due diligence to reduce the risk of catastrophic financial ruin caused by environmental contamination. In order to fulfill this diligence, most buyers engage a qualified environmental consultant to perform a Phase I Environmental Site Assessment (ESA) of the property and the surrounding area before the purchase. This is because a properly conducted Phase I ESA may allow the buyer to qualify for certain defenses under the federal Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. §§ 9601 et seq., which imposes liability on current and certain past owners and operators of property for the release of hazardous substances into the environment, without regard to fault. In a California case, Cappola v. Smith, buyers recently learned a due diligence lesson the hard way for property they purchased 20 years ago that turned out to be contaminated.

In a case of first impression, the Eastern District of Washington recently ruled that CERCLA displaced federal common law public nuisance claims for alleged damages from the release of hazardous substances in smelter emissions. The case is an important example of potential defenses that may be available for entities facing common law damages claims that may be addressed by CERCLA or other federal statutes.