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, according to the Fourth Circuit Court of Appeals in PCS Nitrogen Incorporated v. Ashley II of Charleston LLC, -- F.3d --, 2013 WL 1340018 (4th Cir. 2013).
The owner, Ashley II, argued that the Brownfields Amendments to CERCLA require a less stringent standard of “appropriate care” and “reasonable steps” than applied by the district court. Ashley II also contended that landowners will not undertake voluntary brownfields redevelopment if there is a risk of becoming fully liable for the cleanup costs due to a minor mistake that may not even cause harm to the facility. 2013 WL 1340018 at *13.
Despite these arguments, the court found that Ashley II was not entitled to the BFPP defense because it did not clean out and fill in sumps when aboveground structures were demolished and, thus, failed to exercise appropriate care. The court also found that Ashley II failed to monitor and address environmental conditions at a debris pile and limestone run of crusher cover on the site. According to the court, this was a failure to take “reasonable steps to ... prevent any threatened future release,” as required by CERCLA Section 101(40)(D). 2013 WL 1340018 at *14.
Since Ashley II failed to establish the BFPP defense, the court found it and the other defendants liable under CERCLA, affirmed the district court’s finding of Ashley II’s liability in contribution under Section 113(f), and allocated 5% of the response costs to it. 2013 WL 1340018 at *18.
Although the court compared the standard of appropriate care of a BFPP with the due care standard for innocent landowners under Section 107(b)(3), the court held that it “need not determine whether the BFPP standard of ‘appropriate care’ actually is higher than the standard of ‘due care’ mandated elsewhere in CERCLA, because in all events ‘appropriate care’ under [Section 101](40)(D) is at least as stringent as ‘due care’ under [Section 107](b)(3).” 2013 WL 1340018 at *13.
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 by its continuing duty of appropriate care with respect to hazardous substances located at the facility in order to maintain the BFPP defense.
For a detailed examination of the bona fide prospective purchaser defense, see Frank J. Deveau and David L. Guevara, The Bona Fide Prospective Purchaser Defense to CERCLA Liability (ABA Publishing, forthcoming in August 2013).