B. CERCLA
1. Liability
Congress enacted the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601 et seq. ("CERCLA"), in response to Love Canal and other abandoned hazardous waste sites impacting the environment. CERCLA gives the EPA broad authority to compel "potentially responsible parties," as defined by the Act ("PRPs"), to clean up or pay for the cleanup of the property when it has been determined that there has been a release or a threatened release of a hazardous substance on the property. CERCLA also allows PRPs who conduct cleanup of contaminated property or reimburse the EPA for the cost of cleanup to pursue contribution from other PRPs. Under section 107 of CERCLA, liability extends to four (4) categories of PRPs:
a. the owner and operator of a vessel or a facility,
b. any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of,
c. any person who by contract, agreement, or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment, of hazardous substances owned or possessed by such person, by any other party or entity, at any facility or incineration vessel owned or operated by another party or entity and containing such hazardous substances, and
d. any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities, incineration vessels or sites selected by such person, from which there is a release, or a threatened release which causes the incurrence of response costs, of a hazardous substance.
42 U.S.C. § 9607(a). CERCLA liability applies retroactively to pre-1980 releases even if such releases were legal at the time.2 Under the first category, the mere purchase of real property on which a release of hazardous substances has previously occurred subjects the purchaser and its tenant to liability as a PRP. Section 107 provides for the following limited defenses to CERCLA liability if a party is a PRP under one of the four categories:
a. an act of God;
b. an act of war;
c. an act or omission of a third party other than an employee or agent of the defendant, or than one whose act or omission occurs in connection with a contractual relationship, existing directly or indirectly, with the defendant (except where the sole contractual arrangement arises from a published tariff and acceptance for carriage by a common carrier by rail), if the defendant establishes by a preponderance of the evidence that (a) he exercised due care with respect to the hazardous substance concerned, taking into consideration the characteristics of such hazardous substance, in light of all relevant facts and circumstances, and (b) he took precautions against foreseeable acts or omissions of any such third party and the consequences that could foreseeably result from such acts or omissions; or
d. any combination of the foregoing paragraphs.
42 U.S.C. § 9607(b). Generally, a purchaser of contaminated property cannot assert the "third party" defense because that party has a contractual relationship with the seller.
2. Innocent Landowner Defense
In 1996, Congress amended to CERCLA to provide an "innocent purchaser" defense if the party acquired the contaminated property by inheritance or bequest or the party "did not know and had no reason to know" about the contamination prior to the acquisition of the property. 42 U.S.C. § 9601(35). To qualify for the innocent landowner defense, the acts or omissions causing the contamination cannot be those of a third party with whom the defendant has a contractual relationship, which is defined as: land contracts, deeds, easements, leases, or other instruments transferring title or possession, unless the real property on which the facility concerned is located was acquired by the defendant after the disposal or placement of the hazardous substance on, in, or at the facility, and one or more of the circumstances described below is also established by the defendant by a preponderance of the evidence:
a. at the time the defendant acquired the property the defendant did not know and had no reason to know that any hazardous substance which is the subject of the release or threatened release was disposed of on, in, or at the property.
(1) To establish that the defendant had no reason to know, the defendant must have undertaken, at the time of acquisition, all appropriate inquiries . . . into the previous ownership and uses of the property in accordance with generally accepted good commercial and customary standards and practices in an effort to minimize liability.b. the defendant is a government entity which acquired the property by escheat, or through any other involuntary transfer or acquisition, or through the exercise of eminent domain authority by purchase or condemnation.
c. the defendant acquired the property by inheritance or bequest.
42 U.S.C. § 9601(35). The defendant must also show that he has exercised due care with respect to any existing contamination and provided full...
