PROTECTION FROM ENVIRONMENTAL
LIABILITY FOR LENDERS AND FIDUCIARIES
By:
Paulette S. Wolfson
Houston
As part of the Omnibus Budget Act, Congress passed the Asset Conservation, Lender Liability and Deposit Insurance Protection Act of 1996 (the "Act"). The Act applies to claims brought under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA or Superfund) and the Resource Conservation and Recovery Act (RCRA) that were not resolved by September 30, 1996. Generally, CERCLA and RCRA impose liability without fault on owners or operators of facilities that require remediation under RCRA or CERCLA. The Act clarifies the definitions of owner and operator in CERCLA and RCRA so that lenders and fiduciaries would generally be excluded from liability.
Potential liability for lenders has long been controversial under CERCLA. Although CERCLA includes a so-called secured creditor exemption, creditors were found liable in cases where they had the authority to participate in the management of a company [U.S. v. Fleet Factors, 901 F.2d 1550 (1990), cert. denied, 498 U.S. 1046]. After Fleet Factors, the Environmental Protection Agency (EPA) attempted to protect lenders from liability through regulations. The regulations were, nonetheless, set aside by the courts, Kelley v. EPA, 15 F.3d 1100 (D.C. Cir. 1994), cert. denied, 115 S. Ct. 900 (1995). Similar issues regarding lender liability for cleanup arise under RCRA.
The Act provides that lenders will not be liable under CERCLA or RCRA if they have not actually participated in the management of the borrower. This is the position that had been taken in EPA's rule. However, the Act provides that if the lender has "undertaken responsibility for the hazardous substance handling or disposal practices" of the borrower, then the lender may be liable for remediation expenses. Fiduciaries have faced more limited liability under RCRA and CERCLA than creditors. Generally, a fiduciary's liability for remediation has been limited to the value of the trust's assets; the trustee would not be personally liable unless the trustee engaged in operation of a waste disposal facility. The Act confirms that trustees generally are only liable up to the value of the trust assets.
