ELR Citation: ELR 20961
No(s). CV687-070 (S.D. Ga. May 12, 1993)

The court holds a lender liable under §107(a)(2) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) as an owner and operator at the time of hazardous substance disposal at a facility in Swainsboro, Georgia, because the actions of the lender's agents voided a CERCLA's secured creditor exemption to liability. However, the court holds that the lender is not liable for having arranged for the disposal of a hazardous substance under §107(a)(3), because its voiding of the secured creditor exemption, coupled with its holding of a deed to secure debt, renders the lender an owner of the site at issue. The federal government sought to recover the costs of conducting an environmental response action at the facility, which followed an inspection by the U.S. Environmental Protection Agency (EPA) that revealed several hundred drums and numerous vats of CERCLA hazardous chemicals plus asbestos debris.

The court first addresses the lender's potential liability as an owner and operator under CERCLA by applying EPA's final rule interpreting the CERCLA secured creditor liability exemption included in §106(20)(A). The court holds that the lender is liable under §107(a)(2) as an owner and operator, not because its own level of involvement at the facility rose to impermissible levels, but rather because the activities of its agents were impermissible, voiding its protection under the exemption. Comparing the activities in which the lender engaged against those in which a reasonable, similarly situated creditor might have engaged to protect its security interest, the court finds that the lender did not exercise manager-like control over substantially all operations at the facility. The lender engaged in activities only reasonably related to protecting its security interest. The court, however, holds that the agents' postforeclosure activities voided the lender's protection under the secured creditor exemption, because they handled hazardous substances in an impermissible manner, seriously aggravated a conspicuous environmental hazard, and failed to complete their operations in a reasonably expeditious manner. Handling significant quantities of hazardous substances is impermissible participation in management unless it is done in accordance with §107(d)(1). The court noted that the critical factor was that the environmental threat posed by the drums was obvious even to a lay observer, and the several hundred drums posed precisely the type of threat CERCLA is designed to alleviate. Because the agents' handling of the wastes falls far short of the incidental handling that must be tolerated with regard to foreclosure provisions, the lender is liable. When a secured creditor or its agent undertakes action that it knows or reasonably would know will severely aggravate a site's environmental problems, such action constitutes decisionmaking control concerning hazardous substances that rises to impermissible participation in management. Although the lender liability rule protects a secured creditor who takes possession of assets, continues operations, and liquidates those assets, it does not give carte blanche to carelessly dismantle a site or the assets found there when doing so will cause a severe hazardous substance problem or severely aggravate existing ones.

Because the lender does not qualify for the secured creditor exemption, the court examines whether any hazardous substance was disposed of while the lender owned or operated the facility. The court holds the lender liable under §107(a)(2), because the actions of its agents constituted disposal of hazardous substances at the site. Depositing dilapidated drums in secluded areas of the plant, rupturing drums and spilling their contents, and scattering asbestos-laden debris throughout the site fall squarely within the definition of disposal. It is irrelevant that the agents did not introduce the waste to the site where it was disposed of. It is also irrelevant that some of the wastes were deposited inside the building on the site. Substances need only be deposited such that they may enter the environment.

The court holds that the lender is not liable under §107(a)(3) as a party alleged to have arranged for disposal or treatment of hazardous substances at a facility owned by another. Although the lender arranged for disposal through its agreements with its agents, because those agreements necessarily contemplated the disposal of hazardous substances, the lender, as the holder of a deed to secure debt, owned the facility site. The court's finding that the lender was an owner precludes a finding of liability under §107(a)(3).

[Prior decisions in this litigation are published at 19 ELR 20529, 20 ELR 20832, and 23 ELR 20946.]

Counsel for Plaintiff
Anne S. Almy
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Defendant
Richard E. Miley
Nixon, Yow, Waller & Capers
1500 Union Bank Bldg., Augusta GA 30910
(404) 722-7541