On April 4, 2013, the Fourth Circuit Court of Appeals issued a much anticipated decision in PCS Nitrogen, Inc. v. Ashley II of Charleston LLC, No. 11-1662 (4th Cir. April 4, 2013) (Ashley II).
This wide-ranging decision is most notable for requiring buyers to be very careful if they wish to avail themselves to the protections of the Bona Fide Prospective Purchaser (“BFPP”) defense. But there are three other cautionary Ashley II rulings:
- A party may be liable for hazardous waste disposal even if it just moved around clean dirt. In Ashley, a developer was found liable because it could not prove that it did not move contaminated dirt when it graded portions of a contaminated property.
Lesson: Sampling is important – even in clean areas – before you disturb soil on a contaminated property.
- Leasing property which contains contamination below cleanup levels may not protect the lessee from liability. One of the parties leased a discrete portion of a facility not included in the original contribution claim. However, the court found that a “facility” includes those properties that are “part of a pattern of widespread contamination.” That lessee was found liable for a portion of the cleanup costs for the entire facility.
Lesson: When evaluating a lease, it is important to consider the entire history of contamination, as well as the levels.
- An Asset Purchase Agreement can be read to be a stock sale if not carefully and consistently drafted throughout. A buyer can inherit all liabilities of the company in a stock sale, even liabilities resulting from assets sold before the transaction.
Lesson: Business attorneys and environmental attorneys should work closely to achieve the intended characterization of a transaction.