A buyer of contaminated property was held to have lost its ability to claim to be a non-liable “bona fide prospective purchaser” under CERCLA because it failed to act appropriately with respect to hazardous substances it found on the site. As a result, the buyer was held responsible for cleanup costs.

From 1884 to 1972, fertilizer production on a 43 acre parcel of land in Charleston, SC caused releases of arsenic, lead and other hazardous substances into the soil. In 2003, Ashley II of Charleston, Inc. (Ashley) bought a 27.62 acre portion of the property to include it in a mixed-use project. After Ashley incurred response costs, it sued PCS Nitrogen, Inc. (PCS), as an alleged corporate successor to a company that had caused some of the contamination. PCS counterclaimed against Ashley and brought third-party contribution actions against others currently or formerly associated with the property.

Ashley argued that it was not a “potentially responsible party” (PRP) for the contamination because it was a “bona fide prospective purchaser” (BFPP) under CERCLA. The federal district court disagreed, and on appeal, the U.S. Court of Appeals for the Fourth Circuit affirmed. The court noted that “BFPP status exempts from CERCLA liability a party otherwise liable simply because it is considered to be an owner or operator of a facility’ under” CERCLA. “To qualify for the exemption, a current owner or operator of a facility must have acquired the facility after January 11, 2002, must ‘not impede the performance of a response action or natural resource restoration’ at the facility, and must establish eight criteria by a preponderance of the evidence.” One of those criteria “is the requirement that a current owner ‘exercises appropriate care with respect to hazardous substances found at the facility by taking responsible steps to (i) stop any continuing release; (ii) prevent any threatened future release; and (iii) prevent or limit human, environmental or natural resource exposure to any previously released hazardous substance.’” The appeals court noted that the district court had “specifically found that Ashley failed to clean out and fill in sumps that should have been capped, filled, or removed when related aboveground structures were demolished, and that Ashley did not monitor and adequately address conditions relating to a debris pile” and a crushed limestone partial cover on the site. These findings, the appeals court held, “established that Ashley did not exercise appropriate care at the site.” Therefore, Ashley did not qualify for the BFPP defense and was “a PRP for the site as a current owner” under CERCLA. The court upheld that district court’s decision to allocate 5% of the site liability to Ashley.

In other holdings, the court also affirmed the liability of (1) PCS as a corporate successor to a company that had caused contamination, even though PCS had acquired only assets and not stock of that other company (PCS was assigned a 30% share of the liability); and (2) a company that leased a contaminated two-acre portion of the original 43 acre site, even though (i) it had not caused or exacerbated any contamination; (ii) the land it leased was not involved in the Ashley-PCS dispute; and (iii) no response costs were spent on the land it leased (the lessee was assigned a 1% share of the liability).

The decision demonstrates the importance of determining the applicability of defenses to liability when acquiring or leasing contaminated land and ensuring that they remain applicable on an ongoing basis. PCS Nitrogen Inc. v. Ashley II of Charleston LLC, et al., No. 11-1662 (4th Cir. Apr. 4, 2013).