On April 4, 2013, the U.S. Court of Appeals for the Fourth Circuit held that a bona fide prospective purchaser’s (BFPP) inaction with respect to certain conditions on a contaminated property barred application of the BFPP defense to CERCLA liability. (PCS Nitrogen Inc. v. Ashley II of Charleston LLC). After incurring response costs, Ashley II of Charleston, Inc. (Ashley), the current owner of a contaminated site, brought a CERCLA cost recovery action against PCS Nitrogen, Inc. (PCS), a successor corporation of a former owner of the property. PCS counterclaimed and Ashley asserted it was exempt from liability as a BFPP.
With respect to CERCLA liability, BFPP status exempts a party that that would otherwise be liable simply because it is an “owner or operator” of a facility. To qualify for the exemption, a current owner must satisfy a number of criteria, including the requirement that the owner “exercises appropriate care with respect to hazardous substances found at the facility by taking reasonable 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.” Ashley argued that the “appropriate care” standard should be less stringent when considering BFPP status. The court disagreed, explaining that the “appropriate care” standard is at least equivalent to CERCLA’s “due care” inquiry which asks whether a party “took all precautions with respect to the particular waste that a similarly situated reasonable and prudent person would have taken.” With that, the court held that Ashley’s inactions with respect to sumps and a debris pile at the facility show that it failed to exercise “appropriate care.”