MGMT 520 Legal, Political and Ethical Dimensions of Business Week 3 - Discussion 2 - Environmental Liability and Due Process
In 1979, Paul and John Reardon purchased 16 acres of land located next to a manufacturing plant in Massachusetts. In 1983, a state environmental agency, responding to a citizen's report, tested soil samples from both properties and discovered extremely high levels of polychlorinated biphenyls (PCBs) on the plant site and on the Reardons' property where it bordered the site. Shortly thereafter, the Environmental Protection Agency (EPA) cleaned up the contaminated areas. In 1985, the EPA notified the Reardons that they might be liable for clean-up costs. An EPA investigation of the property in 1987 revealed that some soil was still contaminated. This time, the Reardons cleaned up the property themselves.
In March 1989, the EPA placed a lien for an unspecified amount on all of the Reardons' property to secure payment for any clean-up costs for which the Reardons might be liable. The EPA told the Reardons that they could settle the claims against them for $336,709 but noted that this amount did not limit the Reardon’s potential liability. The Reardons filed a motion for an injunction, arguing that filing a lien against their property without any prior notice or hearing violated their due process rights under the Fifth Amendment, which states that no person can be deprived of life, liberty, or property without due process of law. Superfund (the Comprehensive Environmental Response, Compensation, and Liability Act, or CERCLA, of 1980, as amended in 1986) gives the government several powerful tools to use when attempting to collect clean-up costs from responsible parties. Among those tools is the authority to place a lien on a responsible party's property without providing for a reasonable hearing before placing the lien.
Is the power to place a lien on a piece of property without prior opportunity to be heard in a court of law or administrative hearing constitutional? Why or why not?
Whether placing a lien on a piece of property without prior opportunity to be heard in a Court of Law or Administrative Hearing is constitutional. The purpose of Congress in passing CERCLA first and foremost was to ensure the clean-up of substances that endanger the public. Would this purpose be eviscerated if the EPA is forced to litigate each detail of its removal and remedial plans before implementing them? Second, if the EPA loses its leverage and is not able to look to landowners for cleanup costs, who is left? I think it is you and I, the taxpayers. Where should ultimate responsibility lie--Landowners who perhaps did not perform due diligence in purchasing land or taxpayers who have nothing to do with the hazardous waste?

Ans:
The Reardon’s purchased the property before the EPA tests were conducted. I would argue that existing property owners would be grandfathered into law allowing them a slower, cheaper clean-up procedure. Therefore anyone who buys the property after the EPA tests reveal the contamination onsite is in a different situation. Second, the more important point is that the EPA is requiring payment from the Reardons. The government is bringing to light property issues based on health and safety while requiring remediation. However, the Reardons should be owed Due Process on their property, which they purchased before the testing, because the site now has special attention being applied there. Just as they would ask a farmer to give up property in order to build a park onsite. This example would use similar arguments to be consistent with a family purchasing a home next to a small, low traffic airport. If the airport expands in ten years and allows more flights or bigger planes, the surrounding property owners would have a legitimate case about limiting the airport traffic. On the other hand, if a family buys property next to acres of farmland which ten years later a developer wants to build into an airport, then they stand a much better argument opposing any airport construction because their purchase of housing zoning is grandfathered in the community and rigorous debate that limited chance of approval. The purpose of CERCLA would not be eviscerated if the EPA is forced to litigate each detail of its removal and remedial plans before implementing them. The EPA could still implement removal and remedial plans with the landowners’ compliance so that the hazardous waste could be properly taken care of. The responsibility for the cleanup should be on the land owners and not the taxpayers, but a new process needs to be established. For example, it would be great if the EPA and the landowner worked together to pursue a cleanup strategy, whereby the landowner would be able to pick the way it will be performed to keep the costs as low as possible with the EPA approving the type of clean-up that needs to be performed to ensure that it will be performed adequately so that all of the hazardous waste will be removed efficiently.
The CERCLA was created to respond to the growing concerns of hazardous substance in an attempt to regulate and to provide long-term solutions to hazardous waste problems. To do this, the CERCLA has a fund set aside to conduct emergency clean-up activities and hold landowners responsible for paying for the clean-up. I believe that the EPA's role to litigate details of the clean-up activities would only help to complete and correct these efforts.
The 1980 law requires the parties responsible for the contamination to conduct or pay for the cleanup. If the Environmental Protection Agency's (EPA's) efforts to take an enforcement action for the cleanup are not successful, the federal government can clean up a site using the CERCLA Trust Fund. If the Superfund program conducts the cleanup, the government can take court action against responsible parties to recover up to three times the cleanup costs. http://www.hss.doe.gov/sesa/environment/policy/cercla.html According to the Duane Morris (2012) website, There are requirements for diligence requirements of potential land buyers under CERCLA because environmental issues play a big rule in many real estate transactions. Current laws impose significant environmental liabilities on purchasers, sellers and lenders involved in real estate deals, regardless of who caused the problem or whether they are present owners of the property. EPA issued a final rule for "All Appropriate Inquiry" on November 1, 2005 that will become effective on November 1, 2006. The new rule will affect environmental due diligence conducted by prospective purchasers of commercial real estate, as well as other entities who wish to avail themselves of CERCLA "Superfund" liability protections. The new rule also imposes obligations upon users of environmental site assessments ("ESAs") to affirmatively provide information to the Environmental Professional ("EP") who conducts the diligence, and dictates a more complete and detailed process for examination of the environmental issues surrounding real property subject to acquisition or finance.
"Innocent purchasers" under CERCLA are required to undertake diligence with "all appropriate inquiry" ("AAI"). The final rule is the result of a two-year process undertaken by EPA that makes several additional requirements part of the environmental diligence process. The new rule provides further detailed guidelines to prospective purchasers to enable them to conduct the necessary AAI diligence and gain liability protection should contamination issues arise after the purchase. http://www.duanemorris.com/alerts/alert2279.html There is a due diligence aspect of the CERCLA regulations. There is a 3 phase due diligence process that anyone who is looking to purchase land should go through. First is the search to see if there is any problems or issues with the land or structure, second is the chemical analysis of the land and structures and the estimate of the cost to fix. Third is the actual cleanup.
An inspection is a much needed step for anyone looking to purchase property. This can bring out any issues that might be there. Especially in today's market with so many foreclosures, people must be aware of what they are buying. For most of us buying a typical home, this type of extensive inspection is not necessary. But for those buying near a gas station, manufacturing plant, etc., this type of due diligence may be a good idea and can protect against the type of CERCLA liability.
Reardon was the first case in which a court considered the constitutionality of the CERCLA lien. In conclusion after the case, CERCLA must provide, at the bare minimum notice and a pre-attachment hearing. In reviewing for this decision, the court first looked at due process and if the lien authorized for a taking of significant property interest that violated the Fifth Amendment. It was not until 1993 the EPA offered guidance and compliance procedures for liens because of the Reardon case. To further add to Reardon problems they did not know they would be liable for cleanup on a property that they purchased because their actions did not create the contaminated land. The manufacturers next door neglect created the problem but at the time of incident there were not laws in place to protect the Reardon family. In 2002 the Brownfield Amendment would of protected the Reardon family and the liability would of been on the manufacturer. http://www.epa.gov/oecaerth/cleanup/revitalization/landowner.html
If the Reardons purchased the property in 1979, by which time the damage to the property had already been done, how CERCLA can go after them. "the CERCLA lien by attaching not only to the real property subject to cleanup, but also to revenues, personal property, and real property not related to the contaminated site." Is this to say that once a property is purchased that CERCLA can not only place a lien on the land you just purchased but also go after everything you own to pay for the cleanup? Under CERCLA does liability even have to be proven?
It is my understanding that if this were to happen today then CERCLA would go after the person or organization caused the contamination not the landowner whose land is next door. If a person or business is the cause of problem then they and owners prior to them and prior to them and so on can be liable for clean up. In the Reardon case these regulations and laws were not in effect so the thought was your land equal your problem even though their land and their use of the land did not cause the problem. CERCLA seems to be a still controversial subject and one that still seems to be a hassel. Prior to a Burlington Northern case, anyone who was remotely involved in disposing of hazardous material could be held jointly liable. http://www.goldbergsegalla.com/sites/default/files/AJS_ABAMassTorts_Summer2011.pdf There are certain classes of individuals under CERCLA who may be held legally liable for contamination; does this include those who did not contribute to the contamination?
CERCLA Liability may be extended to the corporate officers in the event the offending company is merged or purchased. The CERCLA liability is purchased with the company. CERCLA liabilities would also extend to those who transport hazardous materials. One reason, certain companies will have special requirements for the transportation of certain materials. One such requirement is the 49 CFR paperwork from the Department of Transportation.
Source: Jennings, Marianne M.. Business: Its Legal, Ethical, and Global Environment, 9th ed., 9th Edition. South Western Educational Publishing.
Anyone who is associated with the disposing can be held liable but at the time the case with the Reardons, they were held liable because at that period of time there were not any laws in place to protect them.The manufacturer is responsble and the prior owners of the manufacturer plant. The Reardon are responsible because at the time of the case there were not laws in place to protect them.
There may still be recourse for the Reardons against the original polluter--can they seek contribution and indemnification for any funds they are required to expend?
The original manufacturer that caused the contamination may be held legally liable under CERCLA. However, what if the plant is defunct or bankrupt? The cleanup still needs to occur.
"In 2010, EPA initiated the Integrated Cleanup Initiative (ICI), a three-year strategy to identify and implement improvements to the Agency’s land cleanup programs. The Initiative includes a focus on enforcement activities that are critical to ensuring that responsible parties are compelled to clean up contaminated sites, thereby preserving Superfund monies to be used to clean up other sites where viable responsible parties do not exist." Based on this it seems like the government may understand that CERCLA actions may be borderline unconstitutional. In part I believe it is because CERCLA is only responsible for the cleanup and not for researching action taken by those involved. The Superfund appears to be only intended for cleanup of certain sites where responsible parties do not exist.
In addition to understanding the administrative process and how we can challenge administrative regulations if procedures are not followed, there can be substantive challenges to regulations and statutes as well, such as due process.
The Reardon court stated noted the two-step analysis afforded due process claims: 1) Whether a challenged statute authorizes the taking of a "significant property interest" protected by the Fifth Amendment. 2) "If there is no significant property interest involved, the inquiry is at an end. If there is, one proceeds to examine what process is due in the particular circumstances." The court explained that a lien on real property is definitely a taking of a significant property interest, as is done under CERCLA. The court then explained the need for a hearing and bond posting in order to protect the landowner. A property lien impacts the owner's ability to transfer the property, and in certain situations a forced sale of the property to satisfy a lien may take place.