Contaminated Collateral and Lender Liability: CERCLA and the New Age Banker

Abstract

Enacted in December of 1980, the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or the Act) authorizes the federal government to clean up inactive hazardous waste sites that threaten human health or the environment (42 U.S.C. 9601-9675, 1982 and Supp. V 1987). CERCLA, also known as Superfund, provides a fund for cleanup of contaminated sites when no other parties are able to conduct the cleanup. This enormous reserve of money is replenished from federal funds, taxes on certain chemicals and petroleum, litigation settlements with responsible parties, and recovery of fines. CERCLA empowers the Environmental Protection Agency (EPA or the Agency) to recover the cleanup costs from those parties responsible for the contamination, if they can be identified, with little or no costs to the American taxpayer. Because of the need for reauthorization, and calls for legislative clarification of what has been cited as poorly drafted legislation. (United States v. Northeastern Pharmaceutical & Chemical Co., 579 F. Supp. 823, 839, W.D. Mo. 1984). CERCLA was amended in October of 1986 by the Superfund Amendments and Reauthorization Act, also known as SARA (Pub. L. No. 99-499, 100 Stat. 1613-1782, 1986; codified throughout 42 U.S.C. Sections 9601-75, 1982 & Supp. V 1987). However, these amendments have proved to be inadequate because of inconsistent judicial interpretation and implementation of the Act's stringent provisions regarding lender liability for contaminated collateral. As a result, lenders who are unsure of what constitutes risk-free lending activities under CERCLA are again raising the call for further legislative reform. What follows is a general overview of CERCLA provisions pertinent to lender liability, a review of several case law holdings which have added to lender confusion and heightened liability concerns, and a discussion of actions taken by lenders to avoid being cited under the Act for cleaning up contaminated properties.