Vapor Intrusion and Environmental Liability—Learning from Past Mistakes
 

Vapor Intrusion and Environmental Liability—Learning from Past Mistakes

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2/12/13 EDR Insight Web event, presented by Joseph G. Maternowski, William C. Wagner & Stuart J. Lieberman

2/12/13 EDR Insight Web event, presented by Joseph G. Maternowski, William C. Wagner & Stuart J. Lieberman

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Vapor Intrusion and Environmental Liability—Learning from Past Mistakes Vapor Intrusion and Environmental Liability—Learning from Past Mistakes Presentation Transcript

  • Vapor Intrusion and EnvironmentalLiability—Learning from Past MistakesPresented by:• Joseph G. Maternowski, Shareholder at Hessian & McKasy, P.A.• William C. Wagner, Partner, Taft Stettinius & Hollister LLP• Stuart J. Lieberman, Esq., Lieberman & Blecher, P.C. © 2012 Environmental Data Resources, Inc. 2011
  • Vapor Intrusion and Environmental Liability Learning From Past Mistakes Presented by: Joseph Maternowski Hessian & McKasy, P.A., Minneapolis, MN EDR Insight Webinar, February 12, 2013
  • Vapor Intrusion In the News
  • Environmental Due DiligenceMeet CERCLA “AllAppropriateInquiries” StandardAssess Liability/RiskFor ProspectivePurchaser or LendersMinimize PotentialLegal Claims
  • Standard of CareASTM StandardPractice - 2013RevisionASTM VaporEncroachmentScreening
  • What Is Vapor Intrusion?General Definition:“The Migration of VolatileChemicals Into Structures”
  • Vapor SourcesDry CleanersGas StationsManufacturingArea-Wide
  • Migratory Pathways of VOCs into BuildingsDry Cleaners From Groundwater Through Soil Into Buildings Vapor Intrusion Through SoilSoil Contamination Migration of Contamination Leaching Through Soil Groundwater Contamination
  • Migratory Pathways of VOCs into Buildings
  • Soil and Groundwater ContaminationSoil gas sampling results adjacent to building can underestimate riskSub-slab sampling requiredGroundwater plume serves as separate source for vapors
  • How Do You Know If There Is A Vapor Intrusion Problem? Tier 1: Preliminary Vapor Screening (Historical Review, Receptor Survey, Source Area Sampling) Tier 2: Subsurface Soil Vapor Sampling Tier 3: Indoor Air SamplingNeed to Compare Results to Applicable Regulatory Standards[Residential and Commercial/Industrial and groundwater]
  • Vapor a Concern to Federal and State Authorities U.S. Environmental Protection Agency (EPA) State Environmental Agencies Occupational Safety and Health State or Local Health Authorities
  • Liability Concerns for Affected PartiesNeighborsTenantsLendersLand Owners
  • Vapor Intrusion FixesMitigation Alternatives Source Removal Sealing Points of Entry HVAC Modifications Sub-slab Depressurization Systems Vapor Barrier Venting Systems (Active or Passive)Possible Long-Term Monitoring,Operations & Maintenance andInstitutional Controls
  • Joseph G. MaternowskiHessian & McKasy, P.A.jmaternowski@hessianmckasy.comwww.EnviroAttorney.net(612) 746-5754 Thanks!
  • Vapor Intrusion and Environmental Liability for EPs and Lenders— Learning from Past Mistakes William C. Wagner Taft Stettinius & Hollister LLP One Indiana Square, Suite 3500 Indianapolis, Indiana 46204 (317) 713-3500 wwagner@taftlaw.com (Bill Wagner Environmental Lawyer Blog)
  • Today’s Goals• Learn from the mistakes of others, rather than your own• Identify the threats to EPs and Lenders• Provide a real life example of due diligence gone wrong• Provide recommendations to EPs and Lenders
  • Legal Theories Against EPs for Phase I’s• Breach of contract & breach of warranty• Negligence / professional malpractice – All Appropriate Inquiries, ASTM E 1527, ASTM E 2600 – ASTM 1527, Section 1.6 – “This ASTM standard is not intended to represent or replace the standard of care by which the adequacy of a given professional service must be judged, nor should this document be applied without consideration of a project’s many unique aspects.”• Negligent misrepresentation (duties to unknown third parties who are not your clients)• Constructive fraud• Statutory claims (some states incorporate ASTM E 1527)
  • Real World Example
  • Aircraft Parts Manufacturer: 1960s-1990s
  • 1991 Buyer Purchased Manufacturing Business
  • 1991 Phase I – Missed Septic Drain in Degreasing Room
  • 2000 No Phase I – Developer Told Bank “It’s Always Been Farmland”
  • 2004 Builder’s Phase I – Identified ManufacturerIn Voluntary Remediation Program ½ Mile Away
  • Solvent Plume Left The Site
  • Indianapolis Star Newspaper Lawsuits • Three separate class actions lawsuits: – Personal injuries, emotional distress, and medical monitoring damages from vapor intrusion – Property damages (costs to investigate and remediate contamination), stigma damages, and holding costs – Claimed $50+ million in total damages • We defeated motion for class certification • 140+ plaintiffs filed consolidated lawsuit • Defendants included developer, builder, manufacturer/polluter, and realtors • Nonparties – Builder’s EP and Lender • Builder filed separate lawsuit against the manufacturer / polluter, developer, and the EP
  • Lawsuits • Site specific evidence – No groundwater / soil exposure – Vapor intrusion investigation – Impermeable clay layer over contaminated groundwater – Indoor air testing eliminated vapor intrusion pathway • Cases settled years later very favorably to the defendants
  • Key Take Aways for EPs – Protect Yourself • Keep your continuing education up to date – Read the relevant federal and state guidance documents* – Read the ASTM standards (E 1527, E 2600) and learn the nuances • Develop and implement: – Standard Operating Procedures – Training Protocols – Quality Control Procedures • Work with your lawyer, insurance broker, and malpractice insurer to: – Review your malpractice and CGL policies for coverages, exclusions, etc. – Review your Phase I proposals – what are you promising to do or not do, e.g. meet AAI, E 1527, etc.; vapor intrusion; recommendations; non-scope items? – Review your contract language, especially your warranty language, to defend negligent misrepresentation claims by third parties / non-clients*http://www.envirogroup.com/links.php; Assessing Protectiveness at Sites for Vapor Intrusion, Supplement to the“Comprehensive Five-Year Review Guidance” (US EPA, OSWER Nov.14, 2012); Proposed Rule to Add a SubsurfaceIntrusion Component to the Hazard Ranking System, sent to OMB Feb. 3, 2012, to be published ~ May 2013.
  • Key Take Aways for Lenders – Protect Yourself • Don’t make Phase I’s decisions based simply on the amount of the loan • Make sure your EPs carry malpractice insurance • Learn to identify red flags in Phase I’s – Review the federal/state guidance, SBA guidance*, ASTM standards • Review your quality control procedures for Phase I’s • Use your lawyer to direct EPs’ work and to maintain the attorney-client and work product privileges • Have your lawyer review the EP’s contract language, warranties, and disclaimers • Always consider cost recovery – forensic analysis and liability analysis • Don’t be too afraid of the risks for revitalizing industrial sites – consultants are able to mitigate VI risks, and funding opportunities exist through federal and state Brownfield grants and tax incentive financing*SBA SOP 50 57, 7(a) Loan Servicing and Liquidation, Ch. 5 - Environmental Risk Management, effective March 1,2013; SOP 50 10 5(E), Lender and Development Company Loan Programs, Ch. 4 - Environmental Policies, effectiveJune 1, 2012.
  • ASTM E 1527Vapor as Standard Practice Stuart J. Lieberman, Esq.
  • Due DiligenceWhere vapor is scientifically likely,due diligence requires analysis of it.
  • Vapor IntrusionAll appropriate inquiry can not ignorevapor intrusion.
  • Innocent Landowner DefenseInnocent Landowner Defense appliesto persons who did not know and hadno reason to know
  • Hazardous SubstancesRecognized environmental conditionsinclude the presence or likely presence ofhazardous substances.
  • Phase 1 Environmental Site Assessment• The purpose of a Phase 1 Environmental Site Assessment is to reduce uncertainty regarding the potential for environmental conditions…vapor analysis is a must!
  • Due Diligence AuditorSpecialized knowledge of the user must begiven to an environmental due diligenceauditor, i.e. chemical processingcompanies, platters, dry cleaners.
  • Site Assessments• Site Assessments – looking for signs of vapor • Exterior and Interior: you cant have one eye closed
  • Uses of Property• Need to take into account: • Current property uses • Past property uses • Current uses of adjoining property • Past uses of adjoining property • Hydrogeological Conditions
  • Phase 1 ReportsPhase 1 reports should summarize allrecognized environmental conditions andin certain instances recommend additionalenvironmental testing when required
  • Testing and Morality• Disease Potential• Water Pollution Potential
  • Potential PurchasersVapor Testing – critical to protectingpotential purchaser of property
  • Dry CleanersDry Cleaners area huge problem inNew Jersey
  • Regional Chlorinated-Hydrocarbon Contamination• Regional Chlorinated-Hydrocarbon Contamination • Example: Union County
  • Vapor DetectionVapor detection and leakingneighborhood gas stations
  • LiabilityLawyer and consultation liability toclients and third parties
  • Thank you! Stuart J. Lieberman, Esq.
  • Q&A © 2012 Environmental Data Resources, Inc. 2011