Lessons Learned from Phase I Litigation: Case Studies EDR Insight Webinar December 11, 2014 Presented by: Anthony J. Buonicore, P.E., BCEE, QEP CEO, The Buonicore Group Past Chairman, ASTM Phase 1 Task Group

1. EDR Insight Webinar:
Lessons Learned from Phase I Litigation: Case Studies
December 11, 2014
Presented by:
Anthony J. Buonicore, P.E., BCEE, QEP
CEO, The Buonicore Group
Past Chairman, ASTM Phase 1 Task Group

2. Overview
• Background
• Case Studies:
• Case Background
• Problem
• Plaintiff’s Contention
• Defendant’s (EP) Response
• Result
• Lessons Learned
• Final Thoughts

3. Background
• The key questions in all five Phase I case studies to be
discussed are:
• Was the “standard of care” provided by the EP deficient?
• How did the EP’s performance compare with “customary practice”?
• Did the work scope meet the requirements in ASTM E1527?
• All of the cases were settled (typical) with the settlement kept
confidential (insurance companies prefer not to establish precedent)
• Where the cases were complex with numerous claims, only that
portion of the case believed to be most relevant to Phase I
consultants will be discussed
• RULE: If you recognize the case, please do not mention the
firm or any individual names in the Q&A (so as to not violate
confidence)

4. #1: Phase I Update Case

5. Case Background
• Paint manufacturing on the site for 40 years
• Operations ended in the early 1970s
• Site abandoned and five vacant buildings
• In 1998, a combined Phase I and Phase II was conducted prior
to acquisition
• Phase I followed the ASTM E1527-97 standard
• Phase II consisted of limited sampling:
• Installed MWs up-gradient (1) and down-gradient (5) of the former
industrial building complex
• Sampled soil (from the borings) and groundwater

6. Case Background cont’d
• Phase II results indicated:
• VOCs and petroleum products in soil and groundwater samples
below the detection limit
• Heavy metals in soil below background levels
• Phase I/II concluded that there were no RECs or serious
environmental contamination issues associated with the site
• Property was acquired and partially developed
• In 2004 the property was put up for sale

7. Case Background cont’d
• Property owner provided prospective purchaser with original
Phase I and Phase II (consultant that performed this work was no
longer is in business)
• Prospective purchaser submitted these reports to lender
• Lender requested that they be updated
• Prospective purchaser retained a Phase I consultant to “do
an update acceptable to the lender”

8. Case Background cont’d
• Consultant submitted SOW with specific tasks to be
conducted for the “update” (“update” defined in the SOW as “from
the time the previous Phase I was conducted to the present”)
• Update of government records
• Review of any new uses of the property in the update period for
potential environmental impact
• Site reconnaissance
• Re-sampling groundwater in existing monitoring wells installed on the
site in previous Phase II investigation
• Lender indicated that SOW for the update was acceptable
• SOW executed by consultant and no material environmental issues
(RECs) identified as occurring in the update period
• Lender made the loan and the property was acquired

9. The Problem
• New owner had plans to remove one of the buildings on the
property and construct new retail/office space
• When geotechnical work was conducted, evidence of possible
soil contamination was observed
• A new consultant was brought in to investigate and found
contamination (VOCs, PCBs and petroleum products) above
state remediation standards in soil located immediately
adjacent to the building that was going to be removed, and in
soil under the building
• Remediation recommended

10. Plaintiff’s Contention
• Consultant who did the original update should have known
that the previous Phase I and Phase II were deficient and the
conclusions should not have been relied upon
• Consultant did not meet the standard of care followed by
environmental professionals performing this type of work
• Consultant who did the update was sued (the consultant who
did the original Phase I/II was no longer in business) for
negligence and harm caused, and sought damages

11. Defendant’s (EP) Response
• The conclusions drawn in the initial Phase I and Phase II
were relied upon (there was no “second guessing”)
• Client did not ask for a new Phase I/Phase II, only an update
• Update only covered the period between when the previous
Phase I/ Phase II was conducted to the present
• The update SOW was agreed to by the lender and the
property owner

12. Defendant’s (EP) Response cont’d
• The update scope of work was conducted as proposed
• The E1527 standard does not require the EP to verify
independently information collected in the course of
conducting the investigation and allows the EP to rely on
information provided unless the EP has actual knowledge
that certain information provided is incorrect or unless it is
obvious [that the information is incorrect]

13. Result
• Case was settled by the insurance company that provides
the consultant’s E&O insurance

14. Lessons Learned
• Updating another consultant’s Phase I can be especially
difficult and risky (particularly since you often do not have the benefit of
being able to review all the information collected and without any assurance
that all reasonably ascertainable information has been collected)
• Relying on the professional opinion of another EP brings with it
considerable risk (looking at the same data, different professionals can
have different opinions and draw different conclusions)
• If you did not do the previous Phase I, it would be wise to
refrain from doing an “update” of another consultant’s
Phase I
• If, for business reasons, you decide to do an update, consider
proposing an SOW consistent with effectively re-doing the
Phase I and charging accordingly

15. #2: Non-Scope Consideration Case

16. Case Background
• A prospective purchaser retained a consulting firm in 1999 to
conduct a Phase I on a parcel of undeveloped property and
specifically to identify “recognized environmental conditions”
• The scope of work conducted followed ASTM E1527-97
• No evidence of “recognized environmental conditions” was
identified
• Property was acquired and development initiated

17. The Problem
• During the permitting process, the new property owner was
advised that:
• Wetlands existed on the property
• A wetlands delineation investigation was required
• Wetlands mitigation would be required
• The extent of the property’s development would likely be limited
• The existence of wetlands on the property resulted in
permitting delays, additional engineering costs, additional
surveying costs, mitigation costs, construction delays and an
inability to develop the property as planned

18. Plaintiff’s Contention
• Property owner relied on the consultant to advise if there were
any environmental issues
• The consultant was aware the property was going to be
developed and should have known that the presence of wetlands
could adversely impact this development
• Had the Phase I consultant exercised reasonable professional
diligence and identified the presence of wetlands on the property,
the property would not have been acquired

19. Plaintiff’s Contention cont’d
• The Phase I consultant breached the standard of care for the
conduct of environmental assessments and was negligent in the
performance of its professional services
• Property owner was harmed and sought damages that were a
direct result of the Phase I consultant’s negligence

20. Defendant’s (EP’s) Response
• An ASTM E1527-97 Phase I was proposed by the consultant,
accepted by the client and conducted by the consultant
• According to the ASTM Phase I standard, wetlands is a non-scope
consideration and is not included in the SOW unless
the client specifically indicates otherwise
• The client did not request that wetlands be included in the SOW
• The Phase I was directed at identifying RECs which are
associated with the presence or likely presence of hazardous
substances or petroleum products on the property – the
presence of wetlands on the property could not be considered a
REC

21. Result
• Case was settled by the insurance company that provides
the consultant’s E&O insurance

22. Lessons Learned
• Do not assume that a client understands what is or is not
included in an ASTM Phase I – many clients still perceive the
Phase I as identifying any environmental conditions that may
adversely impact a property
• Include a detailed scope of work based on the ASTM E1527
standard that makes it clear what an ASTM Phase I includes—
and does not include

23. Lessons Learned cont’d
• Refrain in the SOW from indicating that any non-scope
environmental condition is excluded, e.g., “asbestos is not
included”
• If you say an environmental condition is excluded, but at the same time do
not specifically exclude every other environmental condition, then all those
other environmental conditions not specifically excluded may be presumed
to be included!
• You may want to consider using a “such as” clause to clarify that a non-scope
condition, e.g., asbestos or wetlands or lead-based paint, is not part
of the SOW: “The SOW meets the requirements of the ASTM E1527-XX
standard. The ASTM E1527-XX standard includes Section 13, Non-scope
Considerations such as _________, that are not part of the required ASTM
SOW unless the client specifically requests otherwise. ”

24. Lessons Learned cont’d
• If a non-scope condition has been observed in the site recon, it
should not be mentioned in the Phase I report – by doing so you
run the risk of it being perceived as included in your SOW
• What you might consider doing is contacting your client and
discussing what you observed, what might be done and what it
could cost
• If the client chooses to add this to the SOW, then send the client
a change order with the cost adder
• If the client chooses not to do anything for whatever reason,
business or otherwise, fully document this in the project file
(not in the report)

25. #3: Vapor Migration Case

26. Case Background
• A property developer wanted to acquire a parcel of vacant land
and build a development of single family homes
• A consultant was retained in 2006 to conduct a Phase I
according to the ASTM E1527-05 standard
• A former industrial site that used chlorinated solvents was
identified adjacent and hydraulically cross-gradient from the
target property
• Review of the contaminated plume delineation study on this
former industrial property indicated that the contaminated
groundwater plume was not on the target property
• The consultant did not identify any recognized environmental
conditions on the target property and the property was acquired

27. The Problem
• After the first phase of residential development was
completed and sold, one of the homeowners complained of
“unusual odors”
• An indoor air investigation was conducted and identified the
presence of TCE and PERC in the homes
• An environmental consultant was retained to investigate, and
identified the source of the indoor air contaminants as vapors
volatilizing from the contaminated groundwater plume at the
adjacent former industrial site
• Subsequent indoor air investigations revealed a number of
homes with levels of TCE and/or PERC

28. The Problem cont’d
• The developer incurred the cost of installing vapor intrusion
mitigation systems in all impacted homes
• Homeowners sued the developer for impact on health and
property value diminution
• The developer sued the Phase I consultant for negligence in
not identifying vapors migrating onto the property from the
adjacent former industrial site as a REC, and sought
damages

29. Plaintiff’s Contention
• The ASTM Phase I ESA is driven by CERCLA
• CERCLA does not differentiate by the form of the release
(solid, liquid or vapor) to the environment, only that the
release be a hazardous substance
• TCE and PERC are hazardous substances
• The CERCLA definition of environment includes the
subsurface
• The CERCLA definition of release includes hazardous
substances “emitting” and “escaping” into the subsurface
environment
• Vapor migration is included as a consideration in a Phase I
• The ASTM REC definition includes “releases into structures
on the property”

30. Plaintiff’s Contention cont’d
• The state where the property was located has a draft vapor
intrusion guidance document and the consultant should have
been aware of this
• The consultant was negligent in the conduct of the Phase I
by not identifying the potential presence of hazardous vapors
on the property
• Had the consultant identified the potential presence of
hazardous vapors migrating onto the property, the developer
would not have acquired the property without further
investigation
• The consultant’s negligence caused harm to the property
owner and damages were sought

31. Defendant’s (EP) Response
• The ASTM E1527-05 standard does not require a vapor
migration investigation in the SOW
• The standard of care and customary practice for conducting
a Phase I ESA does not include evaluating potential vapor
migration
• There is no consensus methodology for evaluating vapor
migration in a Phase I [non-intrusive type] investigation
• EPA does not include consideration of the vapor pathway in
its Hazard Ranking System (HRS) for identifying Superfund
sites

32. Result
• Case was settled by the insurance company that provides
the consultant’s E&O insurance

33. Lessons Learned
• If you conducted Phase Is prior to November 2013 (when the
ASTM E1527-13 standard was published) and did not consider
vapor migration in those Phase Is, there is liability risk.
• It would be prudent to work with your legal counsel to develop a
strategy to respond to a potential future lawsuit claiming that
you were negligent .

34. Lessons Learned cont’d
• Consider the following in developing a response strategy:
• Industry consensus on a vapor migration screening methodology
for Phase Is was not developed and published until 2008 (ASTM
E2600-08 standard)
• The ASTM E2600-08 standard included vapor migration as a “non-scope
consideration” that would be included only at the client’s
request (under legal pressure that this exclusion was inconsistent with
CERCLA, E2600 was revised in 2010 to delete vapor as non-scope)
• The ASTM E1527-13 Phase I standard published in November
2013 for the first time specifically refers to vapor migration
• EPA first published a draft vapor intrusion guidance document in
2002, but only published its final version for public comment in April
2013 – and still has not published a final document

35. Lessons Learned cont’d
• Bottom line:
• For Phase Is conducted prior to 2002 (when EPA published its
draft VI guidance), a reasonably strong case can be made for not
having included vapor migration in your Phase I
• For Phase Is conducted between 2002 and 2005 (AAI Rule), a
reasonable case might still be made, but this will likely be
dependent in large part on whether the state where the property
is located had published vapor intrusion guidance
• For Phase Is conducted post-2005 when EPA published its AAI
Rule, it will be difficult to make a case since EPA in its
December 30, 2013 AAI Amendment to the Rule clearly stated
that the 2005 Rule included consideration of vapor migration

36. #4: Former Tenant Case

37. Case Background
• A prospective purchaser of a retail property (shopping
center) retained an environmental consultant in 2003 to
conduct a Phase I on the property to identify recognized
environmental conditions
• The Phase I SOW complied with the ASTM E1527-00
standard
• The Phase I investigation concluded that there was no
evidence of any RECs
• The property was acquired

38. The Problem
• When refinancing was sought four years later, the bank
required a new Phase I and used a firm from their “approved”
list
• The consultant doing the new Phase I for the bank was not
the firm that did the original Phase I
• The consultant identified that a former dry cleaner existed on
the property and recommended a Phase II investigation
• The Phase II investigation found PERC contamination in the
soil and groundwater on the property and remediation was
required to comply with state cleanup standards
• The property was not able to be re-financed

39. Plaintiff’s Contention
• The existence of a former dry cleaner tenant on the property
that was not identified in the original Phase I investigation
conducted prior to the property being acquired
• This resulted in site investigation costs, remediation costs
and an inability to refinance the property
• The firm that performed the original Phase I did inadequate
historical research and did not follow the standard of care
applicable to the conduct of Phase Is

40. Plaintiff’s Contention cont’d
• It should have been obvious that dry cleaners were often
tenants at shopping centers (particularly where there were
large food stores) and that they moved relatively frequently.
As such, a tighter historical search interval should have been
established and, moreover, the city directories were available.
• This caused harm for which damages were being sought
• The damages sought were directly attributable to negligence
by the firm performing the original Phase I investigation

41. Defendant’s (EP) Response
• The Phase I complied with the ASTM E1527-00 standard
• The E1527-00 standard states that “review of standard
historical sources at less than approximately five year
intervals is not required”
• Past tenants were identified by the defendant using a city
directory search at approximately 8-10 year intervals (which
meets the “not less than five year interval” requirement)
[The dry cleaner tenant identified by bank’s consultant was a
tenant on the premises within this 8-10 year interval. The
bank’s Phase I consultant searched city directories more
frequently (at approximately a three year interval), which is
beyond what is required to comply with ASTM E1527]

42. Result
• Case was settled by the insurance company that provides
the consultant’s E&O insurance

43. Lessons Learned
• For retail properties such as shopping centers or industrial
tenant properties, knowledge of past tenants is important
• Sellers typically only have limited information on all past
tenants
• Historical city directories can provide insight into past tenants
• It may make sense to review all available (“reasonably
ascertainable”) city directories for these types of properties
[Note: This may be beyond the [interval] requirements of the E1527
standard; hence, it would be prudent first to discuss this with the client
(you may even be able to charge for the expansion in the scope of work).]

44. Lessons Learned cont’d
• For these types of properties, you should make a special
request to the client to obtain a list of all past tenants (even
though this information typically is not available, and if it is available, it
frequently would only be for a limited period of time)
• If you are following the E1527 standard for these types of
properties, then your Phase I should include a limitation that
the investigation may not identify all past tenants on the
property (a data gap) and therefore may miss a high risk
tenant (such as a dry cleaner)

45. #5: “What is obvious” Case

46. Case Background
• A property was about to be foreclosed upon in 2002 and the
bank authorized a Phase I prior to foreclosure
• A small industrial tenant located on the site was in the process
of closing down
• This industrial tenant assembled small (desk-top) electrostatic
coating equipment (with a component being a small vapor
degreaser) and tested them prior to shipping
• No manufacturing was done on site
• The operation utilized small quantities of chlorinated solvents in
testing the machines

47. Case Background cont’d
• A Phase I consultant was retained by the bank to do a pre-foreclosure
Phase I following the ASTM E1527-00 standard
• The Phase I consultant requested hazardous waste manifests
from the tenant but none were found in the on-site records
• Plant personnel during interviews were not able to recall any
hazardous waste manifests
• The database company’s search of RCRA records identified no
hazardous waste generation records for the site
• The consultant made a request to the state DEP for any
manifest records and was told there were none for the site

48. Case Background cont’d
• The consultant concluded that the site likely was a CESQG
(where an EPA ID number and manifesting was not a requirement in the
state)
• The Phase I consultant recommended a Phase II
• The Phase II involved the installation of 6 monitoring wells
around the building exterior
• No VOCs or PHCs were found in any of the soil or
groundwater samples
• The consultant concluded that there was no evidence of
RECs
• The bank went ahead with the foreclosure proceedings

49. Case Background cont’d
• During the foreclosure proceedings, a prospective purchaser
appeared on the scene and indicated an interest in acquiring
the property
• The prospective purchaser’s lender (different from the bank
involved in the foreclosure) required a Phase I
• The prospective purchaser retained the Phase I consultant that
did the original Phase I for the foreclosing bank
• The original Phase I (8 months old) was updated following the
ASTM E1527-00 standard
• The Phase II conducted for the foreclosing bank was less than
two months old and not updated

50. Case Background cont’d
• The consultant concluded again that there was no evidence of
RECs and the “environmental risk associated with the site was
low”
• The property was acquired and the building subdivided for
office space

51. The Problem
• Five years later, the property owner decided to refinance the
property and the bank (different from the previous banks)
requested a Phase I
• The consultant that was retained conducted the Phase I
following the ASTM E1527-05 standard
• The consultant in requesting manifest data from the state for
the site’s former light industrial operation was now told there
were manifest records and received copies indicating that the
site was in fact a LQG (the initial state search made an error
by searching under an incorrectly spelled address, resulting in
no manifest records on file at this “incorrect” address)

52. The Problem cont’d
• The consultant recommended Phase II sampling both at the
exterior and in the interior of the building
• The Phase II found chlorinated solvent contamination below
the floor of the building at levels that required remediation
• The property owner was unable to get the refinancing
completed and was required to investigate the site more
thoroughly, develop a remediation plan and cleanup the
property
• Had the consultant that conducted the initial Phase I and
Phase II identified the potential presence of hazardous
substances in the subsurface below the slab, the property
would not have been acquired

53. Plaintiff’s Contention
• The Phase I consultant that conducted the Phase I/II did not
meet the standard of care and should have known that these
types of industrial facilities (testing vapor degreasers) require more
comprehensive investigation, including sampling inside the
building where the testing took place
• The consultant should have known the state DEP’s reply was
inaccurate (it was “obvious”) and conducted further investigation,
i.e., visited the regulatory offices and conducted the manifest
record search itself (it is widely known that hazardous waste
transporters for any size generators typically utilize the manifest
system)
• The firm performing the Phase I was negligent and caused harm
for which damages were sought

54. Defendant’s Response
• The interviews of plant personnel indicated:
• The use of solvents at the plant was minimal
• No recollection of spills or releases
• Only minor amounts of waste solvent generated from the testing (1-2
quarts)
• No manufacturing was done on site, only assembly and testing
• State DEP had no manifests for the site (providing support that
the site was likely a CESQG)
• Search of the RCRA database by the government records search
company indicated no hazardous waste generation records at the
federal level for the site

55. Defendant’s Response cont’d
• The ASTM E1527 standard does not require independent
verification of information received from third parties (including
government agencies and personnel interviewed) but may rely on
this information “unless he or she actual knowledge that certain
information is incorrect or unless it is obvious that certain
information is incorrect based on other information obtained or
actually known to the environmental professional”
• A CESQG is not required in the state to have an EPA ID number
and is not required to manifest

56. Result
• Case was settled by the insurance company that provides
the consultant’s E&O insurance

57. Lessons Learned
• If something does not pass the smell test, it probably is worth
doing additional investigation
• If you are relying on certain data for your professional
opinion, make sure this is made clear in the Phase I report
• If there are limitations in any of the site assessment activities
reviewed, such as in this case the fact that there was no
sampling inside the building below the slab, clearly identify
this limitation in the Phase I report

58. Final Thoughts
1. When you rely on important facts (such as the depth to
groundwater or the type soil or groundwater flow direction
from a Phase II investigation), be sure to reference the
source.
2. When you rely on important assumptions (such as
groundwater flow following surface topography, or the soil in
the subsurface being homogenous), be sure to clearly
state this.
3. When you provide your professional opinion, be sure
always to condition it (e.g., clearly identify what you base it
on).

59. Final Thoughts
4. Be sure to identify in your terms and conditions the limiting
conditions identified in the ASTM E1527 standard, i.e., the
investigation is not exhaustive and uncertainty is not
eliminated.
5. Describe your scope-of-work clearly and comprehensively
6. State who can rely on the report (anyone relying on the report
should be provided the SOW, T&C and Limitations/Assumptions and be
asked to confirm in writing that these have been reviewed; may also want to
put a time limitation, e.g., 6 months, on the reliance)
7. When litigation takes place, a key question will be:
“Did you clearly say what you will do?”
And then:
“ Did you do what you said you would, no more, no less?”