This document summarizes three case studies related to professional liability in environmental consulting. Case Study 1 describes a situation where a consultant failed to discover a glass recycling facility was under investigation by state regulators for piles of glass. This led to legal issues for both the buyer and seller of the property. Case Study 2 involves a consultant who was hired to interpret an existing environmental assessment but did not conduct a full assessment. This failed to uncover the property's history as a World War 2 bombing range. Case Study 3 centers on a landfill where a spill was not reported internally but was discovered by local police during repeated visits. This led to a criminal investigation and grand jury proceedings against the landfill operators.

1. Avoiding Harm’s Way
Case Studies in Professional
Liability
By
James Campbell Kean, JD, LLM
Master of Laws, Energy, Environment & Natural Resources
Van Rooyan, Kean & Prestage, LLP

2. Case Study # 1:
Mount Glassmore

4. Commercial Recycling Facility
* Traditional Recycling
* Source Separated
* Multiple containers
* Glass, Paper, Plastic, Aluminum Cans
* Requires more effort

5. ‘Single Stream’ Recycling
* Glass, Paper, Plastic, Aluminum Cans
* Source separated, but co-mingled
* Difficult to find markets for ‘three-mix’ glass

7. Law and Environmental Regulation
Legitimate Recycling vs. ‘Sham’ Recycling.
In substance, if you claim to be engaged in recycling, you are
generally required to prove:
1. That the materials you are accepting for recycling
have a proven market for resale, reuse; and
2. That you are turning over the inventory in a regular
manner.

8. Motivated Seller/Motivated Buyer
Seller engaged consultant to conduct Phase 1 ESA.
Buyer in a hurry, relied upon Seller’s Phase 1 ESA.
Following performance of a records check and site visit; Seller’s consultant
found:
* No RECs;
* No mention of glass pile;
* Nothing found with regard to compliance problems;
* Publicly available information at State regulatory agency clear; and
* Relied upon Seller’s explanations (‘recycling’) and disclosures (none).

9. Property Purchased and Continued in Operation
Seller retained as facility manager.
Twelve months later:
* Management audit led to visit with state environmental
agency.
* Agency revealed that the site had been under investigation
for years with regard to glass piles; internal enforcement
files.

10. * Buyer sues Seller for failure to disclose agency investigation.
* Seller counterclaims against Buyer.
* Buyer wins case against Seller. Seller loses.
* Seller files lawsuit against Consultant for failure to discover.

11. Seller’s Contention?
1. Consultant should have advised Seller of the issues.
2. Problems with that position:
* Enforcement issues were uniquely known to Seller;
* Failed to reveal same to anyone; and
* ASTM (AAI) standard does not require Consultant to
conduct compliance review, access confidential state
records, and/or address matters unrelated to hazardous
materials or petroleum products.

12. Lessons Learned:
1. If you are the Buyer, always conduct your own Phase 1 and
consider Non-Scope considerations (compliance) and risks
unrelated to hazardous materials and petroleum products.
2. Consultant should have familiarity with the nature of the
business being examined.
* These facilities are unique.
* Recycling regulations regarding ‘sham’ recycling are
tricky.

13. Case Study # 2:
“Bombs Away”
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14. “Bombs Away”

15. Scenario:
* Consultant hired by Lender; did not want a full Phase 1.
* Wanted Consultant to ‘interpret’ Seller’s Phase 1.
* Consultant’s engagement written very carefully to spell out
limits of work.
* Provided a ‘statement of work’ acceptable to lender.
* Relied upon statements made in existing Phase 1.

16. Significant Findings:
* Buyer received construction loan.
* Began permitting activity to commence construction.
* Nearby school district coincidentally began excavation.
* Discovered WW2 munitions dump.
* Turns out a large portion of the city had been used as a
bombing range in WW2.

17. Data Gaps:
* Original Phase 1 included a “Formerly Used Defense Site”
(FUDS).
* Bombing range was not included in FUDS report.
* Many, but not all FUDS or extent of FUDS boundaries and
activities have been added to the database.

18. Lessons Learned:
1. There is risk associated with doing ‘less than’ Phase 1.
2. If you must, for business reasons, be sure that your
engagement documentation is crystal clear and
understandable about what you are going to do, and
what you are not going to do.
3. Professional liability insurance is a must have when you
need it, despite the high costs.
4. Databases are changing all the time.
5. There is risk associated with issuing ‘right to rely’ letters,
especially with the passage of time.

19. Case Study # 3:
“You Have the Right to Remain
Silent”
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21. Case Study #3
“You Have the Right to Remain Silent”
1. Landfill operator maintained water tank for dust
suppression.
2. Pumper truck hydraulic system malfunctioned, spewed.
hydraulic fluid over a large area.
3. Adjacent to a drainage ditch.
4. Truck driver fails to report incident to management.

22. 5. Local police environmental crimes unit coincidentally
happened to be inspecting adjoining property, viewed
evidence of release of hydrocarbon on ground next to
water tank.
6. Rather than alert the company, police continued to visit
the property (across fence line) for several months.
7. Police take pictures of condition on each visit.
8. A month later, condition still existed, management had
not discovered it. Police arrived and requested tour of
facility.

23. 9. Management allowed tour.
10. Police go straight to location of spill and commence
taking samples.
11. Case referred to environmental crimes unit and
investigation opened.

24. 12. Grand jury convened.
13. Resolution negotiated with prosecutors, no indictment
issued.
14. Prosecutors close case file.

25. Criminal Enforcement
1. Often local criminal enforcement agencies do not coordinate
with or publish in traditionally available public
documentation.
2. Environmental laws feature criminal enforcement tools.
3. A company can be pursued via the grand jury process and
nothing may be reflected in commonly relied upon records.

26. “You Have the Right to Remain Silent”
Lesson Learned:
* Local criminal enforcement activities are often never reported
in databases that matter to Phase 1 projects.

27. Professional Liability: Standard of Care
Each person is required to act with the same degree of
care as a ‘reasonable and prudent person would act,
considering all of the facts and circumstances.

28. Professional Liability – Standard of Care
Three Simple Rules:
1. Do the right thing
2. Perform to the best of your abilities
3. Care about others
From “Winning Every Day” – Lou Holtz

29. Questions
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