Legal and Regulatory:
Economic Growth And Regulatory Paperwork Reduction
Act of 1996
Subtitle E --
Asset Conservation, Lender Liability and Deposit Insurance Protection (The
"Asset Conservation, Lender Liability, and Deposit Insurance Protection Act of
1996")
Sec. 2502. CERCLA Lender and Fiduciary Liability Limitations
Amendments.
The Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)
was enacted in 1980 to assess liability for the clean-up of hazardous substances. CERCLA
imposes joint and several liability on, inter alia,
present and past owners and operators of contaminated property. While secured
creditors are exempt from the definition of an owner or operator, that exemption
is not available if the secured party is found to have "participated in the
management" of a facility. Prior to the enactment of the Regulatory Paperwork
Reduction Act, CERCLA provided little guidance as to what degree of management
participation would void the exemption. While judicial authority is split,
several court decisions have significantly limited the scope of the secured
lender exemption under CERCLA.
Section 2502 amends CERCLA by
excluding from the definition of "owner or operator," and therefore, liability
for environmental cleanups, lenders (insured depository institutions, credit
unions, Fannie Mae, Freddie Mac, and Farmer Mac, among others) that hold
ownership primarily to protect a security interest unless the lender actually
participates in the management or operational affairs of the property, instead
of merely having the capacity to influence or an unexercised right to control
property operations. A lender does not "participate in the management" unless
the lender (1) exercises decision making control over environmental compliance
related to the property, (2) exercises overall management of the property
encompassing day-to-day decision making with respect to environmental clean-up,
or (3) exercises control over substantially all of the non-environmental
compliance operational functions (as distinguished from financial or
administrative functions) of the property.
In addition, a lender that
forecloses on a property but did not participate in the management of the
property prior to foreclosure is not liable for environmental cleanups
notwithstanding that the lender after foreclosure, among other things, sells,
liquidates, or maintains business operations at the property if the lender seeks
to divest itself of the property at the earliest practicable, commercially
reasonable time.
In general, these amendments also limit any liability of a fiduciary to the assets held in the
fiduciary capacity provided that the fiduciary is not liable independent of the fiduciary capacity
or did not negligently cause or contribute to the release or threatened release of a hazardous substance.
"Fiduciary" is defined to include receivers and conservators, among other
things.
Sec. 2503. Conforming Amendment. This section makes conforming
changes to the Solid Waste Disposal Act.
Sec. 2504. Lender Liability Rule. Section 2504 puts into place
the Environmental Protection Agency's 1992 rule, (40 CFR 300.1105), which had
been invalidated by a prior court decision. In addition, section 2504 provides
that no court shall have jurisdiction to review the 1992 rule. However, courts
may review amendments to the rule made by the EPA after the date of
enactment.
Sec. 2505. Effective Date. The amendments made by this
subtitle apply to any claim that has not been finally adjudicated as of the date
of enactment (September 30, 1996).
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