Solicitor Guidance on Minimizing Liability

341 FW 3
Originating Office
Division of Realty

The following guidance is provided by the Assistant Solicitor for the Branch of Fish and Wildlife, Division of Conservation and Wildlife.

Section 9601(35)(A) of CERCLA provides protection for "innocent purchasers," including the United States, if at the time the owner acquired the real property the owner did not know and had no reason to know that any hazardous substance was disposed of on, in, or at the property (42 U.S.C. 9601 et seq). To establish that the owner had no reason to know for purposes of 9601(35)(A)(I), the owner must have undertaken at the time of acquisition "all appropriate inquiry into the previous ownership and uses of the property consistent with good commercial or customary practice in an effort to minimize liability." 9601 (35)(B) (emphasis added). Factors that will be considered by a court in determining if this standard has been met include: any specialized knowledge or experience by the owner, the relationship of the purchase price to the value of the property if uncontaminated, commonly known or "reasonably ascertainable" information about the property, and the ability to detect such contamination by appropriate inspection. 42 U.S.C. 9601(35)(B) (emphasis added).

One of the critical questions in analyzing potential CERCLA liability is, "What level of inquiry into the previous ownership and uses of the property is appropriate to establish the innocent purchaser defense?" The level of environmental inquiry will not be the same for every transaction but will depend greatly on the specific characteristics of the property and the parties involved in the transaction. While CERCLA does not specifically distinguish certain types of parties and uses from others, or certain types of parties from others, it does provide a list of factors that a court will consider in evaluating whether or not a party has met the appropriate inquiry standard. It is clear from the use of certain terms such as "specialized knowledge or experience," "reasonably ascertainable," and the individual's "ability" to detect contamination that the standard will be different depending on the circumstances of the situation. The levels of inquiry will therefore depend on the nature of the property and the individual parties involved in the transaction. It is likely that federal land managing agencies will be held to a higher standard of inquiry than purchasers with less experience and training in ascertaining environmental problems.

The legislative history for this issue provides some further insight into Congressional intent of this section and the desire to make the level of inquiry change with the type of property and the party. The legislative history states:

"The duty to inquire under this provision shall be judged as of the time of acquisition. Defendants shall be held to a higher standard as public awareness of the hazards associated with hazardous releases has grown as reflected by this Act...Moreover, good commercial or customary practice with respect to inquiry in an effort to minimize liability shall mean that a reasonable inquiry must have been made in all circumstances, in light of best business and land transfer principles."

H.R. Rep. No. 962, 99th Cong., 2d Sess 187 (1986).