JP Morgan Chase Bank entered into a Settlement Agreement For Recovery of Past Response Costs (Settlement Agreement) for a matter captioned In In The Matter Of Browning Lumber Company Superfund Site, Docket No. CERC-03-2007-0028D where the bank agreed to reimburse EPA for $1.28 million in removal costs incurred at a former wood processing facility rural Bald Knob, Boone County, W.Va. JP Morgan was the successor to the trustee who had held title to the property while the wood treating operations had resulted in releases of hazardous substances.
In December 1951, the Charleston National Bank (CNB) acquired title to a large tract of real estate from the Donald D. Shepard and Emily H. Shepard Trust (the “Shepard Property”) in its capacity as the estate trustee. While serving as trustee, CNB conveyed certain timber rights for the Shepard Property to the Lugar Lumber Company, Inc. (Lugar). In 1976, Lugar assigned its interests under the timber agreement to Rubal Browning (d/b/a Browning Lumber) who began operating a wood pressure treatment facility at the Shepard Property that used Chromated Copper Arsenate (CCA). At some point, CNB merged into Bank One, WV (Bank One). In October 19, 1994, Bank One, as trustee, conveyed the Shepard Property to Stephen C. Browning who continued the wood treatment operation as Browning Lumber Company until 1998.
Between April 1987 and 1991, the WVDEP conducted a series of compliance evaluations of the Browning Lumber Company facility. During these inspections, WVDEP inspectors observed significant spillage of CCA solution, solution dripping off finished lumber into large puddles of water in the lumber storage area and uncontained pools of waste CCA solution.
When WVDEP inspectors the facility in 2002, they discovered it had been abandoned and that a fire had destroyed most of the structures. The inspectors observed residual materials from the operations as well as evidence of trespassing and illegal dumping. Because of resource constraints, WVDEP requested EPA to conduct a site assessment and perform any necessary response actions.
In October 2004, the Shepard Property was acquired at tax sale by Magnolia Investors, LLC (Magnolia), a purchaser of tax liens. Upon the expiration of the redemption period, Magnolia conveyed the Site to Rebuild America, Inc. (RAI) in April 2006. Magnolia and RAI appear to have a curious relationship as they seem to have been involved in a number of similar arrangements, primarily inMississippi.
EPA conducted a preliminary assessment (PA) in December 2005 and a Site Inspection (SI) in April 2006. The sampling results detected elevated levels of arsenic, chromium and copper. Some of the soil samples failed the RCRA TLCP test for arsenic. Based on the potential for migration of contaminated sediments and runoff to surface waters and sensitive receptors, EPA determined the site posed an imminent and substantial endangerment. In September 2006, EPA approved a time critical removal action and a request for funding beyond the $2MM statutory limit for removal actions.
EPA conducted a removal action between 2006 and 2007 that included excavation of contaminated soils, 43 drums of waste liquid/sludge, and 2365 gallons of waste water used to pressure wash the equipment and contaminated items on the Site.
EPA issued general notice letters to the two banks and Browning Lumber but apparently did not pursue RAI because it claimed that it did not have the financial resources to conduct a removal action. The EPA memorandum requesting the waiver of the removal action limit also suggested that RAI might be a bona fide prospective purchaser (BFPP). However, given how it failed to take any action to control the ongoing releases, it is hard to see how RAI could have been deemed to have complied with its post-acquisition continuing obligations.
In any event, EPA determined that Bank One, W , as trustee of the Shepard Trust, was an owner of the property at the time of disposal of arsenic and other hazardous substances, and was therefore liable as a past owner. EPA also determined that JPMorgan Chase Bank was the successor by corporate merger with Bank One but only to the extent of the assets of the Shepard Trust.
In 2007, JPMorgan entered into an Administrative Settlement Agreement and Order on Consent for Removal Response Action (AOC) where it agreed to prepare a Response Action Plan (RAP) for approval by EPA to achieve the cleanup goals set forth in the Agreement and to implement the RAP. JP Morgan shall be responsible for post-removal site control, including coordinating with the property owner to maintain any institutional or engineering controls. After EPA issued a close out letter in June 2012 approving the Final Report prepared on behalf of JP Morgan, a notice of the Settlement Agreement was published in the July 11th issue of the Federal Register. The Settlement became effective in September.
One might want wonder why a bank that owns title in its capacity as a trustee given the liability limitation afforded by section 107(n) of CERCLA. The likely reason is that section 107(n)(30 provides that the liability limitation does not extend to a fiduciary who negligently causes or contributes to a release. Given the length of time that the spills occurred, the risks posed by the contamination and that the bank had been notified by EPA about the contamination, it is possible the bank could have been exposed to potential contribution actions by other responsible parties for failing to take actions to at least stabilize the releases. Not only could a creative lawyer have argued that the bank negligently contributed to the release by failing to take action that the absence of any action meant the bank had failed to comply with the due care and precautionary elements of the third party defense as well as the BFPP continuing obligations. By entering into the settlement, JP Morgan received a covenant not to sue and contribution protection.