Property Owner Fails to Qualify as BFPP Because Phase 1 Did Not Contain EP Certification

A property owner failed in its bid to qualify as a CERCLA bona fide prospective purchaser because its phase 1 did not contain the environmental professional certification required by the section 40 C.F.R. § 312.21(d) of EPA’s All Appropriate Inquires (AAI) rule.

In Von Duprin LLC v. Major Holdings, 2021 U.S. App. LEXIS 26726 (7th Cir. 9/3/21), the plaintiff sought contribution from Major Holdings (Major) alleging that the company’s property contributed to a localized groundwater plume containing chlorinated solvents that presented a risk of vapor intrusion to nearby residential properties. As one of its defenses, Major asserted that it qualified for the BFPP because it had performed a phase 1 prior to acquiring the former Zimmer Paper Parcel in January 2007.

While phase 1 stated it complied with the ASTM E15270-05, the plaintiff argued that the report did not satisfy the AAI rule because it lacked the certification that the report was prepared by or under the supervision of an Environmental Professional as defined in 40 CFR 312.10(b).

Major argued that whatever inconsistencies that existed between AAI and the phase 1 were not significant and what was important that Major had  acted reasonably in performing a timely phase 1 that satisfied ASTM E1527-05. For support that strict compliance with AAI was not required, Major pointed to a sentence in Ashley II of Charleston v. PCS Nitrogen, Inc., 791 F.Supp.2d 431, 500 (D.S.C. 2011) where the court found that the plaintiff had complied with AAI because unidentified inconsistences between its phase 1 and ASTM E1527 lacked “significance”. The court went on to say that “What is important is that Ashley acted reasonably; it hired an expert to conduct an AAI and relied on that expert to perform its job properly. The court finds that Ashley properly conducted AAI. “

The Von Duprin district court was not persuaded by the single sentence from the Ashley II case and denied a motion for summary judgment, finding that the Major phase 1 had not complied with AAI 312.21. Following the bench trial, the district court said the Major defendants had not offered any additional evidence  to rebut the plaintiff’s arguments that the 2006 Phase I ESA failed to comply with AAI.

Interestingly, the district court had also said that a property owner could not circumvent AAI by complying with the ASTM E1527-05 as if the standard did not require the EP certification. However, section 12.13 of the standard states that a report must contain the EP certification.

The 7th Circuit affirmed that because the phase 1 failed to satisfy AAI, the Major defendants did not qualify as a BFPP for the former Zimmer Paper site.

In the thousands of phase 1 reports we have reviewed, we have never seen a phase 1 omit the EP certification. However, owners of sites located within the Seventh Circuit might want to review their phase 1 reports to see if they contain the EP certification. If a report lacks the required certification, the owner might want to consider developing information demonstrating how it has complied with the third party defense

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