Sunrise Mountain Landfill 1999 Administrative Record .

HAZARDOUSWASTEANDREAL ESTATETRANSACTIONS ?y Joe/ S. MoskowitzIn (he early 1970s, the term "environm e n t a l law" e v o k e d images of endangered ipecies preservation andsaving redwoods When applied to reale s t a t e transactions, cnvtronmenial lawseemed 10 be a tool for those who preferred undeveloped land and rural v a l ues and opposed d e v e l o p e r s .Praciinoners litigated the Coastal Act.the Vvillumson Act. the California Environmental Quality Act. the Subdivision M a p A c t . a n d sundry o t h e rvigorously debated barriers to urbansprawl V» hilc a few environmental lawyers dealt with the Clean Air and CleanWater a c t s and their state counterparts,these only occasionally presented reale s t a t e issues and the now.dreaded term"hazardous waste" was virtuallyunknownToday, environmental law has notonly evolved and matured into a spec i a l t y as distinct and as arcane at t a x a tion, it has sent tendrils into neighboringfields Practitioners w i t h specialties atdiverse as bankruptcy, mergers and acquisitions, securities, corporate law.banking —and real estate —arc callingwith increasing frequency upon thesmall environmental bar.V» rule the older land use concerns stille x i s t , the litigation ferment surroundingthem has largely (but not entirely)passed Real estate litigation is nowdominated by issues stemming from thegrowing development of historically industrial lands for new residential andindustrial use-sPractitioners in the field must keepcurrent with the state of the law pertaining to liab:' ty, 1 as well as be up tospeed on the recent Superfund Amendments and Reauthonzation Act of 1936signed by President Reagan in midOctoberTHE PLIGHT OF THE I\.\OCE.\TPURCHASERTo real estate practitioners, one of themost alarming developments in recentyears is the often ruinous liability imposed upon a purchaser of property forchemicals placed on the land by hispredecessors or even third parties oftendecades before, of which he was neveradvised and which he never detected.The oft-cited source of this dracomanrule is Section 107 of the ComprehensiveEnvironmental Response. Compensation, and Liability Act of 1980-' whichincludes among those who may be suedfor cleanup cosu:(ll ihe o*ner and operatorof afacility.(2l any person who at the lime ofdisposal of any hazardous substanceowned or operated any facility atwhich such ha:ardous siibucweswere disposed of .Since any place where hazardous substances happen to be is a "facility."' theliability of the propeny owner, innocentor not. is clear.At least this liability would have beenclear had not Congress also sensiblyprovided at Section 107(b)' that a personmay avoid liability under Section 107 byshowing the release or threatened releaseof a hazardous substance was causedJ .t I S Mosko»it: is of counsel 10 CibfonDunn d Crulch.tr. and co-chair of the solely by:an act or omission of a third partyAsicxiuiion i Environmental La * Comother than an employee or agrni ofminet He »oj formerly in charge ofthe defendant, or than one whose setC a l i f o r n i a ' s Tone Substances ControlProgram and »oj for li years a deputyor omission occurs in connectionattorney generalwith a contractual relationship ei.islinf d:rectly or indirect!) »i//i thedefendantif the defendant establishes by a prrponderfm.e of theevidence that lai he exercised duecare with respect to the hazardoussubstance concerned . and Ibi helook precautions against forseeableacts and omissions of any such thirdpany .This exemption seems perfectly tailoredfor an innocent purchaser of propenvpolluted by another: I) the pollution wascaused solely by a predecessor ) thepurchaser never handled the w a s t e andthus exercised "due care " w i t h respect tous handling; and 3) he was in no positionto take precautions against his predecessor's foul deedsIn response to cases that limned thisdefense unreasonably.' the rules werealtered-but not in a useful manner-mthe Superfund Amendments and Reauthorization Act of 1986 The term"contractual relationship," as it appearsin the language quoted above, gained anew gloss with the inclusion of "landcontracts, deeds or other instrument!transferring title or possession " Plugging this new definition into thepre-existing stall. e. the language is notespecially menacing, as it is hard toimagine a predecessor-owner pollutingthe propeny "in connection with" aland contract, deed or other instrumenttransfenng title or possession Howeverthe remainder of the amendment suggests that the innocent owner or lessee isto be held responsible for the acts of hisind Hojl.ifu a CER(. LI!9LOt L A Lll'l II9I6I'CERCL*. 42 U SC 19601,1 f« CtRCLA 42 U SC H 60l(9l ( 101(61 «dOm( 42 U S C I 960'lbl* Nrw orl ? Sl*orf Krtllr Corp M9 F Id ICM: I1044 (2nd Cir I9IJI. Mr cnttdim of iritt Moaa-tur A Hayt iup'0 i l l l l 4 . i i t o 10 UD .JJ.ni 4 2 U S C ( 9 5 0 111) IJioatry 1987/Loi Angeles Lawyer 51000478

prcJe:csior as relief from inclusionwiihin the t e r m is offered onlv if thepollution occurred prior to the t r a n s f e r01 the property and the new o w n e r cane s t a b l i s h bv a preponderance ol the enjence t h a t at the IKTIC of acquisition hedid not know anj haJ no reason 10kno-" mat a h a z a r d o u s Substance wason iris p r - p e r t *To naw naJ no reason to know"/ r/Ar cA'/r'u/urti" "tint hu\C HilJi'r./(/JM''I at Itit.' tinti' i l uiyiii*uii n all\ i i ' t t \ fMt Ht,-r\tnp und Kit'* "/ theP'i'pi-'l\ iiinniteni " nil tfi'i*/nuniMiJ'i i J/ JilJ in\Iotttur\ pruillil.' inpurposes ol ihe prelecting VHi-nfrthe fonri fha/l uke into JCitiunt an\ipeciu/ileu1 k nim ledge or e\perien eon Ihe part of llif delendunt. //ifrelationship of the puri hase prue inthe mint ol the properly il unionlaminated common/! kno*\n orreasonable asiertainahU- ntlorniuiiiin about the propi'ftv ttnd //it*ahiln\ to delta such loniaininutnmh\ appropriate inspritioriFinally, the amendments provide that ifthe new owner learns of the contamination and then sells the property withoutdisclosing it. this defense is unavailableto him Few investors should take comfort inthe Superfund Amendments because oftheir vagueness, iheir case-by-case application, and because they mandate thediscomfiture of having to establish such1things as "the defendant by a preponderance of (he evidence." Further, whilequalifying for this defense is a majorrelief, the illiquidity and possible unusability of the property until the remediation is completed could prove aneconomic disasterThe S u p e r f u n d A m e n d m e n t s do.however, codifv what was rapidly hecoming standard practice of due diligence prior to property acquisition— athorough inspection by e\perts to besure that the property is not contaminatedCalifornia s Hazardous SubstancesA .t. w h i c h is superimposed uponC E R C L - V offers no original contribution on the subject of the responsibilityol innocents to undertake remediationfor the guiliv but merely defines "liableperson" to have the same meaning asunder CERCLA *One unintended and as yet unutilizedbit ol relief has crept into ihe Californias t a t u t e s , h o w e v e r In adopting a "remedial action plan" to address a pollution problem, the CaliforniaDepartment of Health Services is required to preliminarily allocate responsibility among the potentiallyresponsible parties. A party allocatedmore thin 50 percent of the r e s p o n s . b i l ity can demand t h a t his shar: be a r b i t r a t e d under a special, and as yeti g n o r e d , procedure That a l l o c a t i o n . 'however, will be based upon the degree :to which the party is responsible for thepresence of the w me. « In the caw of theinnocent landowner the amount w h i c hshould be allocated to him is z e r o Anyresponsibility not allocated to the landowner. however, will be picked up by thestate superfund. and the landowner isgiven immunity from efforts to scei.recoupment of these c*penditures from him."IA n o t h e r m e a n s for in i n n o c e n tpurchaser to suddenly find his investment in jeopardy under California law isto have his land determined to be " h a z ardous waste" or "border zone" properly. The former is land on, under or inwhich hazardous waste has been deposited which creates a hazard 10 publichealth or safety on (or in the case of"border zone" property within 2.000feet of) such a deposit." The uses of suchland are severely restricted, as theirowners are precluded from developingthem ai residential, school or hospitalproperty absent special dispensation." jThis statutory scheme has never beenletted in practice, but us lack of precision and the difficulty of determiningwhat may have been deposited within2.000 feet of one's property stimulatesthe imagination of developers and realestate brokers.The harshness of these rules is mitigated by the ability to seek indemnity orcontribution from the culpnt who pol- 'luted the property," if his identity can bedetermined, if he can be found, and if hehas any assets. Even then, the timerequired to collect the indemnificationcan play havoc with the owner's cashflow.LIABILITY OF ri,\A.\CtALINSTITUTIONSBecause of the enormous potentialcost of hazardous waste cleanups, thevalue of polluted property is frequently anegative figure. To a financial institutionwhich looked to the supposed value ofthe property as security for a loan, thediscovery of hazardous waste on the it HtAlTH i SAT COOf t 21)10 Sff MHOWhfflhcf me Californn tliiutn «ill be interpretedto tncorporiti Illcr-idoptcd i m c n d m c r t l i toCERCUA it in optn Qucinon" H t A L T M * S»F C O O t Um UdlJJ1S4 )min4IO." H l A L T H * S * f . COOI : J ) ) » « ( C I ."HIAITH A S A F C O O C 2 1 2 Z I"HCALTHAiAF COOC 2):i]" MO»U«MU A HCTTU «*** II I l l i - UP i»4tun cud. H I A L T N A AP COOt i ! ) ) » fccl 4 141.000479

property is a most unwelcome c cnl Aworse f j t e a w j i i s i h e u n w a r v - i n s i i i u t i o n .howeverC E R C L A e x c m p n from l i a b i l i t ythose holding a security miercsl m thecontaminated property, provided theyarc nol "participating in the management" of ihriaolitv''These institutions which believedt h e m s e l v e s cautious by placing p r o v i sions m me loan agreement which mighibeconsiruedasgmngihemiheabilityio"control" the handling of wisie on theproperty ma) be courting liability underrecent interpretations of this c»empnon .' Even abseni such a clause, an instituI lion which actually forecloses on such aproperty is in peril. If hazardous w a s t e isbeing "disposed" of on the propertyfollowing the foreclosure under expanded notions of that term. '' then theliability is immediate. Even if the site itinactive, unless it is rapidly transferred,the institution will be deemed an ordinary owner of a facility, and no longerthe holder of a security interest."Neither the prospect of the diminution of the value of us security, nor stillless the acquisition of responsibility toremediate a site.is likely to invoke muchenthusiasm among lenders Even suchdevices as adding the lender's losses forrequired remediation to the principal ofthe loan may ring hollow without adequate security. Financial institution} aretherefore increasingly seeking assurancethat they will avoid such situations as acondition of loans secured by industrialor formerly industrial properties, and(hose requesting such funds who are notalready concerned about protectingthemselves are finding their projectsstalled until they can comfort their lendersFORMS Of PROTECTION AGAINSTLIABILITYIn principle, only two formsof protection against hidden liabilities created bypolluted ical estate exist: physical andlegal. The former encompasses thoseactions which can be taken to avoidunknowing a t t a c h m e n t to pollutedproperty, and the latter encompassesme t hods of shift ing the liability t o o t henshould pollution be discovered. Thoseb r a v e souls who were not driven fromthe held in fear of liability now aresufficiently cautious that they will wantto seek both forms of protectionPHYSICAL PROTECTION: THEENyiRONMENTAL SURVEYBy far the best means of avoidingliability for the presence of industrialwaste on real estate is for there to be nosuch waste on the property And the bestway to auure on,. ' ! for one's lender thatllic propertv e»amined bv an e\penpnof 10 ihc close o f t i c r o wA Ihrmngindusirv surfed bv en ironmenul engineers has grown to servicellm need The cost of their s e r v i c e sv j n e s w i d c l v . from jhoul S 7 5 t o S l . Sper hour lor senior personnel plus coiislur equipment jnd l-horjiorv Ices ifiuxc*«ury. Depending on the n/e anaiiiinple\iiv 01 ihe propcrtv jnd ihe tnor Highness r l' ihe S u r v c v ihe cost ol -inevjmmjiion cjn rjnge Irorn SI.000 10SM nun M the low end of the scale is thefursi rv visujl ciaminjtion The engineer will visit the propcrtv to look lornhvinus signs ol contamination such asdiscolored soil, the existence ol underground tanks leaking translormcrs andWJMC storjgc areas where drums mjv heleaking.This minimal view is often all thetransaction allows Too often, the specter of potential industrial con lam mat iondoes not come to the fore until itvetransaction is far a d v a n c e d and bothsides ire eager to close and little patienceensts for awaiting laboratory resultswhich can take up to two weeks absent tdoubling of fees or persona I intercessionThis method, however, can easily miss amajor problem. It cannot easily evaluatethe magnitude of problems it doesdeteciand may not satisfy the new SuperfundAmendments.Ai the other end of ihe scale is thecomprehensive site evaluation, whichcan include soil borings, laboratoryanalyses, examination of governmentrecords and old aerial photographs, andinterviews with present and former employees. Unhappily, the most thoroughinvestigations are reserved for preparation for litigation or as pan of a sueremediation.The notion is current among somepurchasers and financial institutionsthat the work product of such an investigation should be some son of "certificate" by the engineer, or better yet by agovernmental agency, that the site is freeof environmental problems —rather inthe nature of a termite report. As withtermite repons. governmental agenciesdo not give luch certificates. In addition,given the often elusive nature of hatardous waste and the enormous liabilities involved, engineers will provideno guarantees Usually, once this is explained, a negative report will sufficeOnce the decision is made thit anengineer's services are necessary, the OEHCI.A »IOU:OIA 4 i u s c ««MU:OIAI -united Suio M.nMc is ELR : m: IE of* WMl''Umitd Suiti Pncr. )!) FSupp I O J ! l O ' lIII) 1 ullJ Ml f It :0'l)rd Cir f»«.'l' United Sinn MirOind link A Truit CoM.TSupp ) T \ D M« l000480

offer is made for ihc b u y e r ' s e n g i n e e r toS u r v e y the property at no cost to Ihcseller This is t e m p t i n g , g i v e n the COM ofthese services, but it is r a r e l y a good ideain practice As any evpen will an engineer will seek to please his c l i e n t J u s tas expert witnesses r a r e l y w i l l r e a c h anopinion adverse to the l a w y e r who engages h i m . so the e n g i n e e r has his c l i e n t sinterests well in m i n dIn the case of the b u y e r ' s e n g i n e e r .these interests i n c l u d e f i n d i n g e v i d e n c eof a problem. This can be a d v a n t a g e o u sto both sides if done well But as mosti n d u s t r i a l sues h a v e some possible problem, how t h a t problem is perceived andarticulated may at once become thebasis for reopening the issue of thepurchase price of the property E x p e n cnce teaches that the b u y e r ' s e n g i n e e rrarely m i n i m i z e s the p r o b l e m , butThe lawyer, rather t h a n the client,rather treats both sides w i t h an impresshould contract for an engineer's sersive projection of w h a t the n e x t phase ofvices The law has not yet recognized anythe investigation w i l T e n t a i l" e n g i n e e r - c l i e n t privilege." W i t h soAt the outset, the b u y e r often seizesm a n y of the t w i j u in the road in storiesthe advantage he has been provided andof hazardous waste v e e r i n g one towarda t t e m p t s to negotiate a lower price Inl i t i g a t i o n , w h a t e v e r a d v a n t a g e m i g h t bethe end. though, he reconsiders w h e t h e rt a k e n of the a t t o r n e y - c l i e n t or workproduct p r i v i l e g e s should not be squjn- he wants to own at any price property vhich cradles such potential disasterdered.and the deal typically is terminatedAt a m i n i m u m , an e n g i n e e r should beThe best results have been reachedengaged by means of a c a r e f u l l y draftedwhere the buyer and seller both pick andcontract. The forms provided by somepay for a neutral engineer, although theengineers omit t e r m s important to themore expensive and adversarial solutionc l i e n t , as do letters of engagement oftenofeach engaging a firm has worked.employed by attorneys1 Some key termsinclude the following. AND The contract should recite t h a t theHARRAXTIESengineer is being engaged to assist thePurchasers of propeny often requestl a w y e r in rendering legal advice to therepresentations and w a r r a n t i e s from theclient.seller, and the seller just as often resists The engineer should be expresilythem. Both parties may struggle tooforbidden from d i v u l g i n g the product ofmuch over the issue, although thesehis i n v e s t i g a t i o n to any person, includdevices certainly have their u t i l i t y .ing g o v e r n m e n t a l agencies, without theFrequently encountered clauses prol a w y e r ' s permissionvide: Documents produced by the en Thai no hazardous waste or subgineer should be marked as privileged,sunce has been stored, treated or disand drafts should be so marked andposed of on the site ind t h a t noreviewed by the lawyer prior to beingunderground storage tanks exist on thet r a n s m i t t e d as a Anal product.lite: The scope of work should be care That the propeny u in compliancefully and f u l l y set out. or if this is notwith all applicable statutes and regulapossible and the work is to extend over ations. including environmental, healthpenodofmonths. the engineer should beind safety requirements:required to provide a work plan at least Thit the business on the propenymonthly, w i t h a projected budget forhat disposed of its waste in accordanceeacn m o n t h . The basis for compensationwith all applicable statutes, ordinancesand l i m i t s on compensation should beand regulation*:clearly specified. In the absence of such That the seller has no notice of anyclauses, the project can gallop away, topending or threatened action or prothe e v e n t u a l chagnn of all.ceeding arising out of the condition of Several miscellaneous provisions,the premises or alleged violation of entuch at a cancellation clause, insurancevironmcntil. health or safety statutes.provisions, and others common to theordinances or regulations:e n g a g e m e n t of o t h e r e x p e r t s h a v e That all governmental pcnruu reprovtn their »onh.quired to operate whatever busmen itFrequently, the seller ii approached bycontemplated in the propeny art in fullthe buyer with an engineer in tow, and anquestion t h e n anses of how to locale thenghi one As w i t h most professions, theexpertise and expense of e n g i n e e r s v a r yc o n s i d e r a b l y The best engineers tend tobe the busiest, and t h e y are most r e a d i l ya v a i l a b l e to and most considerate oft h e i r best customers — m a n y of whichi r e e n v i r o n m e n t a l l a w y e r s . Lrwvcn w h op r a c t i c e in the held often h a v e identifieddifferent f i r m s w i t h s u b - e \ p e r t i s e s . p r e f e r r i n g one firm for us hydrogeologicc a p a b i l i t i e s , a n o t h e r for us i n s i g h t inf e r r e t i n g out areas of historic d u m p i n gfrom s l i g h t clues, still a n o t h e r because ithas acquired f a m i l i a r i t y w i t h a givengeographic area, an i n d u s t r y , or ccnamkey r e g u l a t o r s Locating the best engineers t h r o u g h the phone book is asl i k e l y as locating the best l a w y e r s t h a tf o r c e a n d e ca a n d t h a i n o c o n d i t i o ne x i s i s v.h.ch m i g h t t h r e a t e n t h e v j l i j , i ,of s u c h p e r m n sT h e s e a n j o i h e r clauses a r c follo-.fjbv a s u r v i v j D v l i t y clause and an agrrt'm e n t t o i n d e m n i f y a n d hold t h e b u * t rh a r m l e s s s h o u l d t h e v p r o v e to be falseSuch p r o v i s i o n s are a poor s u b s t i t u t efor an maJcjv.atc i n v e s t i g a t i o n Theproiecnon thev provide assumes t h a t theseller v » i l l be f o u n d - h e n he is neededt h a i he has s u f f i c i e n t assets to respond tot h c s i l u a t . o n and [hat ihev can obtainedu i i h s u i n e n l speed t o a v o i d v i o l e n c e t othe b u v c r s c a s n llowIn e v a l u a t i n g ihe price paid to obtainor a v o i d these p r o v i s i o n s it must beremembered t h a t pr

40.000J 100' 20.0001 100' 10.0001 85' 7.000 70' 6.000 60 ' 6.500 65' 7.000J 70' 7.000J 70' 7.000J 70' 7.000) 70' DCPTH 3001 250' 160' 140' 110-100' 100' 100' IOC1 100' 100' 100-YARDS FROKT so-so1 50' 50' 301 20' 20' 25' 20' 20' 201 20' REAR 75' 50' 50' 25'/. of depth 25' *25' *25-25' *20f