1. All Appropriate Inquiry
December 6, 2005
Kermit Rader, Esquire
Wolf, Block, Schorr & Solis-Cohen LLP
1650 Arch Street, 22nd Floor
Philadelphia, Pennsylvania
(215) .

2. CONTEXT
2002 Federal Brownfields Amendments to Superfund Reflect and Encourage Shift of Responsibility for Brownfields Sites to the States
1. Enforcement Bar
2. Funding for Grants and Loans

3. CONTEXT Continued 3. Defenses
a. Bona Fide Purchasers and Continuous Property Owners
b. Bona Fide Purchaser v. Innocent Landowner
c. All Appropriate Inquiry
i. Initially use of ASTM – 00 constituted All Appropriate Inquiry
ii. EPA required to create new standard
d. Reasonable Steps Following Acquisition
i. Required notices
ii. Prevent releases
iii. Cooperation with investigation and cleanup
iv. Comply with institutional controls
Including 8 Circuit Courts of Appeals

4. Importance of Due Diligence Beyond Defenses
CONTEXT Continued
Importance of Due Diligence Beyond Defenses
a. Value of Property
b. Ability to develop
c. Issues not addressed by AAI or ASTM
1. Background: Aviall purchased several manufacturing facilities from Cooper in Texas. Aviall discovered contamination, in part resulting from Cooper's activities.Aviall reported the contamination to the State TCEQ which threatened enforcement unless Aviall cleaned it up. Aviall cleaned up the contamination without state enforcement and sued Cooper for its share. Cooper defended, in part by saying the clear reading of 113 is that a party can only sue after a civil enforcement action. The lower court agreed but the 5th Cir. Appellate Court reversed saying that the word "may" implied that the rest of the language was not a jurisdictional prerequisite to filing a contribution Action. The U.S. Supreme Court disagreed and overturned the 5th Circuit holding (see slide). The politics and the dynamics of the case are interesting. The Supreme Court requested an opinion from the Justice Department as to whether it should hear the case in the first instance. DOJ said it should and that the 5th Circuit was wrong. Most perceived DOJ took this position because of liabilities associated with federal facilities. Also, 24 states, 9 associations and 14 companies filed amicus briefs siding with Aviall. The only other brief filed on the side of Cooper was by DOJ.
2. Courts are currently split on whether or not a party has a contribution action under Many courts have held that only non-liable parties can bring 107 actions. I.e., since ownership likely makes you a liable party, you would be precluded from brining a 107 case in most jurisdictions.

5. AAI will become standard practice in field
CONTEXT Continued
AAI will become standard practice in field
1. Lenders will require
2. ASTM 05
3. Negotiated rulemaking process
Companies otherwise thinking about cleaning up sites for sale may also be discourages from doing so.

6. 1. Differences between AAI and ASTM are incremental and subtle
OVERVIEW
1. Differences between AAI and ASTM are incremental and subtle
2. Overall process and types of information are the same

7. OVERVIEW Continued
For most users the most important issue will be ensuring that reports certify compliance with AAI.
City wanted to re-develop waterfront property. The EDC would own the property but would lease it for nominal rent to private developers for nominal rent.
Private homeowners whose property would be taken opposed takings.

8. Comparison of AAI to ASTM
1. Environmental Professional
a. ASTM has only general requirement
b. AAI establishes minimum requirements for education and experience on a sliding scale
i. 3 years experience and PE, PG
ii. 5 years experience and BS in relevant field
iii. 10 years experience with no particular education required, major revision from draft rule
City's decision that redevelopment will serve public purpose by bringing more jobs to area and more tax revenue was reasonable. This public purpose amounts to a public use under the 5th Amendment even though private parties will also reap benefits.
Sharply divided Court (5-4). Dissenters worried that giving this kind of deference to local government decisions will give too much power to politically influential citizens to the detriment of those without such influence.
Dissenters worried that the Court's decision will allow the taking of a Motel 6 to build a new Ritz Carlton.

9. Environmental Professional Continued
c. Qualifications were most controversial aspect of proposed rule
d. Professional must supervise assessment and render separate opinions as to qualifications and compliance with AAI
e. Client needs to make sure the report contains certificate
Also, what if government know who the developer will be and how it will benefit? Does this raise an issue?
Likely to be ongoing litigation over individual cases.
Biggest effect however is shifting the focus to state laws/courts.

10. INTERVIEWS 1. ASTM, as needed 2. AAI, mandatory in some instances
a. current owner
b. for abandoned property, at least one neighbor
c. other persons, e.g., past owner, as necessary
d. if not available, report must identify as data gap
National League of Cities is trying to stop federal legislation from moving forward.

11. 1. ASTM – 1940 or first obvious use, whichever earlier
RECORD SEARCHES
1. ASTM – 1940 or first obvious use, whichever earlier
2. AAI – earliest time of known structures or use
3. Burden for all industrial property
4. Possible sources of information
a. Sanborn maps
b. Business directories
c. Archival information
5. Effect on timing and cost

12. 1. ASTM identifies as a source of information, but often not done
TITLE SEARCHES
1. ASTM identifies as a source of information, but often not done
2. AAI requires that either the professional or client search for liens and records of institutional controls
a. Will consultants require client to provide?
b. Institutional controls becoming increasingly common place – need to evaluate impact on planned use

13. INSPECTION OF PROPERTY
1. Professional must perform personally
2. Adjoining properties must be inspected from perimeter
States with the law include Delaware, Maryland and Ohio
HB 2226/HB1249?? (Rubley, R-Chester) would create the Uniform Environmental Covenants Act, to assure the long-term recognition of institutional and engineering controls as part of approved site cleanups. In July, the bill was in the House Environmental Resources and Energy Committee.
Make sure that you consider this issue and think about deed restricting where appropriate.

14. Price Compared to Value if Clean
1. Client must evaluate and provide to professional
a. Draft rule required providing price to professional for evaluation
b. From client's perspective, how do you know whether the price is reduced?
c. From consultant's perspective, how do you know whether the client is fulfilling its obligation?
d. Data gap if not provided

15. Shelf Life 1. ASTM, 6 months 2. AAI, one year but:
a. Can rely on earlier documents if update appropriately
b. Certain information must be current
i. Price
ii. Inspection
iii. Title
Previously, only those cleanup liabilities associated with pending or threatened legal action had to be disclosed.

16. CLIENT OBLIGATIONS 1. Title search 2. Specialized knowledge
3. Price to value
4. Professional likely to specifically request

17. IMPACT ON TRANSACTIONS
1. Assessments may take longer
2. Need to interview current owner
3. More information will lead to more issues to be negotiated
4. Buyers may request representations relating to information required by AAI
a. Earliest structures or use
b. Institutional controls
c. Price?

18. QUESTIONS???