Corporate Practice Series Portfolio No. 57-2nd, Avoiding Liability for Hazardous Waste: RCRA, CERCLA, and Related Corporate Law Issues, provides a thorough overview of the two statutory and regulatory systems through which federal law imposes substantial responsibilities relating to the management of hazardous waste and the cleanup of contaminated sites. The analysis emphasizes the issues faced by the operation of industrial facilities that now generate hazardous waste or did so in the past.

Portfolio 57-2nd: Avoiding Liability for Hazardous Waste: RCRA, CERCLA, and Related Corporate Law Issues

I. Introduction

II. Generator Obligations Under the Resource Conservation and Recovery Act 
    A. The History and Structure of RCRA 
        1. The Used Oil Recycling Act 
        2. The Hazardous and Solid Waste Amendments of 1984 
        3. The Medical Waste Tracking Act of 1988 
        4. Structure of RCRA 
    B. Subtitle C of RCRA 
        1. The RCRA regulations (Code of Federal Regulations Title 40) 
        2. Enforcement 
        3. State authorization 
    C. Definition of Solid Waste 
        1. Statutory definition 
        2. Discarded material 
        3. EPA’s redefinition of solid waste 
    D. Definition of Hazardous Waste 
        1. Statutory definition 
        2. Listed hazardous waste 
        3. Delisting a waste 
        4. Characteristic hazardous waste 
            a. Ignitable wastes 
            b. Corrosive wastes 
            c. Reactive hazardous wastes 
            d. The toxicity characteristic 
        5. The mixture, derived-from, and contained-in rules 
            a. Original rules 
            b. Changes prompted by court decisions 
            c. Amended rules 
                (1). Hazardous Waste Identification Rule—contaminated media 
                (2). Universal wastes 
        6. Residues in empty containers 
    E. The Generator Regulations 
        1. Statutory requirements 
        2. Definition of generator 
        3. Categories of generators 
            a. Conditionally exempt small quantity generators 
            b. Small and large quantity generators 
            c. Episodic generators 
        4. Hazardous waste quantity determinations 
        5. Responsibilities of small and large quantity generators 
            a. Determining if a waste is hazardous (§262.11) 
            b. Determining generator category 
            c. EPA identification number (§262.12) 
            d. The manifest system (§§262.20–.23) 
            e. Packaging, labeling, marking, and placarding requirements (§§262.30–.33) 
            f. Accumulation time (§262.34) 
                (1). The 90/180-day storage provision 
                (2). The satellite accumulation provision 
                (3). Generators treating their waste 
            g. Recordkeeping and reporting (§§262.40–.44) 
            h. Preparedness, prevention, contingency planning, emergency procedures, and personnel training (§262.34(a)(5)) 
    F. International Shipments 
        1. Exporting hazardous waste (§§262.50–.57) 
        2. Importing hazardous waste (§262.60) 
    G. Waste Minimization 
        1. Generator certifications 
        2. Waste minimization program elements 
            a. Top management support 
            b. Characterization of waste generation and management costs 
            c. Periodic waste minimization assessments 
            d. Cost allocation system 
            e. Encourage technology transfer 
            f. Program implementation and evaluation 
            g. Further EPA actions 
    H. Generator’s Obligations Under the Land Disposal Restrictions 
        1. Summary of the land disposal restrictions 
        2. Waste determinations; testing requirements 
        3. Notifications and certifications 
        4. Testing of wastes treated in generator tanks or containers 
        5. Dilution of characteristic wastes 
        6. EPA emergency rule 
    I. Air Emissions Controls on Containers, Tanks, and Surface Impoundments

III. Underground Storage Tanks 
    . Introductory Material 
    A. New Tanks (Installed After Dec. 22, 1988) 
    B. Existing Tanks (Installed Prior to Dec. 22, 1988) 
    C. Immediate Action to Address Spills and Leaks 
    D. Procedures for Closing Tanks 
    E. Reporting and Recordkeeping 
    F. Financial Responsibility 
    G. UST Management Strategies

IV. The Comprehensive Environmental Response, Compensation, and Liability Act 
    A. Introduction 
    B. Overview of CERCLA as Amended 
    C. Activities Covered Under CERCLA 
    D. CERCLA Response Action Authority 
        1. Scope of authority 
        2. Removal and remedial actions 
        3. The National Contingency Plan 
        4. Cleanup objectives and standards 
    E. Enforcement Actions Under CERCLA 
        1. Compelled private response under §106 
        2. Cost recovery under §107 
        3. Other enforcement provisions 
        4. Judicial provisions 
        5. Natural resources damage claims 
    F. Scope and Limitations on Liability 
        1. Who is liable? 
            a. Current owners and operators 
            b. Past owners and operators 
            c. Transporters 
            d. Generators 
            e. Liability of corporate shareholders, officers, employees, and related corporate entities 
            f. Successor corporation liability 
        2. Defenses and exceptions to, and limitations on, liability 
            a. Defenses 
            b. Exceptions to liability 
            c. Monetary limits on liability 
    G. Standards of Liability and Proof 
        1. Strict liability and causation 
        2. Joint and several liability 
        3. Contribution and indemnification 
        4. Effects of bankruptcy, insurance, and equitable considerations on ultimate financial responsibility 
            a. Bankruptcy 
            b. Insurance 
            c. Equitable considerations 
    H. CERCLA Litigation and Settlement 
        1. Information gathering 
        2. PRP committees and legal representation 
        3. Federal government settlement procedures 
    I. Private Party Recovery 
        1. Cost recovery actions under §107 of CERCLA 
            a. Who may recover costs under §107 
            b. What costs may be recovered under §107 
                (i). ‘Necessary costs of response' 
                (ii). ‘Consistent with the NCP' 
            c. Procedural requirements for §107 private recovery 
        2. Contribution actions under §113(f) of CERCLA 
            a. Timing for beginning an action under §113(f) 
            b. Limitations on when an action must be brought under §113(g)(3) 
            c. Recovering costs under §113(f) 
            d. Contribution protection 
    J. Response Funding 
        1. Hazardous Substance Superfund 
        2. Claims procedures 
    K. Reporting Requirements 
        1. Facility notification—by June 1981 
        2. Release notification

V. Liability of Officers and Employees 
    . Introductory Material 
    A. Theories for Imposing Liability 
        1. Direct liability: tort-based and statutory language theories 
            a. Personal involvement 
            b. Statutory interpretation 
                (1). CERCLA §107(a)(3) (generator of hazardous substances) 
                (2). CERCLA §107(a)(1) and (a)(2) (owner-operator of a site where hazardous substances are released) 
                (3). RCRA §§7002(a)(1)(B) and 7003 (person contributing to imminent endangerment) 
        2. Vicarious liability: veil-piercing theory 
        3. Theories of criminal liability 
    B. Activities That Can Lead to Individual Liability 
        1. Individuals held liable as generators 
        2. Individuals held liable as site owners or operators 
        3. Individuals held liable under RCRA 
        4. Criminal liability for improper management of hazardous wastes 
    C. Remaining Questions 
        1. Civil cases 
        2. Criminal cases

VI. Parent Corporation Liability 
    A. Theories for Holding Shareholders Liable 
    B. Parent-Subsidiary Liability Under CERCLA After Bestfoods 
        1. The holding in United States v. Bestfoods (Bestfoods I) 
        2. Direct liability under Bestfoods 
        3. Cases addressing direct liability of parents, following Bestfoods 
            a. Cases looking at direct liability: no liability 
            b. Cases looking at direct liability: liability found 
        4. Derivative liability—piercing the corporate veil under Bestfoods 
            a. Cases looking at derivative liability: no liability 
            b. Cases looking at derivative liability: liability found 
    C. Parent Liability for Subsidiaries’ Pollution Before Bestfoods 
        1. Cases relying on statutory language as a basis for direct liability of parents 
            a. Participation in management 
            b. Familiarity with and capacity to control the subsidiary’s waste disposal 
        2. Statutory language and implicit piercing of the corporate veil 
        3. Piercing the corporate veil to establish vicarious liability 
            a. Personal jurisdiction 
            b. Liability 
            c. Traditional tests for piercing the corporate veil 
    D. Conclusions

VII. Successor Liability 
    . Introductory Material 
    A. Theories for Imposing Liability 
        1. General corporate law rules 
        2. Strict product liability cases 
        3. Environmental injuries 
            a. Early cases and EPA’s position 
            b. Subsequent cases 
                (1). Majority support for successor liability 
                (2). One court’s holding against successor liability 
                (3). Successorship based on traditional principles 
                (4). Successorship based on a federal rule of substantial continuity 
    B. Activities That Can Lead to Successor Liability 
    C. Summary

VIII. Lender Liability 
    A. Background of the Secured Creditor Exclusion (CERCLA §101(20)(A)) 
    B. Overview of Case Law and Response Leading to Asset Conservation Act 
    C. The Asset Conservation Act’s Amendments to CERCLA §101 
    D. The Amendments to CERCLA §107 
    E. New Case Law Since the Enactment of the Asset Conservation Act 
    F. Conclusion

IX. Environmental Liabilities and Bankruptcy Relief 
    A. Areas of Conflict 
        1. Types of bankruptcy proceedings 
        2. Automatic stay 10 
        3. Abandonment 24 
            a. Trustee’s ability to abandon contaminated property 
            b. Trustee’s responsibilities 
        4. Dischargeability 56 
            a. Judgments and orders involving environmental matters 
            b. Other claims 
        5. Administrative expenses 
    B. Exposure of the Debtor or Bankrupt and Its Shareholders 
        1. Remaining exposure of the debtor or bankrupt 
        2. Shareholder liability 90 
        3. Liability of the debtor or bankrupt to potentially responsible parties 
    C. Summary

X. Real Estate Transfers 
    A. Principal Areas of Environmental Risk 
    B. Acquisition of an Interest in Property Contaminated with Hazardous Substances 
        1. Liability under CERCLA 
            a. As originally enacted 
            b. The 2002 amendments 
            c. Other property consequences—environmental liens 
        2. Liability under the Toxic Substances Control Act 
        3. Liability arising from asbestos 
    C. Acquisition of a Regulated Treatment, Storage, or Disposal Facility 
    D. Acquisition of Underground Storage Tanks 
    E. Acquisition of Corporate Assets 
    F. Real Estate Transfers Triggering State Cleanup or Disclosure Requirements 
        1. Environmental cleanup responsibilities 
            a. New Jersey Industrial Site Recovery Act 
            b. Connecticut 
        2. Statutes requiring disclosure or notification 
            a. Alaska 
            b. Arizona 
            c. California 
            d. Colorado 
            e. Delaware 
            f. Georgia 
            g. Idaho 
            h. Illinois 
            i. Indiana 
            j. Iowa 
            k. Kentucky 
            l. Louisiana 
            m. Massachusetts 
            n. Michigan 
            o. Minnesota 
            p. Missouri 
            q. Montana 
            r. New York 
            s. Nevada 
            t. North Carolina 
            u. Ohio 
            v. Oregon 
            w. Pennsylvania 
            x. Rhode Island 
            y. South Carolina 
            z. South Dakota 
            aa. Tennessee 
            bb. Texas 
            cc. Virginia 
            dd. Washington 
            ee. West Virginia 
        3. Transfers of federal property 
        4. Notice provisions relating to hazardous waste management 
    G. Statutory and Common Law Obligations Notwithstanding the Transfer of Property Interests 
    H. Minimizing Environmental Risks in Real Estate Transactions 
        1. Buyer’s concerns 
        2. Seller’s concerns 
        3. State programs resolving the potential liability

XI. Generators’ Common Law Liability for Injuries to Persons or Property 
    . Introductory Material 
    A. Negligence 
    B. Trespass 
    C. Nuisance 
    D. Strict Liability 
    E. Medical Monitoring 
    F. Stigma

XII. Protecting the Company, Directors, Officers, and Senior Managers Against Vicarious Liability for Unintended Environmental Crimes and Errors 
    . Introductory Material 
    A. The Modest Burden of Proof and Substantial Penalties for Violating Environmental Laws 
        1. The ‘Wrongful Profits' theory and due diligence for the board 
        2. Vicarious criminal liability 
            a. Environmental crimes may involve seemingly innocuous conduct 
            b. Specific intent is largely irrelevant 
            c. Responsible corporate officer doctrine as part of environmental statutes 16 
            d. ‘Willful Blindness' is not a defense 
    B. Effective Environmental Compliance Programs Provide Protection 
        1. Use of sentencing guidelines criteria 
        2. The EPA Audit Policy 
    C. Structuring an Environmental Program 
        1. Support from senior management 
        2. Establishing the objectives of program 
        3. Preparing the program: auditing, assuring compliance, and continual improvement 
            a. Audit procedures: baseline procedures for audits 
            b. Preserving privileges and confidentiality 
                (1). Attorney-client privilege 
                (2). Audit privilege statutes 
                (3). Limitations on privileges from administrative policies—incentives for voluntary disclosure for environmental audit findings 
                (4). Elements of successful environmental programs 
    D. Conclusion

Portfolio 57-2nd: Avoiding Liability for Hazardous Waste: RCRA, CERCLA, and Related Corporate Law Issues

Wks. 1 Hazardous Waste Civil Enforcement Response Policy

Wks. 2 Memorandum on Revisions to the 1990 RCRA Civil Penalty Policy

Wks. 2A RCRA Civil Penalty Policy (Revised June 2003)

Wks. 2B Revised Penalty Matrices for the RCRA Civil Penalty Policy (2005)

Wks. 2C Gravity-Based Penalty Matrix to supplement the RCRA Civil Penalty Matrix (2009)

Wks. 3 Criteria for Recycling vs. Treatment (April 26, 1989)

Wks. 4 Documentation Requirements for Conditionally Exempt Small Quantity Generators (February 25, 1988)

Wks. 5 Solid Waste Enforcement Action (In re Lee Brass Co., Aug. 1, 1989)

Wks. 6 On-Site Treatment Exemption (June 17, 1986)

Wks. 7 Streamlined Approach for Settlements with De Minimis Waste Contributors Under CERCLA Section 122(g)(1)(A) (July 30, 1993)

Wks. 8 CERCLA Enforcement Against Lenders and Government Entities That Acquire Property Involuntarily (60 Fed. Reg. 63,517, Dec. 11, 1995)

Wks. 8A Summary of Main Differences between the Final All Appropriate Inquiries Regulation and the ASTM E1527-00 Standard 1

Wks. 9 Liability of Corporate Shareholders and Successor Corporations (June 13, 1984)

Wks. 10 EPA Participation in Bankruptcy Cases (Sept. 30, 1997)

Wks. 11 Environmental Audit Checklist

Wks. 12 Environmental Disclosure Document for Transfer of Real Property

Wks. 13 Glossary of Key RCRA and CERCLA Terminology and Abbreviations

Lynda L. Brothers
SNR Denton LLP
San Francisco, California

Jeffrey C. Fort
SNR Denton LLP
Chicago, Illinois

Susan M. Franzetti
Franzetti Law Firm, P.C.
Chicago, Illinois