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United States v. Fleet Factors Corp.

Citation: 19 ELR 20529
No. No. CV687-070, 724 F. Supp. 955/29 ERC 1011/(S.D. Ga., 12/22/1988) First summary judgment motions

The court holds that a lender is not an owner or operator of a hazardous waste site under § 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), but the lender's activities in connection with an auction after foreclosure may be sufficient to impose liability. The lender defendant had a security interest in a cloth printing facility and had a financing arrangement with the facility's operator under which it lent funds in return for an assignment of accounts receivable. Although the lender never foreclosed on the facility itself, it did foreclose on its security interest in some of the facility's inventory and equipment. The court first holds that the lender is not an owner or operator of the facility within the meaning of CERCLA §§ 107(a)(1) or 101(20)(A). The lender never foreclosed on its security interest in the facility, and had had no access or other control to the facility for several years before the complaint was filed. The court then rules that CERCLA § 101(20)(A) permits secured creditors to provide financial assistance and isolated instances of specific management advice to their debtors without risking CERCLA liability, as long the creditor does not participate in the day-to-day management of the facility. The courtholds that the lender is thus not an owner or operator within the meaning of CERCLA § 107(a)(2) with respect to activities conducted prior to an auction held after foreclosure of the equipment and inventory. The court holds, however, that the lender may be liable for CERCLA response costs incurred in connection with the auction. The lender's contractor may have moved barrels containing hazardous substances before conducting the auction and may have contributed to the release of friable asbestos during that process.

The court holds that the individual owners of the cloth printing facility fall within the class of liable persons under CERCLA. The court holds that the individual defendants are not entitled to the third-party defense in CERCLA § 107(b)(3). Even if the lender asserted its security interest and told the defendants not to dispose of the chemicals at the facility because they might be marketable, there is no evidence that the individual owners did not have the capacity to obtain approval from the bankruptcy court to dispose of the chemicals properly. The court certifies its order for interlocutory appeal under 28 U.S.C. § 1292(b), since there is substantial doubt concerning the court's construction of CERCLA's secured lender exemption and the scope of the third-party defense to CERCLA liability.

Counsel for Plaintiff
Jon A. Mueller, Anne S. Almy
Land and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 633-2000

Kenneth C. Etheridge
Office of the U.S. Attorney
P.O. Box 8999, Savannah GA 31412
(912) 232-3145

Edward G. Booth Jr.
Office of the U.S. Attorney
P.O. Box 2017, Augusta GA 30903
(404) 724-0517

Gail S. Baylor, Ass't Regional Counsel
Environmental Protection Agency
345 Courtland St. NE, Atlanta GA 30365
(404) 347-4727

Counsel for Defendants
Laurice Firenze
Ruskin, Schlissel, Moscou, Evans & Faltischek
170 Old Country Rd., Mineola NY 11501
(516) 248-9500

Richard E. Miley
Nixon, Yow, Walker & Capers
1500 First Union Bank Bldg., Augusta GA 30910
(404) 722-7541

Charles B. Merrill Jr.
Merrill & Stone
P.O. Box 129, Swainsboro GA 30401
(912) 237-7029