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EPA Issues Long-Awaited Lender Liability Rule

October 1992

Citation: ELR 10637

Author: Patricia L. Quentel

On April 29, 1992, the U.S. Environmental Protection Agency (EPA) issued a final rule1 that attempts to define the parameters of the security interest exemption set forth in the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).2 Acting in the wake of the Eleventh Circuit's decision in United States v. Fleet Factors Corp.,3 EPA proposed and promulgated the rule in response to increasing concerns of secured creditors.4

The rule sets forth a range of activities that secured creditors may engage in to manage and protect their security interest while maintaining the security interest exemption. The rule clarifies the application of the security interest exemption and defines what conduct constitutes "participating in management," which may bring a secured creditor within the ambit of CERCLA liability for cleanup costs. Although it is probable that secured creditors are better off with the guidance offered by the rule than without it, the rule nonetheless leaves important issues undecided; consequently, secured creditors remain vulnerable to liability for cleanup costs.

Patricia L. Quentel practices commercial, bankruptcy, and real estate law as an associate with Buist, Moore, Smythe & McGee, P.A., in Charleston, South Carolina. The author received a J.D., cum laude, from the University of Wisconsin Law School, where she was a managing editor of the Wisconsin Law Review, and a B.A., cum laude, from Lawrence University. She served as a law clerk to the Honorable Donald Russell, U.S. Court of Appeals for the Fourth Circuit, from 1988-89.

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