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Courts Shed Light on the Application of CERCLA's Bona Fide Prospective Purchaser Defense

September 2011

Citation: 41 ELR 10790

Issue: 9

Author: Charles S. Warren and Toni L. Finger

Purchasers who knowingly take title to real property found to be contaminated with hazardous substances during pre-purchase due diligence may be subject to liability for remediation costs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund), unless those purchasers are able to establish CERCLA’s bona fide prospective purchaser defense (the BFPP Defense). Prior to the enactment of CERCLA’s Small Business Liability Relief and Brownfields Revitalization Act Amendments on January 11, 2002, purchasers of contaminated property generally could avoid CERCLA liability only if they qualified for the more limited “innocent- landowner” defense, which is unavailable to purchasers who have knowledge or reason to know of the contamination at the time of purchase. The BFPP Defense, however, allows purchasers of contaminated property to avoid CERCLA liability, even if a purchaser has such knowledge, as long as the contamination occurred prior to their period of ownership. Until recently, there was little case law discussing the BFPP Defense in detail. Finally, however, two recent federal court decisions have shed some light on how a purchaser can qualify for this CERCLA defense. This Comment looks at these two decisions and how they may impact parties who knowingly purchase contaminated property with the intent of qualifying for the BFPP Defense.

Charles S. Warren is a partner and Toni L. Finger is Special Counsel at Kramer Levin Naftalis & Frankel LLP. Mr. Warren chairs the firm’s Environmental Law Department, of which Ms. Finger is a member.

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