Environmental Liability For Real Estate And Corporate Transactions - Chapter 10 - Managing Environmental Liability

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Managing Environmental Liability - Business Transactions and Brownfield Redevelopment - Looseleaf

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10
ENVIRONMENTAL LIABILITY FOR
REAL ESTATE AND
CORPORATE TRANSACTIONS
§ 10.01 Introduction
Previous chapters have described the enormous liabilities that may be imposed
on owners and operators of contaminated property and on companies that have
arranged for the disposal of hazardous substances. These liabilities may also be
imposed on purchasers of companies, including parent corporations or successor
companies. As a result, environmental liability is increasingly shaping corporate
and real estate transactions, ranging from multi-billion dollar conglomerates to the
sale of tiny strip malls. While some deals may be killed outright by the discovery of
environmental contamination, the price tags on other deals may be slashed sharply
to take into account the increased risks. Indeed, these potential liabilities have also
been exploited by shrewd negotiators who have in essence engaged in ‘‘environmental
blackmail’’ by exaggerating the potential environmental exposure at certain
sites to obtain concessions in the purchase price or as a ‘‘poison pill’’ to stave off a
hostile takeover. This chapter will describe the liabilities of parties to real estate or
corporate transactions and propose strategies for minimizing or taking advantage of
those potential liabilities.
§ 10.02 Liability of Parent Corporations
A basic tenet of traditional corporate law is that a corporation is a legal entity
that is separate and distinct from its shareholders, officers, directors and other
affiliated corporations who are said to be shrouded under a corporate veil from the
liabilities of the corporate enterprise.1 Under this concept of limited liability, the
shareholder’s responsibility for the debts or obligations of a corporation is limited
to the amount of the investment in the corporation.
In rare circumstances, courts will use the equitable doctrine known as the
piercing the corporate veil to disregard the corporate entity and hold corporate

Chapter 10: Environmental Liability for Real Estate and Corporate Transactions

10.01 Introduction
10.02 Liability of Parent Corporations
10.02A Federal Common Law for Veil Piercing
10.03 Liability of Successor Corporations
10.04 Liability of Dissolved Corporations
10.05 Liability of Franchisors
10.06 Particular Property Interests Triggering Owner Liability
10.07 The Innocent Purchaser Defense
10.07A Bona Fide Prospective Purchase Defense
10.07B Contiguous Property Owner Defense
10.07C New Due Diligence Standards
10.08 The Passive Intervening Landowner’s Defense
10.09 The Innocent Seller’s Defense
10.10 Liability of Lessors and Lessees
10.11 Allocating Environmental Liability in Leases
10.12 Effect of ‘‘As Is’’ Contracts, Releases, and Indemnification Provisions
10.13 Cases Involving Gasoline Service Stations
10.14 Tips for Negotiating and Drafting Corporate Agreements
10.15 Contamination as an Encumbrance to Title?

Lawrence P. Schnapf is Principal of Schnapf LLC. He has 25 years of national environmental experience with Fortune 500 corporations and a number of major New York-based law firms. Mr. Schnapf primarily concentrates on environmental issues associated with corporate, real estate and brownfield transactions, commercial lending, distressed debt, bankruptcy and workouts. He has extensive experience with brownfield redevelopment and financing, negotiating environmental insurance policies for business and real estate transactions, performing environmental due diligence for complex business transactions.

He has also written numerous articles on environmental law, is a contributing author for several chapters of "Brownfield Practice and Law: The Cleanup and Redevelopment of Contaminated Properties" published by Matthew Bender. He was also a contributing author for "The Law Of Environmental Justice" published by the American Bar Association and the Matthew Bender "Environmental Law Practice Guide".

Mr. Schnapf is the co-chair of the New York State Bar Association's Hazardous Site Remediation Committee, co-chair of the NYSBA Brownfield Task Force and a board member of the Board of the NYC Partnership of Brownfield Practitioners. He is also the chair of the Brownfield Committee Force of the Environmental Business Association of New York.

He is Chair of the ABA Section of Business Law Committee on Environmental, Energy and Natural Resources Law. He is a vice chair of the Environmental Transactions, Audits and Brownfield Committee: and Special Committee on Disclosure of the ABA's Section of Environment, Energy and Resources. He is also a member of the board of BNA's Environmental Due Diligence Guide.

Mr. Schnapf is also a member of the ASTM 1527 Task Group, Phase II Legal Work Group, Co-Chair of the legal sub-committee for the ASTM Vapor Intrusion Task Group, a member of the ASTM Appropriate Care/Continuing Obligations Task Group and Building Energy Performance Disclosure Task Group.

Mr. Schnapf is an adjunct professor of environmental law at New York Law School where he teaches "Environmental Issues in Business Transactions" and "Environmental Law and Policy". He is also on the faculty of the Center for Christian Studies at Fifth Avenue Presbyterian Church where he teaches "The Bible and the Environment."

He is listed in the International Who's Who of Business Lawyers 2008 and 2009, the 2009 Madison's Who's Who of Executives and Professionals, and The International Who's Who of Environmental Lawyers 2008 and 2009, and Chambers USA 2009 Client Guide of America's Leading Lawyers for Business.