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February 2016 Archives

What Is A Phase 2 And Why Do I Need It For My Property?

Frequently, during the course of the sale and/or development of property the parties with conduct what is called a "Phase 1" on the property. Almost all banks require a "Phase 1" prior to loaning on the purchase of commercial property. In the simplest terms, a Phase 1 simply looks at the historical uses of the property and surrounding properties to identify where or not there is any risk that there is contamination underlying the property. Accordingly, even if the property at issue doesn't have any historical use that could lead to contamination, if the neighboring properties had uses and/or have discovered contamination, then the Phase 1 simply reports back that there is a possibility for contamination underlying the property. Normally, the purchaser/bank in a transaction and/or property developer will then be faced with the need to perform a "Phase 2" on a property. A "Phase 2" generally screens the property to see if actual contamination is present. Typically, an initial "Phase 2" will not tell you how much contamination is present, how widespread the contamination is nor supply enough information to estimate the cost of cleanup. In sum, the "Phase 2" just provides the information as to whether contamination is present or not in the samples taken. The cost of preparing a "Phase 2" can as little as a couple of thousand dollars to substantially more money. Even the cost estimates to prepare a "Phase 2" between different environmental consulting firms can substantially vary by thousands of dollars for the same basis work. Finally, if contamination is discovered by the Phase 2, there may be reporting requirements and additional work required. Accordingly, for the average layperson, the process can be very confusing, costly and intimidating.

Don't Ignore Waste Manifest Violations

Manifests are required by the various regulations related to the transport and shipment of hazardous and non-hazardous substances and wastes. The various regulations specify the type of manifest that is required and oftentimes impose both civil and criminal penalties for the failure to prepare a manifest and/or incorrectly filling out a manifest. Penalties can even include criminal felony charges and large fines of $25,000 or more per violation. In many instances, the person preparing the manifest is required to sign a verification of the accuracy of the contents of the manifest. Thus, when a manifest is submitted, regulatory agencies will often go after both the company that was responsible for the manifest and also the person that signed the verification of the contents of the manifest. If an error is discovered in the manifest, some regulations may impose "self-reporting" requirements on the party that submitted the manifest to report and correct the error in the manifest. Accordingly, there may be liability for both the error in the original manifest but also the failure to "self-report" the error when it was discovered. As a result, ignoring the problem can potentially serve to increase a party's liability. It is very important to seek appropriate legal advice when faced with either the discovery of a manifest error and/or when contacted by the regulatory agency related to an error as the "head in the sand" approach very rarely results in a positive outcome.

Plating Shop Liability Issues

Historically, companies that did various types of plating, including chrome and zinc plating, utilized large vats of different chemicals as part of the complex plating process. In many areas, with the changes in regulations, particularly air regulations, the companies were forced to shut down and/or relocate. Unfortunately, many of the chemicals utilized in various plating operations are heavily regulated as contaminants in the soil and groundwater. Thus, not only do the current and former property owners face liability for these properties but also the owners and operators of the former plating companies. This liability may exist even if the plating company has not operated on the property for decades. As the liability for cleanup can be substantial, it very important to understand the complexities of the liabilities, locating historical insurance and pursuing insurance coverage to reach a result to both pay for the cleanup of the property and minimize the respective liabilities.

Butte Fire May Have Long-Term Ecological Impacts

Last Fall, in a few short days the Butte Fire in the Northern California foothills burnt over 70,000 acres of land. In addition to the numerous home, structures and other man-made objects, the fire also killed hundreds of thousands of trees, shrubs and was hot enough to kill the perennial grass seeds. With the ground cover gone, the area has already experienced serious problems with erosion and will likely do so for many years to come. As some of the trees killed were literally hundreds of years old and new trees planted and/or starting to grow will take hundreds of years to reach the size of the trees killed. With many of the grass seed burnt and/or sterilized by the fire, it may take years for the grass to return in some areas. In many instances areas burnt by the fire resemble a moonscape with little grass and/or greenery coming back even after the recent rains. For many of the ranchers in the area, feed is becoming an increasing problem as either the grass is not re-growing, the fencing is still down and/or fallen trees pose a problem of access and a danger to the cattle. Many residents lack the insurance and financial resources to re-build and repair what was lost and amount of assistance available in not sufficient to even start to address the issues. Erosion also poses serious issues with the local watershed and stream flows where former wildlife watering holes are filling with excess silt and local streams resemble flowing rivers of mud.

Finding Old Dry Cleaner Insurance Policies

As properties continue to be redeveloped and sold in the current market we are seeing an increase in the number of lawsuits involving properties that had historical dry cleaning operations. In most instances, contamination is discovered on the property during the redevelopment and/or sale of the property. As the contamination costs money to cleanup and impacts the ability to sell and/or redevelop the property, parties frequently sue the former and/or current dry cleaning operators for the cost to cleanup the property. Depending on the amount of contamination and the area where the dry cleaning is located, the cleanup costs can run from relatively small amounts to well over $1 million. A challenge for both the parties suing other parties and/or the parties being sued is locating historical insurance policies that may provide coverage for the claims. Many times the former owners of the dry cleaners have not kept their old policies, their broker is no longer in business and they don't have a recollection as to whom they purchased their insurance from. Thus, finding the old policies presents a challenge and requires the expertise of someone experienced in locating old insurance policies and how to identify potential insurers that may have provided coverage.

They Said They Found PERC Under My Property What Does That Mean?

Perchloroethylene or "PERC" is a chemical that was widely used for many years in dry cleaning operations. PERC is also considered by some states to be a hazardous chemical and subject to regulation. Some states like California are in the process of phasing out the use of PERC in dry cleaning operations and requiring other types of dry cleaning chemicals be used that are supposed to be less potentially harmful to the environment. Finding PERC in the soil and/or groundwater underlying your property may suggest that your property could have been used as a former dry cleaner, may be receiving subsurface contamination from neighboring properties and/or could even be receiving contamination from nearby sewer pipes. An investigation into the source of the contamination may point to other parties that should be responsible and hopefully those parties have the money and/or insurance that would help pay for the cleanup of the contamination.

Selling A Contaminated Property In California

With the current commercial property pricing, many individuals are looking the sell commercial properties. As part of many commercial real estate transactions the buyer will demand a "Phase I" be conducted on the property. A "Phase I" is generally a historical look at the property uses to determine if the property and/or surrounding property uses may have created the potential for the property to be contaminated. Frequently, we receive calls from individuals looking to buy and/or sell property that "discovered" from a "Phase I" on the property that the property use to have a gas station and/or other activity that the was identified as potentially causing contamination. This discovery can create issues with bank loans, delay of sale, and also questions about who should pay for testing to be conducted and bear liability for the cleanup of the contamination. Complicating matters is the fact that environmental consulting firms can sometimes recommend a widely varying approach to the problem and the cost differences between environmental consulting firms quotes can be very significant. Putting into layman's terms the environmental consultant "techno" speak can be equally daunting for the average property owner when faced with a myriad of acronyms, laws and complex advice. In sum, the situation can be extremely confusing, stressful and create a great deal of concern for a seller now faced with a potential liability on their property and in many instances insufficient funding to pay to resolve the problem. Finally, contractually dealing with these issues as part of the sales transaction does not easily lend itself to standard boilerplate contract language.

Lead Contamination Liability At Shooting Ranges

Historically, shooting range location, set up and even operation was not highly regulated for environmental concerns. The emphasis for most ranges was on safety. Moreover, many ranges would periodically seek to cleanup spent bullets on the range. Lead contamination issues continue to dominate media coverage especially with cases such as Flint, Michigan. As many former and/or current range operators have discovered, their historical operational practices may not have been sufficient to prevent soil and groundwater contamination. Thus, range owners, operators and users have found themselves subject to administrative cleanup orders and/or litigation for lead contamination. Liability in many instances may be sought against multiple parties and/or users and in other situations against a single individual and/or company. Some ranges have been fortunate to have insurance coverage that will potentially cover the claims but finding historical insurance coverage and/or convincing the insurance companies to defend and indemnify the range owners and operators can be a challenge.


Whether it be an aftermarket supplier of performance diesel parts and/or a heavy equipment operator, businesses in California continue to face increasingly stringent regulations from the various air districts. Most disturbingly, CARB is also becoming much more draconian in levying fines against businesses, many of times with little to no regard for the size of the business nor the severity of the alleged violation. It would seem that oftentimes there is little consideration given to that actual air quality and/or protecting public health by the enforcement activities. Instead, the priority seems to be focused on revenue generation for CARB. Companies that fight CARB regulations and enforcement activities often face tough choices and ultimately the employees at the companies are the ones that appear to suffer the most as companies are forced into either closing their business entirely and/or layoffs just to stay in business. However, companies have been successful in fighting CARB and succeeding in Court against unreasonable and oftentimes draconian enforcement activities. 


Many times, a deceased family member could have owned and/or operated a business on a property on which years, if not decades, later contamination is discovered. Frequently, not only are the living family members subject to a lawsuit to cleanup the contamination, but also the estate of the deceased, former corporations owned by the deceased and even trusts that the deceased may have formed. Unfortunately, in many instances, the estate, trust, former corporation and/or other related entities can be sued even if the person is no longer living. This can prove to be a complex challenge for the surviving family members to try to negotiate the complexities of estate law, environmental law and also finding the historical insurance policies of the deceased family member. 


Historically, dry cleaning facilities used a liquid commonly referred to a "perc" as part of the dry cleaning process. As "perc" was used in the United States beginning in roughly the 1950s, if not earlier, and is still being used in dry cleaning equipment at the present time, the use of "perc" is both widespread and continuous dating back over 60 years. Unfortunately, although it was a chemical used for "cleaning" clothes, regulations have been enacted that limit the amount of "perc" that is legally allowed in soil, soil vapor and water. This has created the potential for liability at properties that currently have dry cleaning operations but also properties that used to have dry cleaning operations. The liability for the cleanup of some dry cleaning sites can exceed $1 million. Under the existing environmental laws, the current and former property owners and dry cleaning business owners all can have liability for the cost to clean up the contamination. Frequently, these cases can involve understanding the cost of cleanup, locating former property owners/operators and finding old insurance policies. Thus, the cases can be complex for the parties to try to allocate liability, determine the cost to cleanup and even finding the various parties and/or their estates. 

Environmental litigation case underscores need for strong defense

It hasn't been the best year for a Brazilian mining company that trades publicly on the New York Stock Exchange. The enterprise is currently facing litigation woes of a substantial magnitude, a fact that underscores the need for any beleaguered business entity challenged by a toxic waste lawsuit to secure timely and aggressive assistance from a proven environmental law firm.

Contact us now to begin a confidential case evaluation:

Caufield & James, L.L.P

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