PCS Nitrogen secures first-impression ruling in CERCLA appeal establishing rigorous standard for brownfields developers

Client(s) PCS Nitrogen, Inc.

Jones Day secured an important appellate environmental victory for PCS Nitrogen, Inc. involving a question of first impression. The U.S. Court of Appeals for the Fourth Circuit established a rigorous standard for brownfield developers seeking to escape liability under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA") using the bona-fide prospective purchaser defense.

A developer sued PCS Nitrogen for environmental remediation costs under CERCLA. PCS Nitrogen counterclaimed. In response, the developer raised a bona-fide prospective purchaser ("BFPP") defense to claim exemption from liability. Agreeing with PCS Nitrogen, the Fourth Circuit held that the burden of "appropriate care" for brownfields developers seeking to avoid CERCLA liability was "at least as stringent" as the "due care" standard for parties seeking an "innocent landowner" defense. Because the developer had failed to take reasonable steps to prevent the release of hazardous substances, it did not exercise appropriate care, and it could not avoid CERCLA liability. As a result, PCS Nitrogen was able to secure liability against the developer.

This decision marks the first time a federal appellate court considered the effect of the BFPP defense, which was enacted in 2002. As a result of the court"s ruling restricting BFPP status, brownfields developers bear a greater burden to demonstrate that their development activities do not exacerbate or otherwise adversely affect existing contamination conditions if they seek to be exempt from CERCLA liability.

Ashley II of Charleston, LLC v. PCS Nitrogen, Inc., 714 F.3d 161 (4th Cir. 2013)