Identifying Affiliation
According to the guidance, EPA staff should consider four issues before deciding if a party is a bona fide prospective purchaser (BFPP) or a contiguous property owner (CPO). In the 2002 Brownfields Amendments to CERCLA, neither a BFPP nor a CPO is a PRP and therefore, neither is potentially liable for cleanup costs at a facility.
- First, the EPA must consider if a person seeking liability protection under the BFPP or CPO provisions is otherwise a PRP at the facility. For example, was the party an owner/operator at the time of disposal, a transporter, or an arranger for the disposal of hazardous substances? If so, the person cannot qualify as a BFPP or a CPO and further affiliation analysis would be unnecessary.
- Second, the EPA should consider whether the entity is in fact the same entity as a PRP or is potentially liable under principles of corporate law, such as successor liability. For example, a division of a corporation, a company that has continued in business under a changed name, or a corporate successor, such as the survivor of a statutory merger, may appear to be a different entity, but may nevertheless still be liable under principles of corporate law. The same consideration should apply to states and cities that typically create divisions that address certain aspects of governmental services, such as waste, roads, or parks. Depending on state law and how the divisions were created, they may in fact be the same entity as the state or city.
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- Third, is the business entity asserting BFPP or CPO status as a result of a reorganization of a liable party through bankruptcy or other corporate restructuring? For example, company A owns a contaminated site on which it had disposed of hazardous waste. During corporate reorganization, company A forms company B to acquire the contaminated site. Assuming company B is the result of a reorganization of the PRP, company B would not qualify as a BFPP or CPO.
- Fourth, is the party with whom a person may have an affiliation actually a PRP at the facility? For example, the entity with whom a potential BFPP or CPO is affiliated could have owned the property at one point in the past but not at the time of disposal. Under this scenario, the entity would likely not be liable under CERCLA and the relationship would likely not be a prohibited affiliation.
Acceptable Affiliations
Also, certain types of affiliations do not disqualify a BFPP or CPO from protection from CERCLA liability. These include contractual, corporate, or financial relationships that are created by the instruments by which title to the facility is conveyed or financed or relationships formed by a contract for the sale of goods or services.
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Other types of relationships that would generally not be treated as disqualifying affiliations include:
- Relationships at other properties: relationships that occur between an entity seeking BFPP or CPO status with a PRP for properties other than the one impacted by the contamination or the source property;
- Postacquisition relationships: relationships between the purchaser and a PRP that arose after the purchase and sale of the property;
- Relationships created during title transfer; contractual or financial documents or relationships that are often executed or created at the time title to the property is transferred; and
- Tenants seeking to purchase property they lease: relationships established between a tenant and an owner during the leasing process.
The EPA states that these relationships are generally not created to avoid CERCLA. However, the Agency adds that all facts and circumstances surrounding such relationships should be analyzed before making a final determination.