January 9, 2019 Sweetnam and Schwartz

In a lawsuit in which this environmental law firm participated, the US District Court for the Northern District of Georgia held that a property manager of a shopping center, although not liable as an owner, was liable as an operator of a hazardous waste disposal facility under the Comprehensive Environmental Response Compensation and Liability Act (CERCLA),42 U.S.C §§ 9601 et seq., and the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. §§6901 et seq.

The case, Scarlett & Associates v. Briarcliff Center Partners, 2009 WL 3151089 (ND Ga. 2009), involved a dry cleaning facility that had caused hazardous waste contamination of a shopping center in Atlanta. The owner leased the shopping center. The interest of the lessee was assumed by a bank, which hired Faison & Associates (Faison) to manage the property on its behalf. Faison managed the property for approximately two years, between September 1995 and September 1997, when the bank sold the lease. The shopping center was listed on the Georgia Hazardous Site Inventory in 1996. Scarlett & Associates (Scarlett), the principal lessee that acquired the shopping center from the bank, sued several past and present operators seeking contribution for remediation costs incurred at the shopping center. Scarlett alleged that Faison was an operator of a facility under CERCLA and was an operator of a hazardous waste treatment, storage, or disposal facility under RCRA. Further, Scarlett claimed that Faison was in violation of RCRA permit or other requirement based on the continued presence of contamination at the shopping center, even though Faison had ceased management of the property many years earlier.

Holding Faison liable as an operator under CERCLA and RCRA, the court concluded that there was sufficient evidence that Faison managed, directed or conducted operations specifically related to pollution. Specifically, the court noted that Faison (i) informed the dry cleaner of certain EPA requirements; (ii) requested documentation that the dry cleaner was in compliance; and (iii) was generally responsible for managing and maintaining the shopping center and performing all acts necessary to effect the bank’s compliance with the laws. Because of these actions, the court concluded that Faison was an operator in violation of RCRA and, therefore, potentially liable for a continuous or ongoing violation by having failed to remedy the past contamination.

It seems counter-productive to hold property managers responsible for contamination that pre-existed their management of the property, especially where the property manager does not participate in the violation and/or cause the contamination. Indeed, this decision is contrary to holdings in other jurisdictions that no valid claim exists against prior operators under the citizen suit provision of RCRA.

Regardless, recognizing this precedent, property managers in Northern District of Georgia would be well advised to take the following precautions to prevent RCRA liability from their operations:

• Avoid performing management activities related to pollution;
• Avoid leasing to tenants with potential environmental issues;
• Insert provisions in management contracts for owner assumption of responsibility for environmental conditions at the property, whether known or unknown;
• Insert provision in management contracts for owner responsibility for compliance with environmental laws and regulations by owner and tenants;
• Insert provision in management contracts for owner indemnification for environmental claims not caused by property manager;
• Avoid leasing to tenants with environmental issues; and
• Ensure proper insurance for environmental claims.

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