Commercial Investment Real Estate May/June 2017

intent to regulate carbon emissions comprehensively, no federal common law claims, such as public nuisance, would be allowed. The Federal Clean Air Act, however, preserves common law actions brought under state law. Since the Supreme Court’s decision, several lower federal courts have ruled that the federal statute does not bar state public nuisance claims. As a result, injured parties can bring state nuisance actions seeking to recover the losses they suffer from air pollution emissions from power plants, reﬁ neries, or whis- key distilleries. Just as common law claims provide forms of relief beyond those found under federal statutes, state environ- mental statutes also may provide a wider range of relief. Risky Safety Net During the past 30 years of practice, many changes have occurred to environmental insurance products cover- ing the costs of soil and groundwater contamination. For years, environmental insurance polices excluded the greatest risks. While at least one major carrier has retreated from the environmental insurance market, the market seems pretty robust now. With sufﬁ cient site characterization, insurance coverage is available without the types of exclusions that, essentially, gut the policy. With the surges and retreats in the market, however, it is difﬁ cult to predict a continuing robust environmental insurance market. Criminal Liability The past year was one of mixed signals for prosecuting corporate ofﬁ cers individually for criminal violations of environmental law. The U.S. Department of Justice con- tinued to stress the need for corporations facing criminal liability to identify culpable individuals in exchange for leniency from corporate criminal punishment. Courts continue to abide by several doctrines to facilitate criminal prosecutions of corporate ofﬁ cers based on their position and imputed knowledge of those they supervise. The primary doctrines used are respondeat superior, which holds an employer legally responsible for the wrongful act of an employee, if such acts occur on the job; responsible corporate ofﬁ cer; and corporate collective knowledge. Yet in 2016, federal criminal enforcement of environmental laws was at an all-time low. Post-Bankruptcy Under Section 363 of the U.S. Bankruptcy Code, the pur- chaser acquires the asset unencumbered by its associated liabilities — including its environmental liabilities. That can be a meaningful form of environmental liability relief when buying a facility that, for decades, sent its hazardous waste for off-site management. CCIM.COM oid The purchaser will acquire the facility but will avoid ff-site waste taking the liability for all that facility’s past off-site tal condition management. What about the environmental of the acquired facility itself ? That is, what about soil and h the th groundwater contamination on the property on which facility is located? ity for r the For these purchasers to avoid federal liability rty environmental contamination on the acquired property, they have to qualify for the bona ﬁ de prospective purchaser defense to hazardous substance release liability. Qualifying for that defense requires preparation of an environmental assessment before the acquisition and exercising appropriate care after the purchase. The Bankruptcy Code protection will not exonerate the purchaser for the on-site environ- mental liability. Transparency Trend It will be interesting to see how — and how soon — the Trump Administration effects public companies’ climate change and conflict mineral disclosures. The Obama Administration pursued its policy objectives by pressing for public company disclosure on both fronts. Conﬂ ict minerals disclosure — reports on companies’ supply chain diligence to ensure the tantalum, tin, tung- sten, and gold they use doesn’t originate from smelters in the Congo — seems likely to endure. For one thing, con- ﬂ ict minerals disclosures are rooted in statute — the Dodd Frank ﬁ nancial reform legislation. The Trump Administration can roll back Dodd Frank, but at least it’s statutorily grounded. Leading consumer electronics companies, however, have embraced efforts to keep conﬂ ict minerals out of their products. Of course, many public companies also have embraced a transparent approach to disclosure of the physical effects climate change on their businesses. The Securities Exchange Commission’s 2010 guidance on climate change is, however, its new interpretation of broad, decades-old statutory disclosure edicts. The Trump Administration may not want to devote its energies to re- writing the SEC’s 2010 guidance. The guidance’s fairly loose descriptions of what compa- nies should disclose about how severe weather might affect them or the costs of complying with foreseeable new laws, allows subject companies a fair amount of latitude. With that latitude, many companies still report that it is simply impossible to predict long-term effects. Proponents of disclosure decry the throwing-up-their- hands approach. Yet, it is hard to imagine disclosures get- ting any more stringent during the next four years. Tom Mounteer is a partner at Paul Hastings in Washington, D.C., and an instructor at George Washington University Law School. Contact him at [email protected]. May | June 2017 39

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