No environmental professional ever wants to be in the uncomfortable position of having a past Phase I ESA report put under the glaring eye of scrutiny in a professional liability lawsuit. Drawing from years of expertise as an expert witness in these cases, Anthony Buonicore, P.E., BCEE, QEP and CEO of The Buonicore Group, delivered a highly-rated presentation at our Due Diligence at Dawn/Dusk series this year in which he guided hundreds of DDD attendees through five real-world case studies. Each case revolved around a particular element of the ASTM E 1527 standard. The discussion of each case study addressed these questions: Was the “standard of care” provided by the EP deficient? How did the EP’s performance compare with “customary practice?” Did the scope of work meet the requirements in ASTM E 1527? Our first four case studies in this five-part summer series dealt with non-scope issues, vapor migration risk, Phase I updates and historical research intervals, respectively. Today’s lesson addresses the perplexing question: What is considered “obvious?”
CASE STUDY: THE BACKGROUND
- In 2002, a bank authorized a pre-foreclosure Phase I ESA.
- A small industrial tenant located on the site was in the process of closing down.
- This industrial tenant assembled small, desk-top electrostatic coating equipment and tested them prior to shipping. One component of the equipment was a small vapor degreaser.
- No manufacturing was done on-site.
- The operation utilized small quantities of chlorinated solvents in testing the machines.
- A Phase I consultant was retained by the bank to do a pre-foreclosure Phase I ESA in accordance with the ASTM E 1527 standard in place at the time (i.e., E 1527-00).
- The Phase I consultant requested hazardous waste manifests from the tenant, but none were found in the on-site records.
- During interviews, plant personnel were unable to recall any hazardous waste manifests.
- The database company’s search of RCRA records identified no hazardous waste generation records for the site.
- The consultant made a request to the state DEP for any manifest records, but was told none existing for the property.
- The consultant concluded that the site likely was a CESQG (where an EPA ID number and manifesting was not a requirement in the state).
- The Phase I consultant recommended a Phase II ESA.
- The Phase II ESA involved the installation of six monitoring wells around the building exterior.
- No VOCs or PHCs were found in any of the soil or groundwater samples.
- The consultant concluded that there was no evidence of RECs.
- The bank went ahead with the foreclosure proceedings.
- During the foreclosure proceedings, a prospective purchaser appeared on the scene and indicated an interest in acquiring the property.
- The prospective purchaser’s lender (different from the bank involved in the foreclosure) required a Phase I.
- The prospective purchaser retained the Phase I consultant that did the original Phase I for the foreclosing bank.
- The original Phase I (8 months old) was updated following the ASTM E1527-00 standard.
- The Phase II conducted for the foreclosing bank was less than two months old and not updated.
- The consultant concluded again that there was no evidence of RECs and the “environmental risk associated with the site was low.”
- The property was acquired and the building was subdivided for office space.
- Five years later, the property owner decided to refinance the property and the bank (different from the previous banks) requested a Phase I ESA.
- The consultant that was retained conducted the Phase I following the ASTM E1527-05 standard.
- The consultant, in requesting manifest data from the state for the site’s former light industrial operation, was now told that there were manifest records for the property. Copies of the manifest records indicated that the site was in fact an LQG.
- The initial state search made an error by searching under an incorrectly spelled address, resulting in a finding that “no manifest records were on file at this ‘incorrect’ address.”
- The consultant recommended Phase II sampling both at the exterior and in the interior of the building.
- The Phase II found chlorinated solvent contamination below the floor of the building at levels that required remediation.
- The property owner was unable to get the refinancing completed and was required to investigate the site more thoroughly, develop a remediation plan and clean up the property.
- Had the consultant that conducted the initial Phase I and Phase II identified the potential presence of hazardous substances in the subsurface below the slab, the property would not have been acquired.
The PLAINTIFF SAID…
- The Phase I consultant that conducted the Phase I/II ESAs did not meet the standard of care and should have known that these types of industrial facilities (testing vapor degreasers) require more comprehensive investigation, including sampling inside the building where the testing took place.
- The consultant should have known the state DEP’s reply was inaccurate (it was “obvious”) and conducted further investigation, i.e., visited the regulatory offices and conducted the manifest record search itself (it is widely known that hazardous waste transporters for any size generators typically utilize the manifest system).
- The firm performing the Phase I was negligent and caused harm for which damages were sought.
- The interviews of plant personnel indicated:
- The use of solvents at the plant was minimal;
- No one recalled any past spills or releases; and
- There were only minor amounts of waste solvent generated from the testing (i.e., 1-2 quarts).
- No manufacturing was done on site—only assembly and testing.
- The State DEP had no manifests for the site (providing support that the site was likely a CESQG).
- A search of the RCRA database by the government records search company indicated no hazardous waste generation records existed at the federal level for the site.
- The ASTM E1527 standard does not require independent verification of information received from third parties (including government agencies and personnel interviewed), but allows an EP to rely on this information “unless he or she actual knowledge that certain information is incorrect or unless it is obvious that certain information is incorrect based on other information obtained or actually known to the environmental professional.”
- A CESQG is not required in the state to have an EPA ID number and is not required to manifest.
- The Case was settled by the insurance company that provides the consultant’s E&O insurance.
WHAT WE CAN LEARN FROM THIS:
- If something does not pass the “smell test,” it probably is worth doing additional investigation.
- If you are relying on certain data for your professional opinion, make sure this is made clear in the Phase I report.
- If there are limitations in any of the site assessment activities reviewed (such as the fact that there was no sampling inside the building below the slab in this particular case), then clearly identify this limitation in the Phase I report.
What Do You Think?
- How far does an EP have to go, if at all, to verify information received from third parties?
- How can EPs know what is “customary practice” for the conduct of Phase Is by competitors in their area?
- How does one judge what should be “obvious”?
NOTE TO READERS: Anthony’s slides from the Spring DDD season are posted in their entirety here.