Q&A from Webinar: Lessons Learned from Phase I Litigation

“Nothing is ever black or white.”

On December 11, 2014, Anthony Buonicore was the presenter on our EDR Insight webinar, Lessons Learned from Phase I Litigation. He has been an expert witness on cases involving environmental due diligence for more than 20 years. He drew on this experience to outline the details of five real-world cases for our audience of more than 600 consultants across the country.

Due to the high volume of questions that came in, Anthony was unable to address all of them during the live event. As promised, he provided answers to each outstanding question below.

Question: Did any individual liability issues emerge from these cases (e.g., with respect to any participating consultant that was a licensed professional)?

Anthony J. Buonicore: There was no individual liability in any of the cases discussed. The closest was in case #5 where the individual who signed the report was also sued, but was defended by the company he worked for.

Q: If, during the course of your investigation, you become aware of arsenic or lead contamination, are you required to disclose it as part of your Phase I or should it be submitted as a separate report?

AJB: Since both are hazardous substances, and I am assuming such contamination was identified in soil on the target property, this would need to be disclosed in the Phase I and, depending on the concentrations, potentially identified as a REC. If the concentrations were below background levels, for example, under the de minimis provision of E 1527 (the state agency would not undertake enforcement), this may not present a REC situation.

Q: In your Final Thoughts slide, bullet #6 regarding reliance: The typical requested CMBS reliance language is to allow anyone purchasing an interest in the security to rely on the report. Do you have any thoughts on how to limit the number of relying parties?

AJB: My suggestion would be to consider including the Scope of Work, Terms & Conditions and any assumptions/limitations in the back of the Phase I report with a letter that needs to be signed and returned to the consultant by any parties wanting to rely on the report. The letter would confirm that the persons wanting to rely on the report have read the Scope of Work, Terms & Conditions and assumptions/limitations. If the letter is not returned, there would be no reliance. However, you may want to speak with your attorney to confirm this makes sense.

Q: As a professional, say you have knowledge of a site from working from another client. How should this specialized knowledge be included in the Phase I report?

AJB: Assuming you have knowledge of a site involved in a real estate transaction based upon work for a previous owner (who at the time was your client), this would be considered “specialized knowledge” and included in the Findings Section of the Phase I report. However, be aware that this could present a conflict of interest situation for you since I am assuming you are now working for a prospective purchaser of the property. It therefore would make sense to speak with your original client (i.e., the previous owner you worked for), advise him or her of what you have been retained to do by a prospective purchaser, and obtain permission to use the knowledge you received from past work on the property.

Q: It seems that the consultant always takes the blame.  Are there any instances where the consultant’s insurance carrier did not have to pay?

AJB: Not that I am aware of. But keep in mind that in every case I discussed, the consultant does bear at least some of the blame. Nothing is ever black or white. What appears to happen is that whoever presents a better case (plaintiff or defendant) gets a more favorable settlement. Insurance companies seem to prefer settlement than establish precedent, which could hurt them!

Q: For the vapor intrusion case, wouldn’t it make sense that groundwater was also impacted beneath the subject site. Was this investigated?

AJB: The groundwater under the target property was not impacted. It was solely a vapor migration issue on the target property.

Q: Several of these cases appear to suggest that there may have been deficiencies with respect to conduct of the Phase II sampling as well as or, perhaps, instead of conduct of the Phase Is.  Did any of these cases involve contentions about conduct of the Phase IIs?

AJB: Yes, they did.

Q: In case #5: Does stating something to the effect that “This Phase I ESA is valid only at the time that it was conducted. The consultant has no control over changes that may occur over time, either man-made or other” seem worthwhile?

AJB: It is already understood that the Phase I is valid only up to the time it was performed. However, if in the future an issue arises, for example, because of deficient historical research by the consultant who did the Phase I, the Phase I consultant would still have liability.

Q: Have there been any cases in which the dispute was over what was reasonably ascertainable information?  I am thinking of how infrequently I see consultants doing simple web searches (e.g., EPA’s EnviroFacts, ECHO, etc.), which sometimes have other information not found in the standard databases searches, or often supplements or clarifies what is found in other databases. It seems the argument could be made that: What could possibly be more reasonable or ascertainable than online, free databases?

AJB: I have not been involved with a case involving what is or is not reasonably ascertainable, but the ASTM standard makes it clear in my view that reasonably ascertainable equals publicly available, practically reviewable and available within reasonable time for reasonable cost. Everything in this definition is clearly defined in the standard except what constitutes “reasonable cost.” Although “reasonable cost” is generally accepted as “nominal” cost.

Q: In general, what was the effect on the cost of E&O insurance for the consulting firms involved in all these settled cases?

AJB: I do not have access to this information.

Q: Is there a timeline for when resources/information now available in a standard database search package report became “reasonably available” over time?

AJB: Not that I am aware.

Q: What about ‘vapors’ migrating aboveground (in the air) from off-site?  How are these different from belowground vapors?  Vapors in air could be anything from a nuisance (odors) to a health hazard.

AJB: The CERCLA definition of “environment” (“release” of hazardous substances to the “environment”) includes releases to “ambient air.” However, my experience suggests that in general such emissions would be significantly diluted in the open air so as to not present a health risk.

Q: Was vapor migration considered “in the mix” with the ASTM Phase I ESA Standard Practices before 2005?

AJB: No. It was not to my knowledge.

Q: Can you generally characterize the plaintiffs?  Were they all property developers?

AJB: They were either property owners or property developers.

AJB: Was the groundwater plume beneath the houses or were vapors migrating from the neighboring site?

AJB: In case #5, the groundwater beneath the homes was not contaminated. Vapors were migrating from the contaminated groundwater on the nearby adjacent site.

AJBSpecial thanks to Anthony for an insightful and educational look into five carefully-selected examples from the case law involving environmental professionals sued for negligence as the result of a Phase I ESA project. For any consultants looking for advice on how to protect themselves from liability, deal with uncertainty regarding issues like vapor intrusion, non-scope issues, Phase I updates and more, listen to a replay of the 60-minute live event.

We hope to have all of our attendees on a future event!