2006 New York Code - Liability Exemptions And Defenses

 
    §  1389-e. Liability exemptions and defenses. 1. Lender exemption. (a)
  For purposes of this title no lender shall incur any liability from  any
  statutory  claims  of  the state as an owner or operator of a site, or a
  person responsible for the disposal of a hazardous waste at  such  site,
  provided  such  lender,  without participating in the management of such
  site, holds indicia of  ownership  primarily  to  protect  the  lender's
  security  interest in the site or, if such lender did not participate in
  the management of such  site  prior  to  a  foreclosure  on  such  site,
  notwithstanding that such lender:
    (1) forecloses on such site; and
    (2) after foreclosure, sells, releases (in the case of a lease finance
  transaction),  or  liquidates  such site, maintains business activities,
  winds up operations, or takes any other measure to preserve, protect  or
  prepare  such site prior to sale or disposition; provided, however, that
  such lender shall take actions to sell, release (in the case of a  lease
  finance  transaction),  or  otherwise  divest itself of such site at the
  earliest practicable,  commercially  reasonable  time,  on  commercially
  reasonable  terms,  taking  into account market conditions and legal and
  regulatory requirements.
    (b) This exemption shall not apply to any lender that  has  caused  or
  contributed  to  the  release or threatened release of a hazardous waste
  from or onto the site, or to any lender that generated, transported,  or
  disposed   of,   arranged   for,   or   that   caused   the  generation,
  transportation, or disposal of hazardous waste from or onto such site.
    (c) For purposes of this section:
    (1)  The   term   "participating   in   management"   means   actually
  participating  in  the  management  or operational affairs of a site and
  does not include  merely  having  the  capacity  to  influence,  or  the
  unexercised right to control, site operations.
    (i)  A  lender  who  holds indicia of ownership primarily to protect a
  security interest in such site shall be  considered  to  participate  in
  management  only  if,  while  the borrower is in possession of such site
  encumbered by the security interest, the lender:
    (A)  exercises  decision  making  control   over   the   environmental
  compliance  related  to  such  site, such that the lender has undertaken
  responsibility for the hazardous waste handling  or  disposal  practices
  related to such site; or
    (B)  exercises  control  at a level comparable to that of a manager of
  such  site,  such  that   the   lender   has   assumed   or   manifested
  responsibility:
    (I)  for  the  overall management of such site encompassing day-to-day
  decision making with respect to environmental compliance; or
    (II) over all or  substantially  all  of  the  operational  functions,
  excluding financial or administrative functions, of such site other than
  the function of environmental compliance.
    (ii) The term "participate in management" does not include:
    (A)  Performing  an act or failing to act prior to the time at which a
  security interest is created in a site;
    (B) Holding a security interest or abandoning or releasing a  security
  interest;
    (C) Including in the terms of an extension of credit, or in a contract
  or  security agreement relating to such extension, a covenant, warranty,
  or other term or condition that relates to environmental compliance;
    (D) Monitoring or enforcing the terms and conditions of the  extension
  of credit or security interest;
    (E) Monitoring or undertaking one or more inspections of such site;
    (F)  Requiring  a  response action or other lawful means of addressing
  the release or threatened release of a  hazardous  waste  in  connection
  with such site prior to, during, or on the expiration of the term of the
  extension of credit;
    (G)  Providing financial or other advice or counseling in an effort to
  mitigate, prevent, or cure default or diminution in the  value  of  such
  site;
    (H)  Restructuring,  renegotiating, or otherwise agreeing to alter the
  terms and conditions of the extension of credit  or  security  interest,
  exercising forbearance;
    (I)  Exercising  other remedies that may be available under applicable
  law for the breach of a term or condition of the extension of credit  or
  security agreement; or
    (J)  Conducting  a  response action under 42 U.S.C. Section 9607(d) or
  under the direction of  an  on-scene  coordinator  appointed  under  the
  national  contingency  plan  if  the actions do not rise to the level of
  participating in management within the meaning of this subparagraph.
    (2)  The  term  "extension  of  credit"  includes  a   lease   finance
  transaction:
    (i)  In which the lessor does not initially select the leased site and
  does  not  during  the  lease  term  control  the  daily  operations  or
  maintenance of such site; or
    (ii)  That conforms with regulations issued by the appropriate federal
  banking agency or the appropriate state bank supervisor (as those  terms
  are defined in section 3 of the federal deposit insurance act (12 U.S.C.
  1813))   or  with  regulations  issued  by  the  national  credit  union
  administration board, as appropriate.
    (3)  The  term  "financial  or  administrative  function"  includes  a
  function  such  as  that  of a credit manager, accounts payable officer,
  accounts receivable officer, personnel manager,  comptroller,  or  chief
  financial officer, or a similar function.
    (4)  The  terms  "foreclosure"  and  "foreclose"  mean,  respectively,
  acquiring and to acquire, a site through:
    (i) Purchase at sale under a judgment or decree,  power  of  sale,  or
  nonjudicial foreclosure sale;
    (ii)  A  deed  in  lieu  of  foreclosure  or similar conveyance from a
  trustee;
    (iii) Repossession if such site  was  security  for  an  extension  of
  credit previously contracted;
    (iv)   Conveyance  pursuant  to  an  extension  of  credit  previously
  contracted, including the termination of a lease agreement; or
    (v) Any other formal or informal manner by which the lender  acquires,
  for subsequent disposition, title to or possession of a site in order to
  protect the lender's security interest.
    (5) The term "lender" means:
    (i)  An  insured depository institution as defined in section 3 of the
  federal deposit insurance act (12 U.S.C 1813);
    (ii) An insured credit union as defined in section 101 of the  federal
  credit union act (12 U.S.C. 1752);
    (iii)  A  bank  or  association chartered under the farm credit act of
  1971 (12 U.S.C. 2001 et seq.);
    (iv) A leasing or trust company that is an  affiliate  of  an  insured
  depository institution;
    (v)  Any person, including a successor or assignee of any such person,
  that makes a bona fide extension of credit to or  takes  or  acquires  a
  security interest from a nonaffiliated person;
    (vi)  The federal national mortgage association, the federal home loan
  mortgage corporation, the federal agricultural mortgage corporation,  or
  any  other  entity  that  in  a  bona fide manner buys or sells loans or
  interests in loans;
    (vii) A person that insures or guarantees against  a  default  in  the
  repayment of an extension of credit, or acts as a surety with respect to
  an extension of credit, to a nonaffiliated person; and
    (viii) A person that provides title insurance and that acquires a site
  as  a  result  of assignment or conveyance in the course of underwriting
  claims and claims settlement.
    (6) The term "operational function" includes a function such  as  that
  of a site or plant manager, operations manager, chief operating officer,
  or chief executive officer.
    (7)  The  term  "security interest" includes a right under a mortgage,
  deed of trust, assignment, judgment, lien, pledge,  security  agreement,
  factoring  agreement, or lease, and any other right accruing to a person
  to secure the repayment of money, the performance  of  a  duty,  or  any
  other obligation by a nonaffiliated person.
    2.  Municipal  exemption. (a) For the purposes of this title no public
  corporation shall incur any liability from any statutory claims  of  the
  state as an owner or operator of a site, or a person responsible for the
  disposal  of  a hazardous waste at such site, if such public corporation
  acquired such site involuntarily, and such public  corporation  retained
  such site without participating in the development of such site.
    (b)  This exemption shall not apply to any public corporation that has
  caused or  contributed  to  the  release  or  threatened  release  of  a
  hazardous waste from or onto the site, or to any public corporation that
  generated, transported, or disposed of, arranged for, or that caused the
  generation, transportation, or disposal of hazardous waste, from or onto
  the site.
    (c) When used in this section:
    (1)  "Public  corporation"  means  a  public corporation as defined in
  section sixty-five of the  general  construction  law,  a  local  public
  authority,  supervisory  district, improvement district within a county,
  city, town, or village, or Indian nation  or  tribe  recognized  by  the
  state  or  the  United States with a reservation wholly or partly within
  the boundaries of New York state, or any combination thereof.
    (2) "Involuntary acquisition of ownership or control" includes but  is
  not limited to the following:
    (i)  Acquisitions  by  a public corporation in its sovereign capacity,
  including but  not  limited  to  acquisitions  pursuant  to  abandonment
  proceedings or bequest;
    (ii)  Acquisitions  by a public corporation, or its agent, acting as a
  conservator or receiver pursuant to a clear and direct statutory mandate
  or regulatory authority;
    (iii) Acquisitions of assets through foreclosure and its  equivalents,
  or  otherwise,  by a public corporation in the course of administering a
  loan, loan guarantee, tax lien, or tax forbearance  agreement,  or  loan
  insurance program; or
    (iv)  Acquisitions  by  a  public  corporation  pursuant  to  seizure,
  injunction, condemnation, or forfeiture authority;  provided  that  such
  ownership or control is not retained primarily for investment purposes.
    (d)  For  the  purpose  of  this  section, the terms "foreclosure" and
  "foreclose" mean, respectively, acquiring or  to  acquire  a  brownfield
  site through:
    (1)  purchase  at  sale  under a judgment or decree, power of sale, or
  non-judicial foreclosure sale;
    (2)  a  deed  in  lieu  of  foreclosure,  or  similar  conveyance,  or
  abandonment from a person or trustee;
    (3)  conveyance  pursuant to an extension of credit or tax forbearance
  previously contracted; or
    (4) any other formal or informal manner by which  a  person  acquires,
  for subsequent disposition, title to or possession of a site in order to
  protect the security interest of the public corporation or lender.
    (e)  "Participating in development" means the carrying out, or causing
  or permitting the carrying out, of any above-grade improvements  to  the
  site or any other environmental investigation or remediation, except for
  those improvements which are part of a site remedial program pursuant to
  this  article  or  in  furtherance  of  site  safety, such as fencing or
  lighting, but does not include licensing, regulatory oversight,  or  the
  mere  capacity  to  regulate  or  influence, or the unexercised right to
  control the operation of the property. For  purposes  of  this  section,
  participating in development does not include:
    (1) having the capacity to influence management of a site;
    (2) having the unexercised right to control or to regulate the site or
  operations thereof;
    (3)  holding, abandoning, or releasing a security interest or tax lien
  on such site;
    (4) including a condition relating to environmental  compliance  in  a
  contract, permit, license, or security agreement;
    (5)  monitoring  or enforcing the terms and conditions of an agreement
  or tax forbearance agreement;
    (6) monitoring or undertaking  one  or  more  inspections  of  a  site
  including, but not limited to, boring test wells;
    (7) exercising other remedies available under applicable laws;
    (8)  licensing,  permitting,  or  granting  permits,  certificates  of
  occupancy and variances as allowed by law and/or regulation;
    (9) applying for  or  participating  in  federal  or  state  statutory
  programs or benefits; or
    (10)  declining  to take any of the actions described in subparagraphs
  one through nine of this paragraph.
    (f) Any public corporation that has taken possession of a  site  shall
  notify  the department of any release of hazardous waste within ten days
  of obtaining actual knowledge of such release, unless a  shorter  notice
  period  is  required under any other provision of law, in which case the
  shorter notice period controls. Failure to notify the department  within
  the  ten  day or shorter notification period shall result in the loss of
  the exemption set forth in this section.
    3. Fiduciary liability cap. For the purpose of this  title,  liability
  on  the  part  of  a  fiduciary  shall not exceed the assets held in the
  fiduciary capacity if such person is not liable  independently  of  such
  person's  ownership  as  a  fiduciary  or  actions  taken in a fiduciary
  capacity including, but not  limited  to,  the  fiduciary's  negligently
  causing  or  contributing  to  the  release  or  threatened  release  of
  hazardous waste at such site.
    (a) For purposes of this subdivision:
    (1) the term "fiduciary" means a person  acting  for  the  benefit  of
  another   party   as  a  bona  fide  trustee;  executor;  administrator;
  custodian;  guardian  of  estates  or  guardian  ad   litem;   receiver;
  conservator;  committee  of  estates  of  incapacitated person; personal
  representative; trustee (including a successor to a  trustee)  under  an
  indenture  agreement,  trust  agreement,  lease,  or  similar  financing
  agreement, for debt securities, certificates of interest or certificates
  of participation in debt securities, or other forms of  indebtedness  as
  to  which the trustee is not, in the capacity of trustee, the lender; or
  representative  in  any  other  capacity  that  the  department,   after
  providing  public  notice,  determines  to  be  similar  to  the various
  capacities previously described in this paragraph; and does not  include
  either a person that is acting as a fiduciary with respect to a trust or
  other fiduciary estate that was organized for the primary purpose of, or
  is  engaged  in,  actively  carrying  on a trade or business for profit,
  unless the trust or other fiduciary estate was created as part of, or to
  facilitate,  one  or more estate plans or because of the incapacity of a
  natural person or a person that  acquires  ownership  or  control  of  a
  property  with the objective purpose of avoiding liability of the person
  or any other person.
    (2) the term "fiduciary capacity" means the capacity of  a  person  in
  holding  title  to  a  property,  or  otherwise  having control of or an
  interest in a property, pursuant to the exercise of the responsibilities
  of the person as a fiduciary.
    (b) Nothing in this subdivision affects the rights  or  immunities  or
  other  defenses  that  are  available under law that are applicable to a
  person subject to this section; or creates any liability for a person or
  a private right of action against a fiduciary or any other person.
    (c) Nothing in this subdivision applies to a  person  if  that  person
  acts  in  a  capacity other than that of a fiduciary or in a beneficiary
  capacity and in that capacity, directly or indirectly, benefits  from  a
  trust  or  fiduciary  relationship;  or is a beneficiary and a fiduciary
  with respect to the same fiduciary estate and, as a fiduciary,  receives
  benefits   that   exceed   customary  or  reasonable  compensation,  and
  incidental benefits, permitted under other applicable law.
    (d) This subdivision does not preclude  a  claim  under  this  chapter
  against the assets of the estate or trust administered by the fiduciary;
  or   a  nonemployee  agent  or  independent  contractor  retained  by  a
  fiduciary.
    4. Affirmative defenses. (a) There shall be no  liability  under  this
  title for a person otherwise liable who can establish by a preponderance
  of   the  evidence  that  the  significant  threat  to  the  environment
  attributable to hazardous waste disposed at an inactive hazardous  waste
  disposal  site  was  caused  solely by: (1) an act of God; (2) an act of
  war; or (3) an act or omission of a third party other than  an  employee
  or  agent  of  such  person, or than one whose act or omission occurs in
  connection  with  a  contractual  relationship  existing   directly   or
  indirectly   with   such  person  (except  where  the  sole  contractual
  arrangement arises from a published tariff and acceptance  for  carriage
  by  a  common  carrier  or  rail),  if  such  person  establishes  by  a
  preponderance of the evidence that: (i) such person exercised  due  care
  with respect to the hazardous waste concerned, taking into consideration
  the  characteristics  of  such hazardous waste, in light of all relevant
  facts and circumstances, and (ii) took precautions  against  foreseeable
  acts  or  omissions  of  any  such third party and the consequences that
  could foreseeably result from such acts or omissions; or any combination
  of them.
    (b) For purposes of this section, (1) the term "act of God"  means  an
  unanticipated  grave  natural disaster or other natural phenomenon of an
  exceptional, inevitable, and  irresistible  character,  the  effects  of
  which  could  not  have been prevented or avoided by the exercise of due
  care or foresight, (2) the term "contractual relationship" includes, but
  is  not  limited  to,  land  contracts,  deeds,  or  other   instruments
  transferring  title or possession, unless the real property on which the
  site concerned is located was acquired by such person after the disposal
  or placement of the hazardous waste on, in, or at such  site,  and  such
  person  establishes one or more of the circumstances described in clause
  (i), (ii), or (iii) of this  subparagraph  by  a  preponderance  of  the
  evidence:
    (i)  At  the  time  such person acquired the site, such person did not
  know and had no reason to know that any hazardous  waste  which  is  the
  subject  of the significant threat determination was disposed of on, in,
  or at the site; or
    (ii)  Such  person  is  a government entity which acquired the site by
  escheat, or through any other involuntary  transfer  or  acquisition  or
  through  the  exercise  of  eminent  domain  authority  by  purchase  or
  condemnation; or
    (iii) Such person acquired the site  by  inheritance  or  bequest.  In
  addition  to  establishing the foregoing, the person must establish that
  he or she has satisfied the requirements of  clauses  (i)  and  (ii)  of
  subparagraph  three  of paragraph (a) of this subdivision, provides full
  cooperation, assistance,  and  site  access  to  the  persons  that  are
  authorized  to  conduct  remedial  actions  at  the  site (including the
  cooperation  and  access  necessary  for  the  installation,  integrity,
  operation, and maintenance of any complete or partial remedial action at
  the  site),  is in compliance with any land use restrictions established
  or relied on in connection with the remedial action at a site, and  does
  not  impede  the  effectiveness or integrity of any institutional and/or
  engineering control employed at the site in connection with  a  remedial
  action.
    (c)(1)  To  establish  that  the  person  had no reason to know of the
  matter described in clause (i) of subparagraph two of paragraph  (b)  of
  this subdivision, the person must demonstrate to a court that:
    (i)  on  or before the date on which the person acquired the site, the
  person  carried  out  all  appropriate   inquiries,   as   provided   in
  subparagraphs  two  and  four  of  this  paragraph,  into  the  previous
  ownership and uses of the site in  accordance  with  generally  accepted
  good commercial and customary standards and practices; and
    (ii) the person took reasonable steps to:
    (A) stop any continuing release;
    (B) prevent any threatened future release; and
    (C)  prevent  or  limit  any human, environmental, or natural resource
  exposure to any previously released hazardous waste.
    (2) Not later than one year after the effective date of this  section,
  the  commissioner  shall by regulation establish standards and practices
  for  the  purpose  of  satisfying  the  requirement  to  carry  out  all
  appropriate inquires under subparagraph one of this paragraph.
    (3)  In  promulgating  regulations  that  establish  the standards and
  practices referred  to  in  subparagraph  two  of  this  paragraph,  the
  commissioner shall include each of the following:
    (i) the results of an inquiry by an environmental professional;
    (ii) interviews with past and present owners, operators, and occupants
  of  the  site  for  the  purpose  of gathering information regarding the
  potential for contamination at the site;
    (iii) reviews of historical sources, such as chain of title documents,
  aerial photographs, building department records, and land  use  records,
  to  determine  previous  uses and occupancies of the real property since
  the property was first developed;
    (iv) searches for recorded environmental  cleanup  liens  against  the
  site that are filed under federal, state, or local law;
    (v)  reviews  of  federal,  state, and local government records, waste
  disposal records, underground storage tank records, and hazardous  waste
  handling, generation, treatment, disposal, and spill records, concerning
  contamination at or near the site;
    (vi) visual inspections of the site and of adjoining properties;
    (vii) specialized knowledge or experience on the part of the person;
    (viii)  the  relationship  of  the  purchase price to the value of the
  property, if the property was not contaminated;
    (ix) commonly known or reasonably ascertainable information about  the
  property;
    (x)  the  degree  of obviousness of the presence or likely presence of
  contamination  at  the  property,  and  the  ability   to   detect   the
  contamination by appropriate investigation.
    (4)(i)  With  respect  to  property purchased before May thirty-first,
  nineteen hundred ninety-seven, in making a determination with respect to
  a person described in subparagraph one of this paragraph a  court  shall
  take into account:
    (A) any specialized knowledge or experience on the part of the person;
    (B)  the  relationship  of  the  purchase  price  to  the value of the
  property, if the property was not contaminated;
    (C) commonly known or reasonably ascertainable information  about  the
  property;
    (D)   the   obviousness   of   the  presence  or  likely  presence  of
  contamination at the property; and
    (E)  the  ability  of  the  person  to  detect  the  contamination  by
  appropriate inspection.
    (ii)  With respect to property purchased on or after May thirty-first,
  nineteen  hundred  ninety-seven,   and   until   the   commissioner   of
  environmental  conservation  promulgates  the  regulations  described in
  subparagraph two of this  paragraph,  the  procedures  of  the  American
  Society  for  Testing  and  Materials,  including  the document known as
  "Standard E1527-97", entitled 'Standard Practice for Environmental  Site
  Assessment:  Phase  1  Environmental  Site  Assessment  Process',  shall
  satisfy the requirements in subparagraph one of this paragraph.
    (5) In the case of property for residential use or other  similar  use
  purchased   by   a  nongovernmental  or  noncommercial  entity,  a  site
  inspection  and  title  search  that  reveal  no   basis   for   further
  investigation  shall  be  considered to satisfy the requirements of this
  subparagraph.
    (d) Nothing in this subdivision shall diminish the  liability  of  any
  previous  owner  or  operator  of the site who would otherwise be liable
  under this title.  Notwithstanding  this  subdivision,  if  such  person
  obtained  actual  knowledge  of  the  release or threatened release of a
  hazardous waste at the site when such person owned  the  site  and  then
  subsequently transferred ownership of the site to another person without
  disclosing  such  knowledge,  such  person  shall be treated as a person
  responsible for the disposal of hazardous waste  at  the  site,  and  no
  defense  under  this  subdivision  shall  be  available  to such person.
  Nothing in this  subdivision  shall  affect  the  liability  under  this
  section  of  a person who, by any act or omission, caused or contributed
  to the release or threatened release of a hazardous waste which  is  the
  subject of such proceeding relating to such site.