Handling Environmental Cases Without an Environmental Lawyer
Handling Environmental Cases Without an Environmental Lawyer – An environmental lawyer and environmental consultant have different roles and both are an important part of a client’s team.
One common question we hear when commercial or industrial transactional and compliance issues arise is some variation of: “Do I really need to bring in environmental counsel?” or “Since I have a consultant, I don’t need an environmental attorney, do I?”
The answer usually is that an environmental attorney will add significant value and a fuller capacity to assess liability and litigation risks, well beyond the technical work capacity of other environmental professionals. Thus, it almost always makes sense to have an environmental attorney on your team when environmental concerns present themselves.
Legal Environmental Risk vs. Technical/Scientific Environmental Risk
Environmental legal counsel and environmental consultants offer different types of counseling in commercial, industrial, and residential real estate matters. Both are necessary, and they should work in cooperation.
A property purchase or sale necessarily entails consideration of liabilities that may arise from State and federal statutes, as well as common law torts such as trespass, nuisance, and strict liability. In this regard, liabilities arising from environmental contamination may be significant. However, there are some limited defenses from liability arising from statutory provisions in New Jersey and federal laws.
An environmental consultant’s role during property acquisitions typically is to perform the technical assessment required by environmental regulations commonly called “all appropriate inquiry”. Consultants generally assess potential environmental conditions at or impacting property by preparing a “Preliminary Assessment” and “Site Investigation”, as first and second stage investigations are titled under New Jersey regulations, and a Phase I and II under federal regulations. Conducting these investigations may qualify a purchaser for certain statutory liability protections.
Environmental consultants perform these environmental investigations. Their role is critical, but limited inasmuch as the Phase I and Preliminary Assessment are specific in scope and purpose. In this regard they identify potential areas of environmental concern, evaluate specific technical and scientific evidence and circumstances impacting and potentially impacting the properties at issue by conducting sampling to investigate the potential for environmental contamination following technical regulations adopted by the United States Environmental Protection Agency, and in New Jersey, the Department of Environmental Protection. Their perspective and reports appropriately focus on the historic and current uses of the property and assess the technical presence of environmental contamination.
An environmental consultant’s report on pre-purchase due diligence work typically does not address potential associated legal risks. However, if the environmental consultant identifies contamination, and the property is acquired prior to full remediation and regulatory case closure, potential statutory and common law liabilities may be imposed on the purchaser. In addition to statutory liability protections, there are also statutory covenants not to sue that may protect prospective purchasers from liability to the State of New Jersey. And, there are separate but interdependent statutory provisions that govern potential protection from private party contribution litigation in certain circumstances.
It is the environmental attorney’s role to assess legal risks associated with reported environmental conditions, covenants not to sue, and contribution protection. The environmental attorney can also help craft potential legal transaction structures and provide legal counsel regarding insurance products that may mitigate risks associated with environmental conditions at a property.
Thus, while the Environmental Consultant performs the technical investigation and assessment of environmental conditions on a property (including projected costs to address those concerns), an environmental attorney can assess the legal implications of those conditions and provide counsel on structures to reduce a client’s legal risks.
The role of experienced environmental counsel is also to help a client translate the technical environmental risks identified by the consultant into legal liability risks that they may, or may not be, willing to accept. Often, the “Phase I/Phase II” or “Preliminary Assessment/Site Investigation” reports performed for due diligence requirements consider the state of the property and environmental impacts at the Property by comparing the site conditions to regulatory standards and compliance requirements. But that does not provide assessment of the legal liability risk.
Certain properties that may have relatively “low” reported environmental impacts from a technical standpoint at the time of acquisition could still carry substantial risk of litigation or disputes over the origination of and responsibility for contamination after closing. In New Jersey, certain environmental claims may not have a statute of limitations, and disputes over impacts from environmental contamination could arise many years in the future. In this connection, a property may be intertwined with disputes regarding liability for offsite contamination, or the commingling of contamination, and those legal questions may be outside the scope of the Phase I or Preliminary Assessment, but within the purview of environmental legal counsel.
While due diligence environmental reports ask the questions, “What environmental issues may be impacting the Property? What is the regulatory compliance status of those areas?”, the environmental attorney inquiries include, “What are the legal risks from those circumstances? What disputes could arise for the client given those risks? What are the legal consequences of potential compliance deficiencies? What are legal structures or insurance products that may mitigate risk? And, how do those risks align with the Client’s goals and legal risk tolerance?” So, it is important to have environmental counsel analyze the technical due diligence reports for potential legal risks. The different perspectives of the environmental attorney and the environmental consultant complement each other and provide clients with a more complete picture of the legal liability risk associated with a property.
Every property poses its own unique attributes and risks, and not all clients have the same level of risk tolerance in transactions. Tailored approaches and analyses are necessary.
Strategic Planning
Environmental attorneys and environmental consultants have different roles. Consultants provide technical assessments regarding potential contamination at a property including methods for compliance with technical obligations for investigation and remediation. Environmental attorneys analyze those options to assess legal risks. Based on the assessment of legal risks, the environmental attorney can also help a client develop strategy, transactional structure, and negotiate contract language. Careful planning for these matters can avoid delays and disputes and keep deals moving forward.
Our sophisticated team of environmental attorneys can quickly digest complex technical issues in consultants’ reports to identify legal risks, present the risks in terms that clients understand, create effective contractual and regulatory structures, and assess other risk mitigation techniques such incorporation of transactional or historic insurance to help facilitate client goals. This adds value to every transaction, and is especially important in corporate divestitures, asset or land sales, or the cessation of manufacturing operations. Given the complexity of environmental legal implications, and the nuanced risk for commercial or industrial property owners, any team of real estate attorneys, environmental consultants, and brokers should include an experienced environmental attorney.