§ 1389-E — Liability exemptions and defenses

§ 1389-e. Liability exemptions and defenses. 1. Lender exemption. (a)\nFor purposes of this title no lender shall incur any liability from any\nstatutory claims of the state as an owner or operator of a site, or a\nperson responsible for the disposal of a hazardous waste at such site,\nprovided such lender, without participating in the management of such\nsite, holds indicia of ownership primarily to protect the lender's\nsecurity interest in the site or, if such lender did not participate in\nthe management of such site prior to a foreclosure on such site,\nnotwithstanding that such lender:\n (1) forecloses on such site; and\n (2) after foreclosure, sells, releases (in the case of a lease finance\ntransaction), or liquidates such site, maintains business activities,\nwinds up operations, or takes any other measure to preserve, protect or\nprepare such site prior to sale or disposition; provided, however, that\nsuch lender shall take actions to sell, release (in the case of a lease\nfinance transaction), or otherwise divest itself of such site at the\nearliest practicable, commercially reasonable time, on commercially\nreasonable terms, taking into account market conditions and legal and\nregulatory requirements.\n (b) This exemption shall not apply to any lender that has caused or\ncontributed to the release or threatened release of a hazardous waste\nfrom or onto the site, or to any lender that generated, transported, or\ndisposed of, arranged for, or that caused the generation,\ntransportation, or disposal of hazardous waste from or onto such site.\n (c) For purposes of this section:\n (1) The term "participating in management" means actually\nparticipating in the management or operational affairs of a site and\ndoes not include merely having the capacity to influence, or the\nunexercised right to control, site operations.\n (i) A lender who holds indicia of ownership primarily to protect a\nsecurity interest in such site shall be considered to participate in\nmanagement only if, while the borrower is in possession of such site\nencumbered by the security interest, the lender:\n (A) exercises decision making control over the environmental\ncompliance related to such site, such that the lender has undertaken\nresponsibility for the hazardous waste handling or disposal practices\nrelated to such site; or\n (B) exercises control at a level comparable to that of a manager of\nsuch site, such that the lender has assumed or manifested\nresponsibility:\n (I) for the overall management of such site encompassing day-to-day\ndecision making with respect to environmental compliance; or\n (II) over all or substantially all of the operational functions,\nexcluding financial or administrative functions, of such site other than\nthe function of environmental compliance.\n (ii) The term "participate in management" does not include:\n (A) Performing an act or failing to act prior to the time at which a\nsecurity interest is created in a site;\n (B) Holding a security interest or abandoning or releasing a security\ninterest;\n (C) Including in the terms of an extension of credit, or in a contract\nor security agreement relating to such extension, a covenant, warranty,\nor other term or condition that relates to environmental compliance;\n (D) Monitoring or enforcing the terms and conditions of the extension\nof credit or security interest;\n (E) Monitoring or undertaking one or more inspections of such site;\n (F) Requiring a response action or other lawful means of addressing\nthe release or threatened release of a hazardous waste in connection\nwith such site prior to, during, or on the expiration of the term of the\nextension of credit;\n (G) Providing financial or other advice or counseling in an effort to\nmitigate, prevent, or cure default or diminution in the value of such\nsite;\n (H) Restructuring, renegotiating, or otherwise agreeing to alter the\nterms and conditions of the extension of credit or security interest,\nexercising forbearance;\n (I) Exercising other remedies that may be available under applicable\nlaw for the breach of a term or condition of the extension of credit or\nsecurity agreement; or\n (J) Conducting a response action under 42 U.S.C. Section 9607(d) or\nunder the direction of an on-scene coordinator appointed under the\nnational contingency plan if the actions do not rise to the level of\nparticipating in management within the meaning of this subparagraph.\n (2) The term "extension of credit" includes a lease finance\ntransaction:\n (i) In which the lessor does not initially select the leased site and\ndoes not during the lease term control the daily operations or\nmaintenance of such site; or\n (ii) That conforms with regulations issued by the appropriate federal\nbanking agency or the appropriate state bank supervisor (as those terms\nare defined in section 3 of the federal deposit insurance act (12 U.S.C.\n1813)) or with regulations issued by the national credit union\nadministration board, as appropriate.\n (3) The term "financial or administrative function" includes a\nfunction such as that of a credit manager, accounts payable officer,\naccounts receivable officer, personnel manager, comptroller, or chief\nfinancial officer, or a similar function.\n (4) The terms "foreclosure" and "foreclose" mean, respectively,\nacquiring and to acquire, a site through:\n (i) Purchase at sale under a judgment or decree, power of sale, or\nnonjudicial foreclosure sale;\n (ii) A deed in lieu of foreclosure or similar conveyance from a\ntrustee;\n (iii) Repossession if such site was security for an extension of\ncredit previously contracted;\n (iv) Conveyance pursuant to an extension of credit previously\ncontracted, including the termination of a lease agreement; or\n (v) Any other formal or informal manner by which the lender acquires,\nfor subsequent disposition, title to or possession of a site in order to\nprotect the lender's security interest.\n (5) The term "lender" means:\n (i) An insured depository institution as defined in section 3 of the\nfederal deposit insurance act (12 U.S.C 1813);\n (ii) An insured credit union as defined in section 101 of the federal\ncredit union act (12 U.S.C. 1752);\n (iii) A bank or association chartered under the farm credit act of\n1971 (12 U.S.C. 2001 et seq.);\n (iv) A leasing or trust company that is an affiliate of an insured\ndepository institution;\n (v) Any person, including a successor or assignee of any such person,\nthat makes a bona fide extension of credit to or takes or acquires a\nsecurity interest from a nonaffiliated person;\n (vi) The federal national mortgage association, the federal home loan\nmortgage corporation, the federal agricultural mortgage corporation, or\nany other entity that in a bona fide manner buys or sells loans or\ninterests in loans;\n (vii) A person that insures or guarantees against a default in the\nrepayment of an extension of credit, or acts as a surety with respect to\nan extension of credit, to a nonaffiliated person; and\n (viii) A person that provides title insurance and that acquires a site\nas a result of assignment or conveyance in the course of underwriting\nclaims and claims settlement.\n (6) The term "operational function" includes a function such as that\nof a site or plant manager, operations manager, chief operating officer,\nor chief executive officer.\n (7) The term "security interest" includes a right under a mortgage,\ndeed of trust, assignment, judgment, lien, pledge, security agreement,\nfactoring agreement, or lease, and any other right accruing to a person\nto secure the repayment of money, the performance of a duty, or any\nother obligation by a nonaffiliated person.\n 2. Municipal exemption. (a) For the purposes of this title no public\ncorporation shall incur any liability from any statutory claims of the\nstate as an owner or operator of a site, or a person responsible for the\ndisposal of a hazardous waste at such site, if such public corporation\nacquired such site involuntarily, and such public corporation retained\nsuch site without participating in the development of such site.\n (b) This exemption shall not apply to any public corporation that has\ncaused or contributed to the release or threatened release of a\nhazardous waste from or onto the site, or to any public corporation that\ngenerated, transported, or disposed of, arranged for, or that caused the\ngeneration, transportation, or disposal of hazardous waste, from or onto\nthe site.\n (c) When used in this section:\n (1) "Public corporation" means a public corporation as defined in\nsection sixty-five of the general construction law, a local public\nauthority, supervisory district, improvement district within a county,\ncity, town, or village, or Indian nation or tribe recognized by the\nstate or the United States with a reservation wholly or partly within\nthe boundaries of New York state, or any combination thereof.\n (2) "Involuntary acquisition of ownership or control" includes but is\nnot limited to the following:\n (i) Acquisitions by a public corporation in its sovereign capacity,\nincluding but not limited to acquisitions pursuant to abandonment\nproceedings or bequest;\n (ii) Acquisitions by a public corporation, or its agent, acting as a\nconservator or receiver pursuant to a clear and direct statutory mandate\nor regulatory authority;\n (iii) Acquisitions of assets through foreclosure and its equivalents,\nor otherwise, by a public corporation in the course of administering a\nloan, loan guarantee, tax lien, or tax forbearance agreement, or loan\ninsurance program; or\n (iv) Acquisitions by a public corporation pursuant to seizure,\ninjunction, condemnation, or forfeiture authority; provided that such\nownership or control is not retained primarily for investment purposes.\n (d) For the purpose of this section, the terms "foreclosure" and\n"foreclose" mean, respectively, acquiring or to acquire a brownfield\nsite through:\n (1) purchase at sale under a judgment or decree, power of sale, or\nnon-judicial foreclosure sale;\n (2) a deed in lieu of foreclosure, or similar conveyance, or\nabandonment from a person or trustee;\n (3) conveyance pursuant to an extension of credit or tax forbearance\npreviously contracted; or\n (4) any other formal or informal manner by which a person acquires,\nfor subsequent disposition, title to or possession of a site in order to\nprotect the security interest of the public corporation or lender.\n (e) "Participating in development" means the carrying out, or causing\nor permitting the carrying out, of any above-grade improvements to the\nsite or any other environmental investigation or remediation, except for\nthose improvements which are part of a site remedial program pursuant to\nthis article or in furtherance of site safety, such as fencing or\nlighting, but does not include licensing, regulatory oversight, or the\nmere capacity to regulate or influence, or the unexercised right to\ncontrol the operation of the property. For purposes of this section,\nparticipating in development does not include:\n (1) having the capacity to influence management of a site;\n (2) having the unexercised right to control or to regulate the site or\noperations thereof;\n (3) holding, abandoning, or releasing a security interest or tax lien\non such site;\n (4) including a condition relating to environmental compliance in a\ncontract, permit, license, or security agreement;\n (5) monitoring or enforcing the terms and conditions of an agreement\nor tax forbearance agreement;\n (6) monitoring or undertaking one or more inspections of a site\nincluding, but not limited to, boring test wells;\n (7) exercising other remedies available under applicable laws;\n (8) licensing, permitting, or granting permits, certificates of\noccupancy and variances as allowed by law and/or regulation;\n (9) applying for or participating in federal or state statutory\nprograms or benefits; or\n (10) declining to take any of the actions described in subparagraphs\none through nine of this paragraph.\n (f) Any public corporation that has taken possession of a site shall\nnotify the department of any release of hazardous waste within ten days\nof obtaining actual knowledge of such release, unless a shorter notice\nperiod is required under any other provision of law, in which case the\nshorter notice period controls. Failure to notify the department within\nthe ten day or shorter notification period shall result in the loss of\nthe exemption set forth in this section.\n 3. Fiduciary liability cap. For the purpose of this title, liability\non the part of a fiduciary shall not exceed the assets held in the\nfiduciary capacity if such person is not liable independently of such\nperson's ownership as a fiduciary or actions taken in a fiduciary\ncapacity including, but not limited to, the fiduciary's negligently\ncausing or contributing to the release or threatened release of\nhazardous waste at such site.\n (a) For purposes of this subdivision:\n (1) the term "fiduciary" means a person acting for the benefit of\nanother party as a bona fide trustee; executor; administrator;\ncustodian; guardian of estates or guardian ad litem; receiver;\nconservator; committee of estates of incapacitated person; personal\nrepresentative; trustee (including a successor to a trustee) under an\nindenture agreement, trust agreement, lease, or similar financing\nagreement, for debt securities, certificates of interest or certificates\nof participation in debt securities, or other forms of indebtedness as\nto which the trustee is not, in the capacity of trustee, the lender; or\nrepresentative in any other capacity that the department, after\nproviding public notice, determines to be similar to the various\ncapacities previously described in this paragraph; and does not include\neither a person that is acting as a fiduciary with respect to a trust or\nother fiduciary estate that was organized for the primary purpose of, or\nis engaged in, actively carrying on a trade or business for profit,\nunless the trust or other fiduciary estate was created as part of, or to\nfacilitate, one or more estate plans or because of the incapacity of a\nnatural person or a person that acquires ownership or control of a\nproperty with the objective purpose of avoiding liability of the person\nor any other person.\n (2) the term "fiduciary capacity" means the capacity of a person in\nholding title to a property, or otherwise having control of or an\ninterest in a property, pursuant to the exercise of the responsibilities\nof the person as a fiduciary.\n (b) Nothing in this subdivision affects the rights or immunities or\nother defenses that are available under law that are applicable to a\nperson subject to this section; or creates any liability for a person or\na private right of action against a fiduciary or any other person.\n (c) Nothing in this subdivision applies to a person if that person\nacts in a capacity other than that of a fiduciary or in a beneficiary\ncapacity and in that capacity, directly or indirectly, benefits from a\ntrust or fiduciary relationship; or is a beneficiary and a fiduciary\nwith respect to the same fiduciary estate and, as a fiduciary, receives\nbenefits that exceed customary or reasonable compensation, and\nincidental benefits, permitted under other applicable law.\n (d) This subdivision does not preclude a claim under this chapter\nagainst the assets of the estate or trust administered by the fiduciary;\nor a nonemployee agent or independent contractor retained by a\nfiduciary.\n 4. Affirmative defenses. (a) There shall be no liability under this\ntitle for a person otherwise liable who can establish by a preponderance\nof the evidence that the significant threat to the environment\nattributable to hazardous waste disposed at an inactive hazardous waste\ndisposal site was caused solely by: (1) an act of God; (2) an act of\nwar; or (3) an act or omission of a third party other than an employee\nor agent of such person, or than one whose act or omission occurs in\nconnection with a contractual relationship existing directly or\nindirectly with such person (except where the sole contractual\narrangement arises from a published tariff and acceptance for carriage\nby a common carrier or rail), if such person establishes by a\npreponderance of the evidence that: (i) such person exercised due care\nwith respect to the hazardous waste concerned, taking into consideration\nthe characteristics of such hazardous waste, in light of all relevant\nfacts and circumstances, and (ii) took precautions against foreseeable\nacts or omissions of any such third party and the consequences that\ncould foreseeably result from such acts or omissions; or any combination\nof them.\n (b) For purposes of this section, (1) the term "act of God" means an\nunanticipated grave natural disaster or other natural phenomenon of an\nexceptional, inevitable, and irresistible character, the effects of\nwhich could not have been prevented or avoided by the exercise of due\ncare or foresight, (2) the term "contractual relationship" includes, but\nis not limited to, land contracts, deeds, or other instruments\ntransferring title or possession, unless the real property on which the\nsite concerned is located was acquired by such person after the disposal\nor placement of the hazardous waste on, in, or at such site, and such\nperson establishes one or more of the circumstances described in clause\n(i), (ii), or (iii) of this subparagraph by a preponderance of the\nevidence:\n (i) At the time such person acquired the site, such person did not\nknow and had no reason to know that any hazardous waste which is the\nsubject of the significant threat determination was disposed of on, in,\nor at the site; or\n (ii) Such person is a government entity which acquired the site by\nescheat, or through any other involuntary transfer or acquisition or\nthrough the exercise of eminent domain authority by purchase or\ncondemnation; or\n (iii) Such person acquired the site by inheritance or bequest. In\naddition to establishing the foregoing, the person must establish that\nhe or she has satisfied the requirements of clauses (i) and (ii) of\nsubparagraph three of paragraph (a) of this subdivision, provides full\ncooperation, assistance, and site access to the persons that are\nauthorized to conduct remedial actions at the site (including the\ncooperation and access necessary for the installation, integrity,\noperation, and maintenance of any complete or partial remedial action at\nthe site), is in compliance with any land use restrictions established\nor relied on in connection with the remedial action at a site, and does\nnot impede the effectiveness or integrity of any institutional and/or\nengineering control employed at the site in connection with a remedial\naction.\n (c)(1) To establish that the person had no reason to know of the\nmatter described in clause (i) of subparagraph two of paragraph (b) of\nthis subdivision, the person must demonstrate to a court that:\n (i) on or before the date on which the person acquired the site, the\nperson carried out all appropriate inquiries, as provided in\nsubparagraphs two and four of this paragraph, into the previous\nownership and uses of the site in accordance with generally accepted\ngood commercial and customary standards and practices; and\n (ii) the person took reasonable steps to:\n (A) stop any continuing release;\n (B) prevent any threatened future release; and\n (C) prevent or limit any human, environmental, or natural resource\nexposure to any previously released hazardous waste.\n (2) Not later than one year after the effective date of this section,\nthe commissioner shall by regulation establish standards and practices\nfor the purpose of satisfying the requirement to carry out all\nappropriate inquires under subparagraph one of this paragraph.\n (3) In promulgating regulations that establish the standards and\npractices referred to in subparagraph two of this paragraph, the\ncommissioner shall include each of the following:\n (i) the results of an inquiry by an environmental professional;\n (ii) interviews with past and present owners, operators, and occupants\nof the site for the purpose of gathering information regarding the\npotential for contamination at the site;\n (iii) reviews of historical sources, such as chain of title documents,\naerial photographs, building department records, and land use records,\nto determine previous uses and occupancies of the real property since\nthe property was first developed;\n (iv) searches for recorded environmental cleanup liens against the\nsite that are filed under federal, state, or local law;\n (v) reviews of federal, state, and local government records, waste\ndisposal records, underground storage tank records, and hazardous waste\nhandling, generation, treatment, disposal, and spill records, concerning\ncontamination at or near the site;\n (vi) visual inspections of the site and of adjoining properties;\n (vii) specialized knowledge or experience on the part of the person;\n (viii) the relationship of the purchase price to the value of the\nproperty, if the property was not contaminated;\n (ix) commonly known or reasonably ascertainable information about the\nproperty;\n (x) the degree of obviousness of the presence or likely presence of\ncontamination at the property, and the ability to detect the\ncontamination by appropriate investigation.\n (4)(i) With respect to property purchased before May thirty-first,\nnineteen hundred ninety-seven, in making a determination with respect to\na person described in subparagraph one of this paragraph a court shall\ntake into account:\n (A) any specialized knowledge or experience on the part of the person;\n (B) the relationship of the purchase price to the value of the\nproperty, if the property was not contaminated;\n (C) commonly known or reasonably ascertainable information about the\nproperty;\n (D) the obviousness of the presence or likely presence of\ncontamination at the property; and\n (E) the ability of the person to detect the contamination by\nappropriate inspection.\n (ii) With respect to property purchased on or after May thirty-first,\nnineteen hundred ninety-seven, and until the commissioner of\nenvironmental conservation promulgates the regulations described in\nsubparagraph two of this paragraph, the procedures of the American\nSociety for Testing and Materials, including the document known as\n"Standard E1527-97", entitled 'Standard Practice for Environmental Site\nAssessment: Phase 1 Environmental Site Assessment Process', shall\nsatisfy the requirements in subparagraph one of this paragraph.\n (5) In the case of property for residential use or other similar use\npurchased by a nongovernmental or noncommercial entity, a site\ninspection and title search that reveal no basis for further\ninvestigation shall be considered to satisfy the requirements of this\nsubparagraph.\n (d) Nothing in this subdivision shall diminish the liability of any\nprevious owner or operator of the site who would otherwise be liable\nunder this title. Notwithstanding this subdivision, if such person\nobtained actual knowledge of the release or threatened release of a\nhazardous waste at the site when such person owned the site and then\nsubsequently transferred ownership of the site to another person without\ndisclosing such knowledge, such person shall be treated as a person\nresponsible for the disposal of hazardous waste at the site, and no\ndefense under this subdivision shall be available to such person.\nNothing in this subdivision shall affect the liability under this\nsection of a person who, by any act or omission, caused or contributed\nto the release or threatened release of a hazardous waste which is the\nsubject of such proceeding relating to such site.\n