Posted on March 12, 2014 by John Manard
Among other changes, the new standard now defines “migration” to include the movement of vapor in the subsurface. That change makes it more clear that the environmental professional conducting a Phase I must, when identifying releases and threatened releases, evaluate the potential for vapors to migrate from contaminated subsurface soils and ground water into the indoor air of buildings on the surface.
While many lawyers and environmental professionals believed the old standard already required an evaluation of the potential for vapor intrusion, there was no consensus, and there are many Phase I reports out there that do not evaluate that potential. Because treatment of vapor intrusion under the old standard was a topic of genuine dispute among practitioners, you might think we could accept this clarification and move on. Not so.
The USEPA rolled a grenade into the tent when, in its preamble to the final rule sanctioning E1527-13, it stated that it “. . . wishes to be clear that, in its view, vapor migration has always been a relevant potential source of release or threatened release that, depending on site-specific conditions, may warrant identification when conducting all appropriate inquires.” (78 Federal Register 79319 (December 30, 2013).
The USEPA’s clarification has prompted some discussion in the blogosphere about potential malpractice claims against environmental professionals who failed to address relevant vapor intrusion issues in past Phase I reports. Closely related is the question of whether landowners currently relying on one of CERCLA’s landowner liability protections may be at risk due to the inadequacy of their consultant’s work. These are legitimate concerns and only time will tell if theoretic liability leads to actual liability and litigation.
However, it does not appear that the sky is falling and there are reasons to suggest that a landside of litigation over this issue is unlikely. While litigation can be expected under the right (very limited) fact pattern, the following factors should alleviate concerns about widespread litigation:
- While the aggregate Phase I universe is vast, the portion of that universe affected by the vapor intrusion issue is very limited; involving only circumstances where subsurface contamination is known or suspected.
- Even when genuine vapor intrusion questions exist, a cause of action for malpractice requires damages. Simple receipt of a substandard Phase I report is not enough. The recipient of the report must experience damages related to the failure to address vapor intrusion. I see two such scenarios:
- A landowner faces liability for remediation of a vapor intrusion problem, and does not qualify for liability protection under CERCLA because the Phase I failed to evaluate the threat of vapor intrusion.
- A landowner discovers that a vapor intrusion problem reduces the value of its property, after relying on a Phase I that did not evaluate the threat of vapor intrusion.
- In the former situation, case law demonstrates that courts are reluctant to deny CERCLA liability protection to landowners who reasonably rely on an environmental professional’s Phase I report to satisfy AAI. Reliance on an environmental professional would seem particularly reasonable and appropriate regarding a technical issue such as whether or not an assessment should evaluate the threat of vapor intrusion. If landowner liability is improbable, the specter of derivative Phase I malpractice claims is also diminished.
- Concerning the latter (reduced property value) scenario, most Phase I reports are conducted in order to satisfy AAI and qualify for landowner liability protection. While use of the ASTM standard is not limited to that task, the standard directs the environmental professional to assume, absent other direction from the user, that satisfaction of AAI is the user’s purpose. If the user obtains the liability protection it bargained for, can it maintain a malpractice action? The answer to that question will depend upon the facts of each case, but I suspect that the user will face an uphill battle.
- Only after paring down potential vapor intrusion disputes to those involving actual relevant damages do we reach the substantive malpractice question of whether or not the failure to address vapor intrusion in a Phase I is a breach of a professional standard of care.
The answer to that breach of standard question is beyond the scope of this note and will require a descent into the bowels of the ASTM standard. I suggest that the USEPA’s proclamation is not dispositive because it addresses compliance with its own AAI requirement, not compliance with the ASTM standard guiding the environmental professional; a distinction that may make a difference.
For transactions in the pipeline when the December 31, 2013 final rule was promulgated, most will not be affected because they do not present the particular facts and circumstances (i.e., subsurface contamination) triggering a vapor intrusion assessment. In those transactions where vapor intrusion is an issue, however, it is key that AAI be completed prior to the acquisition of property. For pending transactions, deficient Phase I assessments should be revised or supplemented to address vapor intrusion potential. If the property has already changed hands, the new owner’s claim to any of the CERCLA landowner liability protections will be at risk.
How great a risk? Time will tell. But it is clear that good faith arguments that vapor intrusion need not be part of new Phase 1 assessments are no longer tenable.