Amicus Curiae Brief — Fleet Factors Corp. v. United States, 111 S. Ct. 752 (1991) (No. 90-504)

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No. 90-504

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In The jJOSErH! ©

Supreme Court of the Unitec os

October Term, 1990

SPA MiSv, IPR

FLEET FACTORS CORPORATION,

Petitioner,

Vv.

UNITED STATES OF AMERICA,

Respondent.

ON PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

BRIEF OF AMICI CURIAE

BANK OF BOSTON, BANK OF NEW ENGLAND,

CONNECTICUT NATIONAL BANK, FIRST INTERSTATE BANCORP,

JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY,

NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY,

THE PRUDENTIAL INSURANCE CO. OF AMERICA,

SHAWMUT BANK, N.A,

TEACHERS INSURANCE & ANNUITY

ASSOCIATION OF AMERICA,

AND TRAVELERS REALTY INVESTMENT CORPORATION

IN SUPPORT OF

PETITION FOR WRIT OF CERTIORARI

EDWARD I. MASTERMAN

(Counsel of Record)

NANCY A. DALY

STEPHEN S. OSTRACH

New England Legal Foundation

150 Lincoln Street

, Boston, Massachusetts 02111

(617) 695-3660

October 22, 1990 Counsel for Amici Curiae

BEST AVAILABLE COPY

Liji%9

QUESTION PRESENTED

Whether the express exemption from

CERCLA liability for secured lenders, who

hold indicia of ownership primarily to

protect their security interest, and who do

not participate in the management of a

facility, can be interpreted to hold secured

lenders liable for hazardous waste site

cleanups if they neither foreclose on any of

the borrower’s real property, nor participate

in the day-to-day aa SOM of the facility

but who may have had the authority to get

involved in or otherwise influence the

hazardous waste disposal decisions if they so

chose?

CONSENT OF THE PARTIES

Counsel for Fleet Factors Corporation

and the Solicitor General’s office on behalf of

the United States consented to the filing of

this brief in support of the Petition for Writ

of Certiorari. Written copies of those letters

of consent were filed with the Clerk of this

Court at the time the Brief of Amici Curiae

was filed.

TABLE OF CONTENTS

Page

QUESTION PRESENTED ...........c:0:csecse0e0 i

CONSENT OF THE PARTIEG..................:. ii

TABLE OF AUTHORITIEG................::s000:. v

INTEREST OF AMICI

Ca sasacanannsnsnsennans 1

INTRODUCTION AND STATEMENT OF THE

I dicataied lessainsens Lid chacbanvlivcriovecsciosansiecs 7

SUMMARY OF ARGUMENT .............00000+. 11

PTRGUMITIGT ci ssih eck cdcicccdssbisinsecosnscccssesnseesess 13

I. THE ELEVENTH CIRCUIT DECISION

PRESENTS AN ISSUE THAT IS OF

EXTRAORDINARY IMPORTANCE TO

COMMERCIAL LENDERS

THROUGHOUT THE UNITED

A iatatastesevcestostnnesasocevccceseccceses 13

II. THE ELEVENTH CIRCUIT DECISION

CONFLICTS WITH A NINTH CIRCUIT

DECISION ON THE SECURED

LENDER EXEMPTION ...............0000 26

Ii. THE STANDARD FOR SECURED

LENDER'S LIABILITY SET FORTH

IV. THE ELEVENTH CIRCUIT DECISION

UNDERMINES THE BASIC PURPOSE

OF CERCLA AND IS BAD PUBLIC

POLICY. ......ccccccccssccsccscscsesscceceeseseseens

CONCLUSION ........csscsesssessssecrsenssssessseeseneens

TABLE OF AUTHORITIES

Page

Cases

Guidice v. BFG Electroplating and

Manufacturing Co., 732 F. Supp.

556 (W.D. Pa. 1989) rcciccccccsscccsssessreeeees 16, 33

In re Bergsoe Metal Corp., 910 F.2d 668 (9th Cir.

BUDO) wsiercroncieccicscvencsbelbbs décbisi@Usaasbdasedidbbes Passim

Rockwell International v. IU

International Corp., 702 F. Supp. 1384 (N.D. Il.

WD vetecse Deh ceurtnmrndaenniincrrsccatnectinereesienateh 16

State of New York v. Shore Realty Corp.,

759 F.2d 1032 (2d Cir. 1985) ..............000. 8

United States v. ChemDyne Corp.,

572 F. Supp. 802 (S.D. Ohio 1983) .......... 8

United States v. Fleet Factors Corp.,

901 F.2d 1550 (11th Cir. 1990) ................ Passim

United States v. Maryland Bank & Trust Co.,

632 F. Supp. 573 (D. Maryland 1986) ..... 33

United States v. Mirabile, 15 Envtl. L. Rep.

(Envtl. L. Inst.) 20,994

(E.D. Pa. Sept. 4, 1985) .........cccccccssseeseseees 33

United States v. New Castle County, 727 F.

Supp. 854 (D. Del. 1989) ........ceccsessseees 16

Vv

United States v. Nicolet, Inc., 712 F.

Supp. 1193 (E.D. Pa. 1989) wn... 16

Statutes

§ 101(20XA) of the Comprehensive

Environmental nse, Compensation,

and Liability Act of 1980,

42 U.S.C.A. §9601(20XA) (West

GUN SIND. eahsenddccthsasmpontsesncesneccocccccccccccccoseces Passim

§ 107(a) of the Comprehensive

Environmental Response, Compensation,

and Liability Act of 1980,

42 U.S.C.A. §9607(a) (West

BRI MII dnssnsssscsbbsseressscsedcsocccecesoccncsccncccsecs 8

Other Authorities

Secured Creditor CERCLA Liability

Expanded as Appeals Court Rejects

‘Mirabile’ roach, Toxics Law

Reporter (BNA) Vol. 5, No. 1 at 16

GERI GD, TBDD). cccccccciddtcsicrcrctetecveticesescscccscceee 24

Connolly, Wall St. J., Aug. 28,

BOD OE ADD ame lactis brrcdsisccleicsicesiss 25

INTEREST OF AMICI CURIAE

The Amici Curiae are directly affected by

the decision in this case due to their

extensive presence in commercial lending.

More specifically their interests are as

follows:

Bank of Boston, with headquarters in

Boston, Massachusetts, is the largest bank

in New England. It is a full service bank

with assets in excess of $19 billion in real

estate lending as well as _ inventory,

equipment, leasing and accounts receivable

lending.

Bank of New England, with

headquarters in Boston, Massachusetts, is a

major full service bank with substantial

I

assets in real estate lending as well as

inventory, equipment, and accounts

receivable lending.

Connecticut National Bank, based in

Hartford, Connecticut, is an indirect

subsidiary of Shawmut National Corporation,

which is also based in Hartford, Connecticut.

It is a full-service bank with substantial

assets in real estate, as well as inventory,

equipment and accounts receivable lending.

First Interstate Bancorp, with

headquarters in Los Angeles, California, is

as of June 30, 1990, the tenth largest

banking organization in the United States,

owning 25 banks located throughout the

Western United States, which in the

2

aggregate hold assets of $55.1 billion and

operate 1,053 offices. Twenty-two of those

banks are full service banks with substantial

amounts of real estate lending, as well as

inventory, equipment, and accounts

receivabie lending.

John Hancock Mutual Life Insurance

Company, with headquarters in Boston,

Massachusetts, is the ninth largest

insurance company in the United States. It

has more than $32 billion in assets, of

which more than $10 billion is in loans

secured by mortgages on real estate

throughout the nation and more than $10

billion is in loans secured by bonds.

New England Mutual Life Insurance

3

‘Company (The New England) is one of

the nation’s largest diversified financial and

money-management institutions, with

headquarters in Boston, Massachusetts. It

has over $4 billion invested in mortgage

loans secured by real estate throughout the

country as well as substantial assets secured

by inventory, equipment, and other personal

property.

The Prudential Insurance Company

of America (Prudential), a mutual life

insurance company, with headquarters in

Newark, New Jersey, includes among its

investment activities secured lending on

commercial real estate. As of May 30, 1990,

Prudential’s commercial mortgage loan

4

| portfolio included loans with an aggregate

| principal balance of approximately $22

billion.

Shawmut Bank, N.A., based in Boston,

Massachusetts, is an indirect subsidiary of

Shawmut National Corporation which is

based in Hartford, Connecticut. It is a full-

service bank with substantial assets in real

estate, as well as in inventory, equipment,

and accounts receivable lending.

Teachers Insurance and Annuity

Association of America, based in New

York, New York, is the fifth largest life

insurance company in the United States and

the principal pension provider in the higher

education market with over $19 billion

invested in loans secured by mortgages or

real estate throughout the United States.

Travelers Realty Investment

Corporation, based in Hartford,

Connecticut, is a subsidiary of The Travelers

Corporation. It manages a real estate

investment portfolio of $17 billion.

Together the amici have substantial assets

tied up in commercial lending across the

United States. They have substantial

security interests in real and personal

property, including tangibles and intangibles.

INTRODUCTION AND STATEMENT OF

THE CASE

The Amici, Bank of Boston, Bank of New

England, Connecticut National Bank, First

Interstate Bancorp, John Hancock Mutual

Life Insurance Company, New England

Mutual Life Insurance Company (The New

England), The Prudential Insurance

Company of America (Prudential), Shawmut

Bank, N.A., Teachers Insurance and Annuity

Association of America, and Travelers Realty

Investment Corporation adopt and

ae ea eee

incorporate by reference the Statement of

the Case of Fleet Factors Corporation in its

Petition for Writ of Certiorari.

The Comprehensive Environmental

i

Response, Compensation, and Liability Act

[CERCLA] 42 U.S.C.A. § 9607(a) (West

Supp. 1990) provides that present owners

and operators of a vessel or a facility, and

owners or operators o the time of disposal

of hazardous substances, shall be liable for

all the response costs to remove and

remediate the hazardous’ substances

consistent with the national contingency

plan. This has been interpreted to impose

strict, joint and several liability on any

party that could be considered to be involved

in the operation or to have an ownership

interest in the property. State of New York

v. Shore Realty Corp., 759 F.2d 1032, 1042

(2d Cir. 1985); United States v. ChemDyne

Corp., 572 F. Supp. 802 (S.D. Ohio 1983).

However, CERCLA has.a specific exemption

for secured lenders. The term “owner or

operator”

does not include a person, who,

without participation in the

management of a vessel or facility,

holds indicia of ownership primarily to

protect his security interest in the

vessel or facility.

CERCLA § 101(20XA), 42 US.C.A.

§9601(20A) (West Supp. 1990).

In the case at issue, United States uv.

Fleet Factors Corp., 901 F.2d 1550 (11th Cir.

1990), the Eleventh Circuit expressly set a

standard interpreting this exemption which

greatly expands the situations in which a

lender might be found liable. Applying its

new standard, the Eleventh Circuit not only

upheld the portion of the District Court’s

opinion which held that there were material

issues of fact as to whether Fleet Factors

Corporation ("Fleet") participated in

management for one time period, but it also

reversed another portion of the District

Court opinion, expanding the time periods

Fleet might potentially be held liable under

CERCLA.

Amici submit that the standard set by

the Eleventh Circuit is clearly erroneous and

it is having a substantial impact beyond the

determination of the interests before this

Court. Many lenders are already restricting

lending or backing away from troubled

10

borrowers in anticipation of expanded

liability for Superfund cleanups. The result

is an impending credit drought for borrowers

which will undermine the health and growth

of almost every type of business. A

subsequent decision by the Ninth Circuit

imposes a much different threshold for

liability, creating conflict and ambiguity. In

addition, there are an increasing number of

CERCLA cases in the lower courts, requiring

the guidance of this Court on the issue of

lenders’ liability. Therefore it is of great

importance that this Court hear this case to

restore certainty to commercial lending.

SUMMARY OF ARGUMENT

This Court should grant the Petition for

11

Writ of Certiorari of the Fleet Factors

Corporation because the issues involved in

this case are of extraordinary importance to

borrowers and lenders throughout the

country. The Eleventh Circuit decision has

created a situation of uncertainty and

ambiguity which is having an increasingly

negative impact on the national and local

economies. Any fair reading of the decision

below leads to a conflict between the

Eleventh and Ninth Circuit interpretations

of the secured lender exemption. In

addition, the Eleventh Circuit erred on the

law by failing to properly analyze Fleet's

status as an owner or operator before

turning to the exemption and by reading the

12

exemption in such a way as to make it

meaningless. Finally, this Court should

grant the Petition because the decision

below undermines the policy behind the

CERCLA law and is bad public policy in

general.

ARGUMENT

I. THE ELEVENTH CIRCUIT

DECISION PRESENTS AN ISSUE OF

EXTRAORDINARY IMPORTANCE TO

COMMERCIAL LENDERS ACROSS

THE UNITED STATES.

In this case, the Eleventh Circuit went

far beyond the facts of the case to set an

new, expansive, and extra-statutory standard

for lender liability under CERCLA. That

court interpreted the statutory exemption for

secured lenders in such a way as to

13

siciaaitally eliminate the protection that

lenders believed they had under the

exemption, thereby stepping into the

legislative role and rewriting the law. The

result of this decision has been an

immediate and serious negative effect on

lending practices and the economy

throughout the United States.

The Amici, all of whom are major

commercial lenders, assert that this decision

raises the specter of virtually unlimited

liability for lenders for hazardous waste site

cleanup. In response to that decision, some

lenders have already changed their lending

practices, others are seriously considering

making changes. The first change is a

14

significant curtailment in making loan

commitments to any commercial enterprise,

particularly small businesses, which might

develop a hazardous substance problem.

The second change is an _ increased

reluctance to assist troubled borrowers in a

workout situation if there is any potential of

a hazardous waste problem. Together these

changes will have an increasingly negative

effect on the national and local economies.

Ultimately they will undermine the purpose

of CERCLA as fewer businesses will have

the funding available to clean up hazardous

waste problems.

_ Prior to the Fleet Factors case, the

standard set forth in United States v.

15

Mirabile, 15 Envtl. L. Rep. (Envtl. L. Inst.)

20,994 (E.D. Pa. Sept. 4, 1985), was widely

followed. Fleet Factors, 901 F.2d at 1556

(Court refers to the Mirabile test and cites

other lower court cases which followed it:

United States v. New Castle County, 727

F.Supp. 854, 866 (D. Del. 1989); Rockwell

International v. IU International Corp., 702

F.Supp. 1384, 1390 (N.D.Ill. 1988); United

States v. Nicolet, Inc., 712 F. Supp. 1193,

1204-05 (E.D.Pa. 1989); Guidice v. BFG

Electroplating and Manufacturing Co., 732

| F.Supp. 656 (W.D.Pa. 1989), Under that

standard a secured lender could remain

within the secured lender exemption if it

provided some financial advice to a troubled

borrower so long as it did not become

involved in day-to-day management of the

company. Mirabile, 15 Envtl. L. Rep. at

20995. That was a more workable standard

for lenders. It gave them some idea of what

action they might take to protect their

security interest without losing their

statutory protection.

The Eleventh Circuit decision was the

first federal appeals court review of the

secured lender exemption. In it, a quorum

of the appellate court panel, consisting of

one appeals court judge and a senior district

judge sitting by designation,’ set forth a

' ‘This case was argued before a panel consisting of

Cireuit Judges Vance and Kravitch and Senior

(continued...)

17

standard for determining lender liability that

is far more expansive than the standard

that had generally been followed previously:

A secured creditor may incur section

9607(a)(2) liability, without being an

operator, by participating in the

financial management of a facility to a

degree indicating a capacity to

influence the corporation’s treatment of

hazardous wastes. It is not necessary

for the secured creditor actually to

involve itself in the day-to-day

operations of the facility in order to be

liable -although such conduct will

certainly lead to the loss of the

protection of the statutory exemption.

Nor is it necessary for the secured

creditor to participate in management

decisions relating to hazardous waste.

Rather, a secured creditor will be

liable if its involvement with the

management of the _ facility § is

' (...continued)

District Judge Lynne of the U.S. District Court for

the Northern District of Alabama, sitting by

designation. Judge Vance died prior to a decision

on the case. Fo eit Wan decided ty Gisault Judes

Kravitch and Senior District Judge Lynne.

sufficiently broad to support the

inference that it could affect hazardous

waste disposal decisions if it so chose.

Fleet Factors, 901 F.2d at 1557-8 (emphasis

added).

Because any standard loan documents

will give the secured creditor the potential

"capacity to influence the. corporation’s

treatment of hazardous wastes,” the result is

a standard under which it appears that a

secured lender may be held liable merely by

exercising rights under the loan documents

far short of actual control, such as giving

advice. For instance, typical loan documents

have a clause which provides that the

borrower must be in compliance with all

applicable laws. Therefore, if the borrower

19

treats hazardous substances in any way

which violates the law, theoretically the

lender could call a default on the loan.

From that, it could be inferred that the

lender could influence hazardous waste

decisions. Similarly, lenders typically have

a right to inspect the premises under the

loan documents. It is conceivable under the

Eleventh Circuit standard that merely

entering into the loan agreement with such

“compliance-with-law"” or "right to inspect”

clauses and other clauses giving the lender

some control of the business in the event of

default could be sufficient participation in

the facilitys financial management for a

lender to be held liable. The clear

20

, | |

implication of the standard is that a lender

cannot give a troubled borrower any advice

or take any action other than asking for

repayment of the loan without opening itself

to liability for the cost of the entire

hazardous waste site cleanup.

The Eleventh Circuit ignores’ or

misunderstands the nature of secured

lending. Secured lenders are not owners of

the business. They take a leeiaiten interest

in real or personal property and have

certain rights under the loan documents in

order to be able to lend money, for which

they are typically fiduciaries, with some

degree of safety. By making it more risky

for lenders to take a security interest than

21

not, the Eleventh Circuit standard

undermines the concepts that underlie this

realm of financing.

This expansion of liability from the "day-

to-day management” standard of Mirabile to

the “inference that [the lender] could affect

hazardous waste disposal decisions if it so

chose” standard of Fleet Factors has led to

- tremendous uncertainty in the lending

community as to what, if anything, a

secured lender may do to protect its security

interest without potentially incurring

liability far beyond the scope of the loan.

As the Eleventh Circuit was the first Court

of Appeals to address this issue and the

recent Ninth Circuit decision in In re

22

Bergsoe Metal Corp., 910 F.2d 668, 31 ERC

1785 (9th Cir. 1990) fails to clearly

repudiate this standard or to give clearer

guidelines, the lending community feels that

there is a serious danger that lower courts

and possibly other circuits may follow the

Fleet Factors standard.

The degree of concern the lending

community is experiencing over this decision

is reflected in the commentary concerning

the case. “In a case of first impression, the

U.S. Court of Appeals for the Eleventh

Circuit May 23 broadened secured creditor

liability under the superfund law, specifically

rejecting a narrower formulation known as

the Mirabile rule." Secured Creditor

23

CERCLA Liability Expanded as Appeals

Court Rejects ‘Mirabile’ Approach, Toxics

Law Reporter (BNA) Vol. 5, No. 1 at 16

(June 6, 1990). “Lenders already know they

must be ‘very cautious’ in accepting land as

collateral,’ [Bradley S.] Tupi said. Now,

they will have to expect attorneys to advise

them that when a loan ‘looks like it is going

sour, they are in a no-win situation. They

should just walk away and not get involved

in the borrower’s business.” Id. at 17,

quoting an attorney with the Pittsburgh firm

of Reed Smith Shaw & McClay. "A recent

federal court ruling--U.S. v. Fleet Factors

Corp.--delivers a new and potentially

devastating blow to banks. The ruling

24

drastically expands ‘lender liability’ under

the Superfund law....". Connolly, Wall St. J.,

Aug. 28, 1990 at A10.

In summary, the effects of this case are

being felt far beyond the confines of the

Eleventh Circuit. Many lenders, who do not

take an equity risk in businesses and who

consequently do not receive an equity return

on their investment, feel they cannot in good

conscience expose their institutions to

potential liability far in excess of the loan

they made. Given the general uncertainty

generated by the Eleventh Circuit's decision,

the lending community is responding to the

potential for CERCLA liability by changing

lending practices to the detriment of the

25

economy.

Il. THE ELEVENTH CIRCUIT DECISION

CONFLICTS WITH A NINTH CIRCUIT

DECISION ON THE SECURED LENDER

EXEMPTION.

In August 1990, the Ninth Circuit

addressed the scope of the secured lender

exemption in the Bergsoe case. In Re

Bergsoe, 910 F.2d 668 (9th Cir. 1990). The

case involved a public authority which held

nominal title to a plant at which a

hazardous waste problem arose. The Ninth

Circuit cited the standard set forth in Fleet

Factors and noted that it (the Nirth Circuit)

would "leave for another day the

establishment of a Ninth Circuit rule on this

difficult issue.” Id. at 672. However, the

Ninth Circuit then went on to say that it is

clear from the statute that while the precise

parameters of "participation" were undefined,

"there must be some actual management of

the facility before a secured creditor will fall

outside the exception." 910 F.2d at 672.

The Ninth Circuit purports to avoid

setting a standard for what participation

will put a secured lender outside the

exemption. But, in fact, by requiring as a

minimum "some actual management of the

facility,” it is setting at least a threshold

standard that conflicts with the Eleventh

Circuit opinion. Under the Eleventh

Circuit decision, a court may infer that a

secured lender could affect hazardous waste

27

disposal decisions if it so chose, from the

fact that the lender participated in financial

decisions to some degree. As stated in the

previous section, standard loan provisions in

and of themselves seem to give a lender

sufficient authority to affect hazardous waste

disposal decisions if it so chose.

The Bergsoe court specifically rejects

financial participation such as negotiating

and encouraging the building of the facility;

the right to inspect the premises and to

take possession upon foreclosure; and

participation in an agreement for a change

in management during a workout, as bases

for holding the secured creditor liable.

Bergsoe, 910 F.2d at 672. In contrast the

Fleet Factors decision suggests that even

remote participation in financial matters,

coupled with the authority to influence

hazardous waste disposal, is sufficient to

find liability.’

Not only does the Fleet Factors decision

conflict with the Ninth Circuit decision, but

as the Eleventh Circuit noted itself in the

Fleet opinion, it is a distinct departure from

the series of cases in which lower courts

* The Ninth Circuit gives the Eleventh Circuit

decision the benefit of doubt when it notes, “As

over the past five years followed the

Mirabile standard of secured lender liability,

requiring actual foreclosure or day-to-day

management before a secured lender would

be held liable. Fleet Factors, 901 F.2d at

1556. That line of cases had created some

parameters within which lenders felt it was

safe to act. The Eleventh Circuit decision

has undermined any certainty that lenders

may have felt they gained from these cases.

Il. THE STANDARD FOR

SECURED LENDER’S

THE ELEVENTH CIRCUIT 18

CLEARLY ERRONEOUS.

The Eleventh Circuit decision is clearly

erroneous for a number of reasons. First,

the court did not properly adéress the

question of whether Fleet was an “owner or

operator” before moving to consideration of

the exemption. Second, the court rewrote

the language of the statute as to when

liability may be imposed on a lender,

interpreting the secured lender exemption in

such a way as to make it virtually

meaningless.

CERCLA holds those people who are

owners and operators liable for the costs of

responding to a hazardous waste site

problem. The statute then exenipts from

liability secured lenders who are primarily

protecting their security interest and who do

not participate in management. Ar a

thresheld matter, a court must determine

31

whether a lender should be considered an

owner or operator and then move on to

whether the lender is protected by the

exemption. In Fleet Factors, the court did

not make a finding that Fleet was an owner

or operator before moving on to consider

whether it could benefit from the exemption.

The court specifically notes that while it

might have found Fleet liable as an operator

it was forgoing the operator analysis in this

opinion. Fleet Factors, 901 F.2d at 1556, n.

6. The court did say that there was no

dispute that Fleet held indicia of ownership,

so that it would proceed to an analysis of

Fleet’s participation in management. Id. at

1556. The result ignores previous case law

32

which did not deem a lender an "owner"

until it actually foreclosed on its interest.

See United States v. Maryland Bank &

Trust Co., 632 F.Supp. 573, 579 (D.

Maryland 1986); Guidice v. BFG

Electroplating and Mfg. Co. Inc., 732 F.

Supp. 556, 562-3 (W.D. Pa. 1989). In

Mirabile a bank was held to be exempted

from liability even though it actually

foreclosed on the property. 15 ELR at

20,996. Similarly, in Bergsoe the local

authority which held nominal title to the

property was held not to be an owner for

purposes of CERCLA liability. 910 F.2d at

671. The court may have simply assumed

that Fleet was an "owner" because Georgia

33

is a state in which mortgagees are title

holders. However, this assumption would

lead to varying interpretations from state to

state and it still does not square with

Bergsoe.

In Fleet, the court jumped to the

language of the exemption to find potential

liability, using the exemption as a weapon

rather than a shield. The Eleventh Circuit

erred in not squarely addressing the

question of whether or not Fleet was an

owner or operator, before determining how

the exemption applied.

The Eleventh Circuit is guilty of exactly

what it accuses the District Court of doing-

-ignoring the plain language of the statutory

34

exemption for secured lenders in such a way

as to render it virtually meaningless. Fleet,

901 F.2d at 1557. The Eleventh Circuit

cites the “overwhelmingly remedial" goal of

CERCLA in coming to its expansive scheme

of liability for lenders (id.), but Congress

~ would not have included this exemption in

the statute if they had not intended for it to

provide some protection to lenders beyond

that afforded other owners and operators.

Further, the court departed from previous

cases and Seated further ambiguity by

failing to recognize the distinction between

the lender’s actions with respect to real and

_ personal property.

35

IV.THE ELEVENTH CIRCUIT DECISION

UNDERMINES THE BASIC PURPOSE

OF CERCLA AND IS BAD PUBLIC

POLICY.

The decision undermines the basic

purposes of CERCLA. As _ lending

institutions restrict loans to any businesses

that might have a hazardous waste problem

and particularly as lenders become unwilling

to assist a borrower in a workout situation,

there will be less funding available for

private parties to clean up hazardous waste

sites. The recult will be delays and a

greater drain upon the public monies in the

Superfund. Lenders have neither the

experience nor the desire to stand over the

shoulder of their borrowers to make sure

that each and every decision the borrower

makes with regard to hazardous substances

is correct.

The decision below presents lenders with

@ Hobson’s Choice. They may either stay

completely uninvolved with the borrower,

risking their security interest but avoiding

CERCLA liability, or they may get involved

to the point of almost running the business

in order to meet the role set out for them in

Fleet Factors, but thereby almost certainly

becoming liable for even an accidental spill.

The latter role is one which lenders do not

have the capacity or expertise to undertake.

Under the Eleventh Circuit standard a

concerned lender that does ask a borrower

37

for a periodic accounting in connection with

hazardous waste substances could thereby

become subject to CERCLA liability.

Therefore, the net result of the standard is

to encourage lenders to distance themselves

from borrowers’ operations, particularly if

there is any indication that a hazardous

waste problem may be arising. Simply

stated, the Fleet Factors rule does not

accomplish its stated purpose of encouraging

lenders to police the actions of their

borrowers.

The police function which the Eleventh

Circuit would assign to lenders is far more

appropriately assigned to the government

which has various state and federal

regulations to deal with the treatment of

hazardous materials, the expertise to enforce

those regulations, and the ability to impose

criminal sanctions if necessary.

Finally, the tremendous uncertainty and

ambiguity that have resulted from this

decision have had a serious negative impact

on the relationship between borrowers and

lenders that ultimately is bad for the

economy. That result was not intended by

the legislature.

CONCLUSION

For the reasons stated in this brief, the

Amici Curiae request this Court to grant the

writ of certiorari to review the judgment of

the Eleventh Circuit filed by the Fleet

Factors Corporation.

BANK OF BOSTON, BANK OF NEW ENGLAND,

CONNECTICUT NATIONAL BANK, FIRST

INTERSTATE BANCORP, JOHN HANCOCK

MUTUAL LIFE INSURANCE COMPANY, NEW

ENGLAND MUTUAL LIFE INSURANCE

COMPANY, THE PRUDENTIAL INSURANCE

COMPANY OF AMERICA, SHAWMUT BANK,

N.A.,, TEACHERS INSURANCE AND ANNUITY

ASSOCIATION OF AMERICA, TRAVELERS REAL

ESTATE INVESTMENT CORPORATION

Amici Curiae

By their attorneys,

EDWARD I. MASTERMAN

(COUNSEL OF RECORD)

NANCY A. DALY

{STEPHEN S. OSTRACH

New England Legal Foundation

150 Lincoin Street

Boston, MA 02111

(617) 426-3125