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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1991

## Text

————

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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

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385020_2869%3A5. Public record. Not legal advice.