May 14, 2020

Lender Liability

Lender Liability

The Impact of "Superfund" and Other Environmental Statutes on Commercial Lending and Investment Activities
      Margaret Murphy, 41(4): 1133–63 (Aug. 1986)
Recent developments in environmental law could profoundly affect commercial financing transactions and other investment activities. As the cost of environmental clean up increases, public and private litigants are asserting broad liability theories that expand traditional rules governing recovery against parent and successor corporations and lenders with secured interests in contaminated property. New statutes also affect investment activities either by imposing a so-called superlien when the government has extended funds to clean a contaminated site or by restricting or prohibiting the transfer of contaminated property.

Inappropriate and Unconstitutional Retroactive Application of Superfund Liability
      George Clemon Freeman, Jr., 42(1): 215–48 (Nov. 1986)
This Article argues that the EPA's interpretation of Superfund—retroactive application of a new federal substantive liability (strict, joint, and several liability) without any requirement of proof of causation—is fatally flawed. The EPA and the courts it has persuaded have ignored the strong presumption against retroactive construction and have failed to consider grave constitutional problems, including separation of powers, bill of attainder, ex post facto, and due process concerns.

Lender Liability for a Borrower's Unpaid Payroll Taxes
      Larry A. Makel and James C. Chadwick, 43(2): 507–48 (Feb. 1988)
The time for a lender to take steps to protect itself against personal liability for a borrower's payroll taxes is not after the Internal Revenue Service is pursuing the lender because the borrower has gone bankrupt. This Article analyzes the legal risks faced by lenders in this regard and discusses the various circumstances under which a lender can be held personally liable for the unfulfilled payroll tax obligations of a borrower. The Article also provides practitioners and lenders with a practical perspective on how to avoid becoming entangled in this rapidly developing area of lender liability.

CERCLA Made Simple: An Analysis of the Cases Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980
      Lewis M. Barr, 45(3): 923–1001 (May 1990)
Over the past ten years, the courts have reached a consensus on most of the issues presented under CERCLA. As the issues have grown more sophisticated, certain splits of authority have emerged, some of which may need congressional clarification. In general, most courts have interpreted CERCLA to accomplish the results Congress apparently intended.

Application of the Abnormally Dangerous Activities Doctrine to Environmental Cleanups
      Jim C. Chen and Kyle E. McSlarrow, 47(3): 1031–52 (May 1992)
The common law tort doctrine of strict liability for abnormally dangerous activities is emerging as a key element of the law of hazardous substance regulation, which has been dominated by CERCLA. Recent applications of the abnormally dangerous activities doctrine have shown the doctrine's formidable potential for expansion. Together with the related torts of nuisance and trespass, strict liability for abnormally dangerous activities has already begun to complement CERCLA's scheme for allocating the costs of cleaning hazardous waste sites. The authors also explore how the revitalized application of the abnormally dangerous activities doctrine to environmental cleanups will affect insurance coverage.

EPA's Final Rule on Lender Liability: Lenders Beware
      Roger D. Staton, 49(1): 163–86 (Nov. 1993)
The Article explores the recent history of court decisions establishing lender liability under CERCLA. Comment is made on proposed EPA rules pending in 1992, congressional legislation proposed to remedy interpretive problems, the final rule as passed by the EPA in April 1992, and recent judicial interpretations of that rule.

The Past and Future of Debt Recharacterization
     James M. Wilton and William A. McGee, 74(1) 91-126 (Winter 2018/2019)
The bankruptcy doctrine of debt recharacterization, as developed in four federal circuits, uses multi-factor tests derived from tax cases involving solvent companies. Aspects of these tests make no sense when applied to debt of insolvent companies and the U.S. Treasury has determined that, even for the purpose originally intended, the tests produce “inconsistent and unpredictable results.” The Ninth Circuit has now joined the Fifth Circuit in looking to state law as the basis for determining whether debt claims should be recharacterized as equity and disallowed in bankruptcy cases. This Article examines these two approaches, analyzing arguments for and against application of a federal or a state law rule of decision for debt recharacterization. Drawing on U.S. Supreme Court precedent, statutory analysis, and policy, the Article shows that, under long-standing legal principles, state law provides the proper framework for determining whether debt should be recharacterized as equity in bankruptcy and offers both consistency between state and federal courts and a higher degree of predictability concerning the enforcement of insider debt. The article predicts that the U.S. Supreme Court will ultimately resolve the circuit split in favor of a state law rule of decision. In anticipation of such a ruling, the article concludes by providing an overview of choice of law issues and state law approaches to debt recharacterization.