New Court Ruling Suggests Caution When Leasing Industrial Equipment

A ruling last month by the U.S. District Court for the Northern District of Illinois should cause companies to employ caution in leasing equipment to operators where the manufacturing activities may release hazardous materials into the environment. In the case of United States v. Saporito, No. 07-CV-3169 (N.D. Ill., 2/9/10), the Court found liability under the Superfund law for a party that owned electroplating equipment that was leased to another entity to operate in an electroplating operation. Saporito did not own the manufacturing facility or the land on which it was located; he just owned the electroplating equipment which was leased to Crescent Plating to operate on its premises. Contamination stemming from the electroplating operations resulted in a removal action by the U.S. EPA. EPA sued Saporito to recover the costs of the removal action. Saporito claimed that he was neither an owner nor an operator as those terms are defined in the Superfund law, because he did not own or operate the manufacturing facility. The Court ruled that the “plating line is no less a facility than the land on which it operated. Thus, an owner of equipment necessary to the operation of the plating line is no less an ‘owner’ than a part-owner of land.”

Because sale-leasebacks are popular financing mechanisms for industrial equipment, businesses participating in such arrangements should evaluate the potential for releases of hazardous materials from the equipment, and the resulting Superfund liability, in structuring such deals. To obtain more information about potential Superfund liability in sale-leaseback arrangements, contact Steve O’Day or Phillip Hoover.

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