I

103D CONGRESS

1ST SESSION H. R. 2462

To amend the Comprehensive Environmental Response, Compensation, and

Liability Act and the Solid Waste Disposal Act to limit the liabilities

under these Acts of both fiduciaries and lending institutions, including

finance lessors, guarantors, and others directly or indirectly holding indicia of ownership primarily to protect a security interest in property

which is subject to either Act.

IN THE HOUSE OF REPRESENTATIVES

JUNE 18, 1993

Mr. LAFALCE (for himself, Mr. SLATTERY, Mr. LAROCCO, and Mr. MCCOLLUM) introduced the following bill; which was referred jointly to the Committees on Energy and Commerce and Public Works and Transportation

A BILL

To amend the Comprehensive Environmental Response, Compensation, and Liability Act and the Solid Waste Disposal Act to limit the liabilities under these Acts of

both fiduciaries and lending institutions, including finance lessors, guarantors, and others directly or indirectly holding indicia of ownership primarily to protect

a security interest in property which is subject to either

Act.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,
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1 SECTION 1. AMENDMENTS TO COMPREHENSIVE ENVIRON2 MENTAL RESPONSE, COMPENSATION, AND LI3 ABILITY ACT OF 1980.

4 The Comprehensive Environmental Response, Com5 pensation, and Liability Act of 1980 is amended—

6 (1) by striking the last sentence of paragraph

7 101(20)(A); and

8 (2) by inserting the following new paragraphs

9 101(20) (E) and (F):

10 ‘‘(E)(i) The term ‘owner or operator’ does

11 not include a person who, without participating

12 in the management of a vessel or facility, holds

13 indicia of ownership primarily to protect his or

14 her security interest in the vessel or facility.

15 ‘‘(ii) The term ‘indicia of ownership’ means

16 any legal or equitable interest in property ac17 quired directly or indirectly—

18 (I) for the purpose of securing pay19 ment of a loan or indebtedness, a right of

20 reimbursement or subrogation under a

21 guaranty, or the performance of another

22 obligation,

23 (II) evidencing ownership under a

24 lease financing transaction where the les25 sor does not initially select or ordinarily
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1 control the daily operation or maintenance

2 of the property, or

3 (III) in the course of protecting a se4 curity interest or right of reimbursement

5 or subrogation under a guaranty.

6 ‘Indicia of ownership’ include evidence of inter7 ests in mortgages, deeds of trust, liens, surety

8 bonds, guaranties, lease financing transactions

9 where the lessor does not initially select or ordi10 narily control the daily operation or mainte11 nance of the property, other forms of encum12 brances against property recognized under ap13 plicable law as vesting the holder of the security

14 interest with some indicia of title, legal or equi15 table title obtained at, or in lieu of, foreclosure,

16 and their equivalents. A person may, but is not

17 required to, hold title in property in order to

18 hold indicia of ownership in that property.

19 ‘‘(iii) A ‘holder of a security interest’ is a

20 person who holds indicia of ownership in prop21 erty primarily to protect a security interest. A

22 ‘holder of a security interest’ includes the initial

23 holder (such as a loan originator) and any sub24 sequent holder (such as a successor-in-interest

25 or subsequent purchaser of the security interest
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1 on the secondary market); guarantor; lease fin2 ancier or any successor where the lessor does

3 not initially select or ordinarily control the daily

4 operation or maintenance of the property; any

5 person who holds indicia or ownership primarily

6 to protect a security interest; or a receiver or

7 other person who acts on behalf or for the bene8 fit of a holder of a security interest.

9 ‘‘(iv) The term ‘security interest’ means an

10 interest in property created or established for

11 the purpose of securing a loan, right of reim12 bursement or subrogation under a guaranty, or

13 other obligation or constituting a lease financ14 ing transaction. Security interests include mort15 gages, deeds of trust, liens, lease financing

16 transactions in which the lessor does not ini17 tially select or ordinarily control the daily oper18 ation or maintenance of the property, trust re19 ceipt transactions, and their equivalents. Secu20 rity interests may also arise from transactions

21 such as sales and leasebacks, conditional sales,

22 installment sales, certain assignments, factoring

23 agreements, accounts receivable financing ar24 rangements, and consignments, if the trans25 action creates or establishes an interest in prop-
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1 erty for the purpose of securing a loan, right of

2 reimbursement or subrogation under a guaranty

3 or other obligation.

4 ‘‘(v) The term ‘participating in the man5 agement of property’ means actual participation

6 in the management or operational affairs of the

7 property by the holder, and does not include the

8 mere capacity to influence, or ability to influ9 ence, or the unexercised right to control facility

10 operations. A holder is participating in manage11 ment while the borrower is still in possession of

12 the property encumbered by the security inter13 est, only if the holder either—

14 ‘‘(I) exercises decisionmaking control

15 over the borrower’s environmental compli16 ance, such that the holder has undertaken

17 responsibility for the borrower’s solid waste

18 handling or disposal practices; or

19 ‘‘(II) exercises control at a level com20 parable to that of a manager of the bor21 rower’s enterprise, such that the holder

22 has assumed or manifested responsibility

23 for the overall management of the enter24 prise encompassing the day-to-day deci-
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1 sionmaking of the enterprise with respect

2 to—

3 ‘‘(aa) environmental compliance;

4 or

5 ‘‘(bb) all, or substantially all, of

6 the operational (as opposed to finan7 cial or administrative) aspects of the

8 enterprise other than environmental

9 compliance. Operational aspects of the

10 enterprise include functions such as

11 that of facility or plant manager, op12 erations manager, chief operating offi13 cer, or chief executive officer. Finan14 cial or administrative aspects include

15 functions such as that of credit man16 ager, personnel manager, controller,

17 chief financial officer, or similar func18 tions.

19 ‘‘(vi) The term ‘primarily to protect a se20 curity interest’ includes indicia of ownership ac21 quired as a consequence of having or exercising

22 rights as a holder of a security interest where

23 the same is necessary or appropriate to protect

24 the security interest, to provide for compliance

25 with laws, to preserve the value of the property
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1 or benefits therefrom, or to recover a loan, in2 debtedness or right of reimbursement or sub3 rogation under a guaranty or to redress any

4 other obligation secured by such interest or to

5 recover property subject to a finance lease. A

6 holder of a security interest who directly or in7 directly acquires full title or a right to title or

8 possession of such property upon default under

9 the security interest, or at, or in lieu of, fore10 closure, or, in the case of a finance lease, upon

11 expiration, cancellation, or termination of such

12 lease, shall continue to hold indicia of owner13 ship primarily to protect a security interest so

14 long as such holder is diligently proceeding to

15 sell or convey title or the right to title or to re16 lease such property on commercially reasonable

17 terms at the earliest possible time, while pre18 serving the property in the interim.

19 ‘‘(vii) The term ‘property’ means real and

20 personal property and includes facilities, stor21 age tanks, equipment, vessels, vehicles, and

22 other modes of transportation whether by sea,

23 land, or air.

24 ‘‘(viii)(I) The term ‘guarantor’ includes

25 guarantors and sureties of security interests,
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1 securities, and other obligations, issuers of let2 ters of credit and other credit enhancements,

3 title insurers, and entities which directly or in4 directly acquire indicia of ownership in the

5 course of protecting a security interest or acting

6 as such guarantors, sureties, issuers of letters

7 of credit or other credit enhancements or title

8 insurers, and the term ‘guaranty’ includes guar9 anties, surety bonds, title insurance policies, let10 ters of credit and other credit enhancements,

11 and other agreements with a guarantor relating

12 to the obligations described in this subclause

13 (I).

14 ‘‘(II) ‘Directly or indirectly’ includes any

15 interest in property, security interest, indicia of

16 ownership title, or right to title held or acquired

17 by a fiduciary or similar entity for the benefit

18 of a holder of a security interest.

19 ‘‘(ix) The terms ‘borrower’, ‘debtor’, and

20 ‘obligor’ mean a person whose property is en21 cumbered by a security interest and includes a

22 lessee under a lease financing transaction.

23 ‘‘(x) Actions taken by a holder of a secu24 rity interest to foreclose, sell, liquidate, release

25 or otherwise divest or cause the transfer of
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1 property subject to a security interest; or pre2 serve or protect the value of such property; or

3 otherwise to exercise rights of a holder of a se4 curity interest specified in subparagraph (v)

5 above; or to assist the borrower, debtor, obligor,

6 or lessee in winding down its operations or ac7 tivities related to such property; or to abandon

8 or release the property prior to foreclosure or

9 its equivalents; or to require or conduct re10 sponse action on, or relating to, the property;

11 shall not be deemed ‘participating in the man12 agement of property’ within the meaning of this

13 subsection (101)(20)(E). Completion of an envi14 ronmental inspection or evaluation consistent

15 with good commercial or customary practice by

16 or for the use of a holder of a security interest

17 is probative evidence that a holder of a security

18 interest is acting to preserve and protect the

19 property during the time the holder of a secu20 rity interest may have possession or control of

21 such property, except that this Act does not re22 quire a holder of a security interest to conduct

23 nor does it require any environmental inspec24 tion or evaluation to qualify for this exemption.
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1 ‘‘(xi) A holder of a security interest who,

2 in taking actions referred to in subparagraph

3 (x) above respecting property, actively and di4 rectly causes or exacerbates a release of a haz5 ardous waste for which a Federal or an author6 ized State government determines that response

7 action is necessary, shall be liable for the cost

8 of such response action to the extent only that

9 the release is directly attributable to such hold10 er’s activities, except that such a holder shall

11 not be liable for response action costs arising

12 from a release which commences before and

13 continues after such holder takes any action re14 ferred to in subparagraph (x) above.

15 ‘‘(F)(i) The term ‘fiduciary’ means any en16 tity which is considered a fiduciary under sec17 tion 3(21) of the Employee Retirement Income

18 Security Act of 1974, as amended from time to

19 time, or who is acting as trustee, executor, ad20 ministrator, custodian, guardian of estates, con21 servator, committee of estates of disabled per22 sons, personal representative, receiver, agent,

23 nominee or in any other fiduciary capacity for

24 the benefit of another entity.
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1 ‘‘(ii) A fiduciary who acquires ownership or

2 control of property without having owned, oper3 ated, or participated in the management of that

4 property prior to assuming ownership or control

5 as fiduciary, other than for the benefit of a

6 holder of a security interest, shall not be an

7 ‘owner’ or ‘operator’ under this Act.

8 ‘‘(iii) Such a fiduciary who willfully, know9 ingly, or recklessly causes (in a direct and ac10 tive manner) a release of a hazardous sub11 stance, for which a Federal or an authorized

12 State government determines that response ac13 tion is necessary, shall be liable for the cost of

14 such response action to the extent only that the

15 release is directly attributable to the fiduciary’s

16 activities, except that such a fiduciary shall not

17 be liable for response action costs arising from

18 a release which commences before and contin19 ues after such fiduciary acquires ownership or

20 control of the property.

21 ‘‘(iv) Nothing in this subsection shall pre22 vent claims against the assets that constitute

23 the estate held by the fiduciary or the filling of

24 actions against the fiduciary in its representa25 tive capacity.
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1 SEC. 2. AMENDMENTS TO SOLID WASTE DISPOSAL ACT.

2 The Solid Waste Disposal Act is amended—

3 (1) by adding at the end of section 1004 the

4 following paragraph:

5 ‘‘(41) The terms ‘owner’, ‘operator’, ‘generator’,

6 ‘transporter’, and ‘person’ do not include any entity

7 which would not be an ‘owner’ or ‘operator’ within

8 the meaning of paragraphs 101(20) (E) or (F) of

9 the Comprehensive Environmental Response, Com10 pensation, and Liability Act of 1980.’’;

11 (2) by adding at the end of paragraph

12 9003(h)(a) the following sentence: ‘‘This definition

13 shall be construed to be parallel to the provisions of

14 paragraph 101(20)(E) of the Comprehensive Envi15 ronmental Response, Compensation, and Liability

16 Act of 1980.’’, and

17 (3) by adding at the end of section 3006 the

18 following subsection:

19 ‘‘(i) AMENDMENTS MADE BY 1993 ACT.—The provi20 sions of section 1004(41) of this Act shall apply in each

21 State having an interim or finally authorized State pro22 gram to the same extent that such provisions apply in

23 other States.’’.

24 SEC. 3. SCOPE OF APPLICATION.

25 The provisions of this Act shall apply to—
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1 (1) all indicia of ownership acquired prior to

2 the date of enactment that are held primarily to pro3 tect a security interest in property; and

4 (2) each fiduciary with respect to any property

5 acquired by the fiduciary prior to the date of enact6 ment.

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