The Effect of Joint and Several Liability under Superfund on Brownfields

Howard F. Chang () and Hilary Sigman
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Howard F. Chang: University of Pennsylvania Law School

Departmental Working Papers from Rutgers University, Department of Economics

Abstract: In response to claims that the threat of Superfund liability deters the acquisition of potentially contaminated sites or "brownfields" for redevelopment, the federal government and the states have enacted laws or adopted programs to protect purchasers from liability. This protection may be unwarranted, however, if sellers can simply adjust the price of contaminated property downward to compensate buyers for the liabilities associated with the property. We present a formal model of joint and several liability under Superfund that allows us to distinguish four different reasons that Superfund liability may discourage the purchase of contaminated property despite the tendency for land prices to reflect the expected transfer of liability to the buyer. The previous literature has overlooked the four effects that we identify, which all arise because a sale may increase the number of defendants in a suit to recover cleanup costs. First, a sale may increase the share of liability that a seller and a buyer may expect to pay as a group. Second, a sale may increase the amount of damages that the government can expect to recover from the defendants at trial. Third, a sale may increase the total litigation costs that a buyer and a seller may face as a group. Fourth, game theory suggests that a sale may increase the amount that the government can expect to extract from defendants in a settlement.

Keywords: Environmental policy; Real estate; Contaminated sites; Hazardous waste (search for similar items in EconPapers)
JEL-codes: K32 Q5 R3 (search for similar items in EconPapers)
Date: 2005-09-20
New Economics Papers: this item is included in nep-law
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: The effect of joint and several liability under superfund on brownfields (2007)
Working Paper: The Effect of Joint and Several Liability Under Superfund on Brownfields (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:rut:rutres:200508

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