## Facts

- Auto Specialties Manufacturing Company (AUSCO) owned and operated two industrial facilities in St. Joseph, Michigan and Benton Harbor, Michigan.
- Manufacturers National Bank of Detroit (MNB) financed AUSCO through a lending relationship secured by mortgages and other collateral arrangements.
- The State alleged MNB’s loan documents and conduct allowed it to monitor AUSCO’s finances and exert influence, including pressuring AUSCO to replace certain managers during financial distress.
- Hazardous substances were released or disposed of at both facilities during AUSCO’s operations.
- Michigan undertook response and cleanup actions under CERCLA and the Michigan Environmental Response Act (MERA) and sought to recover costs from potentially responsible parties, including MNB.
- The State claimed MNB’s involvement made it an “owner or operator” despite CERCLA’s secured creditor exemption.

## Issues

1. Whether MNB qualified as an “owner or operator” under CERCLA § 107(a)(1)–(2) based on its actions as a secured lender.
2. Whether MNB’s conduct fell within CERCLA’s secured creditor exemption for a person holding indicia of ownership primarily to protect a security interest without participating in facility management.
3. Whether MNB could be held liable as an owner or operator under MERA based on the same asserted conduct.

## Decision

- The court denied the State’s motion for partial summary judgment against MNB.
- The court granted summary judgment for MNB on the CERCLA claims, holding MNB’s conduct fit the secured creditor exemption and did not constitute participation in facility management.
- The court granted summary judgment for MNB on the MERA claims, concluding the same analysis that defeated CERCLA liability defeated state-law owner/operator liability.

## Legal Principles

- CERCLA’s “owner or operator” definition excludes a secured creditor who holds indicia of ownership primarily to protect its security interest and does not participate in facility management.
- Financial monitoring, enforcement of loan covenants, and creditor pressure connected to protecting collateral generally do not, without more, constitute “participating in the management” for CERCLA owner/operator liability.
- Owner/operator liability requires evidence of control over facility operations relevant to hazardous substances (e.g., directing disposal practices or environmental compliance), not merely influence over financial affairs or corporate governance.
- Where state-law owner/operator claims rest on the same conduct alleged to create CERCLA liability, the failure of the federal owner/operator theory can warrant judgment for the lender on the parallel state claims.

## Conclusion

The court held that a secured lender’s financial oversight and leverage in protecting its loan position did not make it an owner or operator of contaminated facilities absent operational control over hazardous-substance handling, and it entered summary judgment for the bank under both CERCLA and MERA.


Kelley ex rel. Mich. Nat. Res. Comm’n v. Tiscornia, 810 F. Supp. 901 (W.D. Mich. 1993)