## Facts

- The City of Florence, Alabama purchased land in 1952 to encourage local industrial development and leased it to Stylon, which built and operated a ceramic tile manufacturing facility.
- The City financed the acquisition through industrial development bonds, mortgaged the property to a trustee bank, and pledged Stylon’s rent payments to repay principal and interest on the bonds; a similar arrangement later covered an adjoining parcel.
- Stylon operated the facility from 1953 until it entered bankruptcy in 1973.
- From 1953 to 1973, hazardous substances were released at the facility, contaminating the property and nearby watershed.
- After Stylon’s bankruptcy, Monarch Tile leased the facility from the City (1973–1988), then purchased the parcels from the City and a related municipal entity in 1988.
- Monarch discovered contamination, notified the EPA, and was directed to conduct cleanup under CERCLA; Monarch contended it was not responsible for most of the pollution.
- Monarch sought to recover some cleanup costs from the City, asserting the City was an “owner” under CERCLA; the City argued it fell within CERCLA’s secured creditor exception because it held title primarily to protect a security interest and did not manage operations.
- The district court granted summary judgment for the City, and Monarch appealed.

## Issues

1. Whether a municipality that retains legal title and related indicia of ownership in connection with industrial development bonds holds them “primarily to protect a security interest” under CERCLA’s secured creditor exception.
2. Whether the City avoided CERCLA “owner” liability because it did not “participate in management” of the facility.

## Decision

- The Eleventh Circuit affirmed summary judgment for the City.
- The court held the City qualified for CERCLA’s secured creditor exception because it retained indicia of ownership primarily to secure repayment of development bonds and did not participate in managing the facility.
- The court treated the City’s title-holding role in the development-bond structure as functionally equivalent to a security interest rather than beneficial ownership for CERCLA liability.
- The court found the 1996 CERCLA amendments defining “security interest” and “participation in management” were consistent with this result.
- The court rejected Monarch’s attempts to characterize the City as an owner based on its initial economic development purpose and the form of legal title.

## Legal Principles

- For CERCLA “owner or operator” liability, a party holding indicia of ownership primarily to protect a security interest may fall within the secured creditor exception.
- Courts may assess the substance and primary function of a title-retention arrangement, including municipal industrial development bond transactions, rather than treating formal title alone as determinative of “owner” status.
- A secured creditor (including a governmental bond-financing entity) loses the protection of the exception if it participates in management of the facility’s operations.
- Statutory definitions added by the 1996 CERCLA amendments may support applying the secured creditor exception where the holder’s role is limited to financing and collateral protection.

## Conclusion

The Eleventh Circuit held that Florence’s retention of title in an industrial development bond financing arrangement was primarily to protect a security interest and, absent participation in management, placed the City within CERCLA’s secured creditor exception, barring “owner” liability for cleanup costs.


Monarch Tile, Inc. v. City of Florence, 212 F.3d 1219 (11th Cir. 2000)