The banking industry's long battle to shield itself from liability for environmental cleanups on foreclosed properties may finally be over.

The federal appeals court in Cincinnati has ruled that recently enacted amendments to the Superfund law prevent litigants from suing banks that hold mortgages on contaminated sites.

"We shouldn't see many more of these cases," said Thomas F. Greco, associate general counsel at the American Bankers Association. "Banks won't face the cost of this type of litigation anymore."

The U.S. Court of Appeals for the Sixth Circuit ruled Dec. 19 that Michigan cannot sue the former Manufacturer's National Bank of Detroit to recover the cost of cleaning up vacated factories in St. Joseph and Benton Harbor, Mich. The bank foreclosed on the properties, which were contaminated by Automobile Specialities Manufacturing Co.'s production of military goods during World War II.

Manufacturer's National - now part of Comerica Inc. - argued that it was not liable for the pollution, citing an Environmental Protection Agency rule that protects lenders that merely foreclose on contaminated sites.

A trial court judge agreed in March 1994, dismissing the case. But Michigan appealed after several other courts had declared the EPA rule unconstitutional.

Judge Alice M. Batchelder, writing for a three-judge panel of the the U.S. Court of Appeals for the Sixth Circuit, said Congress fixed the problem with the EPA rule in September when it enacted amendments to the Comprehensive Environmental Response, Compensation, and Liability Act. The change, included in a larger regulatory relief bill, shields lenders from environmental cleanup suits provided they did not actively run the businesses that generated the pollution.

"The key point in the decision is that the court views the amendments of CERCLA as a codification of the old EPA rule," Mr. Greco said. "We all understood that to be the case. But it is always good to have a court of appeals say that."

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