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Atchison, Topeka & Santa Fe Ry. Co. v. Brown & Bryant, Inc.

Citation: 28 ELR 20463
No. 96-15529, 132 F.3d 1295/(9th Cir., 12/30/1997)

The court holds that a company that purchased many of the assets of an agricultural chemical company is not liable as a successor-in-interest for contribution under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The court first holds that state law dictates the parameters of successor liability under CERCLA. The court recognizes that simply because a federal statute is involved does not always mean that federal courts should fashion a uniform federal rule. Frequently, state rules of decision will furnish an appropriate and convenient measure of the governing federal law. Because California law provides the rule of decision, the purchasing company could not be liable under the "substantial continuation" exception, since California, like most states, does not recognize this exception. The court next holds that there is no "substantial continuation" exception to the successor liability rule in the Ninth Circuit. Therefore, the court would reach the same result under federal common law that it reached under state law. The traditional rules of successor liability in operation in most states should determine the limits of CERCLA successor liability.

The court also holds that the "fraudulently entered transaction" exception does not apply. Even though the purchasing company knew of the seller's environmental problems and bought only "clean" assets, the sale did not provide the seller a means of escaping liability. The seller had insufficient assets to cover its liability even before the sale — indeed this fact was the catalyst for the sale. Nor does the record suggest that there was any intent on behalf of the purchaser or seller to construct the sale solely to circumvent CERCLA liability. Moreover, the purchaser paid the appraised value for each item. In addition, the fact that the purchaser managed to sign employees from the seller rather than allowing a competitor to employ them is not relevant to the fraudulent transaction issue.

Counsel for Plaintiffs
Robert M. Lichtman
Banchero & Lasater
20 California St., 7th Fl., San Francisco CA 94111
(415) 398-7000

Counsel for Defendant
Francis J. Balint Jr.
Bonnett, Fairbourn, Friedman & Balint
4041 N. Central Ave., Ste. 1100, Phoenix AZ 85012
(602) 274-1100

Before, Hug, Jr. and Goodwin, JJ.