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Oyster Bay, Town of v. Occidental Chem. Corp.

Citation: 28 ELR 20638
No. 94-CV-0694 (FB), 987 F. Supp. 182/(E.D.N.Y., 11/14/1997, 12/05/1997)

The court holds several corporations liable under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for response costs associated with a New York landfill. The court first holds that by introducing competent proof that three of the defendant target corporations disposed of waste containing hazardous substances, the plaintiff town satisfied its burden of demonstrating a release or threatened release of hazardous substances at the landfill. A plaintiff must simply prove that the defendant's hazardous substances were deposited at the site from which there was a release and that the release caused the incurrence of response costs. The court next holds that the mere fact that the remediation ordered by the U.S. Environmental Protection Agency (EPA) overlaps with state regulatory requirements should not absolve the target defendant corporations from CERCLA liability. To permit the target corporations to evade responsibility for the cleanup because of the fortuitous congruence of the EPA-mandated remediation and state regulation would render CERCLA's strict liability scheme a nullity. The court then rejects the target corporations' argument that the town's alleged participation in the release of hazardous substances at the landfill and its failure to take prompt remedial measures warrants the legal conclusion that the target corporations are not liable under CERCLA. The town's alleged culpability does not absolve the target corporations from liability. The court also holds that at least some of the town's response costs are consistent with the national contingency plan. Therefore, the court grants the town's summary judgment motion against the target corporations on the issue of CERCLA liability.

The court next holds that the defendant Great American (GA) corporations are responsible for a release or threatened release of hazardous substances. The town proferred compelling proof, including an EPA record of decision, county health agency documents, and GA admissions, in support of its claim that GA deposited hazardous substances at the landfill. The court then holds that CERCLA preempts Fed. R. Civ. P. 17(b) and controls the inquiry into the potential liability of the GA corporations as dissolved and asset-distributed corporations. CERCLA's broad mandate requires the preemption of state corporate capacity laws so that CERCLA liability will not vary from state to state. The court further holds that the GA corporations, which were not dissolved and asset-distributed when they disposed of hazardous substances at the landfill, are subject to suit under CERCLA. Corporations subject to CERCLA claims based on hazardous waste disposal that occurred before corporate dissolution and asset distribution are not absolved from suits under CERCLA. The court also holds that the GA corporations' parent can be held liable for the subsidiaries' hazardous substance disposal under the corporate veil-piercing analysis. The parent and GA subsidiary did not observe corporate formalities, and the subsidiary was the alter ego of the parent. The parent corporation pervasively controlled GA's financial and administrative dealings. Immunizing the parent from liability would encourage the evasion of CERCLA liability by corporate parents through paper corporate dissolutions and transfers of corporate assets. Thus, the court grants the town's summary judgment motion against GA and its parent corporation on the issue of CERCLA liability.

The court next holds that the GA corporations' successor-in-interest, Lin Pac (LP) corporations, cannot be held liable under CERCLA, because they cannot be viewed as a mere continuation of their predecessor. Although LP retained most of the managerial personnel and virtually all of the employees of GA for a period of time, purchased all of GA's physical assets, and continued the same business in the same location, none of the other seven requirements for the substantial continuity test are met. In addition, the LP corporations did not have notice of GA's potential CERCLA liability, because CERCLA was not yet enacted at the time LP acquired GA's assets. Thus, the court grants the LP corporations' summary judgment motion for dismissal of the town's CERCLA claims.

The court next holds that the town, as a responsible party, may proceed against the corporations under CERCLA § 107, but the nature of the town's claim is for contribution as set forth in CERCLA § 113. CERCLA § 107 is a generous statutory provision, with a longer statute of limitations than § 113. If the court were to hold that CERCLA §§ 107 and 113 give potentially responsible parties (PRPs) two entirely separate theories of recovery, no PRP would ever elect to proceed under § 113. Thus, the court grants the corporations' summary judgment motions to dismiss the joint and several liability claims, and denies the town's summary judgment motions for joint and several liability.

The court also holds that the town's common-law nuisance claim is not time barred by the three-year statute of limitations. The town clearly had notice of the alleged damage to the property long before it elected to commence this action, and, therefore, the already incurred remediation costs are clearly consequential damages that are time barred. However, to the extent that the town seeks an order directing the corporations to carry out any remediation as may be needed in the future, such relief is not in the nature of damages and is not time barred. Further, the court holds that the town's claim for unjust enrichment is not time barred by the six-year statute of limitations. The court then holds that the nuisance claims may be maintained against the New York incorporated dissolved and asset-distributed GA corporation, because the claim accrued before the dissolution. However, the unjust enrichment and contribution claims cannot be maintained, because the claims did not accrue until after the corporation dissolved. Regarding the Delaware incorporated GA corporation, the court holds that the town's state-law claims are prohibited. No claims may be asserted against a Delaware corporation after the expiration of the three-year period following the corporation's dissolution.

Counsel for Plaintiff
Peter R. Paden
Robinson, Silverman, Pearce, Aronsohn & Berman
1290 Avenue of the Americas, New York NY 10104
(212) 541-2000

Counsel for Defendants
John Hanna
Whiteman, Osterman & Hanna
One Commerce Plaza, Albany NY 12260
(518) 487-7600