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Truck Components Inc. v. Beatrice Co.

Citation: 28 ELR 21268
No. 96-3018, 143 F.3d 1057/46 ERC 1513/(7th Cir., 05/07/1998)

The court holds that a Wisconsin ironworks company cannot sue its former parent corporation for Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) cleanup costs resulting from actions the ironworks company took when it was a subsidiary of the corporation. When the parent corporation incorporated the subsidiary, it contributed both the assets and the accumulated liabilities of its ironworks company to the subsidiary. The parent corporation then spun off the subsidiary by selling the subsidiary's stock to a small group of investors who later resold the stock to a manufacturer. The court first holds that the ironworks company must accept the liabilities that came with its assets. At its initial incorporation, the ironworks company promised to be satisfied with the assets the parent corporation placed in the corporate solution, and not seek anything more from the parent corporation later. Nothing in CERCLA, the Resource Conservation and Recovery Act, or Wisconsin law says that corporations may disavow such promises. The court next holds that the initial investors may have had a claim, which the manufacturer owns, against the corporate parent, but the contract of sale agreed that any claims by the investors arising out of the sale would be brought within one or two years. This suit, which was initiated in 1994, is eight years too late.

Likewise, the court holds that the manufacturer's claims against the initial group of investors founders because the 1988 contract of sale between the manufacturer and the initial investors set one year as the limit for suit, save for willful breaches of any warranties or representations. The environmental warranties and representations of the 1988 contract are limited to events after the ironworks company was sold to the initial investors, and there had been no willful misrepresentations relating to events in that time period. The court also holds that it need not decide if a former president of the ironworks company is liable under CERCLA § 107(a) as an "operator" of the ironworks or as an "arranger" for the disposal of its wastes. The former president is the beneficiary of indemnity agreements that would make a judgment against him circular.

Counsel for Plaintiffs
Steven A. Smith
Law Offices of Steven A. Smith
221 N. La Salle St., Ste. 863, Chicago IL 60601
(312) 609-6614

Counsel for Defendants
Daniel G. Jarlenski Jr.
McGrath, North, Mullin & Kratz
One Central Park Plaza, Ste. 1400, Omaha NE 68102
(402) 341-3070

Before Coffey and Wood, JJ.