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In re In re Acushnet River & New Bedford Harbor: Proceedings re Alleged PCB Pollution

Citation: 19 ELR 21206
No. No. 83-3882-Y, 712 F. Supp. 1010/29 ERC 1723/(D. Mass., 03/28/1989) Successor liability

The court holds that the current owner of a manufacturing facility is the corporate successor to the prior owner and is thus liable under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for its predecessor's use and disposal of polychlorinated biphenyls (PCBs) in New Bedford Harbor. The court initially rules that the common law doctrine of successor liability applies in CERCLA cases. A contrary ruling would allow corporations to avoid liability through formalistic corporate transactions. Adopting as a uniform federal rule the general doctrine of successor liability in operation in most states, the court holds that the transaction at issue constituted a de facto merger. There is a continuation of the enterprise of the seller corporation and the successor assumed all of its predecessor's obligations except for any liability arising from the predecessor's use and disposal of PCBs. There is also a continuity of shareholders even though the successor did not use its own stock to purchase the assets of its predecessor. A corporation that wishes to purchase the assets of another company with shares of stock cannot avoid liability under the de facto merger doctrine by forming a wholly-owned subsidiary to act as the purchaser. The de facto merger doctrine is not rendered inapplicable by the fact that the predecessor corporation has been revived for the limited purpose of defending this litigation. The court holds that the successor is liable only to the extent that the predecessor's assets are insufficient to cover the damages.

[Other decisions in this litigation are published at 18 ELR 20543, and 19 ELR 21198 and 21210.]

Counsel are listed at 19 ELR 21198.