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City Management Corp. v. U.S. Chem. Co.

ELR Citation: 25 ELR 20170
Nos. Nos. 93-1348, -1396, 43 F.3d 244/39 ERC 1801/(6th Cir., 11/10/1994)

The court holds that the purchaser of the assets of a company that disposed of hazardous waste at a Michigan landfill is not liable as a successor corporation for the seller's off-site liabilities under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), even though the buyer substantially continued the seller's business. Applying Michigan law to determine whether successor liability exists, the court notes that Michigan follows the general rule that a corporation that purchases another corporation's assets does not, simply by virtue of the asset purchase, become liable for the seller's obligations. The general rule, however, is subject to exceptions where successor liability may attach. The court first holds that the buyer is not liable under the mere continuity exception to the general rule because under Michigan law that exception is limited to product liability cases. Turning to the claim that the asset sale was fraudulent under the Michigan Fraudulent Conveyance Act, the court holds that under the Act, those attempting to establish the buyer's liability have the burden of showing that the asset conveyance was made without fair consideration. The court holds that the purchase price was fair consideration, and that the district court did not err in granting summary judgment for the buyer on the fraudulent conveyance claim because there was no genuine issue of material fact as to whether the consideration was fair. The court next holds that CERCLA §107's prohibition on the transfer of liability only applies to prevent one who is already a responsible party from avoiding liability; it does not make one a responsible party. Section 107 does not apply in this case because there is no independent basis on which the buyer is responsible for the seller's obligations. Finally, the court holds that the buyer did not impliedly assume the seller's CERCLA obligations by requesting information from the seller about such liability. The asset purchase agreement expressly provided that the buyer's assumption of hazardous waste contamination liabilities was limited to those liabilities connected with the property on which the business operated. In the face of an express disclaimer of liability, the court need not consider whether the buyer's conduct manifested an intent to assume off-site liability.

Counsel for Plaintiff
Linnea Brown
Holme, Roberts & Owen
1700 Lincoln St., Ste. 4100, Denver CO 80203
(303) 861-7000

Counsel for Defendants
Charles L. McKelvie
Dold, Spath & McKelvie
5445 Corporate Dr., Ste. 170, Troy MI 48098
(810) 952-5100

Before: MILBURN, BOGGS, and NORRIS, Circuit Judges.