Jump to Navigation
Jump to Content

Idylwoods Assocs. v. Mader Capital, Inc.

ELR Citation: 26 ELR 21027
Nos. 91-CV-364S, 915 F. Supp. 1290/42 ERC 1232/(W.D.N.Y., 02/16/1996)

The court holds that the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) preempts New York law governing the capacity of a dissolved corporation to be sued, and that CERCLA liability may be imposed against a dissolved corporation whose assets have not yet been fully distributed. The court first holds that the current owner of a contaminated site may not assert the CERCLA §107(b) third-party affirmative defense to claims that it is liable under CERCLA. Even though there is a significant dispute as to whether the presence of the hazardous substances discovered at the site can be attributed solely to a prior owner or the current owner, there is no question that the current owner did not exercise due care after the hazardous substances on the property were discovered. The court next holds that the current owner is not entitled to the third-party/innocent purchaser affirmative defense. The current owner did nothing when informed of unauthorized dumping at the site by other parties, failed to cooperate in sealing off the area, and did not engage in any affirmative action to guard against a potentially dangerous situation. Rather, the current owner attempted to distance itself from the situation and to relieve itself of any potential liability in the matter. The court next holds that CERCLA preempts state statutes governing the capacity of a dissolved corporation to be sued. Also, CERCLA liability may be imposed against a dissolved corporation whose assets have not yet been fully distributed. The court holds that because the parent corporation of the current owner, which is also the sole shareholder of the current owner, still holds assets in the form of cash or cash equivalents, stock in a subsidiary, and movie rights, it may be liable under CERCLA.

The court holds that the parent corporation of the current owner is liable as an owner under CERCLA. Evidence supports piercing of the corporate veil to impose CERCLA owner liability against the parent corporation. The parent commingled all of its funds with that of the current owner subsidiary. And no corporate formalities were maintained; neither the board of directors of the subsidiary nor its shareholders ever met, any business related to the subsidiary was conducted at the parent corporation's board of directors and shareholders meetings, no payroll existed for the subsidiary, the subsidiary did not have its own office, and personnel working on the subsidiary business were employees, agents, or independent contractors for the parent. The court next holds that the parent corporation exercised such extensive control over the subsidiary and was so sufficiently involved in the affairs of the subsidiary that it is liable under CERCLA as a current operator.

The court holds that genuine issues of material fact preclude summary judgment on whether the shareholder of the parent corporation sufficiently managed the affairs of the parent to support imposing owner or operator liability against him. The court next holds that CERCLA does not impose disposal liability for mere passive disposal occurring by leakage or migration of hazardous substances into soil or water following their initial disposal. Congress did not intend so expansive a definition of disposal so as to include the concept of passive disposal. Therefore, the subsidiary, the parent, and the shareholder are not liable under CERCLA on a theory of passive disposal while the subsidiary owned the site. Addressing the possibility that the subsidiary, parent, and shareholder are liable under §107(a)(2), the court holds that genuine issues of material fact regarding the number of drums found at the site, who dumped the drums, and whether any dumping occurred at the site before and after the subsidiary purchased the property preclude summary judgment. The court next holds that a potentially responsible party that is the successor to the prior owner of the site and that has entered into a consent order may bring an action under both §§107 and 113 of CERCLA. CERCLA's broad remedial purpose requires this approach. Applying New York law, the court holds that the successor to the prior owner of the site could not maintain its contribution claims under New York law against those parties held liable under CERCLA or against parties that were not alleged to be joint tortfeasors regarding the hazardous waste. The proper causes of action against the parent and subsidiary are under §§107 and 113.

Counsel for Plaintiffs
Robert E. Glanville
Phillips, Lytle, Hitchcock, Blaine & Huber
3400 Marine Midland Ctr., Buffalo NY 14203
(716) 847-8400

Counsel for Defendants
Peter G. Ruppar
Duke, Holzman, Yaeger & Photiadis
2500 Main Pl. Tower, Buffalo NY 14202
(716) 855-1111