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SmithKline Beecham Corp. v. Rohm & Haas Co.

ELR Citation: 26 ELR 21564
Nos. No. 95-1644, 89 F.3d 154/42 ERC 2032/(3d Cir., 07/17/1996) rev'd & remanded

The court holds that liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for a pharmaceutical company's contamination of a site must be equitably apportioned between the former parent of the company's successor and the corporation that purchased the successor. The purchase agreement between the former parent and the purchaser provides that the former parent must indemnify the purchaser for all material liabilities relating to the conduct of "the Business" before the first closing date of the sale. The agreement also provides that the purchaser must indemnify the former parent for liabilities resulting from the operation of "the Business" thereafter. The agreement defines "Business" as the worldwide operations and assets of the successor's business. Applying New Jersey law, the court first holds that although the parties entered into the agreement before CERCLA's enactment, the agreement's indemnity provisions are general enough to evidence the parties' intent to include CERCLA response costs. The court next holds that the term "Business" does not encompass the original pharmaceutical company. Nowhere in the definition of "Business" is there a suggestion that the meaning of the term incorporates the successor's predecessors. The court declines to apply the de facto merger doctrine to alter the effect of the indemnification provisions, because the parties to the contract are sophisticated corporations, there is no third party whose interests have been impaired by forces beyond its control, the purchaser is not within the class of plaintiffs that were intended to benefit from the de facto merger doctrine, and using the doctrine would contravene CERCLA's remedial purpose. The court reverses the district court's judgment that the agreement requires the former parent to indemnify the purchaser for the original pharmaceutical company's liability, and remands for a determination under CERCLA's equitable apportionment provisions of the parties' relative responsibilities for the contamination that the original pharmaceutical company caused.

[The district court's opinion is published at 24 ELR 21533.]

Counsel for Appellee
David P. Bruton
Drinker, Biddle & Reath
Philadelphia National Bank Bldg.
1345 Chestnut St., Philadelphia PA 19107
(215) 988-2700

Counsel for Appellant
John G. Harkins Jr.
Harkins & Cunningham
1800 One Commerce Sq.
2005 Market St., Philadelphia PA 19103
(215) 851-6700

Before: STAPLETON, SCIRICA, and COWEN, Circuit Judges.