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Stearns & Foster Bedding Co. v. Franklin Holding Corp.

ELR Citation: 27 ELR 20608
Nos. No. 94-0967, 947 F. Supp. 790/(D.N.J., 12/03/1996)

The court holds that two companies that invested in manufacturers that conducted operations at a site later found to be contaminated are not liable as operators under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), and that genuine issues of material fact preclude summary judgment on the operator liability of a third investor. The court first holds that the current owner of the site may not proceed with an action under CERCLA §107 unless it can demonstrate that it is an "innocent" party. It is unlikely that Congress would have intended that a potentially responsible party (PRP) could avoid the three-year statute of limitations in §113(f) by recasting its contribution action as a cost recovery action under §107(a). Moreover, the residual power granted to a district court in §113 to apportion liability according to equitable principles more than adequately protects a PRP who undertakes a cleanup of another party's toxic legacy.

The court denies summary judgment on the operator liability of one of the investors. The mere fact that a vice president of the investor assumed the interim presidency of one of the manufacturers does not automatically imply that the investor exercised actual control of that manufacturer. In order to show actual control, the current landowner must demonstrate the officer's pervasive involvement in decisionmaking during his tenure as president, but a determination of the extent of that involvement cannot be made on the summary record. The court holds, however, that the two other investors are not operators, because the evidence in the record does not support the assertion that they actually operated the manufacturers. The court rejects the argument that because the investor whose vice president served as one manufacturer's president was the alleged agent of the other investors, the other investors are operators. The current landowner failed to show that these two companies actually controlled the manufacturers. It also failed to show that the investor whose vice president served as one manufacturer's president acted as the agent of the other investors during that presidency. In addition, the court refuses to address the current landowner's continuity-of-enterprise argument as applied to one manufacturer, because the landowner did not move for summary judgment against that manufacturer.

The court next denies summary judgment on the current landowner's New Jersey Spill Compensation and Control Act claim against the investor whose vice president served as president of one of the manufacturers, but dismisses similar claims against the other investors. In order to impose liability on a corporation under the Spill Act, a plaintiff must prove the same elements as under CERCLA. The court dismisses the CERCLA claims against that vice president, because the current landowner does not oppose his summary judgment motion. Because the current landowner abandoned its CERCLA claims against him, the court also dismisses the Spill Act claims against him. The court further holds that he cannot be liable under common law as a vendor of the site, unless the corporate veil is pierced, because the property of a corporation is not the property of its officers or shareholders. The strict liability and negligence claims against him also fail, because he owed no duty to the current landowner. He is not liable for contribution or indemnification, because it is generally recognized that a party will not be so liable unless it is primarily liable for some independent wrong. Also, he has not been unjustly enriched, because he was never a shareholder of the investors.

The court grants summary judgment to another defendant whose motion is unopposed and approves a settlement involving the estates of past site owner defendants. Finally, the court refuses to strike an affidavit and certification submitted by the current landowner because of the seriousness of doing that as a sanction for the landowner's alleged failure to disclose information, the absence of evidence of the landowner's dilatoriness, and the absence of evidence of willfulness or bad faith.

Counsel for Plaintiff
Kevin J. Bruno
Hannoch & Weisman
Four Becker Farm Rd., Roseland NJ 07068
(201) 535-5300

Counsel for Defendants
Steven Gray
Waters, McPherson & McNeill
300 Lighting Way, 7th Fl., Secaucus NJ 07096
(201 863-4400