United States v. Western Processing Co.

Nos. C89-214M, -224M, C83-252M (751 F. Supp. 902, 32 ERC 1597) (W.D. Wash. October 30, 1990)

The court holds that sufficient evidence exists that a successor corporation is liable in this Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) contribution action for substantially continuing the previous business. The court earlier denied defendant's similar summary judgment motion on successor liability after finding genuine issues of material fact, even though discovery was incomplete. The court first holds that although discovery is still incomplete, materials in support of resisting summary judgment indicate a substantial continuation of the previous business exists sufficient to impose liability on the successorcorporation. Relying on the Ninth Circuit's recent decision in Louisiana-Pacific Corp. v. ASARCO, Inc., 20 ELR 21079, which held that the traditional rules of successor liability in operation in most states should govern rather than the "excessively narrow" statutes of a few states, the court observes that the Ninth Circuit did not reject the "continuing business enterprise" exception to nonliability of asset purchasers. In addition, the Ninth Circuit did not rule whether the substantial continuity and product line tests were rejected, making them viable factors in CERCLA cases. The court finds that defendant movant has not demonstrated that the evidence does not raise issues of material fact, making summary judgment inappropriate. Evidence exists that defendant movant had knowledge of the possible liabilities associated with hazardous waste disposal, and that CERCLA and the Resource Conservation and Recovery Act were both in effect at the time the defendant movant purchased the previous business. Moreover, because CERCLA contemplates a sharing of cleanup costs by responsible parties, a more expansive view of successor liability under CERCLA fosters a more equitable sharing of remediation costs.

[Previous cases in this litigation are published at 20 ELR 20986 and 20990. A subsequent decision in this litigation is published at 21 ELR 20976.]

Counsel for Plaintiff
Susan L. Barnes
Office of the U.S. Attorney
3600 Sea-First Plaza Bldg., 800 Fifth Ave., Seattle WA 98104
(206) 442-7970

David W. Zugschwerdt
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Defendant
William A. Gould
Perkins Coie
1201 Third Ave., 40th Fl., Seattle WA 98101-3099
(206) 583-8888

[21 ELR 20976]

McGOVERN, District Judge.

ORDER DENYING MOTION OF BAYSIDE WASTE HAULING & TRANSFER, INC. FOR PARTIAL SUMMARY JUDGMENT

The Ninth Circuit having recently clarified its position on successor liability under CERCLA in Louisiana-Pacific v. ASARCO, 909 F.2d 1260 (9th Cir.1990), Bayside Waste Hauling & Transfer, Inc. ("Bayside") again moves for partial summary judgment on the issue of successor liability. This court denied the earlier motion on June 18, 1990 stating there was a genuine issue of material fact.

When the court made its June ruling, discovery was incomplete (Boeing could not conduct substantive depositions of Bayside until December 15, 1989), and this is still true. Nevertheless, the supporting materials submitted by Boeing then and now in resisting summary judgment (see list in summary pp. 12-14, Boeing's Opposition) tend to indicate a substantial continuation of the previous business sufficient to impose successor liability upon Bayside in the CERCLA contribution action. For example, attachments to the Schneider affidavit tend to show that (1) Bayside perceived LIDCO's business as strengthening its own by adding liquid hazardous waste hauling capability, (2) Bayside had help, at least in transition, from Pinchev, (3) Bayside kept the LIDCO location, (4) Bayside used LIDCO's logo with Bayside's, and (5) there was overlapping employment for a period. Boeing lists additional factors germane to the issue of successor liability on pages12-14 of its brief. While Bayside finds these points irrelevant and urges the Court to adopt the traditional tests and reject the additional tests of "substantial continuity" or "continuing business enterprise" and "product line" tests, the Court concludes these tests are viable in the CERCLA context and declines to reject them.

The Ninth Circuit in Louisiana-Pacific, 909 F.2d 1260, concluded that under CERCLA Congress did intend successor liability; that the issue is governed by federal law; that the court must look to other circuits and states in fashioning the law, and must consider national uniformity in so doing. The Ninth Circuit concluded that the traditional rules of successor liability in operation in most states should govern rather than the "excessively narrow" (id., at 1263) statutes of a few states.

Under traditional rules of successor liability, asset purchasers are not liable as successors unless one of the following four exceptions applies:

(1) The purchasing corporation expressly or impliedly agrees to assume the liability;

(2) The transaction amounts to a "de-facto" consolidation or merger;

(3) The purchasing corporation is merely a continuation of the selling corporation; or

(4) The transaction was fraudulently entered into in order to escape liability.

Louisiana-Pacific, 909 F.2d at 1263. Concerning the "product-line exception," the Court did not decide whether to adopt it under CERCLA as it was not argued. Id. at 1264 n. 3. As to the other exception, the Court concluded:

Because we find this case distinguishable from Oner II, we need not decide whether to adopt the continuing business enterprise exception under CERCLA.

Id., at 1266. The Ninth Circuit did not reject these exceptions in Louisiana-Pacific as Bayside suggests, but merely declined to decide those issues in that case. Factors to be considered in applying the "continuing business enterprise exception" are as follows:

(1) continuity of employees, supervisory personnel and physical location;

(2) production of the same product;

(3) retention of the same name;

(4) continuity of general business operations;

(5) purchaser holding itself out as a continuation of the seller. (citation omitted).

Id. 909 F.2d at 1265 n. 7.

Considering the issue of successor liability in the light most favorable to the nonmoving party, on the present record the Court cannot conclude that Bayside's purchase of LIDCO's assets does not render it liable as a successor. The "continuing business enterprise exception" factors render Boeing's allegations reflective of continuity material to the issue of Bayside's successor liability. Bayside merely characterizes Boeing's allegations as "common elements or similarities" (Bayside Reply at 6) that, even if true, are irrelevant to the issue. As this court has not rejected the "product line" or "continuing business enterprise" exceptions, Boeing's supported allegations are relevant, and Bayside has not come forward with evidence that the statements of fact submitted by Boeing are untrue. Bayside has argued different inferences from Jack Pinchev's two signatures on the purchase agreement and from the "consulting services" provided by Pinchev to Bayside after the sale. Bayside has not demonstrated that it is entitled to summary judgment as a matter of law.

There is support for an expansive interpretation of successor liability in CERCLA actions in Oner II, Inc. v. EPA, 597 F.2d 184 (9th Cir.1979). The action there was brought under the Federal Insecticide, Fungicide and Rodenticide Act, which had no specific successor liability provision. The Court noted that the Act was intended to protect the environment. Id. at 186. The same is true of CERCLA. Oner II cited to Golden State Bottling Co. v. NLRB, 414 U.S. 168, 94 S. Ct. 414, 38 L. Ed. 2d 388 (1973). Therein, the Court noted that

Courts of equity may, and frequently do, go much farther both to give and withold relief in furtherance of the public interest than they are accustomed to go when only private interests are involved.

414 U.S. at 179-80, 94 S. Ct. at 423. There is a public interest element herein. CERCLA contemplates a sharing of clean-up costs by responsible parties. A more expansive view of successor liability under CERCLA fosters a more equitable sharing of remediation costs. Moreover, it is highly likely that Bayside had knowledge of possible liabilities associated with hazardous waste disposal. Bayside does not deny that the Resource Conservation & Recovery Act, 42 U.S.C. §§ 6901, et seq. had been in effect over five years when Bayside purchased LIDCO and that CERCLA had been in effect for over a year.

Bayside having failed to rebut evidence submitted by Boeing on the issue of Bayside's successor liability, Bayside has failed to demonstrate that it is entitled to summary judgment as a matter of law, and its motion is DENIED.