BancAmerica Commercial Corp. v. Mosher Steel of Kansas, Inc.

No. 90-2325-V (D. Kan. March 12, 1992)

The court holds that a dissolved corporation with collectible undistributed assets that previously operated a site contaminated by asbestos waste may be sued for the site cleanup costs by the owner of the site under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The court adopts the Utah district court's conclusion in United States v. Sharon Steel Corp., 18 ELR 20242, that CERCLA supersedes the Fed. R. Civ. P. 17(b) requirement that a corporation's capacity to be sued be determined by state law, and so preempts state laws governing the capacity of dissolved corporations. The court holds that CERCLA actions clearly can be brought against a "dead" but "unburied" corporation that is dissolved but still has undistributed assets. Because no determination has been made as to the financial status of the dissolved corporation and its successor, the court denies motions for summary judgment and dismissal of the suit. The court further holds that CERCLA does not preclude the site owner from seeking contribution when asbestos was disposed of at the site, and that the dissolved corporation and its successor are jointly and severally liable under CERCLA.

Counsel for Plaintiff
Elizabeth Nay
Lewis, Rice & Fingersh
One Kansas Pl., 1200 Main St., Ste. 3800, Kansas City MO 64105
(816) 421-2500

Counsel for Defendants
Roger Stanton
Stinson, Mag & Fizzell
7500 W. 110th St., Overland Park KS 66210
(913) 451-8600

[22 ELR 21352]

Bebber, J.:

Memorandum and Order

This is an action against defendants Mosher Steel of Kansas, Inc. (Mosher), and Trinity Industries, Inc. (Trinity), et al., to recover environmental clean up costs under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), as amended by the Superfund Amendments and Reauthorization Act (SARA), 42 U.S.C. § 9601 et seq. Defendants Mosher and Trinity move the court for summary judgment (Doc. 7)¹ or to dismiss plaintiff's complaint for failure to state a claim upon which relief can be granted (Doc. 36). Plaintiff has responded and opposes the motions. The motions are denied.

For the purposes of resolving the instant motions, the court finds the following facts to be relevant, and accepts them as true. Since 1984, plaintiff has owned real property located at 2100 Metropolitan Avenue, Kansas City, Kansas ("site"). At various times prior to and concurrent with that ownership, smelting operations and steel fabrication facilities have existed on the site. An environmental audit conducted in 1988 disclosed that the site was contaminated with hazardous materials, including asbestos waste. On February 1, 1990, plaintiff entered into an Administrative Consent Order with the Environmental Protection Agency, in which plaintiff agreed to pay the response (clean up) costs. On September 14, 1990, plaintiff filed this CERCLA contribution action against its former tenants (defendants Mosher and Trinity) and other former owners/operators of facilities on the site to recover, inter alia, contribution for its response costs.

The Motion for Summary Judgment

A moving party is entitled to summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P.56(c). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. This burden may be discharged by "showing," that is, pointing out to the district court, that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the moving party has properly supported its motion forsummary judgment, "a party opposing . . . may not rest on mere allegations or denials of his pleading, but must set forth specific facts showing that there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986). Thus, the mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment. Id.

The following additional facts are relevant to the motion under consideration. Defendant Mosher was incorporated as a Texas corporation on October 25, 1984. At about that same time, defendant Mosher leased the site in question from plaintiff and subsequently operated a business on it. On November 18, 1985, defendant Mosher was dissolved by defendant Trinity, its sole shareholder. Defendant Trinity then assumed defendant Mosher's lease, guaranteed its obligations, and continued operating defendant Mosher's business. Defendant [22 ELR 21353] Trinity operated under the lease until it was terminated by agreement of the parties on March 1, 1987.

In their motion for summary judgment, defendants Mosher and Trinity contend that they are entitled to summary judgment on plaintiff's CERCLA contribution claims on two grounds. First, they contend that because defendant Mosher was dissolved more than three years ago Tex. Bus. Corp. Act § 7.12(A)(2) precludes plaintiff from bringing this action against it. Second, they contend that they are entitled to summary judgment because CERCLA precludes plaintiff from recovering contribution for response costs where the alleged contaminant is asbestos.

The Liability of Dissolved Corporations under CERCLA

As enacted in 1980 and amended in 1986, "CERCLA broadly establishes the liability of owners and operators of hazardous waste processing and disposal facilities." Traverse Bay Area Intermediate School Dist. v. Hitco, Inc., 762 F. Supp. 1298, 1300 [21 ELR 21279] (W.D.Mich. 1991). The statute, in part, provides:

Notwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section —

(2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which hazardous substances were disposed of, . . . shall be liable. . . .

42 U.S.C. § 9607(a)(2). The term "corporation" falls within CERCLA's definition of "person." 42 U.S.C. § 9601(21). The fact that a corporation which operated the facility at a time of disposal has been dissolved is not a defense enumerated in section 9607(b). However, CERCLA is silent as to whether a dissolved corporation and its shareholder distributees maybe liable for response costs.

When determining the liability of dissolved corporations under CERCLA, courts have utilized two different approaches. Some courts have looked to the state corporate business capacity statute under which the corporation was organized. See Levin Metals Corp. v. Parr-Richmond Terminal Co., 817 F.2d 1448 [17 ELR 20737] (9th Cir. 1987). Other courts have found that relevant state corporate capacity statutes are preempted by the overall purpose of CERCLA. See United States v. Sharon Steel Corp., 681 F. Supp. 1492 [18 ELR 20242] (D.Utah 1987).

In Levin Metals the Ninth Circuit held that the dissolved corporation involved could not be sued for contribution under CERCLA. However, the court based its ruling on state law and not on CERCLA. Relying on Fed. R. Civ. P. 17(b), which states that "[t]he capacity of a corporation to sue or be sued shall be determined by the law under which it was organized," the court looked to California corporate law to determine the dissolved corporation's capacity to be sued under CERCLA. Because it concluded that under California law the dissolved corporation lacked the capacity to be sued, the court held that plaintiff was precluded from bringing suit against it under CERCLA. See also Onan Corp. v. Industrial Steel Corp., 770 F. Supp. 490, 495 (D.Minn. 1989), aff'd, 909 F.2d 511 (8th Cir.), cert. denied, 111 U.S. 431 (1990) ("[D]issolution, followed by the three-year survival period, terminates the corporation's comatose condition and renders the corporation legally dead. Not even the important policy goals underlying CERCLA can resurrect [the defendant]").

In Sharon Steel the District of Utah expressly rejected the Levin Metals approach as having the effect of thwarting congressional intent. The court concluded that because CERCLA is to be construed broadly and liberally to effect its purposes, section 9607(a) specifically supersedes laws to the contrary. The court thus found that CERCLA preempted state laws governing the capacity of dissolved corporations, as well as Fed. R. Civ. P. 17(b). Id., 681 F. Supp. at 1495-96. The court was careful to note that the dissolved corporation involved was "dead" but not "buried," that is, although the corporation was dissolved, it was still in the process of winding up its affairs, and had tangible assets that could be reached by the plaintiff. See also United States v. Distler, 741 F. Supp. 643 [20 ELR 20945] (W.D.Ky. 1990) (holding that CERCLA preempts Fed. R. Civ. P. 17(b) and state corporate capacity laws, but that CERCLA does not support the proposition that a dissolved corporation whose affairs had been wound up for a number of years may be liable under the statute).

I conclude that the preferred approach is that of Sharon Steel. In that case, the court determined that Congress has the plenary power to supersede a Rule of Civil Procedure. "If Congress' intent to supersede a Rule 'clearly appears' in the statute, then the rule must give way to the statute." Traverse Bay, 762 F. Supp. at 1301 (quoting Sharon Steel, 681 F. Supp. at 149). Having reviewed the language of the statute, the court agrees that congressional intent to supersede Rule 17(b) and state capacity laws is clear and that CERCLA actions may be brought against dissolved corporations. Id.

However, the determination to follow Sharon Steel does not entirely resolve the issue before the court. The court must heed the distinction drawn in Sharon Steel — using its analogy — between a "dead" and a "dead and buried" corporation. A "dead" corporation, as explained in Traverse Bay, 762 F. Supp. at 1301, is one that is dissolved but has not yet distributed its assets. Such an entity would involve a corporate res which could make a judgment collectible, and give tangible existence to the corporation. Id. A "dead and buried" corporation is one that has distributed all of its assets to its shareholders. In that situation, there is no corporate res, and any judgment entered against it would [sic] be fruitless. Id.

Applying the distinction, as amplified by Distler, 741 F. Supp. 643, and other cases, to the case before the court, if defendant Mosher is "dead" but not buried, then it is a "person" amenable to suit under CERCLA. However, if it is "dead and buried" then it is not a "person" amenable to suit. Here, it appears from the record that defendant Mosher is "dead." Whether it is "dead and buried" is not clear. The court finds that there is a question of fact as to whether defendant Mosher is so completely dissolved that it is not a proper party to this action. Additionally, the court notes that if defendant Mosher is "dead and buried" an issue of successor liability as to defendant Trinity may exist. See Anspec Co., Inc. v. Johnson Controls, Inc., 922 F.2d 1240, 1245-47 [21 ELR 20497] (6th Cir. 1991). Because those material issues of genuine fact exist, the court denies the motion for summary judgment insofar as it pertains to defendant Mosher's capacity to be sued.

CERCLA and Asbestos

Defendants' second argument in support of their motion for summary judgment is that the alleged contaminant is asbestos waste. They contend that CERCLA precludes plaintiff from recovering response costs for remediating asbestos waste. Defendants rely on Dayton Independent School Dist. v. U.S. Mineral Products, 906 F.2d 1059 [20 ELR 21464] (5th Cir. 1990) and 3550 Stevens Creek Assoc. v. Barclays Bank of California, 915 F.2d 1355 (9th Cir. 1990). Those cases hold that CERCLA does not apply to asbestos occurring in consumer goods, or asbestos that was not "disposed" of at a "facility." However, it cannot be argued that those cases stand for the proposition that CERCLA precludes contribution for response costs where the asbestos waste was "disposed" of at a "facility," as defined by CERCLA. See e.g. Smith Land & Improvement Corp. v. Celotex Corp., 851 F.2d 86 [18 ELR 21026] (3rd Cir. 1988). In the case at bar, it is uncontroverted that the asbestos was "disposed" of (buried) at a "facility" (the site) within the meaning of CERCLA. The cases that defendants rely on are therefore inapposite. Accordingly, the court denies the motion for summary judgment on this ground.

The Motion to Dismiss

Defendants Mosher and Trinity also move the court to dismiss plaintiff's complaint against them for failure to state a claim upon which relief can be granted. They contend that their liability, if any, is several rather than joint and several. They contend that, because plaintiff seeks to recover against all defendants jointly and severally, it has failed to state a claim upon which relief can be granted. The court rejects this contention. It is clear that under CERCLA "[l]iability among responsible parties is joint and several." Idarado Mining Co., 916 F.2d 1486, 1489 [21 ELR 20270] (10th Cir. 1990), cert. denied, 111 S. Ct. 1584 (1991) (citing O'Neill v. Picillo, 883 F.2d 176, 178-79 [20 ELR 20115] (1st Cir. 1989), cert. denied, 493 U.S. 1071 (1990)). Defendants' motion to dismiss is denied.

IT IS, THEREFORE, BY THE COURT ORDERED that the motion of defendants Mosher Steel of Kansas, Inc., and Trinity Industries, Inc., to dismiss or for summary judgment (Doc. 7) is denied.

IT IS FURTHER ORDERED that the motion of defendant [22 ELR 21354] Mosher Steel of Kansas, Inc., and Trinity Industries, Inc., to dismiss (Doc. 36) plaintiff's complaint is denied.

Copies of this Memorandum and Order shall be mailed to counsel of record for the parties.

1. Document 7 is entitled "Motion to Dismiss or . . . Motion for Summary Judgment." Because the parties refer to materials outside the scope of the pleadings, the motion is considered as one for summary judgment. See Fed. R. Civ. P. 12(b)(6).