A federal court in the Northern District of Illinois granted a motion dismissing all claims against a defendant facing CERCLA contribution claims, holding that the defendant’s acquisition of the assets of an alleged polluter was too remote for the defendant to be held liable.

In Precision Brand Products, Inc. v. Downers Grove Sanitary Dist., 2011 WL 3489844 (N.D. Ill. Aug. 8, 2011), Precision sought contribution claims against several defendants for costs associated with remediating groundwater contamination found on Precision’s property in the Ellsworth Industrial Park in Grove, Illinois.  One of the defendants facing the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”) claims was Corning, Inc.  Corning moved to dismiss, and the court agreed, finding that Precision’s Complaint failed to allege facts sufficient to state a claim against Corning under either an alter-ego or successor liability theory. 

Precision’s alter-ego claim failed because of timing problems.  “A company cannot be liable for the acts of an alleged wrongdoer under an alter-ego theory where the alleged actions giving rise to the claim occurred before that company controlled the alleged wrongdoer.”  Id. at *3.  Precision alleged that H.W. Holding Co. owned a portion of the property in question from 1965 to 1970 or 1971, and that sometime in 1999 Corning became “the indirect 100% owner of H.W. Holding.”  Id. at *1.  Thus, Corning is alleged to have acquired H.W. Holding some 25 years after H.W. Holding owned the contaminated property.  The court found this to be far too remote in time.  In order for Corning to be liable as an alter-ego of H.W. Holding, Corning would have had to acquire H.W. Holding at the time H.W. Holding owned the property in question.  Id. at *3.
 

Further, Precision failed to state sufficient facts to maintain a successor liability claim under CERCLA against Corning.  Citing to the Supreme Court’s opinions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955 (2007) and Ashcroft v. Iqbal, __ U.S. __, 129 S.Ct. 1937 (2009), the court found that Precision’s threadbare allegations failed to state a plausible successor liability claim against Corning.  Merely alleging that Corning at some point became the owner of H.W. Holding wasn’t enough to overcome the “general rule…that one corporation does not acquire the liabilities of another simply by virtue of purchasing that corporation’s assets.”  Id. at *3.  Successor liability only exists under four exceptions to that rule: “(1) the purchaser expressly or impliedly agrees to assume the liabilities; (2) the transaction is a de facto merger or consolidation; (3) the purchaser is a ‘mere continuation’ of the seller; or (4) the transaction is an effort to fraudulently escape liability.”  Id. (citation omitted).  Because Precision failed to allege facts to support any of these exceptions, the successor liability claim against Corning was also dismissed.

For more information, please contact Heidi Trimarco or any member of Taft’s Environmental Practice Group.