ELR Citation: ELR 20921
No(s). 86 C 20377 (N.D. Ill. Jan 26, 1993)

The court holds that a corporation that purchased all the assets of another corporation through a purchase agreement containing a "risk of loss" clause is not liable as a successor under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for the seller's improper pre-sale disposal of hazardous wastes. The court first holds that there was no express or implied assumption of liability by the buyer. That the buyer accepted the risk of business losses after the effective date of the transfer does not indicate that the parties contemplated that the buyer would assume liability for CERCLA cleanup costs. The agreement contained an indemnification clause in case the buyer was held liable for a liability of the seller. The court next holds that there was not a de facto consolidation or merger. Few of the seller's employees continued to work for the buyer, and the officers, directors, and incorporators of the two companies were entirely different. Moreover, there was no continuity of shareholders. The court next holds that the transfer does not meet the "mere continuity of business" test for successor liability, because there is not an identity of officers, directors, and stock. The court refused to apply the "substantial continuity" test because the seller did not produce evidence that the buyer had knowledge of the potential environmental liability or was in any way responsible for the liability.

Counsel for Plaintiffs
John Adams
Taylor, Miller, Sprowl, Hoffnagle & Merletti
33 N. LaSalle St., Ste. 222, Chicago IL 60603
(312) 782-6070

Counsel for Defendants
Peter J. Herzberg
Greenbaum, Rowe, Smith, Ravin & Davis
Metro Corporate Campus One
P.O. Box 5600, Woodbridge NJ 07095
(908) 549-5600