ELR Citation: ELR 20912
No(s). 94-42-P-H (D. Me. Jan 16, 1996)

The court holds that an individual that sold a company involved in hazardous waste operations must indemnify the purchaser's successor for its resulting liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). In the purchase agreement, the seller agreed to indemnify the purchaser and its successors for any future threatened litigation or administrative proceeding attributable to events that occurred before the sale. The successor's owner entered into a settlement agreement with the U.S. Environmental Protection Agency (EPA) to resolve the successor's liability, based on the seller's activities, at a Superfund site. Another of the owner's companies paid the settlement. In response to the seller's argument that the successor is not a real party in interest because it suffered no loss itself, the owner and his other companies filed an affidavit ratifying the successor's actions in bringing the lawsuit, agreeing to be bound by the lawsuit, and waiving any right to pursue subrogation rights against the seller outside of this proceeding. The court first holds that the ratification is sufficient to permit the lawsuit to proceed, does not unduly delay or prejudice the seller, and is not too late. The court grants the seller 30 days in which to make a specific showing of any additional discovery necessary because of the ruling. The court holds that it need not consider the successor's motion to join the owner and the other companies. The court next holds that the successor must demonstrate only potential liability to recover under the indemnity agreement, because the successor's repeated notice of the impending settlement and demands for indemnification gave the seller an opportunity to review, pass on, or participate in the settlement that afforded substantially the same protection to the seller as a formal demand to adopt the settlement or to defend the successor. The court holds that the successor met the standard of having potential liability. When the successor entered into the settlement, the trend in the courts was to hold an asset purchaser liable under CERCLA if it was a "mere continuation" of the seller. A sufficient number of factors indicating that the purchaser was a "mere continuation" were present to expose its successor to at least "potential" liability, given the facts and the then-current case law. Therefore, the successor's decision to settle with EPA was not undertaken as a "volunteer," and the seller is liable on the indemnity agreement.

Counsel for Plaintiff
Brett D. Barber
Rudman & Winchell
84 Harlow St., P.O. Box 1401, Bangor ME 04402
(207) 947-4501

Counsel for Defendants
Jeffrey A. Thaler
Berman & Simmons
129 Lisbon St., P.O. Box 961, Lewiston ME 04243
(207) 784-3576