ELR Citation: ELR 21079
No(s). 89-35402 (9th Cir. Jul 3, 1990)

The court holds that successor companies can be liable under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), according to federal common-law principles. In developing federal common law, the court looks to traditional rules of successor liability in operation in other circuits and most states. Under these rules, corporate successors that have purchased the assets of their predecessors are liable if: (1) the purchaser expressly or impliedly agrees to assume liability; (2) the sale is a de facto consolidation or merger; (3) the purchaser is merely a continuation of the seller; or (4) the sale was fraudulently arranged to escape liability. Some states recognize a fifth circumstance based on product lines, but in a footnote the court reserves judgment on its applicability.

Applying the rules to facts of this case, the court holds that a successor that purchased substantially all of the assets of a waste marketer does not assume successor liability. There was no de facto merger because there was no continuity of shareholders. The purchaser was not a mere continuation of the seller, the seller had not been notified that it may have incurred CERCLA liability and the purchaser did not continue the seller's waste marketing business. The court declines to impose sanctions under Federal Rule of Civil Procedure 11, which applies only at the trial level, or Federal Rule of Appellate Procedure 38, because the appeal was not frivolous.

Counsel for Defendant/Third-Party Plaintiff-Appellant
Michael R. Thorpe, Blair C. Stone
Heller, Ehrman, White & McAuliffe
6100 Columbia Ctr., 701 Fifth Ave., Seattle WA 98104-7011
(206) 447-0900

Counsel for Plaintiff/Third-Party Defendant-Appellee
Richard W. Elliott, Jeff Belfiglio, Miriam Reed
Davis, Wright, Tremaine
10500 N.E. Eighth St., 1800 Bellevue Pl., Bellevue WA 98004-4300
(206) 646-6100

Wright before Poole and Brunetti, JJ.