ELR Citation: ELR 20791
No(s). 89-4268 (D.N.J. Apr 2, 1991)

The court holds that the corporate parent of a company that manufactured organic pigments at a site later determined to be contaminated with hazardous waste may be liable under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for the activities of its subsidiary and that a contract under which a subsequent owner of the site assumed certain site-related liabilities of an intermediate owner does not preclude the subsequent owner's recovery of response costs from the intermediate owner. The court first holds that parent corporation liability under CERCLA should be determined under federal common law. Application of state law would frustrate the compelling national policies underlying CERCLA. Applying a three-part test established by the U.S. Supreme Court in United States v. Kimbell Foods, Inc., the court holds that interpretation of a contract releasing CERCLA liability should also be determined under federal common law. Uniformity with respect to releases from CERCLA liability is necessary to prevent the vagaries of differing state laws from affecting the incentive for voluntary cleanup. The application of state law to interpret releases could frustrate CERCLA's specific objective of guaranteeing a rapid response when hazardous waste cleanup becomes necessary. Application of a uniform rule would not disrupt existing relationships predicated on state law.

The court next holds that the parent corporation is liable for the activities of its subsidiary if it exercised control over or actively participated in the subsidiary's activities. Requiring active involvement in the activities of the subsidiary serves the broad remedial purpose underlying CERCLA to facilitate the fast, efficient cleanup of hazardous waste sites. However, the court denies summary judgment on the corporate parent's liability, finding that material issues of fact remain regarding the extent of the corporate parent's active participation in the management and control of its subsidiary.

On crossclaims relating to the parent corporation's liability under state law, the court holds that neither the complaint nor the crossclaim pleads any facts to support piercing the corporate veil against the corporate parent. The court grants the parties 45 days to amend their pleadings.

Finally, on the issue of contractual preclusion of CERCLA liability, the court holds that, to preclude recovery of response costs, there must be a clear provision that allocates environmental-type liability to one of the parties. The assumption agreement between the subsequent and intermediate site owners does not contain such a provision. Environmental liabilities are nowhere mentioned in the agreement.

Counsel for Plaintiff
Albert Besser, A. Partick Nucciarone, Jeffrey Cohen
Hannoch Weisman
P.O. Box 1040, Newark NJ 07101-9819
(201) 535-5300

Counsel for Defendants
Matthew Boylan, Lee Hilles Wertheim
Lowenstein, Sandler, Kohl, Fisher & Boylan
65 Livingston Ave., Roseland NJ 07068
(201) 992-8700

Bruce I. Goldstein
Saiber, Schlesinger, Satz & Goldstein
One Gateway Center, Newark NJ 07102-5311
(201) 622-3333