ELR Citation: ELR 20915
No(s). 5:94-25-CV-BR2 (E.D.N.C. Feb 1, 1995)

The court holds that a contaminated site's former corporate owner, which failed to dissolve in compliance with state law, is liable under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for response costs the state incurred in cleaning up the site. The court first holds that summary judgment is appropriate on the state's claims against the company because no genuine issues of material fact exist. The court further holds that the company still exists under both North Carolina's former and current Business Corporation Acts, because it failed to file a certificate of completed liquidation and did not send or publish notice of dissolution. Thus, the company is amenable to suit as an existing entity subject to the current Act. The court notes that the company does not refute that the site is a CERCLA facility, that a release of a hazardous substance has occurred at the site, and that the release caused the state to incur response costs. Although the company disputes that it is a "person" liable under CERCLA §107(a), it does not raise any defenses or dispute that its involvement in the hazardous waste disposal activities at the site subjects it to liability. The court holds that the company is liable for the state's future response costs. And the court grants the state's motion for summary judgment on its public nuisance claim against the company, because the company does not dispute the existence of a public nuisance or its liability for creating it.

The court next holds that it may enforce the state's CERCLA claim against the company against the widow of the company's founder, as a shareholder, up to the lesser of her pro rata share of the claim or the corporate assets distributed to her in liquidation. The North Carolina Business Corporation Act's provision addressing enforcement of claims against dissolved corporations makes a shareholder liable regardless of whether the distribution was made when the corporation could not meet its obligations or whether the shareholder knew that the distribution violated the Act. The court also holds that the widow, who was also a director and president of the company, is not liable for breach of a fiduciary duty, because North Carolina statutory and case law do not impose a fiduciary duty on officers and directors. Under the trust fund theory of liability, however, she is liable to the extent of the assets she received from the founder's estate as well as the assets she received from a trust the founder created. Because the founder would be liable were he alive, his estate beneficiaries hold the assets received from the estate in trust to satisfy his environmental liabilities. But the court holds that shareholder distributee liability is not an appropriate basis on which to order the founder's widow to abate the site's public nuisance, because shareholder distributee liability under North Carolina law contemplates a monetary claim, and an order to abate a nuisance is a form of injunctive relief. Because the court has previously found that a fiduciary duty does not run from directors or officers to creditors, breach of such a duty is likewise not appropriate for holding the widow liable. To hold the widow directly liable for the creation of the public nuisance, some evidence must exist of her ownership of the property and her knowing of or having reason to know of the nuisance's existence, or her participation in its creation. But the state has not presented any evidence of a connection between the widow and the creation of the nuisance.

The court holds that the current site owner is liable under CERCLA for the state's past and future response costs. The current site owner cannot assert CERCLA's third-party defense, because it had an indirect contractual relationship with the former site owner and did not acquire the site after the hazardous waste had been disposed. The court denies the state's motion for summary judgment on its public nuisance claim against the current site owner, because genuine issues of material fact exist on what the current site owner knew when it purchased the site. The court holds moot the current site owner's motion to dismiss the state's claims under the Inactive Hazardous Sites Response Act of 1987 and North Carolina's common law of restitution, because the state has voluntarily dismissed these claims.

The court holds that the individual who sold the site to the current site owner is liable for the state's past and future response costs, because he owned the site at the time of hazardous waste disposal and he has not asserted any of CERCLA's defenses. His status as an agent for the current site owner does not negate his liability. The court denies the state's motion for summary judgment on its public nuisance claim against this individual, because it has offered no evidence indicating his knowledge and it did not advance an argument about that knowledge. The court next holds that the trust the founder established is liable for CERCLA response costs to the extent of the assets it received from the founder's estate, because it is a beneficiary of that estate and should be deemed to hold the assets it received. The court denies the state's motion for summary judgment on its public nuisance claim against the trust, because the state has not presented any facts that evidence the trust participated in the company's management or in the hazardous waste disposal activities. And the court refuses to apply the trust fund theory to hold the trust liable under North Carolina's common law of public nuisance.

Counsel for Plaintiff
Robert R. Gelblum, Ass't Attorney General
Attorney General's Office
Department of Justice
Two E. Morgan St., P.O. Box 629, Raleigh NC 27602
(919) 733-3377

Counsel for Defendants
L. Neal Ellis Jr.
Hunton & Williams
One Hanover Sq., P.O. Box 109, 14th Fl., Raleigh NC 27602
(919) 899-3000

BRITT, District Judge.