ELR Citation: ELR 20365
No(s). 91-1046 (4th Cir. Nov 3, 1992)

The court affirms a district court decision granting summary judgment against the sole stockholder and a former president of an electrical transformer repair company, and against the company's successor, for contribution claims by the United States under §107 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). The district court held that the individual defendants were jointly and severally liable for the total amount of government response costs incurred in cleaning up polychlorinated biphenyl (PCB) contamination at the site of the predecessor company's operations. The court first notes that the individual defendants do not contest that the transformer oil containing PCBs is a hazardous substance, that the predecessor company's site is a facility, or that, if they are liable as owners or operators, the imposition of joint and several liability is proper. The court holds that the district court properly held that the individual defendants were operators under CERCLA §107(a), because there is no genuine issue of material fact that they each had the authority to control the predecessor company's facility at the time that transformer oil containing PCBs was spilled, dumped, or leaked into the surrounding groundwater. One defendant, who was the predecessor company's incorporator, sole stockholder, and served as the company's president and chairman of the board, acknowledged that he was in charge of the company and responsible for what occurred on the company's premises. The other individual defendant served as a director and president of the company, admitted that at times relevant to the complaint he operated or otherwise controlled operations at the contaminated site, and stated that he was responsible for the company's entire operation.

The court next holds that the district court properly held that one of the corporate defendants was liable under CERCLA as the transformer repair company's successor. The successor company retained most of the predecessor's employees, who continued to work in the same jobs, received the same salaries, and maintained accrued leave time. Many, if not all, of the predecessor's supervisory personnel went to similar positions at the successor company. The predecessor's sole stockholder and chairman of the board continued to have personal influence over and involvement with the new company, and the predecessor's equipment, inventory, and motor vehicles were transferred to the successor. The transfer of operations to the successor's property was an integral part of an apparent attempt by those controlling both companies to distance themselves, both physically and legally, from the contaminated site. The successor produced basically the same product as the predecessor, and any changes in the product were dictated by external market forces, which would have operated with equal force on the predecessor had there not been a transfer of the business to the successor. There was a continuity of assets, and the successor held itself out as being a continuation of the predecessor. Finally, the record indicates that the transfer of the predecessor's business to the successor was part of an effort to continue the business in all material respects yet avoid the environmental liability arising from the PCB contamination at the site in question.

The court next holds that the district court properly denied the defendants' motion to dismiss because they were not given 60 days' notice prior to being made parties to the case. CERCLA §112(a) provides for response actions to be taken before claims are asserted against the Superfund, not for actions to be taken before reimbursement claims are asserted by the government against private parties. The court also holds that the district court properly awarded treble punitive damages in addition to response costs, and that the district court properly allowed the government to file a third amended complaint 34 months after the action was first filed.

[Pleadings in this case are digested at ELR PEND. LIT. 66180. The district court's opinion is published at 20 ELR 20935.]

Counsel for Plaintiff/Appellee
Edward J. Shawaker, Jon A. Mueller
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Defendants/Appellants
James M. Johnson
Bryan, Jones, Johnson & Snow
302 W. Edgerton St., P.O. Box 397, Dunn NC 28334
(919) 892-2184

Before WIDENER and NIEMEYER, Circuit Judges, and MICHAEL, United States District Judge for the Western District of Virginia, sitting by designation.