ELR Citation: ELR 20461
No(s). s. 91-3085, -3090 (8th Cir. Nov 16, 1992)

The court holds that attorneys fees are recoverable in a contribution action under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and that a waste oil re-refining corporation that purchased the assets of a waste oil hauling company that had owned leaking waste oil storage tanks unknown to the re-refining corporation is not liable under CERCLA as a corporate successor because the re-refining corporation was not a "substantial continuation" of the hauling company's business. The hauling company used the storage tanks to hold oil hauled from numerous clients later found to have polychlorinated biphenyls (PCBs) at their sites. Oil was spilled around the tanks in the process of loading and unloading. The leaking storage tanks were not included on the nonexclusive list of hard assets purchased by the re-refining corporation, and the corporation never knew of their existence.

The court first holds that the hauling company, its president and owner, and the owner and operator of the property on which the hauling company erected the leaking tanks, are liable as owners and operators under CERCLA. The hauler's ignorance of the contaminated nature of the oil hauled is no defense under CERCLA, which imposes strict liability. The court next holds that although the purchasing corporation was substituted as a party defendant at the last minute due to no fault of its own, the corporation had ample notice of the suit and ample incentive and time to prepare a defense. Further, the court holds that the purchasing corporation was not denied procedural due process by not being allowed to relitigate the trial court's ruling on the selling company's CERCLA "owner or operator" liability for PCB contamination at the site. The purchasing corporation was given an opportunity to be heard and contest the evidence against the selling company, and its refusal to do so may not now be used to force the government to prove a second time what it has already established. The court also holds that the purchasing corporation was not prejudiced by a waiver of the district court's local rules.

Turning to the purchasing corporation's successor liability, the court first rules that successor corporations are within the CERCLA §101(21) meaning of "persons" subject to CERCLA liability. Applying a "substantial continuation" test for imposing successor corporation liability, the court holds that the re-refining corporation was not a substantial continuation of the hauling company's business. In the CERCLA context, imposition of successor liability under the "substantial continuation" test is justified by a showing that in substance, if not in form, the successor is a responsible party. In this case, the purchasing corporation does not consist merely of the selling company's former assets, but is a larger, preexisting corporation that bought the hauling company's assets in an arm's-length transaction. Moreover, the circumstances of the case, including the fact that the purchasing corporation had no actual notice of the leaking tanks and the lack of collusion between buyer and seller, fail to establish the continuation necessary to impose successor liability.

Finally, the court upheld the district court's award to the owner and operator of the property of a portion of their legal costs, including attorney fees, in a contribution action under CERCLA §113(f) against the hauling company and its owner and president. The court holds that legal fees may be recovered as a necessary response cost. The court notes that but for the property owners' and operators' settlement with the government, they would have been found to be owners or operators of the site. The court rules that attorneys fees are a necessary cost to parties pursued by the government. The district court did not abuse its discretion in making the award because the owner and operator of the property were not in the waste oil hauling business, had no close relationship with the hauling company, were unhappy with the hauling company's operations, benefitted little from the placement of the tanks on the property, and tried to have the tanks removed.

Counsel for Appellee
Gerhardt Braeckel, John A. Bryson
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Appellant
Thomas J. Immel
P.O. Box 1487, Alton IL 62002
(217) 789-1414

Before JOHN R. GIBSON, Circuit Judge, HEANEY, Senior Circuit Judge, and BEAM, Circuit Judge.