A federal court in Illinois has dismissed a CERCL A contribution claim because the plaintiff could not establish liability under either an alter-ego or successor liability theory. Precision Brand Prods., Inc. v. Downers Grove Sanitary Dist., No. 08-5549 (N.D. Ill. 8/8/11).
Plaintiff sued Corning, Inc., among other allegedly responsible parties for contribution under CERCL A and the Illinois Joint Tortfeasor Contribution Act, alleging that Corning was liable for the operations of H.W. Holding Co., which owned property on the site at issue from 1965 to 1971. Plaintiff alleged that Corning was liable for the actions of H.W. Holding because Corning was the indirect 100 percent owner as the result of various transactions and merger agreements that began in 1999. Corning filed a motion to dismiss, arguing that plaintiff failed to allege facts sufficient to state a claim under either an alter-ego theory or a successor liability theory.
The court first addressed plaintiff’s alter-ego theory, ruling that in the Seventh Circuit, a company cannot be liable for the acts of an alleged wrongdoer under an alter-ego theory where the alleged actions giving rise to the claim occurred before that company controlled the alleged wrongdoer. According to the court, plaintiff’s allegations did not plausibly suggest that Corning controlled H.W. Holding when that company controlled the property at issue.
The court then discussed plaintiff’s successor liability theory. While the Seventh Circuit recognizes the possibility of such liability in the context of CERCL A claims, “the general rule is that one corporation does not acquire the liabilities of another simply by virtue of purchasing that corporation’s assets.” There are four exceptions to that general rule: “(1) the purchaser expressly or impliedly agrees to assume the liabilities; (2) the transaction is a de facto merger or consolidation; (3) the purchaser is a ‘mere continuation’ of the seller; or (4) the transaction is an effort to fraudulently escape liability.”
According to the court, plaintiff failed to allege facts “that would support a reasonable inference that any of those four exceptions apply to Corning’s acquisition of H.W. Holding.” Thus, its “threadbare allegations are insufficient to state a plausible claim of successor liability against Corning.”