granted the defendant's motion for summary judgment after determining that "the plaintiffs [had] not set forth facts showing that [the defendant] had knowledge of the potential environmental liability or was in some way responsible for that liability . . . ." Id.
In City Environmental, Inc. v. U.S. Chemical Co., 814 F. Supp. 624, 1993 U.S. Dist. LEXIS 1523 (E.D. Mich. 1993), the district court entered a declaratory judgment that the plaintiff was not liable under CERCLA for the corporation's pre-asset sale disposal of hazardous waste. As in the instant case, the sale involved most, but not all, of the selling corporation's assets. The selling corporation retained its accounts receivable, all cash on hand and some real estate. Id. at *10. The selling corporation did nothing but collect accounts receivable and defend itself in court after the asset sale. Id. at 19. The defendant continued in the same line of business at the same facility with all but one of the same employees. Id. at *21 n.20. Nevertheless, the court held that the "continuity of enterprise" exception did not apply. The court noted that:
In both Carolina Transformer and Distler, although there was no 'continuity of shareholders' in either case, both actions involved purchasers which had substantial 'ties' to the seller corporations. In Carolina Transformer, the purchasing corporation continued the business of the seller corporation. More importantly, however, the children of the owner of the seller corporation owned the purchasing corporation. Indeed, their father continued to effectively control the new business just as he did with the predecessor-seller. Similarly, in Distler, three of the seller's top-level employees formed the purchaser business for he express purpose of buying out their former employer. As the Eighth Circuit held in Mexico Feed, it was those "continuity" ties that led the courts in Carolina Transformer and Distler to find sufficient "continuity of the enterprise" to impose successor liability on the purchasing corporations so that the intent of Congress that those responsible for hazardous waste would not escape liability.
Id. at 50-51. Although the court decided this difficult question under Michigan law,
its analysis of the recent case law is particularly instructive. It demonstrates that the "continuity of enterprise" exception should supplant the traditional rule only when the purchasing corporation has "substantial ties" to the selling corporation.
This conclusion is bolstered by the Third Circuit Court of Appeals' treatment of the same issue in the products liability context. See Polius v. Clark Equipment Co., 802 F.2d 75 (3d Cir. 1986). In Polius, the court rejected the "continuity of enterprise" theory as "an ill-considered extension of liability to an entity having no causal relationship with the harm." Id. at 82.
Judge Weis' critique of the "continuity of enterprise" theory applies with some force in CERCLA cases. At a minimum, it suggests that the theory ought to be applied only when there is a causal link between the CERCLA defendant and the environmental harm.
The court finds Mexico Feed, ASARCO, Allied Corp., and City Environmental persuasive, insofar as the they limit the applicability of the "continuity of enterprise" exception. The court also finds that Distler and Carolina Transformer are distinguishable on the facts. Given that Garnet Chemical ceased its transfer of waste to the Dorney Landfill in 1972, and that Mr. Williams had no ties to Garnet Chemical, it cannot be said that the 1985 asset sale renders Garnet Electroplating a responsible party.
Plaintiffs have produced no evidence that Mr. Williams knew of or was responsible for the transfer of hazardous waste to the landfill. Accordingly, the court will apply the traditional exception, under which the party seeking to impose successor liability must establish an identity of stockholders and directors. It is undisputed that no such identity exists. Therefore, the court must grant Garnet Electroplating's motion and enter judgment accordingly. An appropriate order follows.