U.S. v. General Battery Corp., Inc.

• Decision Date: 06 September 2005
• Docket Number: No. 03-3515.,03-3515.
• Citation: 423 F.3d 294
• Parties: UNITED STATES of America v. GENERAL BATTERY CORPORATION, INC., Exide Corporation Exide Corporation, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

423 F.3d 294

UNITED STATES of America v. GENERAL BATTERY CORPORATION, INC., Exide Corporation Exide Corporation, Appellant.

No. 03-3515.

United States Court of Appeals, Third Circuit.

Argued January 26, 2005.

Filed September 6, 2005.

Robert L. Collings, (Argued), Carl A. Solano, Schnader Harrison Segal & Lewis LLP, Philadelphia, Pennsylvania, for Appellant.

John T. Stahr, (Argued), United States Department of Justice, Environment and Natural Resources Division, Washington, D.C., Nuriye C. Uygur, Office of United States Attorney, Philadelphia, Pennsylvania for Appellee, United States of America.

Before SCIRICA, Chief Judge, RENDELL and FISHER, Circuit Judges.

SCIRICA, Chief Judge.

This appeal addresses successor liability under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), 42 U.S.C. § 9601 et seq., for environmental response costs incurred by the United States at a lead-contaminated Superfund site. The District Court granted summary judgment in favor of the United States on a "de facto merger" theory of successor liability. We will affirm.

I.

The matter begins with a now defunct company, Price Battery Corporation. From the 1930s through 1966, Price Battery manufactured lead acid batteries at a plant in Hamburg, Pennsylvania. During that time, it arranged for the disposal of waste materials—including spent battery casings—at locations in and around Hamburg. In 1992, the United States Environmental Protection Agency discovered two of the disposal sites, and upon further investigation found three more. The properties contained elevated levels of lead. After testing and monitoring, the EPA concluded remedial action was necessary to protect human health. The United States has since incurred response costs of several million dollars associated with the removal of contaminated soil and the installation of a remedial "cap" at the properties.

Seeking to identify a responsible party under CERCLA, see 42 U.S.C. § 9607(a)(1)-(4), EPA determined that Price Battery, through its disposal of battery casings, was responsible for the lead contamination. Price Battery, however, was long since out of business, having been acquired for cash and stock by General Battery Corporation in 1966. General Battery, in turn, merged with Exide Corporation in 2000. The United States filed this action against Exide, alleging it was responsible for Price Battery's CERCLA liability as a successor in interest.

The parties agree that as a consequence of the 2000 merger, Exide is General Battery's successor. The disputed issue is whether General Battery, by virtue of its 1966 acquisition of Price Battery, was a successor to Price Battery. The relevant aspects of the Price/General transaction are as follows. On February 11, 1966, General Battery, a diversified public company, entered into an agreement with Price Battery, a smaller, privately-held battery manufacturing firm. Price Battery was owned by a single shareholder, William F. Price Sr., who sold General Battery most of his company's assets in exchange for $2.95 million in cash, 100,000 shares of General Battery stock, and a seat on General's board of directors.¹ At the time, 100,000 General Battery shares were valued at approximately $1 million and represented 4.537% of General's outstanding equity. William Price Sr.'s resulting stake in General Battery was comparable to that of the company's cofounders, W.A. Shea and H.J. Nozensky, who in 1966 remained on General's board and held 5.12% and 4.44% of its outstanding equity, respectively.

Under the agreement, General Battery purchased Price Battery's equipment, materials, intellectual property and inventory. It also assumed Price Battery's contractual obligations, including employment contracts, and assumed all other liabilities appearing on Price Battery's balance sheet. General Battery indemnified Price Battery for claims, other than future tort claims, arising from Price Battery's operations, and agreed to continue the employment of three senior Price Battery officers—the president, the executive vice president, and the vice president of manufacturing.

After the transaction, General Battery continued manufacturing batteries at the Hamburg plant. Price Battery's plant superintendent and middle managers retained their positions, as did the union employees, office personnel and sales force. General Battery produced the same batteries that Price Battery had produced and honored Price Battery's contracts with existing customers and vendors. Price Battery, meanwhile, was required under the agreement to immediately change its name to Price Investment Company and to retain $150,000 in cash pending completion of an audit. The agreement contemplated that following the audit and any corresponding adjustment in the purchase price, Price Investment would liquidate on or before December 31, 1966. From the transaction closing in February of 1966 until filing for a certificate of corporate dissolution in February of 1967, Price Investment Company had no operations.

On cross-motions for summary judgment, the District Court held the Price/General transaction constituted a common law "de facto merger." In the District Court's view, the continuity of location, assets, products, operations, management, employees, contracts, and shareholders between Price Battery and General Battery, and the subsequent liquidation and dissolution of Price Battery, establish General Battery (and now Exide) as Price Battery's successors in interest under CERCLA. United States v. Exide Corp., 2002 WL 319940 (E.D.Pa. Feb. 27, 2002), 2002 U.S. Dist. LEXIS 3303. Following the District Court's entry of summary judgment, the parties stipulated to past CERCLA response costs at the Hamburg site in the amount of $6,500,000. Exide retained the right to file this appeal as to liability.

II.

The District Court had jurisdiction under CERCLA, 42 U.S.C. § 9613(b), and 28 U.S.C. § 1331. We have jurisdiction under 28 U.S.C. § 1291. Our summary judgment standard of review is plenary. In re Mushroom Transp. Co., 382 F.3d 325, 335 (3d Cir.2004) (drawing all reasonable inferences in favor of the non-moving party).

III.

We return, once again, to the difficult area of indirect liability under CERCLA.² CERCLA is a "sweeping" federal remedial statute, enacted in 1980 to ensure that "everyone who is potentially responsible for hazardous-waste contamination may be forced to contribute to the costs of cleanup." United States v. Bestfoods, 524 U.S. 51, 56 n. 1, 118 S.Ct. 1876, 141 L.Ed.2d 43 (1998) (quoting Pennsylvania v. Union Gas Co., 491 U.S. 1, 21, 109 S.Ct. 2273, 105 L.Ed.2d 1 (1989) (plurality opinion of Brennan, J.)) (emphasis in original). "As its name implies, CERCLA is a comprehensive statute that grants the President broad power to command government agencies and private parties to clean up hazardous waste sites." Id. at 55, 118 S.Ct. 1876 (quoting Key Tronic Corp. v. United States, 511 U.S. 809, 814, 114 S.Ct. 1960, 128 L.Ed.2d 797 (1994)).

CERCLA is not, however, "a model of legislative draftsmanship," Exxon Corp. v. Hunt, 475 U.S. 355, 363, 106 S.Ct. 1103, 89 L.Ed.2d 364 (1986)—and successor liability is one of its puzzles. Although the statute fails to address the issue expressly, it is now settled that CERCLA incorporates common law principles of indirect corporate liability, including successor liability. See 42 U.S.C. § 9601(21) (including "corporations" among the "persons" covered by CERCLA); 1 U.S.C. § 5 (providing, as a rule of interpretation, that "the word `company' or `association', when used in reference to a corporation, shall be deemed to embrace the words `successors and assigns of such company or association'"); Bestfoods, 524 U.S. at 63-64, 118 S.Ct. 1876 (holding CERCLA incorporates common law of parent/subsidiary veil-piercing); Smith Land, 851 F.2d at 92 (holding CERCLA imposes successor liability).³

The threshold issue on appeal is whether to apply a uniform federal rule of successor liability, or whether to apply the law of a particular state. The second issue is whether Exide is liable as a successor.

A.

We have previously addressed and decided the threshold issue. In Smith Land, we held that CERCLA successor liability is a matter of uniform federal law, as derived from "the general doctrine of successor liability in operation in most states." 851 F.2d at 92 (3d Cir.1988). Likewise, we held in Lansford-Coaldale that "given the federal interest in uniformity in the application of CERCLA, it is federal common law, and not state law, which governs" matters of indirect CERCLA liability. 4 F.3d at 1225 (3d Cir.1993) (discussing parent/subsidiary veil-piercing).

In the course of holding that CERCLA authorizes successor liability, we reasoned that "Congress expected the courts to develop a federal common law to supplement the statute," that "[i]n resolving the successor liability issues here, the district court must consider national uniformity," and that "[t]he general doctrine of successor liability in operation in most states should guide the court's decision rather than the excessively narrow statutes which might apply in only a few states." Smith Land, 851 F.2d at 91-92. This reasoning is unambiguous, essential to the Smith Land disposition, and controlling on the issue before us. Smith Land expressly rejected the position that a particular state's successor liability law applies under CERCLA. Lansford-Coaldale, another indirect liability case under CERCLA, is to the same effect. 4 F.3d at 1225. The Supreme Court has neither addressed nor disturbed these holdings. See Bestfoods, 524 U.S. at 64 n. 9, 118 S.Ct. 1876 (noting, but not resolving, disagreement over "whether, in enforcing CERCLA's indirect liability, courts should borrow state law, or instead apply a federal common law").

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