43 F.3d 244 (6th Cir. 1994), 93-1348, City Management Corp. v. United States Chemical Co., Inc.

Docket Nº:Incorporated; and Allied-Signal Incorporated (93-1348);
Citation:43 F.3d 244
Party Name:CITY MANAGEMENT CORPORATION, Plaintiff-Appellee, v. U.S. CHEMICAL COMPANY, INCORPORATED, et al., Defendants, General Motors Corporation; Sea Ray Boats, Incorporated; Chrysler Corporation; Ford Motor Company; BASF Corporation (Inmont); Reichhold Chemicals, Inc.; Acme Quality Paints Company; Foamseal, Incorporated; Hoover Universal,
Case Date:November 10, 1994
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit
 
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43 F.3d 244 (6th Cir. 1994)

CITY MANAGEMENT CORPORATION, Plaintiff-Appellee,

v.

U.S. CHEMICAL COMPANY, INCORPORATED, et al., Defendants,

General Motors Corporation; Sea Ray Boats, Incorporated;

Chrysler Corporation; Ford Motor Company; BASF Corporation

(Inmont); Reichhold Chemicals, Inc.; Acme Quality Paints

Company; Foamseal, Incorporated; Hoover Universal,

Incorporated; and Allied-Signal Incorporated (93-1348);

Dow Corning Corporation; Upjohn Company; and Grimes

Aerospace Company, as successor-in-interest to Midland-Ross

Corporation (93-1396), Defendants-Appellants.

Nos. 93-1348, 93-1396.

United States Court of Appeals, Sixth Circuit

November 10, 1994

Argued Oct. 10, 1994.

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[Copyrighted Material Omitted]

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Thomas M. Fallucca (argued and briefed), Glenn R. Matecun, Robert P. Ufer & Associates, Bloomfield Hills, MI, Mark S. Demorest, Hainer & Demorest, Troy, MI, Robert Tuchman, Linnea Brown, Holme, Roberts & Owen, Denver, CO, for City Management Corp.

Charles L. McKelvie, Troy, MI, for U.S. Chemical Co., Inc.

James A. Thompson, Jr., Paul T. Fitzpatrick, LeBoeuf, Lamb, Greene & MacRae, Hartford, CT, Frederick B. Lacey (argued), LeBoeuf, Lamb, Greene & MacRae, Newark, NJ, Lisa M. Bogardus, LeBoeuf, Lamb, Greene & MacRae, New York City, for General Motors Corp., Sea Ray Boats, Inc., Chrysler Corp., Ford Motor Co., BASF Corp., Reichhold Chemicals, Inc., Acme Quality Paints Co., Foamseal, Inc., and Hoover Universal, Inc.

James A. Thompson, Jr., Paul T. Fitzpatrick, LeBoeuf, Lamb, Greene & MacRae, Hartford, CT, Frederick B. Lacey, LeBoeuf, Lamb, Greene & MacRae, Newark, NJ, Lisa M. Bogardus, LeBoeuf, Lamb, Greene & MacRae, New York City, Louis R. Pepe (briefed), Pepe & Hazard, Hartford, CT, for Allied-Signal, Inc.

Robert A. Marsac (argued and briefed), James F. Kamp, Wise & Marsac, Detroit, MI, for Dow Corning Corp., Upjohn Co. and Grimes Aerospace Co.

Before: MILBURN, BOGGS, and NORRIS, Circuit Judges.

MILBURN, Circuit Judge.

In this CERCLA 1 action, defendants appeal the district court's grant of summary judgment to plaintiff City Environmental, Inc. 2 in a dispute over environmental obligations arising from the disposal of hazardous waste at landfills in Michigan. On appeal, the issues are (1) whether the district court erred in holding that even though plaintiff substantially continued the business of U.S. Chemical ("USC"), plaintiff was not liable as a successor for USC's off-site CERCLA liabilities because there was no nexus between plaintiff and USC's off-site liabilities; (2) whether the district court erred in concluding as a matter of law that the transfer in question was not fraudulent under Michigan's Fraudulent Conveyance Act; and (3) whether the district court erred in failing to consider defendant's argument that plaintiff impliedly assumed responsibility for USC's off-site liabilities. For the reasons that follow, we affirm.

I.

A.

Defendant USC was incorporated in Michigan in 1962. It is wholly-owned by the two

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individual defendants, William P. Greenway and Leonard F. Coraci, who are the corporation's sole shareholders, officers, and directors. From 1965 until 1990, USC was engaged in the business of solvent reclamation, which involved the treatment, recycling, storage, and disposal of waste-contaminated solvents of its customers, at its facility on Calahan Street in Roseville, Michigan (the "Calahan Property"). As part of these operations, USC would store some its customers' waste-contaminated solvents on the Calahan Property pursuant to its site-specific permit under the Resource Conservation and Recovery Act, 42 U.S.C. Sec. 6901 et seq. (the "RCRA"). Some of the solvents were transported to various off-site landfills, including the Metamora Landfill in Lapeer County, Michigan.

Plaintiff City Environmental, Inc. is an environmental-services company that was incorporated in Michigan in 1982. Since 1985, it has been in the business of treating and processing the industrial waste of its customers at its two facilities in Detroit. Prior to October 12, 1990, plaintiff did not perform solvent-recycling services and it did not have an RCRA permit for waste storage at either of its two facilities.

In 1984, Greenway and Coraci decided to sell either USC or its assets. They decided to sell because (1) Coraci had decided to retire; (2) the market for USC's services was declining; (3) USC's equipment was becoming outdated; (4) they believed that a costly corrective environmental cleanup of the Calahan Property would be required to renew its RCRA permit; and (5) to compete successfully and to meet environmental regulations, USC would have to invest in a substantial marketing effort to become a regional, not just a local company. For five years, Greenway and Coraci unsuccessfully discussed the sale of USC's business with a number of waste-management companies. In mid-1989, USC first contacted plaintiff to inquire whether plaintiff was interested in acquiring USC. Plaintiff expressed an interest in acquiring USC because the acquisition would allow plaintiff to provide its customers additional services under the RCRA permit. Negotiations between the parties ensued in July 1989. During the course of the negotiations, in March 1990, plaintiff retained the services of Techna Corporation to perform an environmental site investigation of the Calahan Property. The investigation, which included oil and groundwater analysis, revealed a significant risk that the Calahan Property was environmentally contaminated. Applied Science, Inc., a second environmental consultant, found significant contamination and recommended further investigation. A third consulting firm, ECT Consultants, was retained by plaintiff in September 1990 to review the Techna report. ECT confirmed the earlier findings of serious contamination on the Calahan Property. Although none of the firms defined the scope and extent of the on-site contamination or estimated what the possible remediation costs would be, plaintiff estimated the costs to be in the range of $1 million to $5 million. Plaintiff also made preliminary investigations of USC's potential off-site CERCLA exposures, but such exposures were not assumed or considered in arriving at a purchase price.

While the negotiations were taking place, USC was notified by the United States Environmental Protection Agency (the "EPA") by certified letter in November 1989 that USC was a potentially responsible party ("PRP") with respect to CERCLA liabilities arising as a result of its dumping of hazardous waste at the Metamora Landfill. The letter stated that the government had already incurred approximately $44 million in response costs at the site and expected to incur additional costs in the future. The letter explained that as a PRP, USC could be held liable for the entire amount of response costs, and advised USC to participate in a voluntary settlement with the other PRPs. Despite the ongoing negotiations with plaintiff, USC never disclosed its EPA notification of Metamora PRP status to plaintiff, even after plaintiff's request in January 1990 that USC provide plaintiff with all the information USC had relative to USC's involvement at any Superfund Sites.

On January 24, 1990, Greenway attended on behalf of USC a Metamora PRP meeting, which was held to provide PRPs with information regarding the Metamora Landfill Site

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and to address the possibility of an allocation of costs among the PRPs. In his deposition, Greenway admitted that USC was likely to be "one of the bigger parties" involved in the allocation process. J.A. 182. The district court concluded that Greenway was hopeful that he could negotiate an "ability to pay" settlement of USC's allocated share of the Metamora Landfill Site costs; however, no such settlement was ever worked out.

On October 12, 1990, after exchanging several proposed agreements, which contemplated that plaintiff would be buying an ongoing business, plaintiff and USC executed the Asset Purchase and Sale Agreement at issue in this case (the "Agreement"). The Agreement provided that plaintiff would purchase "all right, title and interest to all of the tangible and intangible assets which comprise [USC's] Business operations; excluding only cash on hand and in banks, trade and employee receivables, the Company name, officer life insurance policies, and the real estate located in St. Clair County or the proceeds therefrom." J.A. 539. Plaintiff gave consideration of $720,000, payable over fifteen years, plus the assumption of hazardous waste contamination cleanup liability on the Calahan Property. The Agreement expressly provided that plaintiff's assumption of hazardous waste contamination liabilities was limited to those connected with the Calahan Property. 3 The closing was placed in escrow, subject to a transfer to plaintiff of USC's RCRA permit for the Calahan facility. On the same date the Agreement was executed, plaintiff submitted to the EPA a revised RCRA permit application, to notify the EPA of the change in ownership and operational control of the Calahan facility and to obtain a transfer of USC's RCRA permit. The EPA approved the transfer on November 7, 1990.

In March 1991, following the execution of the Agreement, representatives of some of the Metamora PRPs contacted plaintiff and informed it that because of plaintiff's purchase of USC, the Metamora PRPs would be looking to plaintiff to pay USC's exposure at the Metamora Landfill Site. On April 17, 1991, an Allocation Consultant retained by the Metamora PRP group submitted to it an Allocation Report, which allocated a percentage of waste and dollar value to each of the PRPs at the Metamora Landfill Site. The Allocation Report allocated USC a minimum...

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