Tillman v. Highland Indus., Inc.

• Decision Date: 08 September 2020
• Docket Number: Case No. 4:19-cv-02563-SAL
• Court: U.S. District Court — District of South Carolina
• Parties: Janet TILLMAN and Melvin Wilkerson, individually and on behalf of all others similarly situated, Plaintiffs, v. HIGHLAND INDUSTRIES, INC., Defendant.

486 F.Supp.3d 1026

Janet TILLMAN and Melvin Wilkerson, individually and on behalf of all others similarly situated, Plaintiffs,

v.HIGHLAND INDUSTRIES, INC., Defendant.

Case No. 4:19-cv-02563-SAL

United States District Court, D. South Carolina, Florence Division.

Signed September 8, 2020

Christopher James Moore, Richardson Patrick Westbrook and Brickman, Barnwell, SC, Edward John Waelde, Gary W. Poliakoff, Poliakoff and Associates, Raymond P. Mullman, Jr., Spears Poliakoff and Poole, Spartanburg, SC, John D. Harrell, Harrell Law Firm, Charleston, SC, Joshua Slavin, The Law Offices of Joshua E. Slavin, Mount Pleasant, SC, William Camden Lewis, Richardson Patrick Westbrook and Brickman LLC, Richard R. Gleissner, Gleissner Law Firm, Columbia, SC, for Plaintiffs.

Ethan Robert Ware, Jessica Jo King, Ruth Ann Levy, Williams Mullen, Francis B. Knowlton, Nelson Mullins Riley and Scarborough LLP, Kevin Joseph Malloy, Richard Hood Willis, Ashleigh Rayanna Wilson, Bowman and Brooke, Columbia, SC, for Defendant.

OPINION AND ORDER

Sherri A. Lydon, United States District Judge

This action, filed by Plaintiffs Janet Tillman and Melvin Wilkerson on behalf of themselves and all others similarly situated, concerns alleged environmental contamination by the owner and operator of a manufacturing facility located in Cheraw, South Carolina. Burlington Industries, Inc. ("Burlington") owned and operated the plant until 1988, at which time Defendant Highland Industries, Inc. ("Highland") acquired the facility–as well as certain liabilities of Burlington–in an asset acquisition. The present dispute turns largely on whether and to what extent Highland expressly assumed Burlington's liabilities associated with the release or discharge of polychlorinated biphenyls ("PCBs") into the surrounding environment.

This matter is before the Court on Highland's Motion to Dismiss, ECF No. 46, filed on June 1, 2020, and its Motion for Partial Summary Judgment, ECF No. 47, filed on June 4, 2020. The motions have been fully briefed, and the Court heard arguments on the motions on July 16, 2020. In the motion to dismiss, Highland submits that the Amended Complaint fails to state cognizable claims for trespass and negligent failure to warn. In its motion for partial summary judgment, Highland argues, generally, that examination of the asset acquisition documents establishes Highland's entitlement to summary judgment in this action to the extent Plaintiffs’ claims are premised on Burlington's conduct. For the reasons stated herein, the Court denies Highland's motion to dismiss and grants Highland's motion for partial summary judgment in part.

BACKGROUND

Burlington owned the facility at issue in this case since the 1960s. As its operator, Burlington utilized the facility through two business divisions. One division manufactured woven fiberglass products, and the other manufactured industrial fabrics. The parties agree that Burlington's fiberglass division ceased operations prior to Highland's acquisition of the facility. In its 1988 acquisition, Highland purchased the industrial fabric portion of Burlington's business, named the "Burlington Industrial Fabrics Company" or "BIFCO." Highland was originally formed as a subsidiary of airbag manufacturer Takata Corporation ("Takata"), and the parties do not dispute that Highland was formed to operate the facility for the purpose of producing industrial fabric for use in Takata products. Importantly, Plaintiffs acknowledge that it was Burlington's woven fiberglass division, rather than the fabric division, which was responsible for the presence of PCBs at the facility. There is no evidence in the record to suggest Highland's conduct in manufacturing industrial fabric resulted in the release or discharge of PCBs.

Highland Industries has owned and operated the facility since 1988. In 2016, state and federal regulators began investigating environmental contamination at the facility, which revealed elevated concentrations of PCBs at and near the facility. Plaintiffs allege that Highland is liable for the release of PCBs into the surrounding soil and waterways, thereby reducing the value of their property. Plaintiffs seek injunctive relief and assert claims for negligence/recklessness, trespass, and nuisance.

I. Chemical Discharges and Soil Testing at the Facility

It is unclear when Burlington began discharging fluids at the facility; however, in 1970, state authorities received complaints "concerning the discharge of wastes ... into an open ditch." ECF No. 52-2 at 8. During an inspection, health officials confirmed that Burlington was indeed discharging a "green fluid" into an open ditch, which the parties agree was what they now refer to as the Western Ditch. The Western Ditch is located partially on property that Highland acquired from Burlington.

After the state received the aforementioned complaints, Burlington established a new system for disposing of fluids. Burlington began pumping liquid waste into settlement tanks, where heavier sludge settled to the bottom. Burlington then pumped lighter liquids into the town's sewer system, while it pumped the heavier liquids into what the parties refer to as sludge drying beds. The sludge drying beds were located on property that Highland never acquired. See ECF No. 52-2 at 9.

The extent of PCB contamination at the facility was not discovered until several decades after it likely began. In October of 2015, a citizen contacted the South Carolina Department of Health and Environmental Control regarding the location of the sludge drying beds, which had been excavated, filled, and developed upon by that time. The subsequent investigation, undertaken by South Carolina authorities in addition to the Environmental Protection Agency ("EPA"), ultimately revealed elevated concentrations of PCB Aroclor 1248 and PCB Aroclor 1254 in and around the facility.

Because there is no evidence at this stage that Highland's conduct at the facility after its 1988 acquisition resulted in an increase in the level of PCBs at the facility, a critical issue in this case is whether and to what extent Highland may be liable for Burlington's conduct.

II. The Purchase Agreement Between Burlington and Takata

On February 19, 1988, Takata entered an agreement to purchase certain assets of the BIFCO division of Burlington. Section 2.01(a) of the Purchase Agreement states, "Purchaser agrees to purchase and accept from the Seller, ... the Business, as it shall exist on the Closing Date." The "Business" is defined in Section 1.01(e) to mean "the manufacture and sale by the Seller's BIFCO division of specified industrial fabrics, generally 210 denier and greater, manufactured at the [Plant] in Cheraw, South Carolina...." In Section 2.01(b), the contracting parties agreed that

The assets, goodwill and business of the Seller constituting the Business to be transferred to the Purchaser (the "Assets") are as follows: (i) all the Seller's right, title and interest in the real property and interests in real property described in items (1)-(2) of Section 1.01(o) of the Disclosure Schedule, together with all buildings, facilities and other improvements located on such real property, together with such additions thereto and deletions therefrom as shall have occurred in the ordinary course of business prior to the Closing Date[.]

ECF No. 52-4 at 4. One of the "Assets" transferred included 50.81 acres of land described in the Disclosure Schedule as the "James Fabrics plant, Cheraw, South Carolina." ECF No. 52-5 at 13, 37. As the EPA noted, "[t]he property sale to Highland Industries was only a subset of the overall property footprint owned by Burlington Industries and did not include the location on which the six, sludge drying-beds were located." ECF No. 52-1 at 4. Highland does acknowledge, however, that it purchased a portion of the Western Ditch.

The Purchase Agreement also provides in Section 2.02 that "[o]n the terms and subject to the conditions set forth in this Agreement, the Purchaser shall execute and deliver the Assumption Agreement to the Seller on the Closing Date." ECF No. 52-4 at 7.

III. The Assumption Agreement: Highland Acquired Liabilities Related to the "Business" or "Assets."

After executing the Purchase Agreement, Takata assigned the Purchase Agreement to its newly formed subsidiary, Highland. The Assumption Agreement was thus entered into between Burlington Industries and Highland Industries, and Highland served as the Purchaser within the meaning of both the Purchase Agreement and the Assumption Agreement. See ECF No. 52-6 at 2.

In the Assumption Agreement, Highland expressly assumed certain liabilities of Burlington and expressly rejected others. Section 1(a)-(b) of the Assumption Agreement provide as follows:

[Highland] hereby assumes and agrees to pay, perform and discharge, and to indemnify Burlington against and hold it harmless from, any and all liabilities and obligations of or claims against (and any and all losses, damages, costs and expenses resulting from such liabilities, obligations and claims) (referred to herein as the "Liabilities") of Burlington of whatever nature related to the Business or Assets as they existed at the Effective Time and as they have existed or shall exist after the Effective Time (whether fixed or contingent, arising by law or by contract or otherwise), whether such Liabilities arose prior to or arose or arise after the Effective Time, and (b) Burlington agrees to pay, perform and discharge and to indemnify [Highland] against, and hold it harmless from, any and all liabilities of Burlington of whatever nature which are not assumed by the Purchaser under this Agreement.

ECF No. 52-6 at 2. The Effective Time is defined to mean 12:01 a.m. on January 3, 1988. ECF No. 52-4 at 3. As incorporated from the Purchase Agreement, "Business" means "the manufacture and sale by the Seller's BIFCO division of specialized industrial fabrics, generally 210 denier and greater," and the "Assets"...