United States v. Sterling Centrecorp Inc.

• Decision Date: 24 June 2013
• Docket Number: No. 2:08–cv–02556–MCE–JFM.,2:08–cv–02556–MCE–JFM.
• Court: U.S. District Court — Eastern District of California
• Parties: UNITED STATES of America, and California Department of Toxic Substances Control, Plaintiffs, v. STERLING CENTRECORP INC., Stephen P. Elder and Elder Development, Inc., Defendants.

960 F.Supp.2d 1025

UNITED STATES of America, and California Department of Toxic Substances Control, Plaintiffs,

v.STERLING CENTRECORP INC., Stephen P. Elder and Elder Development, Inc., Defendants.

No. 2:08–cv–02556–MCE–JFM.

United States District Court, E.D. California.

June 24, 2013.

Patricia Lyn Hurst, Paul Cirino, Amy R. Gillespie, Esperanza Anderson, Gabriel M. Allen, Karl John Fingerhood, U.S. Department of Justice, Washington, DC, Jamie Jefferson, California Attorney General's Office, Oakland, CA, Kirk McInnis, Attorney General's Office of the State of California, Oakland, CA, for Plaintiffs.

Stephen P. Elder, Nevada City, CA, pro se.

CONCLUSIONS OF LAW

MORRISON C. ENGLAND, JR., Chief Judge.

I. THE ELEMENTS OF CERCLA LIABILITY¹

1. This Court has previously held that in order to establish liability for response costs under Section 107(a) of CERCLA, 42 U.S.C. § 9607(a), Plaintiffs must make a four-part showing. First, Plaintiffs must prove that the Site is a “facility” as defined by CERCLA. Second, they must show that a “release” or “threatened release” of a hazardous substance from the facility has occurred. Third, Plaintiffs must establish that the release or threatened release caused Plaintiffs to incur response costs. Fourth and finally, a defendant must fall within one of the four classes of covered persons described in Section 107(a). Cose v. Getty Oil Co., 4 F.3d 700, 703–04 (9th Cir.1993); 3550 Stevens Creek Assocs. v. Barclays Bank of California, 915 F.2d 1355, 1358 (9th Cir.1990). Docket Entry (“DE”) 154 at 9:14–26, 2011 WL 6749801 (Memorandum and Order, 12/22/2011).

2. Among the four classes of covered persons described in Section 107(a) is “any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of....” 42 U.S.C. § 9607(a)(2).

3. This Court has previously determined that (1) the Lava Cap Site is a facility; (2) that arsenic is a hazardous substance; (3) that there were releases of arsenic at and from the Site; and (4) that the Plaintiffs have incurred response costs responding to those releases. DE 152, 2011 WL 6130887 (Memorandum and Order, 12/8/2011); seeDE 154 at 10:9–16 (Memorandum and Order, 12/22/2011).

4. The remaining issues for decision are Sterling's status as a covered person under Section 107(a) of CERCLA, and this Court's in personam jurisdiction over Sterling.

5. Under Section 101(21) of CERCLA, the definition of “person” includes a “corporation.” 42 U.S.C. § 9601(21); American Tel. & Tel. Co. v. Compagnie Bruxelles Lambert, 94 F.3d 586, 591 n. 8 (9th Cir.1996). The Court concludes, as an initial matter, that Sterling is a person under Section 101(21) of CERCLA because it is a corporation.

6. As discussed below, the Court concludes that (a) Sterling expressly and impliedly assumed the liabilities of former owner/operator Lava Cap Gold Mining Corporation (“LCGMC”); (b) that Sterling is the successor to LCGMC by de facto merger; and (c) that Sterling operated the Lava Cap Mine at the time of a disposal of a hazardous substance. Any one of these three conclusions alone satisfies CERCLA liability. This Court further concludes that it has jurisdiction over Sterling based on its status as LCGMC's successor, and based on its direct operation of the Lava Cap Mine. Either of these two conclusions alone is sufficient for the Court's exercise of jurisdiction over Sterling.

II. STERLING'S EXPRESS AND IMPLIED ASSUMPTION OF LCGMC'S LIABILITIES

7. This Court has previously held that the Ninth Circuit recognizes that corporate successors should answer for the liabilities of their predecessor corporations under CERCLA. See Louisiana–Pacific Corp. v. Asarco, Inc., 909 F.2d 1260, 1262 (9th Cir.1990) (“Congress did intend successor liability” under CERCLA), overruled on other grounds, Atchison, Topeka & Santa Fe Ry. Co. v. Brown & Bryant, Inc., 132 F.3d 1295, 1301,amended and superseded by159 F.3d 358, 364 (9th Cir.1997). DE 154, at 10:19–26.

8. This Court has previously held that, in addition, other courts have uniformly concluded that successor corporations are within the meaning of “persons” for purposes of CERCLA liability. See United States v. Mexico Feed and Seed Co., Inc., 980 F.2d 478, 486–87 (8th Cir.1992); United States v. Carolina Transformer Co., 978 F.2d 832, 837 (4th Cir.1992); Anspec Co., Inc. v. Johnson Controls, Inc., 922 F.2d 1240, 1245–48 (6th Cir.1991); Smith Land & Improvement Corp. v. Celotex Corp., 851 F.2d 86, 91–92 (3d Cir.1988), cert. denied,488 U.S. 1029, 109 S.Ct. 837, 102 L.Ed.2d 969 (1989). DE 154, at 11:1–9.

9. This Court has previously held that the Ninth Circuit has not squarely addressed whether federal or state law governs when determining successor liability under CERCLA. Atchison, 159 F.3d at 362–64 (stepping back from a prior unequivocal announcement as to the applicability of state law, on grounds that the court “need not determine” whether state law is dispositive since both state law and federal common law yield the same result). DE 154, at 12:8–16.

10. This Court has previously held that, under both Ninth Circuit precedent and California law, successor liability does not arise from an asset purchase “unless (1) the purchasing corporation expressly or impliedly agrees to assume the liability; (2) the transaction amounts to a ‘de-facto’ consolidation or merger; (3) the purchasing corporation is merely a continuation of the selling corporation; or (4) the transaction was fraudulently entered into in order to escape liability.” Atchison, 159 F.3d at 361;Ray v. Alad Corp., 19 Cal.3d 22, 28, 136 Cal.Rptr. 574, 560 P.2d 3 (Cal.1977). As the quoted language makes clear, successor liability can rest on any one of these four variants. DE 154, at 10:11–21.

11. This Court has previously held that parol evidence is admissible to show all circumstances surrounding a transaction in order to determine the meaning intended and understood by the parties. See Brookes v. Adolph's Ltd., 170 Cal.App.2d 740, 746, 339 P.2d 879 (Cal.App. 2 Dist.1959); see alsoCal. Civ.Code § 1647 (“A contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates”). DE 154, at 14:24–15:4. 12. Successor liability exists when the parties have, through agreements, words, or conduct, indicated their intent to shift liability from one party to another. Fisher v. Allis–Chalmers Corp. Product Liability Trust, 95 Cal.App.4th 1182, 1192–93, 116 Cal.Rptr.2d 310 (Cal.App. 5 Dist.2002); City of Atascadero v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 68 Cal.App.4th 445, 474, 80 Cal.Rptr.2d 329 (Cal.App. 1 Dist.1998) (“The mutual intention to which the courts give effect is determined by objective manifestations of the parties' intent, including the words used in the agreement, as well as extrinsic evidence of such objective matters as the surrounding circumstances under which the parties negotiated or entered into the contract; the object, nature and subject matter of the contract; and the subsequent acts and conduct of the parties.”). See also Florom v. Elliott Mfg., 867 F.2d 570, 576,reh'g denied,879 F.2d 801 (10th Cir.1989) (holding that material factual issues remained regarding successor liability, preventing summary judgment for the purchaser, because the parties' agreement did not expressly exclude successor tort or product liability, and the purchaser had maintained product liability insurance coverage); Ambrose v. Southworth Products Corp., 953 F.Supp. 728, 736 (W.D.Va.1997) (holding that a letter taking responsibility for product defects and other conduct and circumstances “suggest[ed] that an implied agreement may have existed,” transferring liability).

13. A contracting party's assumption of liabilities may be express, implied, or both. Atchison, 159 F.3d at 361;Ray, 19 Cal.3d at 28, 136 Cal.Rptr. 574, 560 P.2d 3. As discussed below, the Court concludes that Sterling expressly and impliedly assumed LCGMC's liabilities.

A. Sterling's Express Assumption of LCGMC's Liabilities

14. The analysis of whether a contracting party has expressly assumed the liabilities of a seller begins by construing the parties' written agreements. Schwartz v. Pillsbury Inc., 969 F.2d 840, 845–46 (9th Cir.1992); Gee v. Tenneco, Inc., 615 F.2d 857, 862 (9th Cir.1980); United States v. Iron Mountain Mines, Inc., 987 F.Supp. 1233 (E.D.Cal.1997); Universal Sales Corp. v. California Press Mfg. Co., 20 Cal.2d 751, 760, 128 P.2d 665 (Cal.1942). But courts also routinely look beyond the parties' agreements to consider all relevant circumstances. In Warner Construction Corp. v. City of Los Angeles, 2 Cal.3d 285, 296–97, 85 Cal.Rptr. 444, 466 P.2d 996 (Cal.1970), the California Supreme Court stated that “[t]he construction given the contract by the acts and conduct of the parties with knowledge of its terms, before any controversy has arisen as to its meaning, is entitled to great weight and will, when reasonable, be adopted and enforced by the court.” Accord Western Med. Enter., Inc. v. Albers, 166 Cal.App.3d 383, 391, 212 Cal.Rptr. 434 (Cal.App. 1 Dist.1985); Zito v. Firemen's Insur. Co., 36 Cal.App.3d 277, 284–85, 111 Cal.Rptr. 392 (Cal.App. 4 Dist.1973); Schmidt v. Macco Construction Co., 119 Cal.App.2d 717, 732, 260 P.2d 230 (Cal.App. 1 Dist.1953); Bartel v. Assoc. Dental Supply Co., 114 Cal.App.2d 750, 753–54, 251 P.2d 16 (Cal.App. 1 Dist.1952).

15. “The acts of the parties under the contract afford one of the most reliable means of arriving at their intention.” Wolf v. Walt Disney Pictures & Television, 162 Cal.App.4th 1107, 1134, 76 Cal.Rptr.3d 585 (Cal.App. 2 Dist.2008); see also Spinks v. Equity Residential Briarwood Apts., 171 Cal.App.4th 1004, 1024, 90 Cal.Rptr.3d 453 (Cal.App. 6 Dist.2009) (the parties “practical construction of a contract, as shown by their actions, is important evidence of their intent”); Cedars–Sinai Med. Ctr. v. Shewry, 137 Cal.App.4th...