On August 8, 2011, glass and ceramics manufacturer Corning Inc. was dismissed without prejudice from a lawsuit seeking to recover cleanup costs associated with groundwater contamination on and around an industrial park in Downers Grove, Illinois. Maintenance tool manufacturer, Precision Brand Products, Inc. ("Precision"), brought the action against Corning and others, asserting claims for contribution under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), codified at 42 U.S.C. § 9601 et seq., among other theories.
Precision did not allege that Corning directly owned or operated the allegedly contaminated property. Instead, Precision claimed that Corning was responsible for the release of contaminants in the industrial park "through H.W. Holding", who owned and operated certain property in the industrial park in the 1960s and 1970s. According to the complaint, Corning did not purchase H.W Holding until at least 1999. In its motion to dismiss, Corning argued that Precision failed to state a claim for relief under either an alter-ego or successor-liability theory.
The United States District Court for the Northern District of Illinois held that Corning could not be found liable under an alter-ego theory because of timing. "A company cannot be liable for the acts of an alleged wrongdoer under an alter-ego theory where the alleged actions giving rise to the claim occurred before that company controlled the alleged wrongdoer." (Mem. at 6) The Court also found that Precision failed to allege or even suggest that Corning controlled H.W. Holding at the time H.W. Holding controlled the property at issue, and that "the contamination on H.W. Holding's property had to occur over 25 years before Corning is alleged to have acquired ownership in H.W. Holding." (Mem. at 7.)
As for the successor-liability claim, the Court found that even though the Seventh Circuit recognizes the possibility of successor liability in the context of claims under CERCLA, the general rule is that one corporation does not acquire the liabilities of another simply by virtue of purchasing that corporation's assets. There are four exceptions to that general rule: "(1) the purchaser expressly or impliedly agrees to assume the liabilities; (2) the transaction is a de facto merger or consolidation; (3) the purchaser is a 'mere continuation' of the seller; or (4) the transaction is an effort to fraudulently escape liability." (Mem. at 7-8.) Here, the Court found that no facts were alleged that would support a reasonable inference that any of the four exceptions applied to Corning's acquisition of H.W. Holding.
The case is Precision Brand Products Inc. v. Downers Grove Sanitary District et al., case number 1:08-cv-05549, in the U.S. District Court for the Northern District of Illinois.