Petition for Writ of Certiorari — Exide Technologies Technologies v. United States (No. 05-1269)

a Supreme Cot 118

\) ths 79.

OFPICE OF THE Sins

Int

Supreme Court of the United States

EXIDE TECHNOLOGIES,

Petitioner,

Vv.

UNITED STATES OF AMERICA,

Respondent.

On Petition for a Writ of Certiorari

To the United States Court of Appeals

For the Third Circuit

PETITION FOR A WRIT OF CERTIORARI

TimoTHY K. Lewis

ROBERT L. COLLINGS

CARL A. SOLANO (Counsel of Record)

JENNIFER J. NESTLE

Attorneys for Petitioner

SCHNADER HARRISON SEGAL & LEWIS LLP

1600 Market Street, Suite 3600

Philadelphia, Pennsylvania 19103

(215) 751-2202

Of Counsel.

QUESTIONS PRESENTED

1. In light of this Court’s decisions requiring appli-

cation of state law in United States v. Bestfoods, 524 U.S. 51

(1998); Atherton v. FDIC, 519 U.S. 213 (1997); and O'Melveny

& Myers v. FDIC, 512 US. 79 (1994), did the Court of

Appeals for the Third Circuit err in holding that corporate

successor liability for environmental cleanup costs under

the Comprehensive Environmental Response, Compensa-

tion and Liability Act of 1980 (CERCLA) should be deter-

mined by creating and applying federal common law,

rather than applicable state law?

2. Did the Court of Appeals err in crafting a federal

law of corporate successor liability for CERCLA cases that

is at odds with the Pennsylvania law that would otherwise

apply?

PARTIES TO THE PROCEEDING

All of the parties to the proceeding are named in the

caption.

Throughout the proceedings in this case, petitioner

has been identified as Exide Corporation, but it has now

changed its name to Exide Technologies. Exide is the suc-

cessor by merger to General Battery Corporation, which no

longer exists as a separate company. On April 15, 2002,

Exide filed voluntary petitions for relief under Chapter 11

of the Bankruptcy Code. Exide emerged from bankruptcy

in May 2004, but the claim in this case remains subject to

bankruptcy court jurisdiction.

CORPORATE DISCLOSURE STATEMENT

Exide has no parent corporation. Except for Sterling

Capital Management LLC, which owns approximately

14.1% of Exide’s stock, no company holds 10% or more of

Exide’s stock.

TABLE OF CONTENTS

OPINIONS BELOW

STATEMENT OF JURISDICTION

STATUTORY PROVISIONS INVOLVED ............ 2

STATEMENT OF THE CASE

REASONS FOR GRANTING THE WRIT

I. THE DECISION BELOW IS IN CONFLICT WITH

DECISIONS OF THIS COURT MANDATING APPLI-

CATION OF STATE LAW TO FILL GAPS IN FEDE-

RAL STATUTES

THE DECISION BELOW PERPETUATES A SPLIT

AMONG THE CIRCUIT COURTS OF APPEALS

REGARDING WHAT LAW APPLIES TO SUCCESSOR

LIABILITY ISSUES UNDER CERCLA

THE DECISION BELOW INCORRECTLY DECIDED AN

IMPORTANT QUESTION OF FEDERAL LAW REGARD-

ING CERCLA LIABILITY THATSHOULD BESETTLED

BY THIS COURT, AND INJECTED CONFUSION INTO

CERCLA JURISPRUDENCE AS IT DID SO

THE DECISION BELOW DISPLACED GOVERNING

PENNSYLVANIA LAW WITH A FEDERAL RULE THAT

IS AT ODDS WITH STATE POLICY, PRODUCING AN

ERRONEOUS RESULT

‘CONCLUSION

TABLE OF AUTHORITIES

Cases Page

Aluminum Co. of Amer. v. Beazer East, Inc., 124 F.3d 551

RoE eal ROPE? 5 AN ere bN beeso ek Pedeaaes 12

Anspec Co. v. Johnson Controls, Inc., 922 F.2d 1240 (6th

Cae: BURRS ia i see hee OI La RS oe eaee 9

Atchison, Topeka & Santa Fe Ry. v. Brown & Bryant, Inc.,

Lee Ed CaO CPA. LOPON. 6 5c oinvye pv ok Chi aes 8, 10

Atherton v. FDIC, 519 U.S. 213 (1997) .......... 1,4, 6,8

B.F. Goodrich v. Betkoski, 99 F.3d 505 (2d Cir. 1996),

cert. dented, S24 US: 9a6 (199) ese ie 9

Beazer East Inc. v. Mead Corp., 34 F.3d 206 (3d Cir.

1994), cert. denied, 514 U.S. 1065 (1995) ......... 12

Berg Chilling Sys. v. Hull Corp., 435 F.3d 455 (3d Cir.

BO foe Oia tae ee 15

Browning-Ferris Indus. of Ill., Inc. v. Ter Maat, 195 F.3d

953 (7th Cir. 1999), cert. denied, 529 U.S. 1098

2 RAG aapeainie ree nis fe Ae yer Gaia geo nye een tr 12

Carlos R. Leffler, Inc. v. Hutter, 696 A.2d 157 (Pa. Super.

je. St ee ean a eRe ME Or Fd AO ha oat ot Lee wan SCRE Ben 15

Carter-Jones Lumber Co. v. LTV Steel Co., 237 F.3d 745

(6th Cir.), cert. denied, 533 U.S. 903 (2001) ....... 12

Citizens Elec. Corp. v. Bituminous Fire & Marine Ins. Co.,

OE eA aA (SE, BSOOE fs ehh ees s hans 12

City Mgmt. Corp. v. U.S. Chemical Co., 43 F.3d 244 (6th

oe, Ree Negeneae Geom pony puyan Wee S 10

-1V-

Commonwealth v. Lavelle, 382 Pa. Super. 356, 555 A.2d

218, appeal denied, 524 Pa. 595, 568 A.2d 1246

CIs 88 ei yaw OPO One RS 15-16

Continental Ins. Co. v. Schneider, Inc., 810 A.2d 127 (Pa.

Super. 2002), aff'd, 582 Pa. 591, 873 A.2d 1286

GOL Sk Ve naar Owe ca ces enema ares wee 15

Cooper Indus., Inc. v. Aviall Services, Inc., 543 U.S. 137

Pd 2 ERE SMA aren as taptnce Periine ME OY Dire may itera 11

Dawejko v. Jorgensen Steel Co., 290 Pa. Super. 15, 434

rg etme lt N41. < h Rapes aioe hey eeu A 16

Ene Railroad v. Tompkins, 304 U.S. 64 (1938) .......... 6

Exxon Corp. v. Hunt, 475 U.S. 355 (1986) ............ 11

Farris v. Glen Alden Corp., 393 Pa. 427, 143 A.2d 25

CE a Sie 2d ORS ES eee 15-16

Fisher Devel. Co. v. Boise Cascade Corp., 37 F.3d 104 (3d

CR SIN SG Cs eate ORS GW Ss Be I ROR Pe

Hill v. Trailmobile, Inc., 412 Pa. Super. 320, 603 A.2d

LG fF 4 RR Raga pee AS SOM SRL SS ARC ear Ene 16

John S. Boyd Co. v. Boston Gas Co., 992 F.2d 401 (1st Cir.

tg it) SRR Pemba e itp ete ioE eT a Ente Chen oe ae 9

Key Tronic Corp. v. United States, 511 U.S. 809 (1994) .. 11

Lackawaxen Water & Sewer Co. v. Pennsylvania Pub.

Util. Comm., 85 Pa. Commw. 377, 481 A.2d 1386

PE hs FA hee EK LAREN RR SRR LE EA ES 16

Levin Metals Corp. v. Parr-Richmond Terminal Co., 817

Fe 2ESe Ce TI) oo ee ee ea ees 12

Louisiana-Pacific Corp. v. Asarco, Inc., 909 F.2d 1260

SOREN Md AMINO: 3 Sears ev sg'c gine nih Saas OOS Keke 9

Meghrig v. KFC Western, Inc., 516 U.S. 479 (1996) ..... 11

MicroSignal Corp. v. MicroSignal Corp., 147 Fed. Appx.

Wet AEG AE. MPR i ns oN nab ealea hae aa Fas 16

O'Melveny & Myers v. FDIC, 512 U.S. 79 (1994) .. 1, 4-10

Polius v. Clark Equip. Co., 802 F.2d 75 (3d Cir. 1986) .

Redwing Carriers, Inc. v. Saraland Apartments, 94 F.3d

RAS CLUE PII i oi Sa we 12

Smith Land & Improvement Corp. v. Celotex Corp., 851

F.2d 86 (3d Cir. 1988), cert. denied, 488 U.S. 1029

CRE Ora as ene sacks avebraan eee ees 3-5, 9

Smithkline Beecham Corp. v. Rohm & Haas Co., 89 F.3d

ROMO Gl SD a ew ease vb oe eee Sols 12

State of New York v. National Services Indus., Inc., 352

ue UNE AER GE: MEMEO: © Sn ae cs eek wanton eee 10

State of New York v. National Services Indus., Inc., 380 F.

ULEAD, SAR TAG AES AANA As DOD ek alien Mince a aioe | 10

Terry v. Penn Central Corp., 668 F.2d 188 (3d Cir.

NU ck aS ote Rete Sc a ea annie 16

United States v. Bestfoods, 524 U.S. 51 (1998) ..... passim

United States v. Carolina Transformer Co., 978 F.2d 832

OPENERS ENUEE: coor sca eke neces hh cnc ieee ean 9

United States v. Davis, 261 F.3d 1 (1st Cir. 2001) .... 8,10

United States v. Kimbell Foods, Inc., 440 U.S. 715 (1979) . 6

-Vi-

United States v. Mexico Feed & Seed Co., 980 F.2d 478

a te) - rei erte verer eor OO a hp Nt a ree gir 9

United States v. USX Corp., 68 F.3d 811 (3d Cir.

ROE os ok Fis Ls GAA cE WS Tee AES 12

Witco Corp. v. Beekhuis, 38 F.3d 682 (3d Cir. 1994) .... 12

Statutes

Comprehensive Environmental Response, Compensa-

tion and Liability Act of 1980, 42 U.S.C. §§ 9601

EI SiS 5 ace sos BOK eee A Aa os passim

SCOR Mis Gr bie OL ee ow Le 2,8

pection 107; 42 U.S.C. § 960? | a 6S hc ees 2,8

section 21508); 42 USC § 96158) + poe 2,8

Section 301(e), 42 U.S.C. § 9651(e) ............ 2,8

jumacial Code, 20 US4.: § THO4G i a ee 1

Pennsylvania Business Corporation Law, 15 Pa. CS.

ER og REE EG BLS eS ie ee ED ie 16

Other Authorities

Corp. L. Comm. Comments — 1988 to Business Cor-

poration Law §§ 1105, 1904, reprinted at 15 Pa.

a8 TS fy > Seenea ese we nek gene receeE rs 16

15 W.M. FLETCHER, FLETCHER CYCLOPEDIA OF THE LAW

OF PRIVATE CORPORATIONS § 7124.20 (perm. ed.,

FOU VOR TVs eh ors wks os oe oe ke oe we pe 4

-Vil-

Petition for a Writ of Certiorari

To the United States Court of Appeals

For the Third Circuit

This Court has repeatedly instructed that federal

courts are not to fashion “federal common law” to fill the

interstices of federal causes of action when state rules of

decision can be used instead. See United States v. Bestfoods,

924 U.S. 51 (1998); Atherton v. FDIC, 519 U.S. 213 (1997);

O'Melveny & Myers v. FDIC, 512 U.S. 79 (1994). But the

decision below did just that, holding that because of a

perceived need for “uniformity” in federal actions under

CERCLA, the court should fashion a federal rule of deci-

sion to govern corporate successor liability for environ-

mental cleanup costs, rather than applying ‘the law of the

state at issue. The Third Circuit’s decision conflicts with

the decisions of this Court and with those of courts of

appeals that have followed this Court’s pronouncements.

And it leaves in its wake a tattered framework for re-

solving corporate liability issues under CERCLA that fos-

ters neither the uniformity nor the certainty that the court

sought to achieve. This Court therefore should grant cer-

tiorari and direct that the Third Circuit abandon its effort

to create a federal body of corporate succession law.

OPINIONS BELOW

The opinion below, A1-A44, is reported at United

States v. General Battery Corp., 423 F.3d 294 (3d Cir. 2005).

The opinions of the district court, A45-77, are unreported.

STATEMENT OF JURISDICTION

The Court of Appeals entered judgment on Septem-

ber 6, 2005. Exide’s timely petition for rehearing was filed

on October 20, 2005, and denied on November 4, 2005. On

January 20, 2006, Justice Souter extended the time within

which to file this petition to and including April 3, 2006.

This Court has jurisdiction under 28 U.S.C. § 1254(1).

2

STATUTORY PROVISIONS INVOLVED

Relevant excerpts from CERCLA — the Comprehen-

sive Environmental Response, Compensation and Liability

Act of 1980, 42 U.S.C. §§ 9601 et seq. ~ are set forth at A82-

A88. They include Sections 101, 107(a), (b) & (e), 113(f),

and 301(e), 42 U.S.C. §§ 9601, 9607(a), (b) & (e), 9613(f), and

9651(e). :

STATEMENT OF THE CASE

Exide is the successor by merger to General Battery

Corporation. In 1966, General, a manufacturer of batteries

and other products at plants throughout the United States,

purchased the assets of Price Battery Corporation, a bat-

tery manufacturer in Hamburg, Pennsylvania. This case

concerns the Government's efforts to hold Exide liable for

the conduct of Price prior to the 1966 asset purchase.

Under the 1966 agreement, Price sold General its ma-

chinery and other equipment for $2.95 million in cash and

100,000 shares (4.537% of the total outstanding shares) of

General stock worth approximately $1 million. Price sold

its realty to a local development fund for $1.8 million in

cash, and General then leased the realty from that fund. In

all, then, Price received $4.75 million in cash for its assets

(82.6% of the total purchase price), plus the stock.

The agreement provided that Price’s chairman and

sole shareholder, William Price, Sr., would become a direc-

tor of General and that General would employ Price’s mid-

dle managers. General assumed Price’s contracts and the

liabilities on Price’s books and agreed to indemnify Price

for claims arising out of Price’s operations, but, significant-

ly, not for “liabilities sounding in tort or liabilities arising

out of scc:irrences for which a tort claim would apply.”

Following its acquisition of Price’s assets in Ham-

burg, General made batteries at the Hamburg facility (em-

3

ploying battery case disposal methods different from the

practices of Price that gave rise to the CERCLA liability

judgment at issue here). Meanwhile, Price changed its

name, ceased operations, and dissolved in July 1967.

CERCLA was not enacted until 1980. This case was

filed 20 years after that, in June 2000, in the United States

District Court for the Eastern District of Pennsylvania. In

its complaint, the United States contended that Price dis-

posed of battery casings containing lead at sites in the

Hamburg area and that the United States now must

remediate resulting environmental damage.

The Government sought to hold General (and, there-

fore, Exide) liable as Price’s corporate successor. It argued

that, as a matter of “federal common law,” General should

be excepted from the rule that a corporate successor is not

liable for its predecessor's misconduct because the 1966

asset sale constituted a “de facto merger” or because Gene-

ral engaged ina “substantial continuation” of Price’s busi-

ness. The trial court (Buckwalter, J.) agreed and entered

summary judgment for the United States. A50-A72.

Exide appealed, contending that Pennsylvania law,

rather than federal common law, should have been applied

to the claims of successor corporate liability and that,

under Pennsylvania law, General (and therefore Exide)

would not be liable for environmental damage caused by

Price. Inits response, the Government abandoned its reli-

ance on federal common law, but still advocated a de facto

merger theory not grounded in Pennsylvania precedent.

In a September 6, 2005 opinion by Chief Judge Scirica

that was joined by Judge Fisher, the Court of Appeals

affirmed. In doing so, the court specifically adhered to its

holding in Smith Land & Improvement Corp. v. Celotex Corp.,

851 F.2d 86 (3d Cir. 1988), cert. denied, 488 U.S. 1029 (1989),

that issues of corporate successor liability under CERCLA

are governed by federal common law, as derived from

4

“the general doctrine of successor liability in operation in

most states.” A6-A7.

The Court of Appeals declined to overrule Smith Land

despite this Court's recent decisions disapproving use of

federal common law. It explained that O’Melveny & Myers

v. FDIC, 512 U.S. 79 (1994), and Atherton v. FDIC, 519 US.

213 (1997), were inapposite because they dealt with bank-

ing law, not CERCLA. A8-A9. The court said that United

States v. Bestfoods, 524 U.S. 51 (1998), a CERCLA case, “cuts

in favor of a uniform federal standard” because in it this

Court “declined to apply Michigan law and instead looked

to the general ‘hornbook’ rule of veil-piercing.” A9-A10.

The Court of Appeals insisted that a need for national uni-

formity in applying CERCLA should control, and it con-

cluded that this objective could best be served by adopting

a federal common-law rule based on the law of most states,

rather than applying the non-uniform successor liability

laws of individual states. A11-A17.

The court then formulated a federal common-law

rule to govern General's acquisition of Price’s assets. The

court recognized that “most states” hold that corporate

asset buyers are not liable for the selling company” S mis-

conduct. But it fashioned an exception for “de facto mer-

gers’ based on a four- part test derived from federal cases

purportedly stating a “majority” standard and from the

Fletcher Cyclopedia of the Law of Private Corporations (vol. 15,

§ 712...20 (perm. ed., rev. vol. 1999)). A19-A20. The court

concluded that state law is “unsettled” on whether asset

purchases for a mixture of cash and stock (or for a small

percentage of the buyer’s stock) should be treated as de

facto mergers. A12-A13. Nevertheless, after citing federal

and state decisions from just six jurisdictions, the court

adopted a federal rule based on what the “critical . . . in-

quiry appears to be.” A21-A24 & nn. 9-10. Under this new _

rule, the court held that General’s acquisition of Price’s

assets was a de facto merger for purposes of CERCLA, so

that Exide was liable for Price’s conduct. A26.

5

In a separate opinion dissenting in part, Judge Ren-

dell concluded that this Court's recent decisions preclude

creation or application of “federal common law” and su-

persede anything to the contrary in Smuth Land. The majo-

rity's decision, she opined, “runs counter to recent

Supreme Court pronouncements,” “perpetuates a split

among the courts of appeals,” and improperly adheres to

an “outdated notion of promoting uniformity.” A28-A29.

Because of its decision to formulate a federal com-

mon-law rule, the Court of Appeals declined to determine

how Pennsylvania would decide the question before it.

A16-A17. In dicta, itsuggested that its standard “ generally

tracks the Pennsylvania rule,” A26, a view that Judge

Rendell echoed, A44. But on the “unsettled” issue of asset

sales for cash or minuscule stock interests, neither opinion

cited or discussed Pennsylvania authorities.

Exide filed a petition for rehearing and rehearing en

banc. The court denied the petition on November 4, 2005,

with Judges Rendell and Ambro voting to grant rehearing

en banc. A80-A81.

REASONS FOR GRANTING THE WRIT

I. THE DECISION BELOW IS IN CONFLICT WITE

DECISIONS OF THIS COURT MANDATING

APPLICATION OF STATE LAW TO FILL GAPS IN

FEDERAL STATUTES.

This Court's decisions make clear that the Court of

Appeals’ creation and application of a “federal common

law” to determine successor liability under CERCLA was

error. Even the Government recognized that fact when its

brief to the Third Circuit failed to advocate such a theory.

By its election nevertheless to employ “federal common

law,” the court below decided this case in a way that

conflicts with the law that should have been applied —

that of Pennsylvania.

6

InO’Meilveny, this Court held, unanimously, that state

law — not federal common law — governs actions by the

FDIC tor legal malpractice and breach of eUrANY duties

in connection with failed s savings and loan associations.

Quoting cCrie Kairoaa’v. rompkins, 304 U.S. 64, 78 (1938},

that “there is no federal general common law,” the Court

emphasized that creation of federal common law is justi-

tied only “where there is a ‘significant conflict betw een

some federal policy or interest and the use of state law’

and that “the existence of such a conflict [is] a rire

for recognition of a federal rule of decision.” 512 U.S. a

83, 87 88. In Atherton, this Court reiterated that the

holding (again, unanimously) that state law, rather a

federal common law, governs the standard of care appli

cable to the corporate | governance of federally naiened

banks. 519 U.S. at 218-25. These decisions set forth clear

limitations on employing federal common law in any type

of action and are controlling here. See also United States v.

Kimbeli Foods, Inc., 440 U.S. 715, 726 (1979).

This Court's more recent decision in Bestfoods con-

firms that state law should apply in this case. In Bestfoods,

this Court unanimously affirmed the Sixth Circuit's appli-

cation of Michigan veil- -piercing law in holding that a

parent company may be held liable under CER CLA for its

subsidiary’s conduct. 524 U.S. at 60, 63-64. Contrary to the

Court of nef seme suggestion below, A9-A10, this Court

did not reject application of Michigan law. While the par-

ties’ positions made it unnecessary to decide whether to

apply state or federal law, see 524 U.S. at 63-64 n.9, this

Court pointedly noted that CERCLA had not displaced

“well-settled” rules of state corporate law:

CERCLA is thus like many another congres-

sional enactment in giving no indication “that

the entire corpus of state corporation law is to

be replaced simply because a plaintiff's cause of

action is based upon a federal statute,” and the

failure of the statute to speak to a matter as

fundamental as the liability implications of

corporate ow — demands application of

the rule that “in order to abrogate a common-

law principle, the statute must speak directly to

the question addressed by the common law.”

Id. at 63 (quoted citations omitted). In the decision below,

the Court of A pres failed to heed this w arming. More-

over, this Court in Bestfoods rejected the trial court’s formu-

lation of special rules for holding a parent company liable

as a facility “operator” under CERCLA because they

threatened to displace traditional state veil-piercing stan-

dards without congre secre authorization to do so. /d. at

70. Nevertheless, the decision Ts adopted a CERCLA-

specific rule of corporate successor liability.

O'Melveny and its progeny clearly called for the rejec-

tion of federal common law in this case. As the majority

opinion below itself recognized —

o

[T]he Supreme Court in O'Melveny cautioned

against the unwarranted displ acement of state

law, holding that state rules of decision gene-

ally fill interstitial gaps in federal statutes. 512

U.S. at 87. The displacement of state law is par-

ticularly disfavored in the area of corporate law,

because business decisions typically proceed in

reliance on the applicable state standards.

State corporation law generally should be inte-

grated into the fede ral statutory regime, unless

there exists’ ‘a significant conflict betwe ensome

fed eral policy or interest _— the use of state

] ry ‘ >]

A8 (some citations omitted); see also A41-A42 (opinion of

]. Rendell).

Even the court below agreed that there is no conflict

between Pennsylvania law and CERCLA’s purpose of

8

holding liable those responsible for the cost of cleaning up

hazardous wastes. See A1l6. Those courts of appeals that

have considered this issue since the decision in Bestfoods

agrec that there is no state law conflict. See United States v.

Davis, 261 F.3d 1,53 (1st Cir. 2001); Atchison, Topeka & Santa

Fe Ry. v. Brown & Bryant, Inc., 159 F.3d 358, 363-64 (9th Cir.

1998). Indeed, CERCLA itself prevents state law from ad-

versely affecting the Government's ability to obtain com-

pensation from polluters by making the principals of pol-

luting companies (such as William Price, Sr., who sold his

company’s assets to General) directly liable in a cost reco-

very action. See CERCLA § 107(a)(2), 42 U.S.C. § 9607(a)(2);

Be stfoods, 5 524 U.S. at 64-65.

By basing its deciSion on a need for “national unifor-

mity” in CERCLA’s application, A16-A17, the Third Cir-

cuit elevated an interest that this Court already has reject-

ed. This Court held in O'Melveny that uniformity was an

insufficient basis for creating a federal common law for the

FDIC: “Uniformity of law might facilitate the FDIC’s na-

tionwide litigation of these suits, eliminating state-by-state

research and reducing uncertainty — but if the avoidance

of those ordinary consequences qualified as anidentifiable

federal interest, we would be awash in ‘federal common-

law’ rules.” 512 US. at 88. See also Atherton, 519 US. at

219-21. That observation applies with full force here.

There is no indication that Congress desired to create _

uniform federal rules to govern CERCLA’s interstices. A

self-described “comprehensive” statute, CERCLA specifi-

cally sets forth when federal law applies to a cause of

action. E.g., CERCLA §§ 101(32), 42 U.S.C. § 9601(32) (in-

corporating Clean Water Act liability standards), 113(f), 42

U.S.C. § 9613(f) (contribution standards). Moreover, in

CERCLA tool Congress recognized that it was not sup-

planting all state common-law rules and created a com-

mission to study whether any of them should be changed

through future federal legislation. See CERCLA § 301(e), 42

US.C.§ 9651(e). Under O'Melveny, when a federal statute

9

embodies selected federal rules of decision and is other-

wise silent, courts are not free to tinker with Congress’

scheme by applying additional “federal common-law”

rules; doing so “is not to ‘supplement’ this scheme, but to

alter it.” 512 U.S. at 86-87.

The Court of Appeals erred in its adoption of federal

common law. This Court should grant certiorari to bring

the Third Circuit's jurisprudence into compliance with that

of this Court.

Il. THE DECISION BELOW PERPETUATES A SPLIT

AMONG THE CIRCUIT COURTS OF APPEALS

REGARDING WHAT LAW APPLIES TO SUC-

CESSOR LIABILITY ISSUES UNDER CERCLA.

The question whether to use “federal common law “

to resolve successor liability questions under CERCLA has

divided the courts of appeals for years. Before this Court's

decisions in O'Melveny, Atherton, and Bestfoods, the First

and Sixth Circuits had held that state law, not federal com-

mon law, must control. See Jolin S. Boyd Co. v. Boston Gas

Co., 992 F.2d 401 (1st Cir. 1993); Anspec Co. v. Johnson Con-

trols, Inc., 922 F.2d 1240 (6th Cir. 1991). In addition to (and

often in reliance on) the Third Circuit's decision in Smith

Land, the Fourth, Eighth, and Ninth Circuits had opted for

federal common law, sometimes using it to adopt special

pro-Government liability rules for CERCLA cases , suchas

the notorious “substantial continuity” doctrine (under

which the Government needed to prove little more than

that the defendant corporation was carrying on the same

business as an earlier company). See United States v.

Carolina Transformer Co., 978 F.2d 832, 837-38 (4th Cir.

1992); United States v. Mexico Feed & Seed Co., 980 F.2d 478,

487 n9 (8th Cir. 1992) (dicta); Louisiana-Pacific Corp. v.

Asarco, Inc., 909 F.2d 1260, 1262-66 (9th Cir. 1990). Later,

the Second Circuit joined this group. See B.F. Goodrich v.

Betkoski, 99 F.3d 505, 518-520 (2d Cir. 1996), cert. denied, 524

U.S. 926 (1998). :

10

This Court’s O'Melveny trilogy could have been ex-

pected to turn the tide, and it certainly was not without

effect. In light of this Court's decisions, the First Circuit, in

United States v. Davis, 261 F.3d 1, 53-54 (1st Cir. 2001), reaf-

firmed its conclusion that state law must govern, since

there is “no evidence that application of state law to the

facts of this case would frustrate any federal objectiv —

See also City Management Corp. v. U.S. Chemical Co., 43 F.3d

244 (6th Cir. 1994). The Second and Ninth Circuits, in State

of New York v. National Services Industries, Inc., 352 F.3d 682,

686-87 (2d Cir. 2003), and Atcluson, Topeka & Santa Fe Ry. v.

Brown & Bryant, Inc., 159 F.3d 358, 362-64 (9th Cir. 1998),

have jettisoned their adoption of the “substantial con-

tinuity” doctrine (a rejection that the Third Circuit fol-

lowed in its decision below, A27). And the Ninth Circuit

intimated in Afciuson that, when faced directly with the

question, it will abandon federal common law as well. 159

F.3d at 363-64.

In its decision below, however, the Third Circuit

failed to see the light. Despite what should have been

viewed as a post-O ‘Melt eny trend to the contrary in the cir-

cuit case law, the Third Circuit steadfastly declared its con-

tinued adherence to a “federal common law” regimen in

an opinion seemingly designed to turn the tide yet again.

Thus, in Judge Rendell’s words, the decision “ perpetuates

a split among the courts of appeals.” A28.

As things now stand, the First and Sixth Circuits

apply state law and the Ninth Circuit seems poised to fol-

low suit. The Third, Fourth, and Eighth Circuits are still

wedded to federal common law. Though the Second Cir-

cuit may be ready to switch to state law, its discussion of

the issue in National Services Industries, 352 F.3d at 687 n.1,

was sufficiently unclear as to cause the district court on

remand to express frustration because it did “little to clari-

fy which body of case law” it should apply. See State of

New York v. National Services Industries, Inc., 380 F. Supp. 2d

122, 126 (E.D.N.Y. 2005). The frustration is of national

a a

1]

scope and cries out for resolution by this Court. The Court

should grant Exide’s petition for certiorari to impose

harmony on this area of the law that has remained

unsettled for more than a decade.

Ill. THE DECISION BELOW INCORRECTLY DE-

CIDED AN IMPORTANT QUESTION OF FEDE-

RAL LAW REGARDING CERCLA LIABILITY

THAT SHOULD BE SETTLED BY THIS COURT,

AND INJECTED CONFUSION INTO CERCLA

JURISPRUDENCE AS IT DID SO.

CERCLA is one of the principal tools crafted by Con-

gress for remediation of the nation’s environmental da-

mage. See Key Tronic Corp. v. United States, 511 U.S. 809,

814 (1994); Exxon Corp. v. Hunt, 475 U.S. 355, 359-60 (1986).

As its primary purposes include imposition of liability for

environmental cleanup costs and allocation of financial re-

sponsibility through contribution actions, see Cooper Indus.,

Inc. v. Avtall Services, Inc., 543 U.S. 157, 161-63 (2004);

Meghrig v. KFC Western, Inc., 516 U.S. 479, 483 (1996), it is

a prodigious source of federal litigation. And as the dollar

amounts of remediationjudgments often are “substantial,”

Key Tronic, at 814, it is a principal source of concern for

businesses seeking to structure their affairs to take poten-

tial liabilities into account.

The Third Circuit therefore was correct to recognize

the importance of stability and predictability in the selec-

tion of legal rules to govern business liabilities under

CERCLA. See A8, A15. See also Polius v. Clark Equip. Co.,

802 F.2d 75, 83 (3d Cir. 1986). But rather than making the

law more clear, the Third Circuit’s decision has made it

more uncertain and confused.

Apart from successor liability, the courts of appeals

frequently apply state business law to determine liability

in CERCLA cases. For example, they use state law to de-

termine whether a dissolved corporation may be held

12

liable under CERCLA. See Citizens Elec. Corp. v. Bituminous

Fire & Marine Ins. Co., 68 F.3d 1016, 1019-20 (7th Cir. 1995)

(applying Fed. R. Civ. P. 17(b)); Levin Metals Corp. v. Parr-

Richmond Terminal Co., 817 F.2d 1448, 1451 (9th Cir. 1987)

(same). They also apply state law to determine partners’

liability under CERCLA. See Redwing Carriers, Inc. v. Sara-

land Apartments, 94 F.3d 1489, 1500-02 (11th Cir. 1996).

While this Court in Bestfoods, 524 U.S. at 63 n.9, noted a

dispute about the source of law that governs corporate

“veil-piercing” under CERCLA, the appellate decisions on

that issue since Bestfoods have applied state law there too.

See Carter-Jones Lumber Co. v. LTV Steel Co., 237 F.3d 745,

746 n.1 (6th Cir.), cert. denied, 533 U.S. 903 (2001); Browning-

Ferris Indus. of Ill., Inc. v. Ter Maat, 195 F.3d 953, 959 (7th

Cir. 1999) (by agreement of parties), cert. denied, 529 US.

1098 (2000).

Even the Third Circuit has looked to state law on

some of these issues. See, e.g., Aluminum Co. of Amer. v.

Beazer East, Inc., 124 F.3d 551, 567 (3d Cir. 1997) (dissolved

corporation). See also United States v. USX Corp., 68 F.3d

811, 826 n.30 (3d Cir. 1995) (joint venture liability); cf also

Witco Corp. v. Beekliiis, 38 F.3d 682, 686-90 (3d Cir. 1994)

(liability of decedent's estate). And that court has a well-

developed body of law applying state jurisprudence to

determine whether a successor company has incurred lia-

bility under an indemnity or release agreement. See Alumu-

num Co. of Amer., 124 F. 3d at 565; Beazer East Inc. v. Mead

Corp., 34 F.3d 206, 212-15 (3d Cir. 1994), cert. denied, 514

U.S. 1065 (1995). See also Smithkline Beecham Corp. v. Rohm

& Haas Co., 89 F.3d 154, 158 (3d Cir. 1996); Fisher Devel. Co.

v. Boise Cascade Corp., 37 F.3d 104, 109 (3d Cir. 1994).

The Third Circuit did not explain why state law is

sufficient to decide the foregoing issues, but insufficient to

determine corporate successor liability in this case. It

merely emphasized a perceived need for “national unifor-

mity.” A16-A17. That need would seem to apply equally

in any of these situations, however. The patchwork appli-

13

cation of state and federal law in these business liability

decisions results in neither certainty nor predictability —

but instead results in confusion.

Although the Court of Appeals apparently believed

that its decision would bring clarity to the law of successor

liability, its decision did no such thing. The court vowed

to base its rule of federal common law for successor corpo-

rations on the law followed by a majority of states. A6-A7,

A16-A17. But beyond the general framework for successor

liability law, the Third Circuit found no consensus in the

state decisions on how to deal with such specific issues pi-

votal to this case as whether mixed cash/ stock transactions

can be de facto mergers, or how much stock is sufficient to

satisfy a requirement of continuity of ownership. See A11-

Al4 &nn. 5-7. Deeming “the ‘majority’ standard . . .some-

what unsettled” on these questions, the court instead crea-

a federal common law based on what the critical inqui-

y “appears to be” according to a handful of cited deci-

ats from a total of only six jurisdictions. See A21-A24 &

nn. 9-10. The decision thus did not benignly apply a uni-

form majority state rule to this case; it created a brand new

rule of federal law to supplant the absence of any state

consensus whatsoever. That adhoc approach to creation of -

federal law fosters neither uniformity nor predictability.

There is no readily ascertainable standard for deter-

mining how a federal court should craft a new federal rule

of corporate law for CERCLA cases. This Court has firmly

instructed against creation of “a relaxed, CERCLA-specific

rule of derivative liability that would banish traditional

standards and expectations.’ ’ Bestfoods, 524 U.S. at 70. Yet,

it is notable that, in holding in favor of Government reco-

very, the Third Circuit adopted for this case a decidedly

pro-liability de facto merger rule that emphasizes continu-

ity of business operations, waters down any requirement

for continuity of shareholders, and fails to accord any sig-

nificance to the seller’s retention of tort liabilities and sub-

stantial cash with which to pay them. See A20-A26. This

14

new rule looks a great deal like the discredited, CERCLA-

specific “substantial continuity” doctrine that the court

purported to reject. See A20-A27. The decision thus un-

derscores the dangers of special federal-court corporate

law-making for CERCLA cases. The Third Circuit's hold-

ing thus not only fosters confusion, but it invites pro-

Government distortion of corporate law.

Exide’s petition should be granted so that this Court

may restore certainty to business law and thereby enable

businesses purchasing assets and otherwise structuring

their affairs to know how their actions may affect their

CERCLA liability.

IV. THE DECISION BELOW DISPLACED GOVERN-

ING PENNSYLVANIA LAW WITH A FEDERAL

RULE THAT IS AT ODDS WITH STATE POLICY,

PRODUCING AN ERRONEOUS RESULT.

The Court of Appeals’ error in creating and applying

a federal common law made a significant difference here.

In selling its assets to General, Price retained liability for its

tort claims and received the bulk of the selling price ($4.75

million) in cash; the remaining stock component of that

price constituted less than 5% of General’s outstanding,

shares. Whether a sale of corporate assets is a de facto mer-

ger on facts such as these has not been determined by the

Pennsylvania courts, but the policy factors that control that

inquiry under Pennsylvania law are inconsistent with

those advanced by the Court of Appeals. Although the

court below opined in dicta that Pennsylvania law on these

issues is consistent with the federal law that it postulated,

it cited no Pennsylvania authorities in support of that con-

clusion and Exide is aware of none. Rather, the relevant

guideposts signal that the sale of Price’s assets was not a de

facto merger under Pennsylvania law.

1. Pennsylvania focuses on stock transfer (rather than

cash payment) as an essential element of a de facto merger,

15

and no Pennsylvania court has ever found a de facto merger

without such a transfer. See Farris v. Glen Alden Corp., 393

Pa. 427, 143 A.2d 25 (1958) (seller paid with majority of

buyer's stock); Carlos R. Leffler, Inc. v. Hutter,696 A.2d 157,

167-68 (Pa. Super. 1997) (transfer to new company having

same shareholders); Commonwealth v. Lavelle, 382 Pa.

Super. 356, 555 A.2d 218, appeal denied, 524 Pa. 595, 568

A.2d 1246 (1989) (seller had hidden interest in buyer’s

stock). Numerous federal courts that have > examined the

issue agree that, under Pennsylvania law, the absence of a

stock transfer is fatal to a claim of de facto merger, or at

least creates a “strong presumption” against its existence.

Berg Chilling Sys. v. Hull Corp., 435 F.3d 455, 462, 468-69 (3d

Cir. 2006) (Alito, J.).

These cases make clear that, rather than being a

mere sorenciiy, the required stock transfer is a key deter-

minant of whether the selling company has actually

merged into its buyer, or merely sold assets to it. The

majority below held that “only some continuity of owner-

ship is required,” A23 (emphasis added), so that even the

most minimal stock transfer would be sufficient. See 21-

A24. But no Pennsylvania decision has ever held that the

transfer of less than acontrolling interest in the purchasing

company is sufficient to create successor liability. Control

is a factual issue considered inappropriate for summary

judgment. See Continental Ins. Co. v. Schneider, Inc., 810

/A.2d 127, 135-36 (Pa. Super. 2002), aff'd, 582 Pa. 591, 605

n.11, 873 A.2d 1286, 1294 n.11 (2005). To hold that Gene-

ral’s payment of 4.537% of its stock is sufficient in this case

would be a significant expansion of Pennsylvania law that

is not foreshadowed by any state court precedents.

3. A holistic view of Pennsylvania corporate law

makes clear that the Commonwealth would not welcome

such an expansion. See Lavelle, 382 Pa. Super. at 374, 555

A.2d at 227 (factors considered for successor liability in-

clude “the purposes of the provisions of the corporation

law said to be applicable”), quoting Farris, 393 Pa. at 432,

16

143 A.2d at 28. Ina series of enactments designed to keep

competitive with neighboring Delaware, Pennsylvania’s

Legislature has liberalized allowance of corporate asset

sales that do not comply with merger formalities and

restricted efforts to challenge such transactions under a de

facto merger theory. See Business Corporation Law (BCL),

15 Pa. C.S. §§ 1105, 1904 (declaring de facto merger doctrine

“abolished”), 1932; Corp. L. Comm. Comments — 1988 to

BCL §§ 1105, 1904, reprinted at 15 Pa. C.S.A. §§ 1105, 1904;

MicroSignal Corp. v. MicroSignal Corp., 147 Fed. Appx. 227,

232-33 (3d Cir. 2005); Terry v. Penn Central Corp., 668 F.2d

188, 193-94 (3d Cir. 1981). While these enactments do not

abrogate the equitable principles of successor liability,

MicroSignal, at 232 n.9, they inform the framework within

which such issues must be decided in Pennsylvania and

demand caution.

4. Against this background, the Pennsylvania courts

have been careful not to expand the de facto merger doc-

trine. See, e.g., Dawejko v. Jorgensen Steel Co., 290 Pa. Super.

15, 26, 434 A.2d 106, 111 (1981) (rejecting de facto merger

expansion to deal with product liability issues, and crea-

ting special doctrine limited to product liability actions in-

stead). They have declined to expand traditional successor

liability law where alternate avenues of redress are availa-

ble. See Hill v. Trailmobile, Inc., 412 Pa. Super. 320, 328-31,

603 A.2d 602, 607-08 (1992) (no expansion where party has

alternative sources of recovery against other parties). See

also Lackatvaxen Water & Sewer Co. v. Pennsylvania Pub. Util.

Conm., 85 Pa. Commw. 377, 381, 481 A.2d 1386, 1388 (1984)

(transferor must “no longer ha[ve] substantial assets with

which to meet its contractual or tort obligations”).

Here, Price retained its tort liabilities rather then

making them subject to General’s indemnity, and was paid

the vast bulk of the sales price in cash with which it could

satisfy those obligations. Price remained in existence until

1967, and its sole shareholder could have been pursued

thereafter. No Pennsylvania court ever has held that there

17

is a de facto merger where there has been such a retention

of liabilities by, and such a large payment of cash (rather

than stock) to, the seller. Nothing in Pennsylvania law

warrants such an expansion of successor liability law by a

federal court in this case, and nothing in CERCLA autho-

rizes Pennsylvania law’s displacement. This Court should

grant certiorari so that it may restore deference to the

governing Pennsylvania corporate law.

CONCLUSION

Pennsylvania law did not permit entry of summary

judgment against Exide. Rather than applying that law,

the Court of Appeals displaced it with federal common

law, even though this Court had instructed that it should

not do so. This Court should grant the petition for a writ

of certiorari, vacate the Court of Appeals’ decision, and re-

mand for application of Pennsylvania state law to the suc-

cessor liability issue.

Respectfully submitted,

TIMOTHY K. LEwIs

ROBERT L. COLLINGS

CARL A. SOLANO

(Counsel of Record)

JENNIFER J. NESTLE

Attorneys for Petitioner

SCHNADER HARRISON SEGAL & LEWIS LLP

1600 Market Street, Suite 3600

Philadelphia, Pennsylvania 19103

Of Counsel.

Dated: March 31, 2006.

APPENDIX

TABLE OF CONTENTS

Page

Opinion of the Court of Appeals ................. Al

OpNGGR OF TNE COUNG 605 86 5 So ac Al

Concurring and Dissenting Opinion......... A28

Opinion of the District Court on Motions for Sum-

SADT Y PGRN os rise a este Kueh Nes A45

Opinion of the District Court on Motion for Reconsi-

deration or Certification: 5 i665 ok cece ws ts A73

Order of District Court Entering Judgment ....... A78

Order of Court of Appeals Denying Rehearing .... A80

Statutory Provisions (Excerpts).................. A82

CERCLA $101, 42 USC. 6 9601 |. 330.5... A82

CRRCLAS 107, 42 USS BOE oy ceva wus A82

CERCLA § 113, 42 US.C.§9613 .........0.. A85

CERCLA 8001, G2U SC. 8908 Sr ieee A87

OPINION OF THE COURT OF APPEALS

(423 F.3d 294)

United States Court of Appeals

for the Chird Circuit

No. 03-3515

UNITED STATES OF AMERICA

v.

GENERAL BATTERY CORPORATION, INC;

EXIDE CORPORATION,

Exide Corporation, Appellant

Argued January 26, 2005

Before: SCIRICA, Cluef Judge,

~ 4 oO

RENDELL and FISHER, Circurt Judge

(Filed September 6, 2005)

OPINION OF THE COURT

SCIRICA, Cluef Judge

[*296] 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-contaminate

Supertund site. The District Court granted summary

-Al-

judgment in favor of the United States on a “de facto

merger’ theory of successor liability. We will affirm.

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 w ith

Exide Corporation in 2000. The United States tiled 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 ged 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

A.

agreement with Price Battery, a smaller, privately-held

battery manufacturing firm. Price Battery was ow ned 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.’ At =

time, 100,000 General Battery shares were valued <

approximately $ 1 million and represented 4.537% a

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 [*297] board and held

9.12% and 4.44% of its prvordadle ie equ.ty, respectively.

Under the agreement, General Battery purchased

say Battery’ s equipment, aa. intellectual property

nd inventory. It also assumed Price Battery’s contractual

obli gations, 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.

transaction, General Battery continued

batteries at the Hamburg plant. Price

The only Price Battery asset nominally excluded from the

transaction was its real property, including its manufacturing

plant. Price Battery sold its real property and the building toa

nonprofit development organization for $ 1.8 million. The

development organization, in turn, leased the facility back to

General Battery until 1978, when the deed was transferred to

General for S$ 1.00. Taking this into account, Price Sr. received $

4.75 million cash and 100,000 shares of General Battery stock for

the Price Battery enterprise.

as:

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.

Oncross-motions for summary judgment, the District

Court heid 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 U.S. Dist. LEXIS 3303 (E.D. Pa.

Feb. 27, 2002). Followi ing 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.

Il.

The District Court had jurisdiction under CERCLA,

42 US.C. § 9613(b), and 28 US.C. § 1331. We have

jurisdiction under 28 U.S.C. § 1291. Our summary

judgment standard of review is plenary. In re Mushroom

-A4-

Transp. Co., 382 F.3d 325, 335 (3d Cir. 2004) (drawing all

reasonable inferences in favor of the non-moving party).

If.

We return, once again, to the difficult area of indirect

liability under CERCLA.* 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 [*298] cleanup.” United States v. Bestfoods, 524

U.S. 51, 56 n.1, 141 L. Ed. 2d 43, 118 S. Ct. 1876 (1998)

(quoting Pennsylvania v. Union Gas Co., 491 U.S. 1, 21, 105

L. Ed. 2d 1, 109 S. Ct. 2273 (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.” [d.

at 55 (quoting Key Tronic Corp. v. United States, 511 US.

809, 814, 128 L. Ed. 2d 797, 114 S. Ct. 1960 (1994)).

CERCLA is not, however, “a model of legislative

draftsmanship,” Exxon Corp. v. Hunt, 475 U.S. 355, 363, 89

L. Ed. 2d 364, 106 S. Ct. 1103 (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 ox oy

liability, including successor liability. See 42 U.S.C.

2. See, ¢.g., Alcoa v. Beazer E., 124 F.3d 551 (3d Cir. 1997) (share-

holder, successor and indemunitor liability); SmithKline Beecham

Corp. v. Rolin & Haas Co., 89 F.3d 134 (3d Cir. 1996) (indemnitor

and successor liability); United States v. USX Corp., 68 F.3d 811

(3d Cir. 1995) (shareholder and officer liability); Lansford-

Coaldale joint Water Auth. v. Tonolli Corp., 4 F.3d 1209 (3d Cir.

1993) (parent-subsidiary liability); Snuth Land & Improvement

Corp. v. Celotex Corp., 851 F.2d 86 (3d Cir. 1988) (corporate

successor liability).

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

(holding CERCLA incorporates common law of

parent/subsidiary veil-piercing); Smuth Land, 851 F. 2d at

92 (holding CERCLA imposes successor liability).*

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

The courts of appeals that have addressed the issue are

unanimous in recognizing successor liability under CERCLA.

United States v. Davis, 261 F.3d 1, 54 (1st Cir. 2001); N.Y. v. Nat'l

Servs. Indus., 352 F.3d 682 (2d Cir. 2003); Smith Land, 851 F.2d at

92 (3d Cir. 1988); United States v. Carolina Transformer Co., 978

F.2d 832, 837 (4th Cir. 1992); Anspec v. Johnson Controls, Inc., 922

F.2d 1240, 1245 (6th Cir. 1991); N. Shore Gas Co. v. Salomon, Inc.,

152 F.3d 642, 649 (7th Cir. 1998); United States v. Mex. Feed &

Seed Co., 980 F.2d 478, 486 (8th Cir. 1992); Atchison, Topeka &

Santa Fe Ry. Co. v. Brown & Bryant, Inc., 159 F.3d 358, 364 (9th

Cir. 1997).

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 [*299] 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

(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”).

Relying principally on O'Melveny & Myers v. FDIC,

312 U.S. 79, 129 L. Ed. 2d 67, 114 S. Ct. 2048 (1994), a case

decided under the federal banking statutes, and Davis, 261

F.3d at 54 (1st Cir. 2001), a case applying state successor

liability law under CERCLA, Exide invites us to overrule

Smith Land.

In United States v. Kimbell Foods, Inc., 440 U.S. 715, 59

L. Ed. 2d 711, 99 S. Ct. 1448 (1979), the Supreme Court

addressed the propriety of applying state law under an

ambiguous or incomplete federal statute. The Court

emphasized that, “[wlhether to adopt state law or to

fashion a nationwide federal rule is a matter of judicial

policy ‘dependant upona variety of considerations always

By ie I

relevant to the nature of the specific governmental

interests and to the effects upon them of applying state

law.’” Id. at 728 (quoting United States v. Standard Oil, 332

U.S. 301, 310, 91 L. Ed. 2067, 67 S. Ct. 1604 (1947)). The

issue in Kimbell Foods was whether, absent an express

statutory directive, a uniform federal rule of lien priorities

was necessary under certain federal loan programs. Id. at

718. Employing a three-factor analysis, the Court answered

this question in the negative, holding state law governed

the priority of the liens. Kimbell Foods considered (1)

whether the federal program, by its very nature, required

uniformity; (2) whether application of state law would

frustrate specific objectives of the federal program; and (3)

whether application of uniform federal law would disrupt

existing commercial relationships predicated on state law.

Id. at 728-29.

Emphasizing the second Kimbell Foods factor — a

conflict with an identifiable federal interest — the Supreme

Court in O'Melveny cautioned against the unwarranted

displacement of state law, holding that state rules of

decision generally fill interstitial gaps in federal statutes.

312 U.S. at 87. The displacement of state law is particularly

disfavored in the area of corporate law, because business

decisions typically proceed in reliance on the applicable

state standards. Kamen v. Kemper Fin. Servs., Inc., 500 U.S.

90, 105, 114 L. Ed. 2d 152, 111 S. Ct. 1711 (1991). State

corporation law generally should be integrated into the

federal statutory regime, unless there exists “a significant

conflict between some federal policy or interest and the

use of state law.” O'Melveny, 512 U.S. at 87; see also Kamen,

200 U.S. at 107; Kimbell Foods, 440 U.S. at 728; see generally

Henry J. Friendly, In Praise of Erie — And of the New Federal

Common Law, 39 N.Y.U. L. Rev. 383 (1964). The principal

question here, then, is whether CERCLA requires a

uniform federal standard of corporate successor liability.

As noted, Smith Land and Lansford-Coaldale expressly

held that CERCLA requires uniform federal standards of

~ Zs

successor and veil-piercing liability, respectively. Neither

case has been overruled. O'Melveny, a case brought under

a state law cause of action (as opposed to a federal liability

statute), 512 U.S. at 83, dealing with the preemptive force

of the federal banking statutes, id. at 86, did not overrule

our CERCLA-specific holdings in Smith Land and Lansford-

Coaldale. O'Melveny involved claims brought by the

Federal Deposit Insurance [*300] Corporation (FDIC), as

the receiver of a federally insured bank, under California

tort law. The FDIC argued, notwithstanding its reliance on

a state law cause of action, that uniform federal liability

standards should preempt the California rules of decision.

The Supreme Court disagreed, holding the relevant federal

statutes neither authorized nor required the creation of a

preemptive body of federal common law in cases arising

under state law causes of action. Id. at 89. Atherton v.

FDIC, another decision cited by Exide Corporation in

which the Court cautioned against the unwarranted

“creation” of federal common law, also involved the

preemptive scope of the federal banking laws. 519 U.S.

213, 218, 136 L. Ed. 2d 656, 117 S. Ct. 666 (1997).

Smith Land and Lansford-Coaldale, incontrast, held that

uniform standards of indirect corporate liability are

necessary under CERCLA, an environmental liability

statute enforced under its own federal cause of action.

O'Melveny and Atherton neither addressed the CERCLA-

specific reasoning of Smith Land and Lansford-Coaldale nor

overruled their CERCLA-specific holdings.

Bestfoods, a case decided after O'Melveny and Atherton,

is the only Supreme Court decision touching on the

CERCLA question at issue. But the Court there explicitly

declined to resolve the circuit split on whether CERCLA

borrows a particular state’s law of indirect corporate

liability. Bestfoods, 524 U.S. at 64 n.9. Bestfoods neither cited

O'Melveny nor otherwise suggested that uniform CERCLA

successor liability standards were inappropriate.

-A9-

If anything, Bestfoods cuts in favor of a uniform

federal standard. Bestfoods applied “fundamental” and

“hornbook” principles of indirect corporate liability, not

the law of any particular state. 524 U.S. at 61-62. The court

of appeals in Bestfoods had applied Michigan law. United

States v. Cordova Chem. Co., 113 F.3d 572, 580 (6th Cir. 1997)

(en banc). But the Supreme Court declined to apply

Michigan law and instead looked to the general

“hornbook” rule of veil-piercing. The Court’s reliance on

the general standard is a different matter than borrowing

the law of a particular state. Applying a particular state’s

law requires a state-by-state interpretation of the federal

liability statute — a result, in the case of successor liability

under CERCLA, that we believe conflicts with the

statutory objectives. See discussion infra.

A uniform federal standard is also consistent with

recent Supreme Court decisions in which gaps in federal

liability statutes were filled not with the law of a particular

state, but with general common law principles. Clackamas

Gastroenterology Assocs., P.C. v. Wells, 538 U.S. 440, 448, 155

L. Ed. 2d 615, 123 S. Ct. 1673 (2003) (looking to the general

common law definition of “servant” to define the term

“employee” under the ADA); Burlington Indus., Inc. v.

Ellerth, 524 U.S. 742, 754, 141 L. Ed. 2d 633, 118 S. Ct. 2257

(1998) (relying on “the general common law of agency,

rather than on the law of any particular State,” in defining

the term “agent” under Title VII) (citation omitted). Just as

the ADA and Title VII require uniform federal definitions

of the terms “employee” and “agent,” respectively,

CERCLA requires a uniform federal definition of

“successor corporation.” As the Court explained in

Burlington, “{t}he resulting federal rule, based ona body of

case law developed over time, is statutory interpretation

pursuant to congressional direction,” not the free-wheeling

creation of federal common law. 524 U.S. at 755.

For these reasons, we believe that Smith Land and

Lansford-Coaldale have [*301] not been undermined by |

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recent Supreme Court decisions and remain circuit law. See

Third Circuit Internal Operating Procedure 9.1 (“[T]he

holding of a panel in a precedential opinion is binding on

subsequent panels. Thus, no subsequent panel overrules

the holding in a precedential opinion of a previous panel.

Court en banc consideration is required to do so.”).

Moreover, we believe Smith Land is consistent with

CERCLA’s objectives. CERCLA is a federal liability statute,

applicable nationwide to those responsible for hazardous-

waste contamination. Liability under the statute is a matter

of federal law. 42 USC. § 9613(f)(1) (CERCLA

contribution actions “shall be governed by Federal law”);

Kimbell Foods, 440 U.S. at 726 (“This Court has consistently

held that federal law governs questions involving the

rights of the United States arising under nationwide

federal programs.”).

[t is true that successor tort liability, including

successor environmental liability, rests at the intersection

of tort and corporate law — both areas largely regulated

by the states. But it does not necessarily follow that

CERCLA’s statutory scheme is served by borrowing a

particular state’s successor liability law as the federal rule

of decision. The choice of law ‘framework governing

successor liability remains unsettled.* And although the

4. Compare In re Asbestos Litig. (Bell), 517 A.2d 697, 699 (Del. Super.

Ct. 1986) (characterizing successor liability as a

corporate/contract doctrine), with Savage Arms Inc. v. West. Auto

Supply Co., 18 P.3d 49, 53 (Alaska 2001) (collecting cases, noting

that “state courts have split on the question,” and characterizing

successor products liability as a tort doctrine); see also Ruiz v.

Blentech Corp., 89 F.3d 320, 322 (7th Cir. 1996) (describing a

question of successor liability choice of law as “rather

mystifying”); SmithKline Beecham Corp. v. Rohim & Haas Co., 1995

U.S. Dist. LEXIS 3361, at *12-26 (E.D. Pa. Mar. 17, 1995)

(wrestling with choice of law for CERCLA successor liability).

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a ae 7 — a a = —_ aes

general doctrine of successor liability is “largely uniform”

under state law, Atchison, 159 F.3d at 363 (9th Cir. 1997)

(citation omitted), this uniformity is less apparent when

the general standards are applied in specific cases.”

Beneath a veneer of uniformity, the “entire issue of

successor liability . . . is dreadfully tangled, reflecting the

difficulty of striking the right balance between the

competing interests at stake.” EEOC v. Vucitech, 842 F.2d

936, 944 (7th Cir. 1988).

In Atchison, the Court of Appeals for the Ninth

Circuit, in considered dictum, expressed doubt that a

uniform federal rule of successor liability is necessary

under [*302] CERCLA. 159 F.3d at 364. The court

S. For example, some states emphasize “continuity of ownership”

as a key element of successor liability. Cargo Partner AG v.

Albatrans Inc., 352 F.3d 41, 47 (2d Cir. 2003) (New York law).

Others do not. Woodrick v. Jack ]. Burke Real Estate, Inc., 306 N.J.

Super. 61, 703 A.2d 306, 313-14 (N.J. Super. Ct. App. Div. 1997)

(finding de facto merger absent continuity of ownership). Some

states apply unique successorship rules in products liability and

environmental cases. Dawejko v. Jorgensen Steel Co., 290 Pa.

Super. 15, 434 A.2d 106, 111-12 (Pa. Super. Ct. 1981); Dep't of

Transp. v. PSC Res., Inc., 175 N.J. Super. 447, 419 A.2d 1151 (NJ.

Super. Ct. Law Div. 1980). Others do not. Bielagus v. EMRE of

N.H., Corp., 149 N.H. 635, 826 A.2d 559 (N.H. 2003). In some

states, the governing rules are difficult to ascertain. Compare

Hart v. Bruno Mach. Corp., 250 A.D.2d 58, 679 N.Y.S.2d 740 (N.Y.

App. Div. 1998) (applying product line theory of successor

liability), with City of N.Y. v. Charles Pfizer & Co., 260 A.D.2d 174,

688 N.Y.S.2d 23 (N.Y. App. Div. 1999) (rejecting same theory).

Even jurisdictions in broad agreement on the appropriate legal

standards may apply them differently. SmithKline Beecham, 1995

U.S. Dist. LEXIS 3361, at *23-24 (E.D. Pa. Mar. 17, 1995) (noting

differences between New Jersey and Pennsylvania application

of common de facto merger elements). Reconciling these

holdings poses some difficulty. See Cargo Partner AG v.

Albatrans, Inc., 207 F. Supp. 2d 86, 93-114 (S.D.N.Y. 2001).

-Al2-

reasoned that “[i]f state law varied widely on the issue of

successor liability, perhaps the need for a uniform federal

rule would be more apparent.” Id. at 363. But we

respectfully disagree with Atchison’s premise. State law

does vary substantially on the issue of successor liability,

and its unpredictability counsels in favor of CERCLA

uniformity.

The successor liability issues raised in this case are

illustrative. Whether a mixed cash/stock acquisition

triggers successor liability under the de facto merger

doctrine does not command uniform treatment among the

states.° Whether successor liability attaches to a transaction

where the seller receives a “small percentage” of the

buyer's outstanding equity is also unsettled.’ For example,

6. Compare Ladenburg Thalmann & Co. v. Tim’s Amusements, Inc.,

275 A.D.2d 243, 248, 712 N.Y.S.2d 526 (N.Y. App. Div. 2001)

(finding continuity of ownership in assets-for-promissory note

transaction), and Fenderson v. Athey Prods. Corp., 220 Ill. App. 3d

832, 581 N.E.2d 288, 292, 163 Ill. Dec. 337 (Ill. Ap. Ct. 1991)

(Illinois law) (no requirement “that all or even most of the

purchase price” be paid in stock), with Nova Ribbon Prods. v.

Lincoln Ribbon, 1995 U.S. Dist. LEXIS 4322, at *20 (E.D. Pa. Mar.

30, 1995) (Pennsylvania law) (holding de facto merger liability

turns on whether transaction is “primarily” for stock). Even

within New Jersey, the continuity of ownership standard

appears unsettled in mixed cash/stock transactions. Compare

Wilson v. Fare Well Corp., 140 NJ. Super. 476, 356 A.2d 458, 461

(N.J. Super. Ct. Law Div. 1976) (imposing successor liability

where stock comprises less than half of purchase price), with

McKee v. Harris-Seybold Co., 109 N.J. Super. 555, 264 A.2d 98, 104

(N.J. Super. Ct. Law Div. 1970) (no continuity of ownership in

mixed cash/stock transaction).

3 Compare Cargill, Inc. v. Beaver Coal & Oil Co., Inc., 424 Mass. 356,

361, 676 N.E.2d 815 (1997) (Massachusetts law) (finding

continuity of ownership where seller receives 12.5% stake in

acquiring company), and Glynwed, Inc. v. Plastimatic Inc., 869 F.

-Al13-

New Jersey corporations may be held responsible for

successor environmental liability from which New York

corporations may be exempt. Compare PSC, 175 N.J. Super.

447, 419 A.2d 1151 (NJ. Super. Ct. Law Div. 1980)

(applying expansive theory of successor liability to

environmental torts), with Schumacher v. Richards Shear Co.,

99 N.Y.2d 239, 451 N.E.2d 195, 198, 464 N.Y.S.2d 437 (N-Y.

1983) (adhering to traditional concepts of successor

liability). We doubt Congress intended to incorporate such

variations under a comprehensive federal liability statute.

See 42 U.S.C. § 9613(f)(1) (CERCLA contribution actions

“shall be governed by Federal law”); Miss. Band of Choctaw

Indians v. Holyfield, 490 U.S. 30, 43, 104 L. Ed. 2d 29, 109 S.

Ct. 1597 (1989) (“federal statutes are generally intended to

have uniform nationwide application’).

A more uniform and predictable federal liability

standard corresponds with specific CERCLA objectives by

encouraging settlements and facilitating a more liquid

market in corporate and “brownfield” assets. See 42 U.S.C.

§ 9622 (encouraging CERCLA settlements “in order to

expedite effective remedial actions and minimize

litigation”); § 9607(r) (encouraging transfer and

redevelopment of contaminated property under

CERCLA’s so-called “Brownfield Amendments”)*; cf.

Supp. 265, 277 (D.N.J. 1994) (New Jersey law) (“continuity of

ownership, not uniformity, is the test”), with Savage Arms, 18

P.3d at 58 (Alaska 2001) (noting that percentage of shares owned

is an “important fact”), and Kaleta v. Whittaker Corp., 221 Ill.

App. 3d 705, 583 N.E.2d 567, 571, 164 Ill. Dec. 651 (III. App. Ct.

1991) (finding no continuity of ownership where seller received

a “de minimis” .00037% stake in buyer).

In 2001, Congress amended CERCLA with the Brownfields

Revitalization Act in order to spur the cleanup, transfer and

redevelopment of contaminated land. Pub. L. No. 107-118, 115

Stat. 2356 (the “Brownfields Amendments” ). Among other goals,

-A14-

Clark Equip. Co., S02 F 2c 75, 83 (3d Cir.

Seeman altera tions liability

rs ent necessari rily increases

"Major economic dec Isic ons, critical to

e certainty and

aaa oredictabil tv.”) (citation ‘omitted).

Snuth Land's application of the “majority” standard

fosters CERCLA predictability. It ™ accords respect to

existing commercial relationships predicated on the

majority state law, cf. Kimbell ‘uae “440 U.S. at 728-29,

while ensuring that responsible parties, including

successor corporations, contribute their fair share to the

cleanup of hazardous waste under the federal program.

Accord B.F. Goodrich v. Betkoski, 112 F.3d 88 (2d Cir. 1997)

(applying uniform federal standard); Carolina Transformer,

978 F.2d at 837 (4th Cir. 1992) (same); Mex. Feed & Seed,

980 F.2d at 487 n.9 (8th Cir. 1992) (dicta); but see Davis, 261

F.3d at 54 (1st Cir. 2001) (applying state law); Atchison, 159

F.3d at 361-64 (9th Cir. 1997) (dicta); Anspec, 922 F.2d at

1230 (6th Cir. 1991) (Kennedy, J., concurring)

Davis, the most recent court of appeals decision

applving state law, held that CERCLA incorporates state

successor liability rules unless the particular state law is

“hostile to the federal interests anim ating CERCLA.” 261

F.3d at 54 (1st Cir. 2001). Davis followed Atchison, where

the Court of Appeals for the Ninth Circuit concluded that

the Brownfields Amendmcnts encourage the acquisition and

redevelopment of Superfund sites by according bona fide asset

purchasers a defense to CERCLA liability. 42 U.S.C. § 9607(r)(1)

[he principal goal ot the Amendments is to balance the interest

in cost recovery under CERCLA’s liability provisions with the

economic interest in a liquid market for “brownfield” assets

Consistent with this purpose, a predictable test for successor

liability lowers transaction costs and encourages brownfield

acqu isivions

borrowing state law is consistent with CERCLA, because

“Tijt is unrealistic to think that a state would alter general

corporate law principles to become a particularly

hospitable haven for polluters.” 159 F.3d at 364 (9th Cir.

1997). As a general matter, we agree it is unlikely that

States w ould a attempt to imm unize their corporations from

ERCLA Hability. See generaily Richard L. Revesz,

Rehabilitati ing Interstate Com petition: Rethinking the “Race to

the Bottom” Rationale for Federal Environme sda Re gulation,

67 N.Y.U. L. Rev. 1210 (1992).

But neither Atcison, nor Davis, nor the concurring

and dissenting opinion, address the conflict between

CERCLA’s objectives and borrowing unpredictable state

successorship law. We believe that incorporating variable

and uncertain state successor liability standards would

increase significantly CERCLA litigation and transaction

costs — in conflict with the statutory interests embodied in

42 USC. § 9622, which aims to encourage early

settlements, and § 9607(r), which aims to facilitate a | iquid

market in brownfield assets. See In re Tutu Water Wells

CERCLA Litig., 326 F.3d 201, 206 (3d Cir. 2003)

(emphasizing CERCL ete 3 in icy of minimizing litigation

costs); United States v. DiBiase, 45 F.3d 541, 545-46 (1st Cir.

1995) (explaining CERCLA’s policy of reducing

“transaction costs”); see generally Uni ted States v. Charter

Int'l Oil Co., 83 F.3d 510, 520 (Ist Cir. 1996) (surveying

empirical research on the “huge resources going into the

transactions costs of CERCLA li itigation” and observi ing

that reducing these costs was a primary objective of the

1986 amendments to the statute).

To summarize, the Supreme Court has neither

overruled nor directly undermined Smith Land.

Furthermore, a uniform federal standard is appropriate

under Kimibell Foods and O'Melveny: (1) the nature of [*304]

the federal program, a comprehensive federal liability

statute, counsels in favor of national uniformity; (2) a

uniform successor liability standard is necessary to

-Al6-

advance CERCLA’s remedial objectives and to facilitate a

fluid market in corporate and brownfield assets; and °)

uniform application of the majority state standard accords

proper respect to commercial relationships predicated on

the majority state law. Therefore, we will apply “the

general doctrine of successor liability in operation in most

states.” Siuth Land, 851 F.2d at 92.

The concurring and dissenting opinion contends that

we reach an “unnecessary” holding on this issue,

emphasizing that Pennsylvania law mirrors the majority

“de facto merger” standard and would yield the same

result. But Sth Land and Lansford-Coaldale preclude

exclusive reliance on the law of a particular state. For the

reasons stated, we believe these decisions remain

controlling. More fundamentally, because CERCLA’s goal

of minimizing litigation and transaction costs is ill-served

by a case-by-case Papproach to the question of successor

liability choice-of-law, we need not inquire whether

Pennsylvania law conflicts with or mirrors the majority

uccessor liability doctrine before holding that a federal

rule applies.

We add a final note on nomenclature and its pitfalls.

Part of the difficulty in this area may stem from imprecise

use of the term “federal common law.” In its strictest

sense, federal common law represents the judicial

creation” of law under a generalized statutory mandate.

Atherton, 319 US. at 218. Examples include the federal

labor laws, Textile Workers Union v. Lincoln Mills, 353 U.S.

448, 1 L. Ed. 2d 972, 77 S. Ct. 912 (1957), and ERISA,

Frrestone jody & Rubber Co. v. Bruch, 489 U.S. 101, 110, 103

L. Ed. 2d 80, 109 S. Ct. 948 (1989). In recent years the

Supreme "es has emphasized that the cases requiring

this brand of federal common law are “few and restricted.”

O'Melveny, 512 U.S. at 87 (citation omitted). To view every

ambiguous federal statute as authorizing an expansive

body of “federal common law” would be an invitation to

federal courts to eviscerate both the Erie doctrine and the

concept of dual sovereignty it embodies.

But the “creation” of federal common law must be

distinguished from statutory interpretation. See Atherton,

519 US. at 218. Ambiguous federal statutes generally do

not authorize the creation of anew (and preemptive) body

of federal law. Id. But this principle does not require that

everv federal statutory gap be filled by way of state-by-

state interpretation. ‘In almost any statutory scheme, there

may be a need for judicial interpretation of ambiguous or

incomplete provisions. But the authority to construe a

statute is fundamentally different from the authority to

fashion a new rule or to provide a new remedy which

Congress has decided not to adopt.” Northu est Airlines,

Inc. v. Transport Workers Union, 451 U.S. 77,97, 67 L. Ed. 2d

750, 101 S. Ct. 1571 (1981); see also Atherton, 519 U.S. at 218

(distinguishing the “creation” of federal common law from

“interpretation of a federal statute or a _ properly

promulgated administrative rule”).

In the case of federal liability statutes enforced under

a federal cause of action, the law is generally intended to

have uniform nationwide application. Cmty. for Creative

Non-Violence v. Reid, 490 U.S. 730, 740, 104 L. Ed. 2d 811,

109 S. Ct. 2166 (1989) (“federal statutes are generally

intended to have uniform nationwide application”); Jansen

v. Packaging Corp., 123 F.3d 490, 507 (7th Cir. 1997) (en

banc) (Posner, J., concurring and dissenting). The most

recent Supreme Court cases, both decided after O'Melveny

and [*305] Atherton, followed this approach. Clackamas,

538 U.S. at 448 (2003); Burlington, 524 U.S. at 754-55 (1998).

These decisions affirm the view that uniform

interpret ation of an undefined term in a federal liability

statute “is not free-wheeling common-law rulemaking,”

but rather ‘ ‘tilling a statutory gap, a standard office of

interpretation.” Jansen, 123 F.3d at 507. Accordingly,

supplying a uniform definition of “successor corporation”

under CERCLA is a matter of interpreting the federal

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statute. See 42 U.S.C. § 9601(21) (including “corporations”

among the “persons” covered by CERCLA); 1 U.S.C. § 5

(prov iding, as a rule of interpretation, that “the word

‘company’ or ‘association’, when used in reference to a cor-

poration, shall be deemed to embrace the words ‘succes-

sors and assigns of such company or association’”).

B.

Turning to the appropriate liability standard, we are

nindful of Bestfoods, where the Supreme Court held that

CERCLA incorporates, but does not expand upon,

“fundamental” common law principles of indirect

corporate liability. 524 U.S. at 62-64. The general rule of

corporate successorship accepted in most states is non-

liability for acquiring corporations, with the following

exceptions:

The purchaser may be liable where: (1) it

assumes liability; (2) the transaction amounts to

a consolidation or merger; (3) the transaction is

fraudulent and intended to provide an escape

from liability; or (4) the purchasing corporation

is a mere continuation of the selling company.

Polius, 802 F.2d at 78 (3d Cir. 1986) (stating general rule);

15 William Meade Fletcher et al., Fletcher Cyclopedia of the

Law of Private Corporations § 7122, at 227-48 (perm. ed., rev.

vol. 1999) (collecting cases).

This case involves the “de facto merger” exception,

which has four elements under the majority standard. It

applies where:

(1) There is a continuation of the enterprise of

the seller corporation, so that there is a continu-

ity of management, personnel, physical location,

assets, and general business operations.

(2) There is a continuity of shareholders which

results from the purchasing corporation paying

for the acquired assets with shares of its own

stock, this stock ultimately coming to be held by

the shareholders of the seller corporation so that

they become a constituent part of the pur-

chasing corporation.

(3) The seller corporation ceases its ordinary

business operations, liquidates, and dissolves as

soon as legally and practically possible.

(4) The purchasing corporation assumes those

obligations of the seller ordinarily necessary for

the uninterrupted continuation of normal

business operations of the seller corporation.

Bud Antle, Inc. v. Eastern Foods, Inc., 758 F.2d 1451, 1457-38

(11th Cir. 1985) (stating the “majority” de facto merger

standard); Keller v. Clark Equip. Co., 715 F.2d 1280, 1291

(8th Cir. 1983) (same); 15 Fletcher, supra, § 7124.20, at 302

(stating majority rule and collecting cases). The majority

standard generally tracks the inquiry under Pennsylvania

law. See SmithKline Beecham, 89 F.3d at 162 n.6.

Based on the record, we agree with the District Court

that the Price/General transaction constituted a de facto

merger.

(1)

Under prong one — continuity of enterprise —

General Battery purchased all of [*306] Price Battery’s

equipment and inventory, assumed tenancy of its manu-

facturing plant, and continued its production of batteries.

The plant superintendent and middle managers retained

their positions, as did the union employees, office person-

nel and sales force. General Battery continued the employ-

ment of three senior Price Battery executives — the presi-

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dent, executive vice president, and vice president of manu-

facturing — who, among other duties, remained active in

supervising the Hamburg plant. General Battery was

supplied by Price Battery’s vendors, served Price Battery’s

customers, and manufactured essentially the same battery

products. In every operational respect — from manage-

ment and employees to location and assets to products and

general business operations — General Battery continued

the Price Battery enterprise. We agree with the District

Court's exemplary analysis under this element.

(2)

De facto merger prong two — continuity of

shareholders — presents a closer question. Prior to the

transaction, William Price Sr. was the sole shareholder of

Price Battery. He received from General Battery $ 2.95

million in cash, 100,000 shares of General Battery stock,

and a seat on General Battery’s board of directors in

exchange for the Price Battery enterprise. At the time,

100,000 shares of General Battery stock were valued at

approximately $ 1 million and represented 4.537% of its

outstanding equity. Price Sr.’s resulting stake in General

Battery was comparable to that of the company ‘s two co-

founders, who owned 5.12% and 4.44% of its stock,

respectively.

The parties dispute whether this mixed cash/stock

transaction evidences the requisite continuity of

ownership. Exide contends continuity of ownership is

lacking where the seller receives “primarily” cash and a

“small percentage” of the buyer’s outstanding equity. The

United States responds that “under the de facto mer ger

exception, there is no requirement that the seller acquire

majority control or any other specific percentage of the

buyer, only that there be some continuity of shareholder

ownership.”

The standard applied in most states recognizes

continuity of ownership where “the shareholders of the

seller corporation . . . become a constituent part of the

purchasing corporation.” 15 Fletcher, supra, § 7124.20, at

302 (stating general rule); Keller, 715 F.2d at 1291 (8th Cir.

1983) (same); see also SmithKline Beecham, 89 F.3d at 162 n.6

(3d Cir. 1996) (Pennsylvania law).

This standard, which requires continuity rather than

identity of ownership, corresponds with the general

purposes of the successor liability doctrine. See” Cargo

Partner AG, 352 F.3d at 47 (2d Cir. 2003) (New York law)

(holding continuity of ownership “is the essence of” a de

facto merger); Nat. Gypsum Co. v. Cont. Brands Corp., 895 F.

Supp. 328, 337-38 (D. Mass. 1995) (collecting cases). The

overriding goal of successor liability, and of the de facto

merger inquiry, is to balance “the interest in preventing

tortfeasors from externalizing the costs of their

misconduct” with “the interest in a fluid market in

corporate assets.” Vucitech, 842 F.2d at 944 (7th Cir. 1988).

The continuity of shareholders element is designed to

identify situations where the shareholders of a seller

corporation retain some ownership interest in their assets

after cleansing those assets of liability. See generally Marie

T. Reilly, Making Sense of Successor Liability, 31 Hofstra L.

Rev. 745 (2003); Mark J. Roe, Mergers, Acquisitions and Tort:

A Comment on the Problem of Successor Corporation Liability,

{*307] 70 Va. L. Rev. 1559 (1984). Successor liability in this

context accords a legal remedy to injured third-parties,

preventing the externalization of the seller’s costs of doing

business, and deterring transactions designed to impose

the costs of misconduct on third-parties. See SmithKline

Beecham, 89 F.3d at 164 (discussing remedial purposes of

de facto merger doctrine). Identifying these transactions is

the objective of the continuity of ownership requirement.

Nat'l Gypsum, 895 F. Supp. at 337 (D. Mass. 1995); Cargo

Partner AG, 352 F.3d at 47 (2d Cir. 2003).

But the cases do not, as Exide contends, distinguish

sharply between transactions “primarily” for cash versus

stock, or between large versus small percentage interests

in the ongoing enterprise. Rather, only some continuity of

ownership is required. There is no generally accepted

common law distinction between primarily stock mergers,

on the one hand, and primarily cash transactions, on the

other.” Nor does successor liability necessarily turn on the

seller's percentage interest in the buyer.” Although the

“majority” standard is somewhat unsettled at this frontier

of successor liability, the critical “continuity of ownership”

See, ¢.g., Wilson, 140 N.J. Super. 476, 356 A.2d 458 (N_J. Super.

Ct. Law Div. 1976) (imposing successor liability where stock

comprised less than half of purchase price); Atlas Tool Co. v.

Comm'r, 614 F.2d 860, 871 (3d Cir. 1980) (New Jersey law)

(“Although there was no stock transfer here, and only cash was

involved, there was clearly a continuation of stockholder

interest.”); Bud Antle, Inc. v. E. Foods, Inc., 738 F.2d 1451, 1458

(11th Cir. 1985) (“ At the very least, there must be some sort of

continuation of the stockholders’ ownership interests.” ); Ametek,

Inc. v. Ptoncer Salt & Chem. Co., 709 F. Supp. 556, 560 (E.D. Pa.

1988) (holding a de facto merger is possible where the seller

retains a “contingent stake . . . in its former business”);

Fenderson, 581 N.E.2d at 292 (Ill. App. Ct. 1991) (no requirement

“that all or even most of the purchase price” be paid in stock).

See, ¢.g., Cargill, 424 Mass. 356, 676 N.E.2d 815 (1997) (Massa-

chusetts law) (finding continuity of ownership where seller

received 12.5% stake in acquiring company); United States v.

Keystone Sanitation Co., 1996 U.S. Dist. LEXIS 13651, at *23-25

(M.D. Pa. Aug. 22, 1996) (federal law) (finding continuity of

ownership where seller received less than 1% stake in buyer);

T.H.S. Northstar Assocs. v. W.R. Grace & Co., 840 F. Supp. 676 (D.

Minn. 1993) (Minnesota law) (finding continuity where seller's

owners received 2.27% of buyer's stock); Glynwed, 869 F. Supp.

at 277 (D.N.J. 1994) (New Jersey law) (“continuity of ownership,

not uniformity, is the test”).

-A23-

inquiry appears to be whether the owners retained some

ongoing interest in their assets.

Continuity of ownership is established under

CERCLA where the owners of the predecessor enterprise

become a “constituent part” of the successor by retaining

some ongoing interest in their assets. See 15 Fletcher, supra,

§ 7124.20, at 302 (stating majority rule and collecting

cases). Under this standard, William Price Sr. became a

“constituent part” of General Battery when he received

100,000 shares of General Battery stock and a seat on

General’s board in exchange for the Price Battery

enterprise.

(3)

Under the third de facto merger element, it is

apparent that Price Battery ceased operations, liquidated,

and dissolved as soon as legally and practically possible.

The Price/ General agreement, which closed in February of

1966, required Price Battery to discontinue operations

immediately and change its name to Price Investment

Company. Price Battery did so. The agreement also

required that Price Investment remain in existence from

February through December of, 1966, maintaining cash

reserves pending completion [*308] of an audit and other

contingencies. After this waiting period and following any

adjustments in the purchase price, the agreement

contemplated that Price Battery would liquidate and

dissolve. Specifically, the contract provided “for the

complete liquidation of Price and the distribution of all of

its assets within the twelve month period beginning [on

February 8, 1966].” Price Investment filed for corporate

dissolution on February 8, 1967, and formally dissolved

approximately six months later.

The contractual requirement that Price Battery

immediately change its name, cease operations, and

subsequently liquidate and dissolve, is more characteristic

-A24-

of a merger than an asset purchase. As recognized under

the de facto merger doctrine, an essential characteristic of

a merger is that one corporation survives while another

ceases to exist. Knapp v. N. Am. Rockwell Corp., 506 F.2d

361, 367 (3d Cir. 1974) (Pennsylvania law). Here, the

Price/General agreement expressly required the

liquidation and dissolution of Price Battery as a condition

of the transaction, suggesting a merger rather than the

mere sale of Price Battery’s assets.

Exide emphasizes Price Investment’s failure to

dissolve immediately, contending that for over a year “the

two companies remained completely independent of each

other in management and operations.” But the more

salient fact is that Price Battery immediately ceased

ordinary business operations. Within one week of the

closing x date, Price Battery recast itself as Price Investment

Company — acorporate shell that only held cash reserves

‘pending final settlement with General Battery. Price

Investment had no operations.

The Knapp case presented similar facts. There we held

the seller company dissolved as soon as legally and

practically possible. 506 F.2d at 369 (3d Cir. 1974)

(Pennsylvania law). The seller corporation in Knapp had

“technically continued to exist until its dissolution

approximately 18 months after the consummation of the

transaction,” id. at 364, but during that period it “had no

substance” and “could not undertake any active

operations.” Id. at 369. As in Knapp, “barren continuation”

of the seller company does not bar application of the de

facto merger doctrine. Id. at 368. We agree with the

District Court that Price Battery ceased operations,

liquidated and dissolved as soon as legally and practically

possible.

(4)

Finally, under prong four — assumption of

obligations ordinarily necessary for the uninterrupted

continuation of normal business operations — _ the

Price/ General agreement expressly provided that General

Battery would assume Price Battery’s contractual

obligations and all other obligations appearing on Price

Battery’s balance sheet. This unambiguous assumption of

obligations, including employment, sales and vendor

contracts, satisfies the fourth de facto merger element.

Cc.

In sum, the de facto merger criteria are satisfied.

Citing Polius, Exide responds with the overarching

objection that “imposition of successor liability on a

purchasing company long after the transfer of assets

defeats the legitimate expectations the parties held during

negotiation and sale.” 802 F.2d at 83. But even if we accept

this statement as a general proposition, the response here

is twofold. First, application of the traditional de facto

merger standard, which generally tracks the Pennsylvania

rule, can hardly come as a surprise to sophisticated

corporate parties who transacted under Pennsylvania law.

Second, CERCLA by its [*309] very nature upsets party

expectations. Congress nevertheless viewed retroactive

CERCLA liability as necessary to ensure that those

“responsible for any damage, environmental harm, or

injury from chemical poisons may be tagged with the cost

of their actions.” Bestfoods, 524 U.S. at 56 (quoting S. Rep.

No. 96-848, 13 (1980)) (internal punctuation marks

omitted).

We hold that General Battery and Exide, as successors

to Price Battery, are responsible for the CERCLA liability

of their predecessor.

-A26-

D.

We briefly address the District Court's alternative

holding that Exide is liable under CERCLA on a

“substantial continuity” theory of successor liability.”

Prior to Bestfoods, several courts adopted the “substantial

continuity” test as a basis for CERCLA successor liability.

See New York v. Nat'l Servs. Indus., 352 F.3d 682, 687-88 (2d

Cir. 2003) (collecting cases). “Substantial continuity”

eliminates certain elements of the de facto merger analysis

— including the continuity of ownership requirement —

and in effect creates a more expansive rule of liability than

is accepted in most states. Id. at 687 (noting substantial

continuity is applied “by only a handful of states”).

Recently, however, several courts of appeals have rejected

the doctrine as inconsistent with Bestfoods, 524 U.S. 51,141

L. Ed. 2d 43, 118 S. Ct. 1876 (1998)."* We agree. Bestfoods

held that CERCLA does not, sub silentio, abrogate

fundamental common law principles of indirect corporate

liability. 524 U.S. at 63-64. Accordingly, “substantial

continuity” is untenable as a basis for successor liability

under CERCLA.

IV. Conclusion

We will affirm the judgment of the District Court.

11. The government does not seek affirmance on the basis of

“substantial continuity” and does not cite any relevant law on

the issue.

12. See Nat'l Servs. Indus., 352 F.3d at 687 (2d Cir. 2003) (holding

“the substantial continuity doctrine is not part of general federal

common law and, following Bestfoods, should not be used to

determine whether a corporation takes on CERCLA liability as

the result of an asset purchase”); Davis, 261 F.3d at 53 (1st Cir.

2001) (same); Atchison, 159 F.3d 358 (9th Cir. 1998) (same).

-A27-

Concurring in part and dissenting in part

RENDELL, Circuit Judge.

I agree with the majority’s conclusion that the fact

pattern presented wasa de facto merger such that successor

liability for purposes of CERCLA exists and therefore

concur in its ultimate ruling. However, I part company

with the majority regarding its decision to announce that

the issue of successor liability in this context is controlled

by federal common law. This determination is unnecessary

to the resolution of the issues before us and runs counter

to recent Supreme Court pronouncements which both call

into question the concept of federal common law and

explicitly state that only in the most limited of circum-

stances should we look beyond applicable state law. More-

over, two other courts of appeals — the First and the Ninth

— have considered the precise issue before us and our

opinion perpetuates a split among the courts of appeals.

Those courts have opined that the Supreme Court's recent

directives cast serious doubt on the advisability of creating

federal common law to dictate the contours of successor

liability under CERCLA." The [*310] majority, however,

embraces the application of federal common law, relying

instead on the outdated notion of promoting uniformity.

Over the course of the last decade, and since we

decided Smith Land & Improv. Corp. v. Celotex Corp., 851

F.2d 86 (3d Cir. 1988) and Lansford-Coaldale Joint Water

Auth. v. Tonolli Corp., 4 F.3d 1209 (3d Cir. 1993), the

Supreme Court has issued several opinions denouncing

the creation of federal common law where state law would

Interestingly, as we note below, one of the courts — the Ninth

Circuit — had previously followed our lead in Smith Land, but

more recently reevaluated its view in light of later Supreme

Court precedent concluding, as we should, that creating federal

common law should be a last resort.

-A28-

otherwise apply. Principally, in O'Melveny & Myers v

FDIC, 512 US. 79, 129 L. Ed. 2d 67, 114 S. Ct. 2048 (1994),

the Court rejected the notion that a federal common law

rule regarding the imputation of corporate officer know-

ledge to a corporation should be applied in an action

against the Federal Deposit Insurance Corporation

(“FDIC”). The Court stated:

The first of these contentions need not detain us

long, as itis so plainly wrong. “There is no fede-

ral general common law, and... the remote

possibility that corporations may go into tederal

receivership is no conceivable basis for adopting

a special federal common-law rule divesting

states of authority over the entire law of imputa-

tion.”

ld, at 83 (internal citation omitted) (citing Bi _ of America

Nat'l Trust & Sav. Ass’n v. Parnell, 352 Us.2 9, 33-34, 1 L.

Ed. 2d 93, 77 S. Ct. 119 (1956)).

The O'Melveny Court went on to note that, with

regard to “the central question of displacement of [state]

law’ in favor of a rule federal in nature:

[W]e of course would not contradict an explicit

federal statutory provision. Nor would we

adopt a court-made rule to supplement federal

statutory regulation that is comprehensiv e and

detailed; matters left unaddressed in such a

scheme are presumably left subject to the

disposition provided by state law.

een’ As we proceed to explain, even assuming

the inapplicability of FIRREA [Financial Institu-

tions Reform, Recovery, and Enforcement Act of

1989] this is not one of those cases in which

-A29-

judicial creation of a special federal rule would

be justified.

Such cases are, as we have said in the past, “few

and restricted,” Wheeldin v. Wheeler, 373 US.

647, 651, 10 L. Ed. 2d 605, 83 S. Ct. 1441 (1963),

limited to situations where there ts a “significant

conflict between some federal policy or interest and

the use of state law.” Wallis v. Pan American Petro-

leum Corp., 384 U.S. 63, 68, 16 L. Ed. 2d 369, 86 S.

Ct. 1301 (1966). Our cases uniformly require the

existence of such a conflict as a precondition for

recognition of a federal rule of decision. Kimbell

Foods, 440 U.S. at 728. Not only the permissi-

bility but also the scope of judicial displacement

of state rules turns upon such a conflict. What ts

fatal to re sponde nt’s position in the prese nt case is

that it has identified no significant conflict with an

identifiable federal policy or interest.

O'Melveny & Myers, 512 U.S. at 85, 87-88 (some internal

citations omitted) (emphasis added). W hile O'Melveny did

not involve CERCLA, nonetheless, the pronouncement of

the Court regarding displacement of state law makes

crystai clear that matters left unaddressed by a compre-

hensive federal statutory scheme are presumably lett

subject to the [*311] disposition provided by state law”

The issue before us is not the meaning of a term contained in

CERCLA, as was the case in many of the cases cited by the

majority. Rather, the issue before us is whether state or federal

law regarding successor liability will apply when the courts are

fashioning remedies under CERCLA. No one has contended we

are construing a word or phrase in the statute. If we are, we

should request further briefing on this issue as it has not been

addressed by the parties

CERCLA now counts a “corporation” as a “person” for

-A30-

there must exist a conflict, identifiable and specific, withan

important federal policy before we consider resorting to

federal common law.

Three years after deciding O’Meli eny, the Supreme

Court again commented on the concept of “federal com-

mon law,” in the case of Atherton v. FDIC, 519 US. 213, 136

L. Ed. 2d 656, 117 S. Ct. 666 (1997). in Atherton, the Court

again emphasized the “precondition,” id. at 218, that a

conflict exist to warrant the conception of a federa? rule;

purposes of liability, see 42 U.S.C. § 9601(21), but the statute

itself clearly does not reference or provide for successor liability.

Therefore, we are confronted with a matter in an otherwise

detailed federal statutory scheme, not a mere need to attach

meaning to a term of artemployed but not defined by Congress,

as was the case in Clackamas Gastroenterology Assocs., P.C. v.

Wells, 538 U.S. 440, 448, 155 L. Ed. 2d 615, 123 S. Ct. 1673 (2003)

(looking “to the common law to fill gaps in statutory text,

particularly when an undefined term has a settled meaning at

common law,” in this case to define “employee under the ADA)

(emphasis added); Burlington Indus. v. Ellerth, 524 U.S. 742, 755,

141 L. Ed. 2d 633, 118 S. Ct. 2257 (relying on sical 3 common

law of agency to define term “agent” under Title VII where state

court decisions “determinations of employer liability under state

law rely in large part on federal court decisions”); Mississippi

Band of Choctaw Indians v. Holyfield, 490 U.S. 30, 47, n.22, 104 L.

Ed. 2d 29, 109 S. Ct. 1597 (1989) (using federal common law to

define “domicile” under the Indian Child Welfare Act and

noting that Congress had, in other parts of the legislation, stated

explicitly where it wanted terms “defined by reference to tribal

law or custom and to state law”); and Cty. for Creative Non-

Violence v. Reid, 490 U.S. 730, 740, 104 L. Ed. 2d 811, 109 S. Ct.

2166 (1989) (employing federal common law to define “work

made for hire” under provisions of the Copyright Act of 1976, a

statute intended to broadly preempt state statutory and

common-law copyright regulation). These cases would be

informative if we too were focusing on the meaning given to a

term in a federal statute, but that is not our focus.

-A31-

under the facts of the case before it, the Court stated that

its initial inquiry must concern whether the application of

the relevant state law standard of care to banks would

conflict with, and thereby significantly undermine, an

identifiable federal policy or interest:

States normally look to the State of a business’

incorporation for the law that provides the

relevarit corporate governance general standard

of care. And by analogy, it has been argued,

courts should look to federal law to find the

standard of care governing officers and

directors of federally chartered banks.

To find a justification for federal common law in

this argument, however, is to substitute analogy

or formal symmetry for the controlling legal

requirement, namely, the existence of a need to

create federal common law arising out of a

significant conflict or threat te a federal interest.

O’Melveny, 512 US. at 85, 87.

Ves

In sum, we can find no significant conflict with,

or threat to, a federal interest. The federal need

is far weaker than was present in what the

Court has called the “few and restricted’ in-

stances,” Milwaukee v. Illinois, 451 U.S. 304, 313,

68 L. Ed. 2d 114, 101 S. Ct. 1784 (1981), in which

this Court has created a federal common law.

Atherton, 519 U.S. at 224-25. The Court then detailed such

“few [*312] and restricted” cases, which | list in the

margin.” Again, the Court's focus was on the presence of

1S. As enumerated by the Court in Atherton: See Hinderlider v. La

Plata River & Cherry Creek Ditch Co., 304 U.S. 92, 82 L. Ed. 1202,

a significant conflict. And, to discern whether a conflict is

present, we are not to evaluate the jurisprudential

landscape of all fifty states; rather, “federal courts should

incorporate state law into federal common law unless the

particular state law in question is inconsistent with the

policies underlying the federal statute.” Kamen v. Kemper

Fin. Servs., 500 U.S. 90, 111 S. Ct. 1711, 1722, 114 L. Ed. 2d

152 (1991) (emphasis added).

Most recently, in United States v. Bestfoods, the Court

was called upon to consider whether a parent corporation

that actively participated in, and exercised control over,

the operations of a subsidiary may, without more, be held

liable under CERCLA as an operator of a polluting facility

owned or operated by the subsidiary. 524 U.S. 51, 55, 141

L. Ed. 2d 43, 118 S. Ct. 1876 (1998). The Court answered in

the negative, “unless the corporate veil may be pierced.”

Id. In so concluding, the Court expounded upon certain

general principles of corporate law — for example, that

38 S. Ct. 803 (1938) (controversy between two States regarding

apportionment of streamwater); Boyle v. United Technologies

Corp., 487 U.S. 500, 101 L. Ed. 2d 442, 108 S. Ct. 2510 (1988)

(Federal Government contractors and civil liability of federal

officials); United States v. Standard Oil Co. of Cal., 332 U.S. 301,

305, 91 L. Ed. 2067, 67 S. Ct. 1604 (1947) (relationship between

Federal Government and members of its armed forces); Howard

v. Lyons, 360 U.S. 593, 597, 3 L. Ed. 2d 1454, 79S. Ct. 1331 (1959)

(liability of federal officers in the course of official duty); Banco

Nacional de Cuba v. Sabbatino, 376 U.S. 398, 425, 11 L. Ed. 2d 804,

84S. Ct. 923 (1964) (relationships with other countries). See also

Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 641,

68 L. Ed. 2d 500, 101 S. Ct. 2061(1981) (“Absent some

congressional authorization to formulate substantive rules of

decision, federal common law exists only in such narrow areas

as those concerned with the rights and obligations of the United

States, interstate and international disputes implicating the

conflicting rights of States or our relations with foreign nations,

and admiralty cases”).

parents are not liable for the acts of their subsidiaries, 1d.

at 62, along with the “equally fundamental principle of

corporate law” that a corporate veil may be pierced where

the corporate form was misused, id. Significantly, the

Court explained:

Nothing in CERCLA purports to rewrite this

well-settled rule, either. CERCLA is thus like

many another congressional enactment in

giving no indication “that the entire corpus of

state corporation law is to be replaced simply

because a plaintiff's cause of action is based

upon a federal statute,” Burks v. Lasker, 441 US.

471, 478, 60 L. Ed. 2d 404, 99 S. Ct. 1831 (1979),

and the failure of the statute to speak to a matter

as fundamental as the liability implications of

corporate ownership demands application of

the rule that “in order to abrogate a common-

law principle, the statute must speak directly to

the question addressed by the common law,”

United States v. Texas, 507 U.S. 529, 534, 123 L.

Ed. 2d 245, 113 S. Ct. 1631 (1993) (internal

quotation marks omitted). The Court of Appeals

was accordingly correct in holding that when

(but only when) the corporate veil may be

pierced, may a parent corporation be charged

with derivative CERCLA liability for its

subsidiary’s actions.

Id. at 63-64 (footnotes omitted).

As noted by the majority, the Bestfoods Court declined

to reach the precise issue before us, noting a “dis-

agreement” as to whether “courts should borrow state law,

or instead apply a federal common law of [*313] veil

piercing,” 524 U.S. at 64, n.9, but sidestepping any con-

clusion: “Since none of the parties challenges the Sixth

Circuit’s holding that [certain companies] incurred no deri-

vative liability, the question is not presented in this case,

-A34-

and we do not address it further,” 1d. The majority protests

that the Court did not declare the use of federal common

law inappropriate at this juncture or cite to O’Melveny. But

the Court clearly did not need to, or choose to, reach the

issue. We should infer nothing from its silence.

I find more significant the Bestfoods Court's affirma-

tive discussion of “norms of corporate behavior,” which it

viewed as constituting crucial reference points, along with

the reliability of bedrock principles of corporate law. See,

e.g., 524 US. at 70n.13 & 71. 1 cannot help but conclude

that reference to the “norms” bolsters the view that

existing state corporate law principles should control, and

we need not invent federal law, or deem them “federal”,

in order to further CERCLA’s regulatory scheme. The

Court's discussion of “congressional silence” concerning

these “bedrock” corporate principles, which it describes as

“audible,” supports this view. 524 U.S. at 62. With respect

to the silence wrought by Congress’ failure to address, in

the statute, the claim at issue in Bestfoods, notably, the

Court stated that “CERCLA is thus like many another

congressional enactment in giving no indication ‘that the

entire corpus of state corporation law is to be replaced

simply because the plaintiff's cause of action is based upon

our federal statute.’” Bestfoods, 524 U.S. at 63 (quoting

Burks v. Lasker, 441 U.S. 471, 478, 60 L. Ed. 2d 404, 99S. Ct.

1831 (1979)). Indeed, the Bestfoods Court chided the district

court in that case for having “treated CERCLA as though

it displaced or fundamentally altered common law

standards of limited liability” because “such a rule does

not arise from congressional silence, and CERCLA’s

silence is dispositive.” 524 U.S. at 70. Finally, it bears

noting that the Supreme Court affirmed the court of

appeals’ determination applying Michigan law that a

parent may be held liable only where the corporate veil

may be pierced. See United States v. Cordova Chem. Co., 113

F.3d 572, 580 (6th Cir. 1997).

After reading these three recent Supreme Court opi-

nions, I am left with the clear impression that the notion of

resorting to a federal rule of successor liability here, man-

dating it as controlling in our Circuit without regard to

state law, would not be endorsed by the Supreme Court.

The overarching theme is that state law should not be

displaced unless the particular state law at issue conflicts

with an important federal policy. Noticeably absent is any

reference to the majority’s guiding theme — that of the

need for uniformity. And, as I discuss more fully below,

uniformity for uniformity’s sake is not such a policy.

The courts of appeals that have addressed this issue

agree that the Supreme Court's recent decisions discussed

above have moved toward reliance on state law, and away

from the creation of federal common law, unless a conflict

exists. In Atchison, T. & S.F. Ry. v. Brown & Bryant, 159

F.3d 358 (9th Cir. 1997), the Court of Appeals for the Ninth

Circuit considered whether the Supreme Court's pro-

nouncements on this issue in O’Melveny and Atherton

(Bestfoods had not yet been decided) were clear enough to

cause it to abandon its own previous determination in

Louisiana-Pacific Corp. v. Asarco, Inc., 909 F.2d 1260 (9th Cir.

1990) (adopting Third Circuit’s rationale in Smuth Land)

that the parameters of successor liability under CERCLA

should be fashioned by federal common law in order to

promote national [*314] uniformity. The Atchison court

concluded that although the Atherton and O'Melveny

opinions implicated FIRREA, and not CERCLA, the under-

lying analysis was nonetheless applicable and persuasive.

159 F.3d at 362. Thus, in concluding that the promotion of

national uniformity does not justify application of federal

common law to CERCLA, the Court effectively rejected its

previous determination in Louisiana-Pacific along with that

opinion’s underlying rationale — our own opinion in

Smith Land.

Initially, the Atc hison Court correctly noted that “sim-

ply because a federal statute is involved does not always

-A36-

mean that federal courts should fashion a uniform federal

rule.” 159 F.3d at 362 (citation omitted). “Frequently, state

rules of decision will furnish an appropriate and con-

venient measure of the governing federal law.” Id. The

subsequent discussion merits repeating in full:

In Louisiana-Pacific, we agreed with the Third

Circuit that CERCLA’s “’meager legislative

history available indicates that Congress

expected the courts to develop a federal com-

mon law to supplement the statute.’” 909 F.2d

at 1263 (quoting Smuth Land, 851 F.2d 86 at 91).

This legislative history consists of a discussion

in Congress that common law should govern

the issue of joint and several liability under

CERCLA. Louisiana-Pacific recognized that

Congress did not address the particular issue of

successor liability under CERCLA.

O'Melveny tells us that when dealing with a

“comprehensive and detailed” federal statutory

regulation, a court should instead presume that

matters left unaddressed in such a scheme are

subject to state law. “Congress acts . . . against

the background of the total corpus juris of the

states ....” Atherton, 1175S. Ct. at 670 (alteration

in original). The formation of corporations and

the dissolution and continuing liability of

corporations are traditional areas of state law.

As CERCLA lacks any clear directive that

federal courts develop standards for successor

liability, we turn to the Kinthell Foods test, as

clarified by O’Melveny and Atherton.

i

Although Loutsiana-Pacific refers to the “need for

national uniformity” as a reason for developing

federal rules for successor liability, Atherton

-A37-

notes that “to invoke the concept of ‘uniformity’

...is not to prove its need.” 1175. Ct. at 671; see

also O'Melveny, 114 S. Ct. at 2055 (recognizing

how generic and “lightly invoked” is the need

for uniformity). Although often invoked in this

context, there has been no real explanation of

the need for uniformity in the particular area of

successor liability — especially since state law

will in many other instances determine whom

the EPA may or may not look to for compen-

sation. If state law varied widely on the issue of

successor liability, perhaps the need for a

uniform federal rule would be more apparent.

This is not the case, however, as “the law in the

fifty states on corporate dissolution and succes-

sor liability is largely uniform.” Anspec Co. v.

Johnson Controls, Inc., 922 F.2d 1240, 1249 (6th

Cir: 1991) (Kennedy, J., concurring) (holding .

that state law determines successor liability

under CERCLA). The argued “need” for unifor-

mity thus stems not from disarray among the

various states, but from the alleged need for a

more expansive view of successor liability than

state law currently provides — in other words,

the notion that state law on this issue is inade-

quate for CERCLA’s purposes.

[*315] But O'Melveny and Atherton also speak to

this argument. Before a court can recognize a

federal rule of decision, there must be a “’signi-

ficant conflict between some federal policy or

interest and the use of state law.’” O’Melveny,

1145S. Ct. at 2055 (quoting Wallis, 384 U.S. 63 at

68). Indeed, such a conflict is a “precondition”

to fashioning federal common law rules.

Atherton, 117 S. Ct. at 670. The Court’s recent

cases clarify that to demonstrate such a conflict,

more than speculation is required — there must

be a “specific, concrete federal policy or interest

-A38-

that is compromised” by the application of state

law. O'Melveny, 1145S. Ct. at 2055. We therefore

doubt that the concern noted in Louisiana-Pacific

is sufficient grounds for developing a federal

rule of decision.

Atchison, 159 F.3d at 362-64 (certain internal citations and

footnotes omitted).’® The Atchisom Court concluded that it

would not adopt the “substantial continuation” exception

(which would have expanded federal common law lia-

bility). It then reasoned that because the same result would

flow in the case before it under either state law or federal

common law, it need not decide whether state or federal

law governs successor liability under CERCLA. Id. at 364.

Despite bypassing the question we now consider, it is

abundantly clear that the Ninth Circuit, were its hand

forced, would follow the recent directives of the Supreme

Court and hold that state law should govern successor

liability under CERCLA.

16. The majority excerpts a line of dictta from \/c/rison in which the

Court muses that if “state law varied widely on the issue of

successor liability, perhaps the need for a uniform federal rule

would be more apparent.” (Maj. Op. at 17.) However, as the

more fully excerpted passage above shows, the Court goes on to

explain that this need not preoccupy it because, first and

foremost, the Supreme Court has made clear that there must

exist a significant conflict between some federal policy or

interest and the use of state law.

In disagreeing with the Atchison Court on this point, and by

citing what it views as a varied set of state laws concerning

successor liability as the jumping off point for application of a

federal rule, the majority leapfrogs over the critical inquiry —

whether there exists a conflict between Pennsylvania law and an

important federal policy or interest. Lack of uniformity itself

does not satisfy the requirement that a conflict exist — only after

a conflict has been identified does the Supreme Court direct us

to evaluate the need for a uniform rule.

-A39-

Even more recently, and with the benefit of the Best-

foods opinion, the Court of Appeals for the First Circuit,

considering displacement of Connecticut state law to

determine successor liability under CERCLA, did just that:

We have concluded that the majority rule is to

apply state law “so long as it is not hostile to the

federal interests animating CERCLA,” and have

applied Massachusetts contracts law to deter-

mine an issue of successor liability. John S. Boyd

Co., Inc. v. Boston Gas Co., 992 F.2d 401, 406 (ist

Cir. 1993). Recent Supreme Court precedent

confirms that Boyd’s approach is correct. The

Court applied state corporation law in a recent

CERCLA case involving the potential liability of

a parent corporation for its subsidiary and left

little room for the creation of a federal rule of

liability under the statute. See United States v.

Bestfoods, 524 U.S. 51, 63, 141 L. Ed. 2d 43, 118 S.

Ct. 1876 (1998) (“CERCLA is .. . like many

another congressional enactment in giving no

indication that the entire corpus of state cor-

poration law is to be replaced simply because a

plaintiff's cause of action is based upona federal

statute.”) (internal quotation marks omitted).

The Court's statements [*316] in Bestfoods and

O'Melveny demonstrate that to justify the crea-

tion of a federal rule, “there must be a specific,

concrete federal policy or interest that is com-

promised by the application of state law.”

Atchison, Topeka & Santa Fe Railway Co. v. Brown

& Bryant, inc., 159 F.3d 358, 363-64 (9th Cir.

1998) (internal quotation marks omitted). We

see no evidence that application of state law to

the facts of this case would frustrate any federal

objective. Connecticut’s “mere continuation”

test thus is the correct test for determining suc-

cessor liability for the hazardous waste dis-

posed.

-A40-

United States v. Davis, 261 F.3d 1, 54 (1st Cir. 2001).

As recognized by the Atchison and Davis courts, the

Supreme Court has repeatedly emphasized that a specific

and identifiable conflict must be present before we should

invoke and apply a federal rule of decision. Here, no such

conflict exists. Absent evidence that application of

Pennsylvania state law, not the hypothetical application of

the law of 49 other states, does frustrate CERCLA’s purpose

— holding liable parties responsible for the costs asso-

ciated with the clean up of hazardous waste sites — and in

the face of recent Supreme Court opinions discouraging

the creation of a federal rule of decision, it is readily

apparent that resort to any law other than Pennsylvania‘s

is unnecessary and uncalled for.

I subscribe to and seek to reiterate a number of the

majority's threshold observations, which it appears to note

but then discard: namely, that the Supreme Court has

“cautioned against the unwarranted displacement of state

law” (Maj. Op. at 11) (citing O’Melveny, 512 US. at 87);

additionally, that “[iJncorporation of state law is

particularly favored in the area of corporate law, because

business decisions proceed in reliance on the applicable

state standards” (Id.) (citing Kamen, 111 S. Ct. at 1722);

and, finally, that absent some significant conflict arises

between a federal policy interest and the use of state law,

“state corporation law g generally should be integrated into

the federal statutory regime.” (Id.) (citing United States v.

Kimbell Foods, Inc., 440 U.S. 715, 59 L. Ed. 2d 711, 99S. Ct.

1448 (1979)) (other citations omitted). But, it is not clear to

me why, in the face of these guiding ehebs ase the

majority then frames the issue before us simply as

“whether CERCLA requires a uniform federal standard of

corporate successor liability.” (Maj. Op. at 11.)

The majority’s determination that application of

federal common law is warranted here hinges on our

previous terse treatment of the issue in Smuth Land &

-A41-

Improv. Corp. v. Celotex Corp., 851 F.2d 86 (3d Cir. 1988) and

Lansford-Coaldale Joint Water Auth. v. Tonolli Corp., 4 F.3d

1209 (3d Cir. 1993), cases in which the Court ac vanced

only one animating rationale for adopting the “general

doctrine of successor liability in operation in most states,”

851 F.2d at 92 — the need for a uniform and predictable

body of law. We did so in a few conclusory sentences,

without any meaningful discussion. Intervening Supreme

Court precedent makes clear, however, that this rationale

is no longer, if it ever was, paramount when evaluating

whether we are confronted with “one of those extra-

ordinary cases in which the judicial creation of a federal

rule of decision is warranted.” O'Melveny & Myers v.

FDIC, 3512:US. 79, 89, 129 L: Ed. 2d 67, 114.5. Ct 2048

(1994). To the extent SmithLand and Lansford-Coaldale com-

mand us to ignore in our analysis longstanding, ingrained

principles of state corporate law in favor of “that most

generic (and lightly invoked) of alleged federal interests,

the interest in uniformity,” id. at 88, [*317] those decisions

should be reevaluated. George Harms Constr. Co. v. Chao,

371 F.3d 156, 161 (3d Cir. 2004) (“We recognize that we

may reevaluate a precedent in light of intervening

authority even without en banc consideration.”); United

States v. Adams, 252 F.3d 276, 286 (3d Cir. 2001) (“ Although

a panel of this court is bound by, and lacks authority to

overrule, a published decision of a prior panel, a panel

may reev aluate a precedent in light of intervening autho-

rity.”) (internal quotations omitted). We must reevaluate

the exalted position that we previously afforded

“uniformity” in light of the Supreme Court's direction that

we are to employ a different mode of analysis.'

The majority asserts that resort to federal common

law is necessary because state laws concerning successor

17. To the extent that it could be argued that adopting this position

requires us to convene the Court en banc and overrule prior

opinions, then I would urge that we do so.

-A42-

liability are not uniform and thus, without fashioning a

federal rule of decision, predictability will be lacking. To

say that the need for uniformity is the articulated federal

policy supplying the rationale for creating federal common

law is to put the analytic rabbit in the hat, so to speak. If

uniform application 1s indeed’ the goal’, resort would never

be had to state law assuming some variation as among the

different laws. Uniformity cannot be, and has never been

said to be, the single animating principle. While it is a

laudable goal, it is not one that has served as the basis on

which the Supreme Court, or any other court of appeals to

have addressed the issue, has rejected the application of

state law. Rather, as discussed above and made clear in

O'Melveny and Atherton, those courts that have considered

rejecting the application of a particular state law in favor

of a federal scheme have done so only when the state law

in question clearly conflicted with an important federal

policy to be advanced. See, e. 8 Kamen, 500 U.S. at 98;

Boyle, 487 U.S. at 504; Texas Industries, Inc., 451 U.S. at 641;

Wailis, 384 US. . 68; Sabbatino, 376 U.S. at 425; Wheeldin,

373 woe at 651; Lyons, 360 U.S. at 596; Standard Oil Co. of

Cal., 332 US. at 305. See also Redwing Carriers, Inc., v.

Saraland Apartments, 94 F.3d 1489, 1501-02 (11th Cir. 1996)

(holding that state law should be adopted as the federal

standard for determining whether a limited partner may

be held accountable for the CERCLA liability of the

partnership). These cases also make clear that it is the

second factor of the Kimibell Foods test'* which should

18 The Kunbell Foods test details three considerations relevant to the

determination of whether federal common law or state law

should provide the rule of decision: 1) whether the nature of the

federal program requires national uniformity; 2) whether the

application of state law would frustrate specific objectives of the

federal program; and 3) whether the application of federal law

would disrupt commercial relationships predicated on state law

See Adams v. Madison Realty & Dev., inc., 937 F.2d 845, 856 (3d

Cir. 1991) (citing Kimbeil Foods, 440 U.S. at 728-29)

-A43-

soe € paramount consideration. The Supreme Court in

Melveny and Atherton cite to the Kimbell Foods test in

peas support of the precept that “when courts decide to

fashion rules of federal common law, ‘the guiding

principle is that a significant conflict between some federal

policy or interest and the use of state law . . . must first be

specifically shown.’ Indeed, such a ‘conflict’ is normally a

‘precondition.’ " Atherton, 519 U.S. at 218 (quoting

O'Melveny, 512 U.S. at 87. and citing Kimbell Foods, 440

U.S. at 728). [*318] The Court in Atherton cites to Ki mbell

Foods an additional time, where it explains, “To invoke the

concept of ‘uniformity, U is not to prove its need.” 519

U.S. at 220 (citing Kimbell Foods, 440 U.S. at 730 (rejecting

“generalized pleas for uniformity”)). Certainly, neither

opinion relies, as the majority seems to do, on Kimbell

Foods’ other espoused consideration — whether the federal

program requires uniformity, or come close to elevating

this factor to the point of deeming it a “precondition,” as

has the Court with respect to the presence of a significant

conflict.”

Clearly, the required conflict does not exist here;

application of Pennsylvania law produces the desired

result. Therefore, we need not abandon Pennsylvania law,

nor should we label the rule applied today by the majority

“federal.” Accordingly, I respectfully dissent from the

reasoning contained in the majority’s opinion but concur

in the result ting affirmance of the District Court's order.

a Cwwie a = > . gum SS Fee

19 BDestfoods does not even cite to Kimbell Foods

-A44-

DISTRICT COURT OPINION

ON MOTIONS FOR SUMMARY JUDGMENT

(2002 U.S. Dist. LExIs 3303)

United States District Court

for the Eastern District of Pennsylvania”

United States of America, Plaintiff,

v.

Exide Corporation, Defendant.

Civil Action No. 00-cv-3057

February 27, 2002, Decided

MEMORANDUM

BUCKWALTER, J.

[*1] Plaintiff, the United States of America (the

“United States”) brings this action against Defendant

Exive Corporation (“Exide”) alleging that under the

Comprehensive Environmental Response, Compensation,

and Liability Act of 1980 (“CERCLA”), 42 U.S.C. § 9601 et

seq., Exide is liable for costs incurred by the United States

in response to the release of hazardous substances at the

Hamburg Lead Superfund Site in Berks County,

“ennsylvania. The United Sates also seeks a declaratory

judgment under [*2] § 113(g)(2) of CERCLA, 42 U.S.C. §

9613(g)/2), that Exide is liable for set future response costs

or damages. Presently before the Court are the parties’

cross motions for summary judgment pursuant to Rule

56(c). For the reasons stated below, ihe United States’

motion is granted.

I. FACTS

From the 1940s until approximately February 11,

1966, Price Battery Corporation (“Price”) operated a lead-

acid battery manufacturing plant in Hamburg,

Pennsylvania (“the Hamburg Plant” or “the plant”). As a

matter of course, Price reused the lead plates from old

batteries in the process of creating new batteries. Until the

early 1960s, Price employees brought used batteries back

to the Hamburg Plant, split them open, and re-used the

lead plates in the plant's smelter. The junk battery casings,

each often containing a paste of lead residue, were not re-

used. Price employees dumped these battery casings at

various locations in and around Hamburg. Price also made

these battery casings available for members of the

community to pick up for themselves and use as landfill.

During this time until 1961, Price also contracted with Blue

Mountain Coal Company (“Blue Mountain”) [*3] tocrush

the junk battery casings with a bulldozer after they were

dumped in and around Hamburg, and to dump slag

(waste leftover from the smelting operations) at the same

locations. At least one Blue Mountain truck driver saw

pieces of lead in the slag.

Beginning in the early 1960s, Price altered its method

of acquiring the lead plates for re-use. Instead of breaking

the junk batteries itself, Price contracted with Brown’s

Battery (“Brown’s”) to do so. Brown’s used a shear that

sliced off the tops of the batteries in order to remove the

lead plates for re-use. After the tops were removed,

Brown's shipped not only the lead plates, but the casing

battery tops (which also contained re-usable quantities of

lead) back to Price. Price crushed the battery tops,

removed the lead pieces, and then gave away the

remaining battery casing pieces as landfill. Price then re-

used both the lead plates and the lead pieces removed

from the battery tops in its smelter.

-A46-

On February 11, 1966, General Battery Corporation

(“General”) entered into a Purchase Agreement (the

“Agreement”) with Price. The Agreement called for

General to purchase all of Price’s assets, except its cash on

hand at closing and [*4] the Hamburg Plant and attendant

land, which were sold to the Greater Berks County

Development Fund and leased by General. Price also

transferred to General all its rights under its existing

contracts, including contracts pertaining to employment

and employee benefits, insurance, customers, purchasing,

material supply , as well as the batiery breaking contract

with Brown’s. In exchange, Price received approximately

S 2.9 million in cash, 100, 000 shares of General’s common

stock, and General’s promise to “pay, perform and

discharge the debts, obligations, contracts and [certain]

liabilities” of Price. Specifically, General agreed to assume

all liabilities reflected on its balance sheet as of the day of

purchase, and agreed to “indemnify and save harmless

Price” regarding “all other liabilities of any kind or

character ... unless unknown to Price ... arising out of the

operation of the business of Price or its subsidiaries in the

normal course prior to January 1, 1966.” Under the

Agreement, Price agreed to change its name to Price

Investment Company or another name as approved by

General. In addition, the Agreement was also conditioned

upon General's employment of numerous Price executives.

[*5] General continued the system for re-using the

lead in junked batteries that had been in place since the

early 1960s: it provided the batteries to Brown’s for

breaking and received back both the lead plates and the

sheared battery tops. It crushed the battery tops and

removed the lead pieces. Finally, it re-used these lead

pieces, as well as the returned lead plates, in its smelter.

Significantly, however, the parties disagree on what

happened to the remaining pieces of the battery tops after

General’s purchase. The United States contends that

General continued to give away the remaining pieces for

landfill as Price had done. Exide, however, contends that

General burned them for fuel and did not give them away.

In any case, General continued this basic system to re-use

lead from old batteries until the smelter closed in the early

1970s. In 2000, General merged with Exide.

In August 1993, the US. Department of

Environmental Protection (EPA) performed a removal

assessment of two sites near Hamburg — referred to as

“the Fieldhouse” and “the Playground” — where Price

dumped broken battery casings and where it now

observed such casings. Levels of lead well above allowable

amounts were [*6] found at both sites. EPA performed a

removal action from August 1994 to August 1995 at the

Fieldhouse and the Playground. In connection with the

removal action, EPA discovered three additional sites at

which Price had dumped broken battery casings and that

now contain levels of lead above EPA’s removal action

level. OnSeptember 28, 2000, EPA Region III approved the

re-start of the removal action to remedy soil erosion due to

heightened concern about these hazardous substances in

residential areas where children play. As of this date, EPA

is still acting at these five sites and is investigating further

sites in and around Hamburg where battery casings

battery casings may have been dumped.

Il. LEGAL STANDARD

A motion for summary judgment shall be granted

where all of the evidence demonstrates “that there is no

genuine issue as to any material fact and that the moving

party is entitled toa judgment as a matter of law.” Fed. R.

Civ. P. 56(c). A genuine issue of material fact exists when

“a reasonable jury could return a verdict for the

nonmoving ahh ’ Anderson v. Liberty Lobby, Inc., 477 US.

242, 248, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). “Only

disputes [*7] over facts that might affect the outcome of

-A48-

the suit under the governingNaw will properly preclude

the entry of summary judgment.” Id.

If the moving party establishes the absence of the

genuine issue of material fact, the burden shifts to the

nonmoving party to “do more than simply show that there

is some metaphysical doubt as to the material facts.”

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.

574, 586, 89 L. Ed. 2d 538, 106 S. Ct. 1348 (1986).

When considering a motion for summary judgment,

a court must view all inferences in a light most favorable

to the nonmoving party. See United States v. Diebold, Inc.,

369 U.S. 654, 655, 8 L. Ed. 2d 176, 82S. Ct. 993 (1962). The

nonmoving party, however, cannot “rely merely upon

bare assertions, conclusory allegations or suspicions” to

support its claim. Fireman’s Ins. Co. v. Du Fresne, 676 F.2d

965, 969 (3d Cir. 1982). To the contrary, a mere scintilla of

evidence in support of the nonmoving party’s position will

not suffice; there must be evidence on which a jury could

reasonably find for the nonmovant. Liberty Lobby, 477 U.S.

at 252. Therefore, it [*8] is plain that “Rule 56(c) mandates

the entry of summary judgment, after adequate time for

discovery and upon motion, against a party who fails to

make a showing sufficient to establish the existence of an

element essential to that party’s case, and on which that

party will bear the burden of proof at trial.” Celotex Corp.

v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548

(1986). Insucha situation, “the moving party is ‘entitled to

a judgment as a matter of law’ because the non-moving

party has failed to make a sufficient showing on an

essential element of her case with respect to which she has

the burden of proof.” Id. at 323 (quoting Fed. R. Civ. P

56(c)).

III. DISCUSSION

A. Liability Under § 107(a) of CERCLA

In order to establish a defendant's liability under §

107(a) of CERCLA, a plaintiff must establish four elements:

(1) that hazardous substances were disposed of at a

“facility”; (2) that there has beena “release” or “threatened

release” of “hazardous substances” from the facility into

the environment; (3) that the release or threatened release

has required or will require the United States to expend

“response [*9] costs”; and (4) that the defendant falls

within one of four categories of responsible parties set out

under the statute. 42 U.S.C. 9607(a). The relevant category

of responsible parties includes “any person who by

contract, agreement, or otherwise arranged for disposal ...

of hazardous substances owned or possessed by such

person.” 42 U.S.C. 9607(a)(3).’ If these requirements are

met, responsible parties are liable regardless of their intent.

United States v. CDMG Realty Co., 96 F.3d 706, 712 (3d Cir.

1996). See also United States v. Alcan Aluminum Corp., 964

F.2d 252, 258-259 (3d Cir. 1992).

[*10] Exide does not dispute that the United States

satisfies the first three elements of § 107(a). To satisfy the

fourth element, in its motion the United States contends

that: (1) Exide is a responsible party because it is the

successor to the liabilities of General through its merger

with General in 2000; (2) General is a responsible party

both indirectly, because it was the successor to the

l. A corporation is a “person” under CERCLA. 42 U.S.C. §

9601(21). Corporations are liable under § 107(a) if their waste

containing hazardous substances is transported to a site and the

same hazardous substances are later sound at the site. Sve

O'Neil v. Picillo, 682 F. Supp. 706, 725 (D.R.I. 1988), aff'd, 883 F.2d

176 (1st Cir. 1989), cert. denied, 493 U.S. 1071 (1990); United States

v. Wade, 577 F. Supp. 1326, 1332 (E.D. Pa. 1983).

-A50-

liabilities of Price through its purchase of Price in February

1966, and directly, because after the purchase it continued

to give away pieces of the battery tops as landfill; and (3)

Price is directly a responsible party since it arranged for

disposal of hazardous substances later found in the five

sites in and around Hamburg.

Exide does not contest the first and third links in this

chain of liability. However, Exide contends that summary

judgment in favor of the United States is inappropriate

because, viewing the evidence in the light most favorable

to it, the United States has not established that General is

either successor to the liabilities of Price or directly a

responsible party. Exide has also filed its own summary

judgment motion on this point, arguing that judgment in

its favor is [*11] appropriate because the United States

cannot establish that it is a responsible party under

CERCLA as a matter of law for these same reasons. In any

case, summary judgment on Exide’s liability turns on

whether General is liable under either of these two

scenarios.

1. General’s Successor Liability

In general, “where one company sells or otherwise

transfers all its assets to another company, the latter is not

liable for the debts and liabilities of the transferor.” 15 W.

Fletcher, Cyclopedia of the Law of Private Corporations § 7122

(perm. ed. rev. vol. 1999). However, the doctrine of

successor liability permits exceptions to the general rule in

four specific instances: when (a) the purchaser expressly or

implicitly agrees to assume liability; (b) the purchase isa

de facto consolidation or merger; (c) the purchaser is a mere

continuation of the seller; or (d) the transfer of assets is for

the fraudulent purpose of escaping liability. See id;

Philadelphia Elec. Co. v. Hercules, Inc., 762 F.2d 303, 308-309

(3d Cir. 1985), cert. denied, 474 U.S. 980, 88 L. Ed. 2d 337,

106 S. Ct. 384 (1985) (reviewing Pennsylvania law).?

Significantly, [*12] these theories are recognized as the

traditional successor liability rules under both

Pennsylvania law and federal common law created by

some courts to enforce successor liability under CERCLA.

See Atlantic Richfield Co. v. Blosenski, 847 F. Supp. 1261,

1283-1284 (E.D. Pa. 1994). In addition, some federal courts

have recognized another theory of CERCLA successor

liability under federal common law that is more relaxed,

and therefore easier to meet, than the “mere continuation”

exception under the traditional successor liability rules.

This theory is known as the “substantial continuity” test.°

See United States v. Carolina Transformer Co., 978 F.2d 832,

837-838 (4th Cir. 1992). .

[*13] The United States contends that General is

indirectly responsible for the liabilities of Price under two

theories of successor liability. As a threshold matter, the

United States argues that this Court should apply federal

common law to the question of CERCLA successor

liability. Under that federal common law, the United States

contends that (1) General's purchase of Price was a de facto

merger; and (2) the transaction resulted in a continuation

of Price under the “substantial continuity” test recognized

by many, but not all, federal courts. In the alternative, the

United States argues, even if the Court does not apply

i Although CERCLA does not provide specifically for successor

liability, courts have interpreted the statute as including

successor liability, and routinely find successor corporations

liable. See Smith Land & Improv. Corp. v. Celotex Corp., 851 F.2d

86, 91-92 (3d Cir. 1988), cert. denied, 488 U.S. 1029, 102 L. Ed. 2d

969, 109 S. Ct. 837 (1989).

3: The “substantial continuity” test is also sometimes referred to as

the “continuation of the enterprise” test. To avoid confusion, the

Court will consistently refer to it as the “substantial continuity”

test.

-A52-

federal common law, it should find that the state law

requirements for a de facto merger have been met. Again,

if General is liable either theory of successor liability, then

Exide is liable as well, since the chain of liability from Price

to Exide is complete. ,

Exide denies that General is indirectly liable under

any theory of successor liability. It contends that this Court

should not apply federal common law, and that under

Pennsylvania law, General's purchase of Price was not a de

facto merger. In the alternative, Exide argues, even if this

Court were [*14] to apply federal common law, it should

not adopt the “substantial continuity” test and instead find

only that the requirements for a de facto merger are

similarly not met under federal common law. Finally, and

again in the alternative, Exide contends that even if federal

common law and the “substantial continuity” test are

applied, the transaction completed between General and

Price does not meet this test such that successor liability

should pass to General.

The parties have thoroughly briefed the issue of

whether this Court should apply federal common law to

the case at bar, and if so, whether it should apply the

“substantial continuity” test of successor liability. In its

sole teaching directly on point, the Third Circuit held that

courts should look to federal common law to determine

successor liability under CERCLA. The court reasoned that

federal common law’s_ uniformity would support

CERCLA’s broad remedial aim to find successor corpora-

tions, and not taxpayers, liable for the costs associated with

hazardous substance clean-up. See Smith Land & Improv.

Corp. v. Celotex Corp., 851 F.2d 86, 91-92 (3d Cir. 1988), cert.

denied, 488 U.S. 1029, 102 L. Ed. 2d 969, 109 S. Ct. 837

(1989). [*15] The Fourth Circuit subsequently fashioned

the “substantial continuity” test as part of that common

law in Carolina Transformer. A number of circuits followed

suit in recognizing that test for successor liability under

CERCLA, while others have declined to do so.* The Third

Circuit has not specifically endorsed the “substantial

continuity” test.? However, courts in this circuit routinely

apply itin making successor liability determinations under

CERCLA. See, e.g., Gould, Inc. v. A&M Battery & Tire Serv.,

950 F. Supp. 653, 656 (M.D. Pa. 1997).

[*16] Exide’s principal argument as to why this Court

should not apply federal common law, and especially not

the “substantial continuity” test, is that the rationale and

authority for applying them have been eroded by US.

Supreme Court decisions postdating Smith Land. The U.S.

Supreme Court has indeed cautioned courts regarding the

unwarranted creation of federal common law ina number

of cases since Smith Land. Exide calls the Court's attention

to three decisions in particular.

In O'Melveny & Myers v. FDIC, 512 U.S. 79, 129 L. Ed.

2d 67, 114 S. Ct. 2048 (1994), the FDIC sued the former

counsel of a failed savings [*17] and loan for legal

malpractice and breach of fiduciary duty, causes of action

created under state law. Quoting the familiar passage from

4, See B.F. Goodrich v. Betkoski, 99 F.3d 505, 518-519 (2d Cir. 1996),

cert. denied, 524 U.S. 926 (1998) (applying federal common law

and the “substantial continuity” test); United States v. Mexico Feed

& Seed, 980 F.2d 478, 487-489 (8th Cir. 1992) (applying the

“substantial continuity” test). Cf Redwing Carriers, Inc. v.

Saraland Apts., 94 F.3d 1489, 1501-1502 (11th Cir. 1996); City

Mgmt Corp. v. U.S. Chem, Co., 43 F.3d 244, 253 n. 12 (6th Cir.

1994).

5. The Third Circuit rejected the “substantial continuity” in the

products liability context due to concerns that application of the

test would violate traditional tort law’s causation requirement.

See Polius v. Clark Equipment Co., 802 F.2d 75, 81 (3d Cir. 1986).

However, such concerns are not present under CERCLA, which

imposes strict liability. See United States v. Alcan Aluminum

Corp., 964 F.2d 252, 259 (3d Cir. 1992).

-A54-

Erie R.R. v. Tompkins, 304 U.S. 64, 78, 82 L. Ed. 1188, 58 S.

Ct. 817 (1938), that “[t]here is no general federal common

law,” the Court held that state law governed the issue of

imputation of knowledge to corporate victims of alleged

negligence. O'Melveny, 512 US. at 83-84.

Similarly, in Atherton v. FDIC, 519 U.S. 213, 136 L. Ed.

2d 656, 117 S. Ct. 666 (1997), the Court held that state law,

and not federal common law, governed the standard of

care applicable to the corporate governance of federally

chartered banks. The Court instructed that in order to

fashion rules of federal common law, the “guiding princi-

ple is that a significant conflict between some federal

policy or interest and the use of state law ... must first be

specifically shown.” Id. at 218. It cautioned that “[t]o

invoke the concept of uniformity ... is not to prove its

need.” Id. at 220. Finally, the Court concluded that there

was no evidence of significant conflict or threat to the

federal interest [*18] if state law standards of care were

applied. Id. at 225.

More recently, the Supreme Court addressed the

issue of indirect liability of a parent corporation for its

subsidiaries under CERCLA itself in United States v.

Bestfoods, 524 U.S. 51, 141 L. Ed. 2d 43, 118 S. Ct. 1876

(1998). In Bestfoods, the Court held, inter alia, that a parent

corporation may be indirectly liable under CERCLA for its

subsidiary’s actions only if the corporate veil may be

pierced. Id. at 63-64.

To some extent, O'Melveny, Atherton, and Bestfoods

can be construed to undermine the reasoning behind Smith

Land, since they caution against the creation of federal

common law (even when the need for uniformity is

asserted) other than when a significant conflict between

federal interests and application of state law is concretely

demonstrated.° Significantly, however, neither O'Melveny

nor Atherton addressed the creation of federal common law

in the context of a cause of action created under a federal

statute, such as CERCLA. Furthermore, in Bestfoods, the

Court specifically declined to address whether the source

of the veil-piercing [*19] law should be state or federal

common law.’ /d. at 64n.9. Therefore, in the absence of any

authority specifically overruling it, this Court remains

In light of these Supreme Court cases, the First Circuit recently

declined to adopt federal common law and instead applied state

law to a successor liability question in United States v. Davis, 261

F.3d 1, 53-54 (1st Cir. 2001). In response, the United States points

out that in Davis, the First Circuit relied in part on its previous

decision in John S. Boyd Co. v. Boston Gas Co., 992 F.2d 401, 406

(Ist Cir. 1993). In that case, the court applied state law to

construe an indemnity agreement between two corporations to

apportion liability. The United States argues that in Boyd, there

was no real federal interest at stake, since rules of successor

liability were applied to determine which of two different

defendants were liable to the government under CERCLA. In the

case at bar, a federal interest in forcing a responsible party (and

not taxpayers) to pay for environmenta clean-up under

CERCLA is present, since if Exide is not liable, taxpayers will

ultimately pay. Asa result, the United States argues, this federal

interest bolsters the argument that federal common law should

be applied in this case. In addition, the United States notes, the

Third Circuit has effectively recognized this distinction by

holding that federal common law applies to successor liability

issues under CERCLA in Smith Land, while also holding that

state law should be used to interpret CERCLA indemnification

provisions negotiated between two defendants. See Beazer East,

Inc. v. Mead Corp., 34 F.3d 206, 214 (3d Cir. 1994), cert. denied, 514

U.S, 1065, 131 L. Ed. 2d 559, 115 S. Ct. 1696 (1995).

Significantly, the Third Circuit looks to federal common law to

decide this question. See Lansford-Coaldale Joint Water Auth. v.

Tonolli Corp., 4 F.3d 1209, 1225 (3d Cir. 1993).

-A56-

bound by Smith Land.* In accordance with Smith Land, the

Court will apply federal common law.

[*20] As noted supra, there is no specific guidance

from the Third Circuit regarding application of the

“substantial continuity” test to the issue of CERCLA

successor liability. And O’Melveny, Atherton, and Bestfoods

can also be construed [*21] to undermine the rationale for

applying the “substantial continuity” test as part of federal

common law.” Significantly, however, even after these

Supreme Court decisions cited by Exide, courts in this

Exide also argues that Third Circuit case law since Smith Land

counsels against applying both federal common law and the

“substantial continuity” doctrine as well. See Smuthkline Beecham

Corp. v. Rolim & Haas Co., 89 F.3d 154, 158 (3d Cir. 1996)

{applying state law to construe CERCLA indemunification

provision); Beazer East, 34 F.3d at 214 (same); Vitco Corp. v.

Beckhuis, 38 F.3d 682, 688 (3d. Cir. 1994) (applying state

nonclaim statute to liability question under CERCLA). However,

these decisions did not specifically affect that court's Smuti Land

holding, and in fact often cite it with approval.

Before these Supreme Court cases, the Ninth Circuit had held

open the question of whether to adopt the “substantial

continuity” test. See Lowsiana-Pacific Corp. v. Asarce, Inc., 909

F.2d 1260, 1262-1265 (9th Cir. 1990). After these decisions,

however, that court specifically declined to do so. See Atchison,

Topeka & Santa Fe R. Co. v. Brown & Bryant, Inc., 159 F.3d 3538,

361-364 (9th Cir. 1998). The Court found that, under this line of

cases, there was no evidence that the application of traditional

rules of successor liability would frustrate CERCLA’s objectives

because there was no evidence that traditional state law rules

were not already sufficiently uniform and otherwise up to the

task of finding successor corporations liable. Significantly, the

court held that it need not decide whether, in applying the

traditional rules of successor liability, it applied them as federal

common law or state law, since the outcome of its analysis was

the same. /d. at 364.

circuit have continued to apply the test. See, e.g., Andritz

Sprout- Bauer, Inc. v. Beazer East, Ine. P 12 F. Supp. 2d 391,

405-406 (M.D. Pa. 1998)."° In any case, the court need not

resolve whether federal common law properly includes

the “substantial continuity test” since, as a matter of law,

Exide is indirectly liable as the successor to Price both

because (1) General’s transaction with Price meets the

definition of a de facto merger under traditional successor

liability concepts’ ‘recognized by federal common law, and

because (2) the Price-General transaction meets the

“substantial continuity” test as well. Because General is

indirectly responsible for Price’s CERCLA liability under

both of these theories, Exide is liable due to its merger with

General.

[*22]

a. De Facto Merger Test

Under traditional rules, courts consider four factors to

determine whether a transaction is a de facto merger:

(1) There is a continuation of the enterprise of

the seller corporation, so that there is continuity

of management, personnel, physical location,

assets, and general business operations.

(2) There is a continuity of shareholders which

results from the purchasing corporation paying

for the acquired assets with shares of its own

stock, this stock ultimately coming to be held by

the shareholders of the seller corporation so that

Courts in the Second Circuit, which previously expressly

adopted the “substantial continuity” test, have continued to

apply it in light of these Supreme Court cases as well. See New

York v. Nat'l Servs. Indus., 134 F. Supp. 2d 275, 277-278 (E.D.N.Y.

2001)

they become a constituent part of the

purchasing corporation.

(3) The seller corporation ceases its ordinary

business operations, liquidates, and dissolves as

soon as legally and practically possible.

(4) The purchasing corporation [*23] assumes

those obligations of the seller ordinarily

necessary for the uninterrupted continuation of

normal business operations of the seller

corporation.

Smuthkline Beecham Corp. v. Rohm & Haas Co., 89 F.3d 154,

162 n.6 (3d Cir. 1996) (citing Philadelplia Elec. Co. v.

Hercules, Inc., 762 F.2d 303, 310 (3d Cir.), cert. denied, 474

U.S. 980, 88 L. Ed. 2d 337, 106 S. Ct. 384 (1985)). No one of

the factors outlined above is either necessary or sufficient

to find the existence of a de facto merger. See United States

v. Keystone Sanitation Co., 1996 U.S. Dist. LEXIS 13651, No.

CV-93-1482, 1996 WL 672891 at *7 (M.D. Pa. Aug. 22, 1996).

First, then, the Court must ascertain if Price’s

enterprise was continued by General in terms of

management, personnel, physical location, assets, and

general business operations. As for management and

personnel, even viewing the evidence in the light most

favorable to Exide, the record on the whole reveals that

there was significant continuity of management and

almost total continuity of other personnel at the Hamburg

Plant after the transaction with General.

There is no dispute that the principal upper-level

[*24] management figures at Price were all employed by

General in various capacities after the sale. Some of these

managers continued to have some responsibility for the

Hamburg Plant, although they were eventually moved

from Hamburg to General’s offices in Reading,

Pennsylvania. William Price, Sr., the Chairman of the

Board at Price, was employed as a consultant and named

to the Board of Directors of General, as well as its

Executive Committee, although he was not involved with

the day-to-day management of the Hamburg Plant after

the transaction. William Price, Jr., the President of Price,

came to be employed as an officer of General, although,

Exide contends, one without significant administrative

duties. Saul Dershwin, Price’s Executive Vice President,

and Robert Restrepo, the Vice President for Manufacturing

of Price, both became officers of General with some

responsibility for all General plants, including the

Hamburg Plant. Dershwin also became a member of

General’s Board of Directors. At some point after the sale,

Dershwin and Restrepo ceased to have operating

responsibilities at the Hamburg Plant, although it is

unclear precisely when." Mid-level management remained

basically [*25] the same, as Warren Werley continued to

serve ina significant capacity at the Hamburg Plant. Before

the sale, and for an unspecified time thereafter, Werley

served as superintendent. At some point after the sale, he

became plant manager.

Exide argues that after the sale, there was no

continuity of management, since ultimate responsibility

for the Hamburg Plant passed to General’s Board of

Directors and upper-level management in Reading.

However, it is clear that former Price managers became a part

of General's Board and upper-level management after the

transaction. Additionally, as for management of the day-

to-day plant operations, despite the fact that members of

the upper-level management of Price were at some point

moved to Reading, Exide has not set forth evidence that

Both Restrepo’s and Dershwin’s offices were eventually moved

to Reading. However, Restrepo’s office was not moved until six

months to a year after the sale. It is unclear when Dershwin’s

was moved.

any member of ine General management [*26] team was

named to a position at the Hamburg Plant or assumed any

day-to-day management responsibility there.”

Personnel continuity at the lower levels was even

greater. The sales personnel were retained. Additionally,

union members and other hourly workers were kept on.

Ralph Mengel, the Hamburg Plant's Traffic Manager [*27]

in charge of transporting batteries to customers, stated in

an affidavit that General kept the same employees and

management personnel. Robert Schock, a member of the

steelworker’s union who worked at the plant’s smelter,

stated in an affidavit that he and his fellow union members

continued to work at the plant, under the same

supervisors. Finally, Miriam Woerner, who worked in

Personnel, stated in an affidavit that no major changes in

personnel at the Hamburg Plant were made after the sale.

The location and assets of Price’s operations at the

Hamburg Plant obviously remained the same. Exide

argues that 10 continuity of assets occurred because the

Agreement did not include the sale of the Hamburg Plant

itself and its land. However, this analysis fails to

appreciate the true nature of the transaction. On February

11, 1966, the real property and Hamburg Plant were sold

12. Although Exide also argues that environmental management of

the plant significantly changed with Price's sale to General, there

is no evidence to support this contention. The document Exide

offers as evidence of such, a memorandum regarding anti-

pollution measures to be taken at the Hamburg Plant, was

written in response to a government investigation requiring the

company to submit a pollution abatement plan. It therefore is

not evidence of a marked shift in the company’s environmental

policy initiated by new General management. In addition, the

document was written over a year and a half after the sale took

place, and was authored by Robert Restrepo, a former member

of Price’s management.

by Price to the Greater Berks County Development Fund

(the “Fund”"), an organization which exists to arrange for

low-interest loans, tax credits and development assistance

for qualified businesses. The Fund then entered into a

mortgage agreement with American Bank & Trust Co. of

Pennsylvania, and leased the Hamburg Plant [*28] to

General. General then effectively made the mortgage

payments on the property until 1978, when the deed was

transferred to it for a nominal sum. Therefore, as a

practical matter, all of Price’s assets were transferred to

General as part of the transaction between the companies,

and all the assets continued to be part of the ongoing

business.

The general business operations at the Hamburg

Plant remained very similar after the sale to General.

General used the same employees and used the same

equipment to make the same batteries as had Price.

General then used the same employees to sell and deliver

the batteries to the same customers. This make sense, since

General had assumed Price’s obligations under “its

existing contracts of every kind and description, oral or

written, including ... all contracts for the purchase or sale

of goods, materials, equipment, machinery, supplies or

services, warranties, leases, licenses, union contracts,

royalty agreements, distributor’s contracts and

employ ment contracts.” One witness, Arthur Kistler,

stated in an affidavit that he did not observe any changes

to the plant when Price was sold to General.

There is also undisputed evidence that General [*29]

continued to use the Price name, at least to some extent.

Exhibits to the Agreement demonstrate that, at least at one

time, General intended to continue the Price name by

operating it as its own division — “new Price.” Therefore,

it required Price to change its name to Price Investment

Co., which it did. The United

This text is long and has been trimmed here. Open the source document for the complete record.