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Land v. Celotex Corp.

filed: June 30, 1988.

SMITH LAND & IMPROVEMENT CORPORATION, APPELLANT IN 87-5740
v.
THE CELOTEX CORPORATION SMITH LAND & IMPROVEMENT CORPORATION, APPELLANT IN 87-5741 V. RAPID-AMERICAN CORPORATION



Appeal from the United States District Court for the Middle District of Pennsylvania, D.C. Civil Nos. 86-1151 & 86-0116.

Weis,*fn* Greenberg and Aldisert, Circuit Judges.

Author: Weis

Opinion OF THE COURT

WEIS, Circuit Judge.

This is a suit by a purchaser of land seeking contribution toward expenses incurred in the clean-up of a hazardous waste site. The defendant invoked and the district court accepted the defense of caveat emptor. A review of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. ยงยง 9601-75, convinces us that caveat emptor, though it may affect the amount of an award, is not a permissible defense to liability. We also conclude that the general doctrine of corporate successor liability is appropriate in CERCLA contribution claims. Accordingly, we will vacate the judgment entered in favor of defendants and remand for further proceedings.

Plaintiff owns a tract of land in Plymouth Township, Pennsylvania, on which is deposited a large pile of manufacturing waste containing asbestos. In July 1984, the Environmental Protection Agency informed plaintiff that unless it took steps to alleviate the asbestos hazard the federal government would perform the work and then pursue reimbursement. Plaintiff proceeded to correct the condition to EPA's satisfaction, allegedly incurring costs of $218,945.44.

Before reaching a settlement with the EPA, plaintiff notified defendants of its intention to seek indemnification. Plaintiff asserts that defendants are corporate successors to the Philip Carey Company (Carey), which had created the large waste pile in the course of manufacturing asbestos products. Carey sold the land to the plaintiff's predecessor in 1963.

When defendants failed to accept responsibility for clean-up, plaintiff filed suit alleging causes of action under CERCLA and various state law theories including nuisance, unjust enrichment, and common law indemnity. Relying on Philadelphia Elec. Co. v. Hercules, Inc., 762 F.2d 303 (3d Cir.), cert. denied, 474 U.S. 980, 88 L. Ed. 2d 337, 106 S. Ct. 384 (1985), the district court, holding that caveat emptor applied, entered summary judgment for defendants. The plaintiff's predecessor, wrote the court, "bought the land in an open, arm's-length" transaction, without concealment. "In the eyes of the law, the plaintiff calculated or must be held to have calculated the risk of future clean-up costs into the amount it was willing to pay for the land." That Hercules was precipitated by a state agency acting under state law, from the courts standpoint, did not suffice to distinguish the case from the CERCLA claim at hand.

The court noted that the plaintiff's predecessor was a sophisticated company which had inspected the land on five occasions, known of its past use, and admitted that the pile of waste was a "negative" factor in the decision to purchase the land. Despite the plaintiff's assertion that it lacked knowledge about the hazards of asbestos, the court concluded that the "price plaintiff paid for the land reflected the possibility of environmental risks."

Plaintiff does not now challenge the rulings on the state claims, but appeals only the judgment entered on the federal claim. Plaintiff argues that CERCLA permits only limited and specific defenses and that "caveat emptor" is not among them. Defendants respond that they never owned or conducted any operation on the property and hence cannot be liable. In the alternative, defendants argue that if found responsible on a theory of successor liability, then they may assert the caveat emptor defense against this experienced purchaser.

I.

A number of CERCLA's provisions are pertinent here. Section 9607(a) provides that:

"Notwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section --

(1) the owner and operator of a . . . facility, [and]

(2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous ...


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