On Appeal from the United States District Court for the Eastern District of Pennsylvania D.C. Civil Action No. 00-cv-03057 (Honorable Ronald L. Buckwalter).
The opinion of the court was delivered by: Scirica, Chief Judge.
Before: SCIRICA, Chief Judge, RENDELL and FISHER, Circuit Judges
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-contaminated Superfund site. The District Court granted summary 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 with Exide Corporation in 2000. The United States filed 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 Battery'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 agreement with Price Battery, a smaller, privately-held battery manufacturing firm. Price Battery was owned 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.*fn1 At the time, 100,000 General Battery shares were valued at approximately $1 million and represented 4.537% of General's outstanding equity. William Price Sr.'s resulting stake in General Battery was comparable to that of the company's co-founders, W.A. Shea and H.J. Nozensky, who in 1966 remained on General's board and held 5.12% and 4.44% of its outstanding equity, respectively.
Under the agreement, General Battery purchased Price Battery's equipment, materials, intellectual property and inventory. It also assumed Price Battery's contractual obligations, 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.
After the transaction, General Battery continued manufacturing batteries at the Hamburg plant. Price 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.
On cross-motions for summary judgment, the District Court held 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). Following 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.
The District Court had jurisdiction under CERCLA, 42 U.S.C. § 9613(b), and 28 U.S.C. § 1331. We have jurisdiction under 28 U.S.C. § 1291. Our summary judgment standard of review is plenary. In re Mushroom Transp. Co., 382 F.3d 325, 335 (3d Cir. 2004) (drawing all reasonable inferences in favor of the non-moving party).
We return, once again, to the difficult area of indirect liability under CERCLA.*fn2 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 cleanup." United States v. Bestfoods, 524 U.S. 51, 56 n.1 (1998) (quoting Pennsylvania v. Union Gas Co., 491 U.S. 1, 21 (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." Id. at 55 (quoting Key Tronic Corp. v. United States, 511 U.S. 809, 814 (1994)).
CERCLA is not, however, "a model of legislative draftsmanship," Exxon Corp. v. Hunt, 475 U.S. 355, 363 (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 corporate liability, including successor liability. See 42 U.S.C. § 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); Smith Land, 851 F.2d at 92 (holding CERCLA imposes successor liability).*fn3
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.
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 LansfordCoaldale 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 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 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, 512 U.S. 79 (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 (1979), the Supreme Court addressed the propriety of applying state law under an ambiguous or incomplete federal statute. The Court emphasized that, "[w]hether to adopt state law or to fashion a nationwide federal rule is a matter of judicial policy 'dependant upon a variety of considerations always 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 (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. 512 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 (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, 500 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 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 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 (1997).
Smith Land and Lansford-Coaldale, in contrast, 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.
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 (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 (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 on a 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 not been undermined by 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 U.S.C. § 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.").
It 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.*fn4 And although the 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.*fn5 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 CERCLA. 159 F.3d at 364. The court 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 ...