A corporate successor may be liable under CERCLA for actions of its predecessor, however, courts have varied on the precise standard to be applied in determining if such liability exists. The Third Circuit adopted the general common law rule for corporate successor liability, which is essentially non-liability for the acquiring corporation unless one of the four recognized exceptions is met:
- The purchaser assumes liability;
- The transaction amounts to a consolidation or merger;
- The transaction is fraudulent and intended to provide an escape from liability; or
- The purchasing corporation is a mere continuation of the selling company.
The Fourth Circuit has applied the so-called “continuity of enterprise” theory, which is also known as the “substantial continuity test.” Under this theory, courts look to the following series of factors to determine whether one corporation is a successor of another and will thus incur successor liability:
- Retention of the same employees;
- Retention of the same supervisory personnel;
- Retention of the same production facilities in the same physical location;
- Production of the same product;
- Retention of the same name;
- Continuity of assets;
- Continuity of general business operations; and
- Whether the successor holds itself out as the continuation of a previous enterprise.
According to one Texas federal court, the Third Circuit test was the more prudent approach and is consistent with current Supreme Court precedent, nonetheless, given the absence of any controlling authority, it analyzed the facts of its case under both tests. It should be noted that some Texas state courts do not recognize either the de facto merger doctrine or the continuation theory as a basis for imposing liability.
However, veil-piercing is not required in order for individuals to be directly liable under the owner/operator provisions of CERCLA. CERCLA prevents individuals from hiding behind the corporate shield when, as “operators,” they themselves actually participated in the wrongful conduct. In essence, a person who is an operator of a facility is not protected from liability by the legal structure of ownership.
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