were changed after the acquisition. Only six of the 37 Speed-O-Laq employees went to work for Valspar after the asset purchase. Moreover, the officers, directors and incorporators of the two companies were entirely different. Additionally, Valspar closed the storage facility in Menomonee Falls, discontinued manufacturing lacquers and, within 10 days, discontinued the manufacture of industrial coatings. Further, Valspar continued to manufacture private label paints, but only after reviewing and changing the formula. Accordingly, because Valspar has shown that there is no continuation of the enterprise (factor #1) and no continuity of shareholders (factor #2), this court finds that there was no de facto merger.
Mere Continuation of Business
The "traditional" version of the "mere continuation" test emphasizes an "identity of officers, directors, and stock between the selling and purchasing corporations." Mexico Feed, 980 F.2d at (quoting Tucker v. Paxson Machine Co., 645 F.2d 620, 626 (8th Cir 1981)); see also Carolina Transformer, 978 F.2d at 838 (the continuity of stock, shareholders and directors is determinative); Sylvester Bros., 772 F. Supp. at 448 (same); Goldstein, 444 F. Supp. at 584 (key element of a "continuation" is a common identity of the officers, directors, and stockholders in the selling and purchasing corporations). Additionally, courts have considered the continuity of investors and control and the adequacy of consideration in the transfer of assets. Soo Line, 797 F. Supp. at 1483. Valspar has set forth sufficient facts which indicate a lack of such continuity. Therefore, under the "traditional" test, Valspar cannot be considered to be a "mere continuation" of Speed-O-Laq.
Plaintiffs argue that the court should apply a broadened "mere continuation" theory commonly known as the "substantial continuity" or "continuity of enterprise" exception.
This exception, however, only applies when it has been shown that the asset purchaser has knowledge of the potential liability and responsibility for that liability. See Mexico Feed, 980 F.2d at .
As the court pointed out,
CERCLA is aimed at imposing clean up costs on the parties responsible for the creation or maintenance of hazardous waste sites. Therefore, in the CERCLA context, the imposition of successor liability under the "substantial continuation" test is justified by a showing that in substance, if not in form, the successor is a responsible party. The cases imposing "substantial continuation" successorship have correctly focused on preventing those responsible for the wastes from evading liability through the structure of subsequent transactions.
Mexico Feed, 980 F.2d at ; see also Carolina Transformer, 978 F.2d at 838-39 ("Against the background of Carolina Transformer's emerging environmental problems," former director and employee formed successor corporation); Asarco, 909 F.2d at 1265-66 ("substantial continuation" test inapplicable because purchaser had no actual notice of the seller's potential CERCLA liability and because seller's offending installation had ceased operating before the asset sale). Because plaintiffs have not set forth facts showing that Valspar had knowledge of the potential environmental liability or was in some way responsible for that liability, this court will not apply the "substantial continuation" test. Accordingly, the court finds that Valspar was not a "mere continuation" of Speed-O-Laq.
For the foregoing reasons, Valspar's motion for summary judgment on the issue of successor liability is granted.
PHILIP G. REINHARD, JUDGE
UNITED STATES DISTRICT COURT
DATED: January 26, 1993