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NORTH SHORE GAS CO. v. SALOMON

May 5, 1997

NORTH SHORE GAS COMPANY, Plaintiff,
v.
SALOMON, INC., Defendant.



The opinion of the court was delivered by: GETTLEMAN

 This opinion supersedes the court's opinion in this case dated March 7, 1997.

 Plaintiff North Shore Gas Company brings this action against defendant Salomon, Inc. pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq., and the Declaratory Judgment Act, 28 U.S.C. §§ 2201-2202, seeking a determination that it is not liable to defendant under CERCLA for response costs incurred and to be incurred in connection with remediating contamination from releases of hazardous substances at 1805 South Bannock Street, Denver, Colorado (the "Site"). This court has subject matter jurisdiction over this action pursuant to CERCLA, 42 U.S.C. §§ 9607(a) and 9613(b). The parties have filed cross-motions for summary judgment. For the reasons set forth below, the court denies defendant's motion and grants plaintiff's motion for summary judgment.

 FACTS1

 Plaintiff is an Illinois corporation with its principal place of business at 122 Michigan Ave, Chicago, Illinois. Plaintiff was incorporated in the early 1900's as a company that supplied gas to communities around Waukegan, Illinois. In 1916, plaintiff retained a "well-known consulting engineer," William A. Baehr, to solve its operating problems and to manage the company and its property. In 1922, Baehr formed a registered public utilities holding company, North Continent Utilities ("NCU"), that held plaintiff's common stock.

 By 1926, plaintiff's existing gas production facilities were becoming obsolete and inadequate to satisfy the needs of plaintiff's customers. Thus, on January 17, 1927, Baehr incorporated North Shore Coke & Chemical Company ("NSC") to provide plaintiff's gas requirements. In 1928, NSC completed the construction of a coke oven plant in Waukegan and, thereafter, supplied the bulk of plaintiff's gas requirements (83-91%).

 The management of plaintiff, NSC, and NCU was headed by Baehr, who was president of all three companies, which all had management services agreements with the William A. Baehr Organization, Inc. From 1927 to 1942, NCU held the majority of the common and preferred stock of NSC. By 1941, NCU owned all of plaintiff's outstanding common stock and approximately 2.28% of its preferred stock.

 The S.W. Shattuck Chemical Company ("Old Shattuck") was incorporated in 1918 in Colorado. Old Shattuck's principal activity was mineral ore processing, including a mineral processing plant on the Site. In 1934, NSC purchased a 60% stock interest in Old Shattuck. On March 8, 1955, Denver Ice and Cold Storage merged with Old Shattuck, keeping the name S.W. Shattuck Chemical Co. In December 1969, Englehard Minerals purchased Old Shattuck, forming the S.W. Shattuck Chemical Co., Inc. ("Shattuck"). Thereafter, Shattuck became a wholly-owned subsidiary of defendant. In 1984, Shattuck closed the majority of its operations.

 In the mid-1930's, NSC organized North Continent Mines ("NCM"). The business of NCM consisted principally of the mining and processing of ores containing vanadium and uranium. NCM carried out some of its operations in Colorado.

 In the spring of 1941, plaintiff and NSC jointly filed a Plan of Reorganization (the "1941 Plan") under Section 11 of the Public Utility Holding Company Act of 1935. The principal features of the 1941 Plan were the transfer of the utility assets of NSC to plaintiff, the recapitalization of plaintiff, the settlement of all conflicting claims by interested parties, and the refunding of joint bonds issued by NSC and plaintiff. Non-utility assets (i.e. Old Shattuck and NCM) were transferred to NCU.

 The Plan was approved by the Securities and Exchange Commission ("SEC") by order on November 13, 1941. The Illinois Commerce Commission ("ICC") also approved the 1941 Plan by order entered on November 5, 1941. After the reorganization, plaintiff operated the Waukegan coke plant and manufactured coke oven gas for its utility customers. On March 30, 1942, NSC liquidated.

 In 1983, the Site was included on the National Priorities List because both radioactive and nonradioactive hazardous substances were found there. In 1992, the United States Environmental Protection Agency found that the S.W. Shattuck Chemical Company, Inc. ("Shattuck") was responsible for cleaning up the Site, and issued a CERCLA Section 106 Order (the "Order") compelling Shattuck to clean up the property. In a guarantee dated September 1, 1993, defendant guaranteed the performance of the Order by its wholly-owned subsidiary, Shattuck. For purposes of this action, defendant has also agreed to assume Shattucks liability.

 John Faught ("Faught"), on behalf of Shattuck, sent plaintiff a letter dated January 31, 1994 (the "Faught Letter"), demanding reimbursement, indemnification, and contribution for Shattuck's CERCLA response costs at the Site. (Hereinafter "Shattuck" refers to Old Shattuck and Shattuck.) In the letter, Faught asserts that, pursuant to the 1941 Plan, plaintiff is liable for the clean-up costs as the successor corporation to NSC. NSC allegedly owned and/or operated the Bannock Street Site at the time when hazardous substances were disposed of on the Site. In the demand letter, Faught quotes full paragraphs from the 1941 Plan. The Faught Letter also explains that Shattuck is a wholly owned subsidiary of defendant Salomon, and that defendant has provided financial assurance for the remediation.

 After receiving the demand letter, the parties met to discuss the issues raised in the Faught Letter, but failed to resolve the dispute. Plaintiff was told that if it did not agree to share in the clean-up costs it would be sued for contribution. On December 5, 1994, plaintiff filed the instant declaratory judgment action asking this court to declare whether plaintiff is liable to defendant under CERCLA for response costs incurred and to be incurred, or any other damages in connection with the Site.

 Defendant filed motions before this court on February 2, 1995, requesting the court to: (1) decline to exercise jurisdiction over the case pursuant to 28 U.S.C. § 2201; (2) dismiss plaintiff's action pursuant to Fed.R.Civ.P. 12(b)(7) and 19, for failure to join an indispensable party (Shattuck); or, in the alternative, (3) transfer venue of this action to the District Court for the District of Colorado, pursuant to 28 U.S.C. § 1404(a). In its opinion dated August 22, 1995, the court denied defendant's motion to decline declaratory judgment jurisdiction, its motion to dismiss, and its motion to transfer.

 The parties have filed the instant cross-motions for summary judgment. Plaintiff argues that it did not succeed to any Shattuck liabilities under the 1941 Plan because: (1) plaintiff did not expressly or implicitly assume NSC's liabilities (if any) for Shattuck under the 1941 Plan; (2) plaintiff did not succeed to NSC's liabilities (if any) for Shattuck as a matter of law; and in any event, (3) NSC is not liable as either an "operator" or an "arranger" for Shattuck's liabilities under CERCLA. Defendant responds that: (1) plaintiff is a direct successor to NSC's liabilities under the 1941 Plan; (2) even if the 1941 Plan was an asset purchase, plaintiff succeeded to NSC's liabilities as a matter of law; (3) NSC is liable under CERCLA as both an operator and an arranger.

 DISCUSSION

 I. Standard

 A court should grant summary judgment if "there is no genuine issue of material fact and... the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The burden is on the moving party to identify portions of the pleadings, answers to interrogatories, and affidavits which demonstrate an absence of a genuine issue of material fact. Id.; Celotex Corp. v. Catrett, 477 U.S. 317, 323, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986). The burden then shifts to the non-moving party to "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(c). The simple assertion that a factual dispute exists is not enough to defeat a Rule 56(c) motion. To defeat a motion for summary judgment, the non-moving party must set forth specific facts, through affidavits or other materials, that demonstrate disputed material facts. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986). In deciding a motion for summary judgment, the court must read the facts in a light most favorable to the non-moving party. Id., 477 U.S. at 255.

 II. Successor Liability Under CERCLA

 In 1980, Congress enacted CERCLA to provide a comprehensive response to the wide-spread problem of hazardous waste disposal. American National Can Co. v. Kerr Glass Manufacturing Corp., 1990 U.S. Dist. LEXIS 10999, 1990 WL 125368, at *4 (Aug. 22, 1990 N.D. Ill.). The statute imposes the costs of environmental cleanup on the parties responsible for the contamination, shifting the burden away from the federal government and, ...


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