Home » Case Summaries » 1998 » Atchison, Topeka & Santa Fe Railway Co. v. Brown & Bryant, Inc.


Atchison, Topeka & Santa Fe Railway Co. v. Brown & Bryant, Inc.



In this case, the Ninth Circuit revised a 1997 opinion[1] in which the court refused to assign successor-in-interest liability to the purchaser of interests of a liable party under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA).[2] The revised opinion substantially repeats the analysis and holding of the prior opinion, but does not hold that state law determines the scope of successor liability.

Plaintiff railroad companies, Atchison, Topeka & Santa Fe Railway Company and Southern Pacific Transportation Company (Railroads), brought this contribution action under CERCLA to recover cleanup costs for soil contamination on property leased to defendant Brown & Bryant (B & B). Railroads sought contribution from defendant PureGro, which had purchased many of B & B’s assets once B & B realized it could not afford to comply with cleanup orders issued by the Environmental Protection Agency (EPA) pursuant to CERCLA. The Ninth Circuit held that PureGro was not liable for contribution because it was not the successor-in-interest. First, the Ninth Circuit declined to apply CERCLA’s “mere continuation” exception[3] to the general rule that asset purchasers are not liable as successors-in-interest. Second, the court found that PureGro’s purchase of B & B’s assets did not qualify for the “fraudulently entered transaction” exception to the same rule.[4]

Aside from minor grammatical and citation amendments, the court altered its analysis in the revised opinion only in its discussion of the expanded “substantial continuation” exception.[5] The court in the prior opinion determined, on the basis of a series of United States Supreme Court cases, that state law dictates the parameters of successor liability. The court declined to assign liability because the governing law of California includes no substantial continuation exception.[6]

In the revised opinion, the court noted that its decision “not to extend the ‘mere continuation’ exception to include the broader notion of a ‘substantial continuation'” rendered the same result under either state or federal law. The court did not need to determine whether state law governed the scope of successor liability, because in this case both state and federal law reached the same result. The court also deleted a paragraph from the earlier opinion that rejected an argument for expanding the “mere continuation” rule on the basis that such expansion would increase the funds available to finance CERCLA cleanup operations.

[1] Atchison, Topeka & Santa Fe Ry. Co. v. Brown & Bryant, Inc., 132 F.3d 1295 (9th Cir. 1997), amended by 159 F.3d 358 (9th Cir. 1998); see also 27 Envtl. L. 577, 582-83 (1997).

[2] 42 U.S.C. §§ 9601-9675 (1994 & Supp. III 1997).

[3] 159 F.3d at 361 (citing Louisiana-Pacific Corp. v. Asarco, Inc., 909 F.2d 1260, 1263 (9th Cir. 1990)).

[4] Id.

[5] Id.

[6] 132 F.3d at 1301.

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