EIA Gains Support in Superfund Liability Case

LYNN SCHENKMAN

The National Solid Wastes Management Association (NSWMA), Washington, D.C., is involved in a Superfund liability case calling attention to inconsistencies in the way courts uphold responsibility for environmental damage.

National Services Industries Inc. (NSI), Atlanta, purchased Serv-All Uniform Rental Inc., a New York-based uniform-rental company that dry cleaned garments and sent its hazardous waste to the Blydenburgh landfill in Islip, N.Y. When NSI purchased the company in 1988, it was not aware the waste had elevated the landfill to Superfund status. NSI is being held responsible for $12 million in Superfund liability but paid approximately $2 million to buy Serv-All.

“It's patently unfair for a company to be liable for six times the amount it paid for an asset purchase under these circumstances,” says David Biderman, NSWMA general counsel. Allied Waste Inc., Scottsdale, Ariz., and the National Association of Manufacturers (NAM), Washington, D.C., have joined NSWMA in supporting NSI. The organizations are asking a federal appeals court to overturn a 2001 district court decision that ignored a Supreme Court decision determining responsibility for Superfund damage amid ownership shifts.

In 1998, the Supreme Court ruled in Bestfoods v. the United States that traditional, state corporate law should be applied. Under the law, an asset purchaser does not assume an acquired company's Superfund liabilities unless certain criteria are met. By contrast, under the Substantial Continuity theory advanced by the district court, a purchaser is liable if it continues the acquired company's business.

“Under the Bestfoods case, you wouldn't automatically avoid Superfund liability,” Biderman says, “but NSWMA is trying to make sure state corporate law is the law judges look to when deciding whether purchasers are liable.”