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Trial Court Finds Broad Assumption of Liabilities in Corporate Minutes Sufficient to Confer Personal Jurisdiction and Impose Liability

In a Letter Order issued on July 10, 2020, the United States District Court for the District of New Jersey held that broad language by which an entity assumed the liabilities of a dissolved entity was sufficient to confer both personal jurisdiction and liability on the entity which assumed the obligations. Occidental Chemical Corporation v. 21st Century Fox America, et. al., Civ. Action No. 18-11273 (D.N.J. July 10, 2020). In doing so, the Court brushed aside arguments that the jurisdiction was lacking because the dissolved entity had ceased operations in New Jersey long before the assumption of liability and that the lack of specificity in the assumption precluded a finding that CERCLA liability was included.

United Piece Dye Works (United) operated at properties in proximity to the Passaic River in New Jersey until 1968. Through a series of transactions, in 1979 United merged into UPDW, which in turn became a subsidiary of Chargeurs Inc., a Delaware entity without any operations in New Jersey. UPDW was dissolved in 1982 in connection with a plan of liquidation by which, according to minutes of the UPDW Board of Directors, Chargeurs “assume[d] the liabilities of UPDW and United not paid or otherwise provided for by UPDW and United.”

The Lower Passaic River Study Area (LPRSA), a portion of the Diamond Alkali Superfund Site in New Jersey, is a 17-mile tidal stretch of the Passaic River. In 2018, Occidental (OxyChem), a PRP at the Site, brought suit against a number of parties, including Chargeurs, for cost recovery and contribution under CERCLA. OxyChem claimed that United’s operations released substances which contributed to contamination of the sediments in the LPRSA. Chargeurs moved to dismiss for lack of personal jurisdiction and for summary judgment on the ground that it did not assume United’s alleged CERCLA liability, to which OxyChem cross-moved.

With respect to personal jurisdiction, the Court rejected Chargeurs’ argument that it could not be brought into court in New Jersey as United had ceased operations in the state long before United was merged into UPDW and UPDW became a subsidiary of Chargeurs. While agreeing that there was no general jurisdiction, relying on New Jersey and Third Circuit precedent, the Court held that there was successor jurisdiction because United had purposefully directed activities in the state and that, based upon the assumption of liability by Chargeurs, those jurisdictional contacts were to be imputed to its successor.

On the issue of whether Chargeurs could be liable for the obligations of United, Chargeurs claimed that as the assumption did not reference “all” liabilities, the Court should find that CERCLA liabilities were not assumed. The Court disagreed and instead granted summary judgment on the issue to OxyChem. The Court noted that assumption of liabilities is one basis upon which a party can be liable under CERCLA. That the assumption at issue here did not expressly mention CERCLA did not mean that such liabilities were not included within its ambit, especially where the language did specify certain excluded liabilities, those being liabilities not paid or otherwise provided for by UDPW and United. “The plain reading” then, the Court held, was that all other liabilities, including CERCLA liabilities, were assumed by Chargeurs.