Metro Container Grp. v. AC&T Co.

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METRO CONTAINER GROUP Plaintiff v. AC&T CO., INC. et al., Defendants

Civil Action No. 18-3623

United States District Court, E.D. Pennsylvania

April 14, 2023

MEMORANDUM

GENE E.K. PRATTER, J.

The Metro Container Group (“Metro”), an unincorporated association of several entities, settled with the Environmental Protection Agency for storing hazardous materials at an industrial site in Trainer, Pennsylvania. Metro then brought this action pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (“CERCLA”), 42 U.S.C. § 9601, et seq, against numerous defendants that also stored hazardous materials at the same site for cost recovery contribution, and declaratory relief related to costs Metro incurred as part of its efforts to remove contamination at the site.

One of those defendants, Rahway Steel Drum Co., Inc. (“Rahway”), has moved for partial summary judgment on the issue of whether it may be liable for the actions of a number of other entities under a theory of successor liability. This motion is premature, however because there has not been an opportunity to develop a sufficient record on these issues. Therefore, the Court denies Rahway's motion without prejudice.

Background

Writing primarily for the benefit of the parties, the Court assumes their basic familiarity with the facts of the case.^[1] The Court recounts portions of the case's procedural history that explain why Rahway's motion, despite arriving years into the litigation, remains premature.

The story begins in Fall of 2019, when several defendants including Rahway, filed motions to dismiss. While those motions were pending, the Court stayed all discovery in this case to allow for settlement discussions to take place. Then, in March 2020, the Court ordered Metro to submit a proposed plan for limited discovery on the issues of corporate and successor liability, More than a year passed before the Court approved a plan for this limited discovery. Pursuant to this plan, Metro's discovery was limited to 15 interrogatories, 15 requests for admission, and 15 requests for production of documents; all other discovery remained stayed as per the Court's prior order. This stay remained in place until February 24, 2022, after Rahway and other defendants served their discovery responses. No sooner did discovery recommence, however, than new disputes arose, leading the Court to order the parties to participate in mediation. After an initial settlement conference, the Court issued a new scheduling order staying discovery until January 2, 2023 and setting a deadline for summary judgment motions for October 27, 2023. Less than two months after that scheduling order-and two months before discovery was to recommence-Rahway filed the present motion for partial summary judgment.

Legal Standard

I. Summary Judgment Standard

To succeed on a motion for summary judgment, the moving party must establish “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a), “A fact is material if it might affect the outcome of the suit under the governing law,” S.H. ex rel. Durrell v. Lower Merlon Sch. Dist., 729 F.3d 248,256 (3d Cir. 2013), and a dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party,” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The moving party bears the burden to demonstrate the absence of a genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once they do, the burden shifts to the nonmovant to point to specific evidence in the record to show that there is a genuine issue for trial. Id. at 324. In other words, “summary judgment is essentially ‘put up or shut up' time for the non-moving party,” who must “rebut the motion with facts in the record and cannot rest solely on assertions made in the pleadings, legal memoranda, or oral argument.” Berckeley Inv. Grp., Ltd. v. Colkitt, 455 F.3d 195,201 (3d Cir. 2006), All of this presupposes, of course, that there is a sufficiently developed record. Where discovery relevant to a particular issue has not yet been completed, a summary judgment motion on that issue is premature. See Sarnes v. Gable, 732 F.2d 49, 51-52 (3d Cir. 1984) (reversing grant of summary judgment where answers to certain discovery requests were outstanding). This is especially true where relevant facts “are in possession of the moving party,” id. at 51 (quoting Costlow v. United States, 552 F.2d 560, 564 (3d Cir. 1977)), or where critical witnesses have not yet been deposed, see Miller v. Beneficial Mgmt. Corp., 977 F.2d 834, 846 (3d Cir. 1992).

IL Successor Liability Standard

The parties disagree over exactly what the term “successor liability” encompasses with respect to this case. Rahway uses the term to describe a specific form of indirect liability that CERCLA imposes “on corporations which either have merged with or have consolidated with a corporation that is a responsible party as defined in the Act.” Smith Land & Improvement Corp. v. Celotex Corp., 851 F.2d 86, 92 (3d Cir. 1988), cert, denied, 488 U.S. 1029 (1989). This kind of “successor liability” does not apply where a company merely purchases or acquires a responsible party, unless one of four exceptions applies:

(1) The purchaser assumes liability;

(2) The transaction amounts to a consolidation or merger;^[2]

(3) The transaction is fraudulent and intended to provide an escape from liability; or

(4) The purchasing corporation is a mere continuation of the selling company.

United States v. Gen. Battery Corp., Inc., 423 F.3d 294, 305 (3d Cir. 2005). Based on this definition, Rahway argues that it has no liability because it did not acquire or purchase any of the nexus parties.

Metro protests that Rahway focuses on purchaser successor liability to the exclusion of two other theories of indirect corporate liability: agency liability and “alter ego” liability. Agency liability exists where there is “[1 [a] manifestation by the principal that the agent shall act for [it], [2] the agent's acceptance of the undertaking, and [3] the understanding of the parties that the principal is to be in control of the undertaking.” Behrens v. Arconic, Inc., 429 F.Supp.3d 43, 53 (E.D. Pa. 2019) (citations omitted). “Alter Ego” liability exists where a liable corporation is a mere instrumentality of the defendant; this is determined by looking at a variety of factors, including “continuity of ownership, similarity of the two companies in relation to management, business purpose, operation, equipment, customers, supervision, and anti-union animus . . .” Md. Elec. Indus. Health Fund v. Kodiak Utility Constr., Inc., 289 F.Supp.2d 698, 702 (D. Md. 2003).

Discussion

The threshold issue for this argument is whether Rahway's summary judgment motion is premature. It is undisputed that the parties have not completed fact discovery; the parties disagree only as to whether there has been enough discovery to resolve the issue of successor liability.

So far the only discovery that has taken place between Metro and Rahway are 15 each of interrogatories, requests for admission, and requests for production of documents per the Court's order. None of Rahway's witnesses have been deposed, nor has any discovery been sought &om third parties or other defendants regarding Rahway, despite Rahway stating in its response to Metro's interrogatories that certain questions could only be answered with information in the possession of third parties.

Rahway contends, however, that there has been an adequate opportunity to conduct additional discovery over the course of this case. But there was, in fact, only a brief window- between February 24, 2022 and September 19, 2022-during which discovery was not stayed. Moreover, that period of time coincides with the parties' efforts at mediation. Given the size and complexity of this case, it is quite reasonable that the necessary discovery would not be completed within this seven-month window, Regardless, discovery in this case has not closed-indeed, it only just recommenced in January 2023.^[3]

Moreover the limited discovery to date appears to raise more questions about successor liability than it answers. For example, one of the entities for whose conduct Rahway claims it is not liable is JTM Drum Co. (“JTM”), which was owned and operated by John A. Foglia, the son of Rahway's owners. Rahway contends that it has never had any ownership interest in JTM and therefore cannot be held liable under CERCLA's direct successor liability. Metro, however, contends that further discovery will show that JTM was in fact an agent or alter ego of Rahway. To date, there has been no discovery from any party about JTM other than Rahway. But JTM was a transporter for several of the other defendants in this case, including some that did not participate in the limited discovery on successor liability; discovery from these parties...