Document Type

Article

Publication Date

2000

Abstract

During the 1980s and early 1990s, a series of decisions broadly interpreting the liability provisions of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCIA) appeared destined to transform corporate law practice. CERCIA does not directly address successor liability, but the statute's complex and contradictory legislative history arguably implies that Congress wanted federal courts to apply broad liability principles to achieve the statute's fundamental remedial goal of making polluters and their successors pay for cleaning up hazardous substances.

Notably, a number of courts rejected state corporate law principles that usually limit the liability of successor corporations and instead adopted expansive federal common law standards to make successor corporations liable under CERCIA. Courts applying a federal common law of successor liability argued that their approach would achieve greater national uniformity and avoid the danger of state laws that supposedly unduly limited the liability of successor corporations.

Additionally, while some courts adopting a federal common law standard for successor liability applied the "mere continuation" doctrine used in most states, other courts have endorsed the expansive "substantial continuity" doctrine (also called the "continuity of enterprise" exception) applied in a minority of states because it better serves CERCLA's broad remedial goals. On the other hand, the United States Court of Appeals for the Sixth Circuit rejected the use of federal common law in this area because it concluded that state successor liability principles generally did not interfere with CERCLA's basic liability requirements.

Much of the controversy about whether courts should apply a federal common law of successor liability or follow state law depends on the broader principle of when it is appropriate for federal courts to use federal common law standards to displace state law.