## Facts

- A mineral ore processing facility in Denver, Colorado generated hazardous waste that later required cleanup under CERCLA; remediation costs exceeded $20 million.
- From 1934–1942, North Shore Coke & Chemical Co. owned 60% of the operator and, through an affiliated mining company, sent radium-bearing materials to the Denver facility for processing and disposal.
- North Shore Gas Co. and the Coke Company had overlapping ownership and management, shared officers/directors, issued joint bonds, and operated in a vertically integrated arrangement (the Coke Company sold gas exclusively to North Shore Gas).
- In 1941, the Coke Company transferred most operating assets to North Shore Gas as part of a reorganization, and North Shore Gas agreed to assume the Coke Company’s existing liabilities.
- Shares of the operator and the mining affiliate were not transferred to North Shore Gas in the asset sale; they were placed with a related holding company controlled by the same interests.
- After EPA action against the then-current site owner, Salomon Inc. (as parent and guarantor) sought contribution from entities connected to historical contamination and asserted North Shore Gas was liable as the Coke Company’s successor.
- North Shore Gas filed a declaratory judgment action in the Northern District of Illinois seeking a declaration that it was not liable for CERCLA costs at the Denver site.

## Issues

1. Whether the district court abused its discretion by entertaining a declaratory judgment action in Illinois rather than dismissing or transferring the case to another forum.
2. Whether North Shore Gas could be held liable under CERCLA as a successor to the Coke Company based on the 1941 asset reorganization and assumption of liabilities.
3. How the equitable doctrine of successor liability should be applied in the CERCLA context, including whether courts should look to continuity of the enterprise rather than formal corporate structure.

## Decision

- The Seventh Circuit affirmed the denial of Salomon’s motion to dismiss or transfer, holding the district court did not abuse its discretion in hearing the declaratory action in Illinois.
- The Seventh Circuit reversed the summary judgment and declaratory ruling that North Shore Gas could not be liable, holding successor liability could apply on the facts presented.
- The case was remanded for further proceedings to determine the extent of any CERCLA responsibility.

## Legal Principles

- Federal courts have discretion to entertain declaratory judgment actions; a plaintiff’s selected forum will generally stand when the forum has meaningful connections to the parties and dispute and the choice does not constitute an abuse of the declaratory remedy.
- In CERCLA cases, successor liability is an equitable doctrine informed by CERCLA’s remedial purpose of placing cleanup costs on responsible parties.
- Courts applying successor liability under CERCLA may look beyond formal transaction labels to the substance of a reorganization, including continuity of ownership, management, and business operations and the transfer of substantially all operating assets.
- An express assumption of liabilities in an asset transfer may support successor responsibility for environmental obligations, and corporate restructuring cannot automatically shield a continuing enterprise from CERCLA-related liabilities.

## Conclusion

The Seventh Circuit held that Illinois was an appropriate forum for declaratory resolution of potential CERCLA responsibility and that North Shore Gas was not insulated as a matter of law from successor liability arising from a reorganized transfer of operating assets and assumed liabilities; the case returned to the district court to determine North Shore Gas’s potential cleanup responsibility.


North Shore Gas Co. v. Salomon Inc., 152 F.3d 642 (7th Cir. 1998)