Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.


United States District Court, Eastern District of New York

February 16, 2001


The opinion of the court was delivered by: Mishler, District Judge.

Memorandum Of Decision And Order

This is an action, brought by the State of New York (the "State") under the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), to hold National Service Indus., Inc. ("NSI") liable for cleanup costs incurred by the State at the Town of Islip municipal landfill on Blydenburgh Road in Islip, New York (the "Blydenburgh Landfill"). Presently before the Court are NSI's and the State's cross-motions for summary judgement. NSI requests that the Court grant summary judgment in its favor and dismiss the claims against it. The State cross-moves for partial summary judgement, requesting that NSI's fifth affirmative defense be dismissed,*fn1 and seeking a declaratory judgment that NSI is the legal successor to Serv-All Uniform Rental Corporation ("Serv-All") for purposes of CERCLA liability. For the following reasons, NSI's motion is denied, and the State's cross-motion is granted.


From 1962 until 1988, Serv-All operated an industrial garment rental service out of a facility located in the Town of Bayshore, New York. Serv-All rented uniforms and other industrial garments to commercial customers. As part of its service, Serv-All dry-cleaned the rented uniforms using the solvent perchloroehtylene ("PCE"). PCE is a hazardous substance within the meaning of Section 101(14) of CERCLA.

On or about June 1978, Serv-All arranged with Hicky Carting Co., Inc. ("Hicky") for the disposal or transport for disposal of several 55 gallon drums of liquid waste which contained PCE.*fn2 Hickey was not a "certified waste hauler." Serv-All had been provided with a list of "certified waste haulers" by the Suffolk County Department of Environmental Control, however, Serv-All chose to employ Hicky instead, allegedly because the approved waste haulers were more expensive.

In 1988 Ralph Colantuoni and William Lepido, Serve-All's two principals, decided to retire from the garment industry. On or about October 18, 1988, Initial Service Investments ("Initial") entered into an "Asset Sale Agreement", whereby it agreed to purchase certain assets, including customer contracts, customer lists, all of Serv-All's trucks, and the right to use or retire Serv-All's name. The purchase price was approximately $2,229,000.00. As part of the Asset Sale Agreement, Mr. Lepido and Mr. Colantuoni entered into covenants not to compete with NSI. These covenants required them not to use the Serv-All name and not to compete for seven years with NSI in the garment rental service business. On November 6, 1992, NSI acquired all shares in Initial, and on August 31, 1995 Initial merged into Serv-All.

The Blydenburgh Landfill was listed in the New York Registry of Hazardous Waste Sites in 1983, and the listing states that there was confirmed disposal of oil, trichlorethylene and vinyl chloride beginning in 1978, the date of the illegal disposal of wastes generated by Serv-All. The Blydenburgh Landfill was proposed for listing on the U.S. Environmental Protection Agency's Priority List in January 1987, and has since been listed on the federal National Priority List of the most contaminated hazardous waste sites in the United States.

The Complaint in the immediate action was filed on May 14, 1999. The State seeks: (a) recovery of its costs of responding to and abating the release and/or threatened release of hazardous substances at and/or from the Blydenburgh Landfill, including but not limited to all payments made by the State to the Town of Islip for the implementation of the remedial program at the Landfill: and (b) a declaratory judgment that NSI is strictly liable to the State for all future costs it may so incur. NSI asserts, as its fifth affirmative defense that:

NSI is not Serv-All Uniform Rental Corp.'s ("Serv-All") legal successor. Consequently, NSI bears no legal responsibility for the acts of Serv-All and cannot be liable for cleanup costs resulting from Serv-All's activities.

The State responds to this affirmative defense by asserting that NSI purchased Serv-All as an ongoing business and acquired all or substantially all of Serv-All's assets, and thus, is Serv-All's legal successor for CERCLA liability purposes.


A court should grant summary judgment if, when viewing the evidence in the light most favorable to the nonmovant, the court determines that there is no genuine issue of material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c): Eastman Kodak Co. v. Image Technical Serv., Inc., 504 U.S. 451, 456, 112 S.Ct. 2072, 119 L.Ed.2d 265 (1992). A party seeking summary judgment must demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the movant demonstrates an absence of material issues of fact, a limited burden of production shifts to the nonmovant, which must "demonstrate more than `some metaphysical doubt as to the material facts . . . [and] must come forward with specific facts showing that there is a genuine issue for trial.'" Aslanidis v. United States Lines, Inc., 7 F.3d 1067, 1072 (2d Cir. 1993) (citations and emphasis omitted). If the nonmovant fails to meet this burden, summary judgment should be granted.

Both NSI and the State agree that there are no genuine issues of material fact concerning the issue of successor liability. Accordingly, the parties have conceded that summary judgment on this issue is appropriate.*fn3


In the Second Circuit, successor liability for CERCLA purposes is analyzed under a "substantial continuity" test. B.F. Goodrich v. Betkoski, 99 F.3d 505 (2d Cir. 1996). Pursuant to this test, a court analyzes the following eight factors to determine whether an entity is a "substantial continuation" of its predecessor and thus subject to CERCLA liability. These eight factors are:

(1) retention of the same employees;

(2) retention of the same supervisory personnel;

(3) retention of the same production facilities in the same location;

(4) production of the same product;

(5) retention of the same name;

(6) continuity of the same general business operations;

(7) continuity of assets; and

(8) whether the successor holds itself out as the continuation of the previous enterprise.

Town of Oyster Bay v. Occidental Chemical Corp., 987 F. Supp. 182, 206 (E.D.N.Y. 1997) (quoting United States v. Carolina Transformer Co.,
978 F.2d 832, 838 (4th Cir. 1992)).*fn4 This test is designed to "identify[] transactions where the essential and relevant characteristics of the selling corporation survive the asset sale and it is therefore equitable to charge the purchaser with the seller's liabilities," New York v. Westwood-Squibb Pharmaceutical Co., 62 F. Supp.2d 1035, 1038 (W.D.N.Y. 1999) (quoting North Shore Gas Co. v. Salomon, Inc., 152 F.3d 642, 651 (7th Cir. 1998)).

Application of the "substantial continuity" test to the conceded facts in this case makes clear that NSI is Serv-All's legal successor to liability arising out of the Blydenburgh Landfill. Pursuant to the Asset Sale Agreement between Serv-All and Initial. Initial acquired substantially all of Serv-All's assets. Specifically, the agreement provided, inter alia, that:

(1) Serv-All was required to provide a warranty that the asset transfer was "sufficient to meet the needs" of Serv-All's customers;

(2) Serv-All transferred to Initial all "rights, title and interests" in Serv-All's contracts and accounts for "industrial service and the providing of industrial garments, mats, dust mops, wipers, and all other items";

(3) Initial agreed to assume and perform Serv-All's obligations under existing contracts;

(4) Initial acquired all of Serv-All's customer records, including "all customer lists, daily delivery lists, records and other similar data";

(5) Initial acquired all of Serv-All's "in service inventory and circulating inventory or used inventory, consisting of, among other things, industrial garments, mats, dust mops, wipers and other items and garments";

(6) Initial acquired all of Serv-All's "non-obsolete new inventory";

(7) Initial acquired all of Serv-All's accounts receivable;

(8) Initial acquired all of Serv-All's trucks, including spares and out of service vehicles.

(9) Initial acquired all of Serv-All's "rights, title and interest" in the name "Serv-All Uniform Rental Corp.";

(10) Initial acquired all of Serv-All's miscellaneous office supplies, including a computer, jack, metal cabinet, insulated jackets with the name "Serv-All" sown on them, and paper towels;

(11) Initial also acquired Serv-All's hangers, rail system, garage equipment, truck parts, heat sealer button machine, manual tape coding machine:

(12) Initial assumed the right to collect accounts receivable from over 185 of Serv-All's customers:

(13) Initial received covenants not to compete from Mr. Colantuaoni and Mr. Lepido, which ran for seven years and covered all of New York, New Jersey and Connecticut, and

(14) The owners of Serv-All agreed to stop using the name "Serv-All" or any similar name.

Additionally, the Asset Sale Agreement was valued based upon Serv-All's revenues as an ongoing operation, not by the sum of the assets, and on the same day that the agreement was executed. Mr. Colantuoni and Mr. Lepido adopted a plan of complete liquidation and dissolution of Serv-All. Furthermore, following the Asset Sale Agreement, Initial continued Serv-All's operations by employing many of Serv-All's employees,*fn5 including all of its truck drivers, providing the same uniforms and service that Serv-All provided, charging the same rates that Serv-All had provided, and using trucks and invoices which displayed the name "Serv-All."

We find, additionally, that Initial was on notice of Serv-All's potential environmental liabilities at the time of the Asset Sale Agreement. Although not specifically listed as a factor for consideration, several courts have held that "notice of the seller's potential liabilities" is an additional factor "relevant to a determination of whether successor liability should attach under the substantial continuity test." Town of Oyster Bay, 987 F. Supp. at 206. Here, there was, in 1979, a proceeding before the New York State Department of Environmental Conservation, which found that Serv-All had arranged for the disposal of hazardous materials at the Blydenburgh Landfill. See Appendix to Brief in Support of NSI's Motion for Summary Judgment, Exs. D — H. This decision has been confirmed, not only by the Commissioner of the Department of Environmental Conservation, but also in publically reported judicial decisions by New York State Courts. See Hickey's Carting, Inc. v. Commissioner of Environmental Conservation, 76 A.D.2d 1039, 428 N.Y.S.2d 768 (1980), app. denied, 54 N.Y.2d 609, 445 N.Y.S.2d 1027, 429 N.E.2d 835 (1981). In view of this publically available information. NSI cannot now claim that Initial had no notice of Serv-All's potential environmental liabilities with regard to the Blydenburgh Landfill at the time of the Asset Sale Agreement.*fn6 Accordingly, this factor further militates in favor of a finding that NSI is Serv-All's legal successor.

NSI argues that the notion that Initial was a substantial continuation of Serv-All is undermined by the fact that the Serv-All's operating facility at 8 Drayton Avenue was not transferred to Initial. Although, "retention of the same production facilities in the same location" is one of the factors that a court is to consider under the "substantial continuity" test, we find that the fact that Serv-All's plant was not transferred to Initial did not interfere with Initial's substantial continuation of Serv-All's operations. First, as the State argues, "Serve-All URC had no true production facilities, because at the time of the sale it sent its garments to another company for cleaning and used the 8 Drayton Avenue facility only for assembling the garments into routes." Plaintiffs Memorandum of Law in Support of its Motion for Partial Summary Judgment, p. 24. Additionally, the fact that the plant at 8 Drayton Avenue was not included in the Asset Sale Agreement is not surprising, considering the fact that this plant was not owned by Serv-All. The building at 8 Drayton Avenue was held by a separate company named "8 Drayton Avenue Associates", which was a d/b/a for William Lepido and Ralph Colantuani. Serv-All's two principals. See Colantuoni Aff. ¶ 5.*fn7 Thus, we reject NSI's agreement that Initial's failure to acquire and operate out of the 8 Drayton Avenue facility impacted on its continuation of Serv-All's operations.

NSI additionally claims that it should not be held liable for Serv-All's environmental liabilities relating to the Blydenburgh Landfill because it did not continue Serv-All's dry cleaning operations, which, NSI asserts, was the conduct that gave rise to the environmental liability in the first place. We find, however, that the fact that NSI employed a different cleaning process from that which created the environmental hazard, does not, under the "substantial continuity" analysis, cut off NSI's successor liability for Serv-All's alleged infractions. First, even though Initial and subsequently NSI did not dry clean its customers uniforms, on a whole, it appears that the Asset Sale Agreement was structured such that Initial could take over Serv-All's business operations, and Serv-All's customers would notice no change in service. Additionally, we note that the CERCLA claims brought against NSI do not stem directly from Serv-All's dry-cleaning of uniforms, but rather from Serv-All's "arranging" for the disposition of certain hazardous by-products of that dry-cleaning. Under CERCLA, "arrangers" of off-site disposal of hazardous materials are strictly liable for the costs of cleaning up contamination regardless of fault or knowledge. See 42 U.S.C. § 9607(a). Thus, because we find that NSI is a substantial continuation of Serv-All's business, the fact that NSI has not performed any dry-cleaning operations itself since the Asset Sale Agreement does not absolve NSI of successor liability under CERCLA.

Accordingly, applying the the "substantial continuity" factors to the conceded facts, we find that NSI's operations were a substantial continuation of Serv-All's business, and thus, NSI is subject to successor liability for Serv-All's environmental infractions.


For the forgoing reasons the State's motion for partial summary judgment dismissing NSI's fifth affirmative defense and for a declaratory judgement that NSI is the legal successor to Serv-All is GRANTED. NSI's motion for summary judgment is DENIED.


Buy This Entire Record For $7.95

Official citation and/or docket number and footnotes (if any) for this case available with purchase.

Learn more about what you receive with purchase of this case.