UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF CALIFORNIA
October 27, 2011
CITY OF SAN DIEGO,
COMPANY, ALSO KNOWN AS NATIONAL
STEEL & SHIPBUILDING COMPANY, ET
The opinion of the court was delivered by: Hon. Anthony J. Battaglia U.S. District Judge
ORDER DENYING MOTION FOR SUMMARY JUDGMENT NATIONAL STEEL AND SHIPBUILDING [Doc. No. 134]
Defendant, Star & Crescent Boat Company (hereinafter "S&C Boat"), filed a motion, [Doc. No. 134], seeking summary judgment on the following grounds: 1) there is no evidence that S&C Boat contributed to any of the environmental contamination at the Shipyard Site, 2) there is no evidence that S&C Boat is the successor-in-interest to San Diego Marine Construction Company (hereinafter "SDMCC")/Star & Crescent Investment Co. (hereinafter "Investment Co.), and 3) the District has no reasonable probability of locating evidence proving that S&C Boat is the successor-in-interest to SDMCC/Investment Co.*fn1 SDMCC is one of the parties potentially responsible for contamination of the Shipyard Sediment Site in the San Diego Bay. Plaintiff, the City of San Diego, and Defendants Cross/Counter-Claimants San Diego Unified Port District (hereinafter "SD Port") and Campbell Industries (collectively hereinafter "Opponents") filed oppositions, [Doc. Nos. 141,142 and144 respectively],*fn2 and S&C Boat filed a reply, [Doc. No. 145].*fn3 The hearing set for October 28, 2011 at 1:30 p.m. before Judge Battaglia in Courtroom 12 is hereby vacated as this motion is appropriate for submission on the papers without oral argument pursuant to Civil Local Rule 7.1.d.1. Based upon the parties moving papers and for the reasons set forth herein, S&C Boat's motion for summary judgment is hereby DENIED.
Plaintiff, the City of San Diego, and Defendants National Steel and Shipbuilding Company ("NASSCO"), BAE Systems San Diego Ship Repair, Inc. (BAE Systems), Campbell Industries, San Diego Marine Construction Company ("SDMCC"), Star and Crescent Boat Company ("S&C Boat"), San Diego Gas & Electric ("SDG&E") and the United States Navy ("US Navy") were all named as "Dischargers" or "Persons Responsible" for alleged environmental contamination at the property known as the "Shipyard Sediment Site" by the California Regional Water Control Board, San Diego Region ("the Regional Board"), in Tentative Clean Up & Abatement Order No. R9-2005-0126 (the "Tentative Order") on September 15, 2010. The Shipyard Sediment Site is a portion of the San Diego Bay along the eastern shore of the Bay in an area extending from approximately the Sampson Street Extension to the north and Chollas Creek to the south, and from the NASSCO shipyard facility and BAE Systems shipyard facility shoreline out to the San Diego main shipping channel to the west.
The Regional Board contends that Plaintiff and Defendants are jointly and severally responsible for alleged property damage, including, but not limited to, alleged damages to aquatic life, at and beyond leaseholds at the Shipyard Sediment Site once and/or currently occupied by Defendants and other entities. Since 1991, the Regional Board has been working with various private and governmental entities to address discharges of metals and other pollutant wastes to San Diego Bay marine sediment and waters located within and adjacent to the area collectively called the Shipyard Sediment Site.
SDMCC, owned and operated by the Hall family, operated a shipyard from approximately 1915 until 1972 on a leased portion of the Shipyard Sediment Site for shipbuilding purposes.*fn4 SDMCC's shipyard site was located in San Diego Bay south of the Coronado Bridge, generally between the Sampson Street extension and the mouth of Chollas Creek in the City of San Diego. Other than its shipyard operations, SDMCC had other businesses, including real property holdings and a boat division, Star & Crescent Boat Company (hereinafter "S&C Boat Company"), which operated the harbor excursion business. S&C Boat Company, along with a number of other ship owners, operated the only shore boat/water taxi operations throughout the San Diego Bay beginning in 1925 through an exclusive City of San Diego franchise issued to United Water Taxi Company.*fn5 As an operator under the franchise, S&C Boat Company was permitted to use the five authorized shore boat landings in the bay, two of which were located with the Shipyard Sediment Site, for a number of years (Exhibits "I", "J", "K", "L"; UF No.8).*fn6
The record indicates that from 1959 until 1972, S&C Boat Company used SDMCC's Shipyard Sediment Site to install and store diesel fuel storage tanks and pumping equipment to provide fuel to the boat division's equipment including the division's tug boats, barges, and ferries.(Exhibits "A", "B", "C", "D", "E", "F"; UF No. 10). S&C Boat Company also utilized SDMCC's Shipyard Sediment Site facilities for the construction, repair, and fueling of its marine vessels during this period. Id. S&C Boat Company's use of SDMCC shipyard leasehold ceased when SDMCC sold the marine division assets to Campbell Industries/MCCSD on July 14, 1972. After the sale of its shipyard assets to Campbell Industries in 1972, SDMCC, which still consisted of the investment division and boat division, changed its name to Star & Crescent Investment Co. ("Investment Co.").
On March 19,1976, Star & Crescent Boat Company (S&C Boat) was incorporated in California, signed by six original directors. On April 7, 1976, Investment Co. transferred its harbor excursion *fn7 and liabilities*fn8 to the newly-incorporated S&C Boat, the moving party in this motion, which operates the same harbor excursion business today. On April 9, 1976, the Board of Directors of the S&C Boat held a meeting and the six original directors resigned and were replaced by members of the Hall family.*fn9 At that meeting, Mr. Hall Jr. and the other directors created stock in S&C Boat*fn10 . Also at the April 9th meeting, Mr. Hall Jr. reported that he had received a written offer from his Investment Company to transfer all the Investment Co.'s "right title and interest of every kind and description in and to its business and assets pertaining to its harbor excursion business," in exchange for the S&C Boat's assumption "of the debts and liabilities of said harbor excursion business as set forth in Exhibit "A," and one thousand five hundred (1,500) shares of the S&C's Boat's stock.*fn11 As a result, the Investment Co. held all 1,500 shares of S&C Boat's stock and S&C Boat received all of Investment Co.'s harbor excursion business assets and liabilities before March 31, 1976.*fn12 On October 26, 1976, Investment Co.'s transferred its 1,500 shares of S&C Boat stock back to Mr. Hall, Jr.'s children: Stephen P. Carlstrom, Judy Hall, and Janet Miles, who each received 500 shares.*fn13 Doc. No. 134-2, SUF No. 20. Under the terms of the stock sale agreement, these three individuals paid $765,400 to Investment Co. to purchase this stock,*fn14 and the payments were made from S&C Boat dividends until paid in full in 1981.*fn15 The Investment Co. continued to operate its own separate businesses, including the Lake Mead Ferry Service, Las Vegas Baggage Service, and Lasco Truck Rental & Equipment Co., until it dissolved more than 15 years after selling its harbor excursion business to S&C Boat.
"The court shall grant summary judgment if the movant shows 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 Hall are all Mr. Hall, Jr.'s children. genuine issue of material fact exists if there is sufficient evidence for a reasonable jury to return a verdict for the non-moving party. Miller v. Glenn Miller Prod., Inc., 454 F.3d 975, 987 (9th Cir. 2006).
In order to prevail, a party moving for summary judgment must show the absence of a genuine issue of material fact with respect to an essential element of the nonmoving party's claim, or to a defense on which the nonmoving party will bear the burden of persuasion at trial. Nissan Fire & Marine Ins. Co. v. Fritz Cos. Inc., 210 F.3d 1099, 1102 (9th Cir. 2000). When the nonmoving party would bear the burden of proof at trial, the moving party may satisfy its burden on summary judgment by simply pointing out to the Court an absence of evidence from the nonmoving party. Miller, 454 F.3d at 987. "The moving party need not disprove the other party's case." Id.
Once the movant has made that showing, the burden shifts to the opposing party to produce "evidence that is significantly probative or more than 'merely colorable' that a genuine issue of material fact exists for trial." LVRC Holdings LLC v. Brekka, 581 F.3d 1127, 1137 (9th Cir. 2009) (citing FTC v. , 265 F.3d 944, 954 (9th Cir. 2001)); see also Miller, 454 F.3d at 988 ("[T]he nonmoving party must come forward with more than 'the mere existence of a scintilla of evidence.'") (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).
The Court must review the record as a whole and draw all reasonable inferences in favor of the nonmoving party. Hernandez v. Spacelabs Med. Inc., 343 F.3d 736, 738 (9th Cir. 2000). However, unsupported conjecture or conclusory statements are insufficient to defeat summary judgment. Id.; Surrell v. Cal. Water Serv. Co., 518 F.3d 1097, 1103 (9th Cir. 2008). "Thus, '[w]here the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.'" Miller, 454 F.3d at 988 (quoting Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio , 475 U.S. 574, 587 (1986)).
S&C Boat's motion for summary judgment alleges that: 1) there is no evidence that S&C Boat contributed to any of the environmental contamination at the Shipyard Sediment Site, 2) there is no evidence that S&C Boat is the successor-in-interest to SDMCC/Star & Crescent Investment Co., and 3) the District has no reasonable probability of locating evidence proving that S&C Boat is the successor-in-interest to SDMCC/Star & Crescent Investment Company. The central issue in the present motion is whether S&C Boat is responsible as the successor-in-interest to SDMCC for potential environmental contamination at SDMCC's shipyard in the San Diego Bay. SDMCC operated a shipyard in the northern part of the Shipyard Sediment Site (the portion of the San Diego Bay and tidelands that is the focus of this CERCLA contribution action) from approximately 1915 until 1972.
I. Whether S&C Boat Contributed to the Contamination at the SDMCC Shipyard Site S&C Boat argues in its summary judgment motion that there is no evidence that S&C Boat contributed to any of the environmental contamination at the Shipyard Sediment Site. S&C Boat states that it was first incorporated in 1976 and operates today primarily from the same location north of the San Diego-Coronado Bay Bridge that it has since incorporation.*fn16 S&C Boat contends that there are no allegations that S&C Boat ever had any involvement with the Shipyard Sediment Site after 1976, and thus, S&C Boat has no direct liability for any environmental problems there.
Alternatively, however, the Defendant SD Port argues that S&C Boat's own corporate documents demonstrate that genuine issues of fact exist as to whether S&C Boat assumed the liability of SDMCC/Investment Co. as a result of the written offer from Investment Co. that transferred all "right title and interest of every kind and description in and to its business and 6 assets pertaining to its harbor excursion business," in exchange for the S&C Boat's assumption "of the debts and liabilities of said harbor excursion business as set forth in Exhibit "A," and 1,500 shares of the S&C Boat's stock. (Exhibit "6"; UF No. 18.)
The undisputed facts indicate that S&C Boat expressly assumed the liabilities listed in the Investment Co.'s offer.*fn17 Defendant SD Port also contends that S&C Boat expressly and impliedly assumed all the liabilities not specifically listed in the offer before March 31, 1976. Since SDMCC operated its boat division, S&C Boat Company, beginning in 1925 and 1) utilized two shore boat landings located within the Shipyard Sediment Site; and 2) utilized SDMCC's Shipyard Sediment Site from1959 until 1972 for the construction, repair, and fueling of its marine vessels, there is a genuine issue of material fact as to whether S&C Boat Company actually contributed to the environmental contamination at the Shipyard Sediment Site and whether S&C Boat assumed liability for this contamination when it accepted Investment Co.'s transfer offer.
II. Whether S&C Boat Is the Successor-in-interest to SDMCC/Investment Co. For summary judgment, S&C Boat, as the moving party, must show that the exceptions that create successor liability do not apply. Fisher v. Allis-Chalmers Corp. Product Liability Trust, 95 Cal.App.4th 1182, 1188 (2002). The general rule of successor liability under California law is that the corporate purchaser of another corporation's assets presumptively does not assume the seller's liabilities, unless: (1) there is an express or implied assumption of liability; (2) the transaction amounts to a consolidation or merger of the two corporations; (3) the purchasing corporation is a mere continuation of the sellers; or (4) the transfer of assets to the purchaser is for the fraudulent purpose of escaping liability for the seller's debts.*fn18 The Opponents of S&C Boat's motion contend there are questions of fact regarding: 1) whether there was an express or implied assumption of liability; 2) whether the S&C Boat was a mere continuation of SDMCC/Investment Company; and 3) whether the transfer of assets from Investment Company to S&C Boat was for the fraudulent purpose of escaping SDMCC's liability with regard to the Shipyard Sediment Site.
1) Whether S&C Boat Expressly or Impliedly Agreed to Assume Liability from Investment Co.
As set forth above, the Court finds that there is a genuine issue of material fact as to whether S&C Boat Company actually contributed to the environmental contamination at the Shipyard Sediment Site and whether S&C Boat assumed liability for this contamination when it accepted Investment Co.'s transfer offer.
2) Whether S&C Boat is a Mere Continuation of SDMCC
S&C Boat argues that the acquisition of the harbor excursion business did not result in a mere continuation or de facto merger between S&C Boat and Investment Co. because the two companies were owned and operated separately; Investment Co. continued to own and operate several other businesses and own real property, while S&C Boat engaged in the still-ongoing harbor excursion business. Alternatively, the Opponents of S&C Boat's motion argue that there are genuine issues of fact as to whether the asset purchase by S&C Boat was merely a continuation of the Investment Co.'s boat division.
When applying the continuation exception to the general rule of successor non-liability, the California Supreme Court states that liability will be imposed on a successor corporation upon a showing of one or both of the following elements: 1) inadequate consideration is given for the predecessor corporation's assets and made available for meeting the claims of its unsecured creditors; or
2) one or more persons were officers, directors, or stockholders of
both corporations. Ray v. ALAD Corporation (1977) 19 Cal. 3d 22, 29.
The Opponents argue that the consideration given by S&C Boat to
Investment Co. was grossly inadequate because the 1500 newly created
shares of S&C Boat that were transferred to Investment Co. were
initially valued at $15,000 and this in combination with S&C Boat's
assumption of $86,000 of liabilities totals roughly $101,000, whereas
the Harbor Excursion business was valued at over $800,000.*fn19
S&C Boat argues in its moving papers that the value of the
shares was actually in excess of $700,000 and S&C Boat paid this back
to Investment Co. over a five year period from 1976 until 1981.
Despite S&C Boats arguments to the contrary, the Court finds that
there is a genuine issue of material fact as to whether this subject
transfer was for adequate consideration.
3) Whether the Transfer of the Harbor Excursion Business Was Fraudulent
While the Court need not reach this element because genuine issues of
material fact abound, the Court finds S&C Boat's argument that there
is no evidence that S&C Boat's acquisition of the harbor excursion
business was part of a fraudulent transfer, to be without merit. Given
the sudden and unexplained resignation of all directors two days after
S&C Boat was incorporated, the fact that the directors were then
replaced by Hall family members, and the fact that Investment Co. and
S&C Boat were closely run inter-related family businesses,*fn20
the Court finds that questions of fact remain regarding the
For the reasons set forth above, the Court hereby DENIES Defendant S&C Boat's motion for summary judgment, [Doc. No. 134], as there are genuine issues of material fact which preclude summary judgment.
IT IS SO ORDERED.