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. e du/thir dc ir c uit_1996/102UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

___________

No. 95-1644

___________

SMITHKLINE BEECHAM CORPORATION

v.

ROHM AND HAAS COMPANY

v.

BUCKEYE PIPE LINE COMPANY

Rohm and Haas Compa ny, Ap pellant

__________________________________________ _____

On Appeal from the United States District Court for the Eastern District of Pennsylvan ia (D.C. Civil Action No. 92-cv-05394)

___________________

Argued March 13, 1996

Before: STAPLETON, SCIRICA and COWEN, Circui t Judges

(Filed July 17, 1996)

JOHN G. HARKINS, JR., ESQUI RE (ARGUED) Harkins Cunningham 1800 One Commerce Square

2005 Market Street Philadelphia, Pennsylvania 19103-7042

Attorney for Appellant

DAVID P. BRUTON, ESQUIRE (A RGUED) Drinker, Biddle & Reath Philadelphia National Bank Building

1345 Chestnut Street Philadelphia, Pennsylvania 19107-3496

Attorney for Appellee, SmithKline Beecham Corpo ration__________________

OPINION OF THE COURT

__________________

SCIRICA, Circuit Judge.

Plaintiff SmithKline Beecham Corp. ("SKB") brought this declaratory judgment action against the defendant, Rohm and Haas Co. ("R&H"), seeking equitable apportionment of the costs of the clean-up of a contaminated site in Myerstown, Penns ylvania under the Comprehensive Environmental Response, Compensat ion, and Liability Act ("CERCLA"), 42 U.S.C.  9601-75 (1988 & Supp. V). Alternatively, SKB sought apportionment of the clea n-up costs in accordance with the indemnification provisions of a Purchase Agreement between SKB and R&H. In 1978, SKB purchased Whitmoyer Laborator ies, Inc. ("New Whitmoyer") from R&H under a Purchase Agreeme nt containing certain indemnification provisions. Although R&H a nd SKB discharged toxic wastes, most of the contamination at the Myerstown site occurred before 1964, when the site was owned by R&H's predecessor ("Old Whitmoyer"). The able and experienced district court he ld the indemnifications in the Purchase Agreement covered CERCLA liability arising from R&H's ownership of the site. In addition, the court held the doctrine of corporate successor liability by de facto merger brought CERCLA liability arising fr om the conduct of Old Whitmoyer within the scope of the indemnity clauses of the Purchase Agreement. Consequently, the court alloca ted all of the clean-up costs for CERCLA liability arising from th e conduct of Old Whitmoyer to R&H. R&H brought this appeal. On appeal, we must determine whether the c ontractual indemnity provisions of the Purchase Agreement were intended to allocate the environmental liability of Old Whitmoy er, the original owner of the property. Because the Purcha se Agreement does not indemnify for CERCLA clean-up costs arisin g prior to New Whitmoyer's ownership of the Myerstown site, we wil l reverse the district court. In addition, we believe that under the facts of this case the doctrine of de facto merger cannot be used to modify an indemnity provision drafted by two sophis ticated corporations.

I. Facts In 1931, Dr. Clarence W. Whitmoyer founded a veterinary feedstock and pharmaceutical business based in Myer stown, Pennsylvania. Incorporated as "Whitmoyer Laborator ies, Inc." in 1934, the corporation went public in 1961 ("Old Whi tmoyer"). From 1957 to 1964, Old Whitmoyer deposited large qu antities of arsenic-laden hazardous waste on the grounds of its Myerstown plant. In 1964 defendant Rohm and Haas ("R&H") cr eated W-L, Inc., a Delaware corporation, as a wholly owned sub sidiary. W-L Inc. purchased the assets of Old Whitmoyer and assu med certain specified balance sheet liabilities in exchange for 50,000 R&Hshares. Subsequently, Old Whitmoyer changed its na me and took

steps to dissolve, distributing the R&H stock to it s shareholders. R&H did not know of the contaminatio n at the Myerstown site when its subsidiary purchased the as sets of Old Whitmoyer. W-L Inc., took the name Whitmoyer Laborato ries, Inc. ("New Whitmoyer") and continued to run the business of Old Whitmoyer. New Whitmoyer retained the same CEO as Old Whitmoyer, manufactured the same products under the same name, and sold those products to the same customers. From 1964 to 1978, New Whitmoyer disposed of additional arsenic-contaminat ed waste at the Myerstown site. But New Whitmoyer also underto ok efforts to remediate groundwater contamination. Shortly after acquisition, it supplied bottled water to over twenty neighbors of the plant
whose wells had been contaminated with arsenic. In 1965, New Whitmoyer removed over three million pounds of cont aminated wastes and soil skimmings from the existing waste l agoon and stored them in a concrete vault built specially for that purpose. In addition, New Whitmoyer devised a method to moni tor and remove arsenic waste from the groundwater. Between 1965 a nd 1971, almost 450,000 pounds of arsenic were removed from the groundwater at the site. On March 31, 1978, R&H sold its entire ani mal health products business, including all the stock of New W hitmoyer, to Beecham Inc., a predecessor of the plaintiff SmithK line Beecham Corporation. Before completing the transaction, R& H notified SKB of the bottled water obligation, showed SKB exe cutives the vault and told them it contained arsenic wastes, an d gave them free access to all records at New Whitmoyer. The Purchase Agreement that governed the s ale between SKB and R&H ("1978 Purchase Agreement") contains a broad
indemnification clause in which R&H indemnified SKB against "[a]ll material liabilities relating to the conduct of the Business prior to the First Closing Date." In addi tion, SKB agreed to indemnify R&H for all losses and liabilit ies "resulting from the operation of the Business by the Buyer aft er the First Closing Date." During SKB's ownership of New Whitm oyer, arsenicladen waste continued to be released into the envir onment at the Myerstown site. Congress enacted CERCLA in 1980. Two year s later, SKB sold New Whitmoyer to Stafford Laboratories, Inc. ( "Stafford"). Stafford was a small, undercapitalized company with limited assets and no experience in chemical manufacturing operations. Its president was a felon with two prior conviction s for grand
theft and embezzlement. Stafford has since filed f or bankruptcy and has not been named as a party in this action. In 1986, the federal government placed the Myerstown site on the Superfund National Priorities List unde r  105 of

CERCLA. 42 U.S.C.  9605. Both R&H and SKB were deemed "potentially responsible parties" liable for the co ntamination at the Myerstown site under CERCLA. In 1992, the Unit ed States settled its CERCLA liability claims against R&H and SKB, resulting in the entry of a consent judgment. Unit ed States v. Rohm and Haas Co., Civ. No. 92-CV-1295 (M.D. Pa.). Although OldWhitmoyer caused the majority of the contamination before New

Whitmoyer owned the Myerstown site, under the conse nt decree R&H and SKB are jointly and severally liable for the en tire cost of
its remediation because of their successive ownersh ip of New Whitmoyer. Estimated clean-up costs total $123 mil lion. SKB brought this action against the R&H se eking an equitable apportionment of clean-up costs under sec tions 107(a) and 113(f) of CERCLA, 42 U.S.C.  9607(a) and 9613(f), and enforcement of the indemnity provisions of the 1978 Purchase Agreement. On cross-motions for summary judgment, the district court held R&H liable for clean-up of wastes dumped during the period when New Whitmoyer was an R&H subsidiary--19 64 to 1978-- based on the indemnification provision of the 1978 Purchase Agreement. SmithKline Beecham Corp. v. Rohm and Ha as Co., 854 F. Supp. 1201, 1214-15 (E.D. Pa. 1994). But it did no t allocate liability for Old Whitmoyer's share of clean-up cos ts because "at this stage of the proceedings, the court cannot fin d as a matter of law that [the indemnification] includes conduct of [Old] Whitmoyer Laboratories before R & H purchased it in 1964." Id.at 1214. The district court took testimony on the indemnification provision in the 1978 Purchase Agre ement. It found it unnecessary to determine whether the indem nification expressly included Old Whitmoyer's contamination be cause it determined New Whitmoyer was liable for Old Whitmoy er's contamination as its corporate successor under Penn sylvania's de facto merger doctrine. It then found the indemnifi cation provision required R&H to indemnify SKB for all New Whitmoyer's pre-closing liabilities, including successor liabil ity for Old Whitmoyer's conduct. SmithKline Beecham Corp. v. R ohm and Haas Co., No. 92-5394 (E.D. Pa. March 17, 1995). On appeal, R&H argues the indemnity provis ion of the 1978 Purchase Agreement does not indemnify against environmental liabilities arising under CERCLA. Even if the prov ision covers CERCLA liability, R&H contends it does not indemnif y SKB for Old Whitmoyer's conduct. Finally, R&H claims the distr ict court should not have applied the de facto merger doctrin e to make R&H liable for Old Whitmoyer's contamination of the Mye rstown site. We exercise plenary review of the district court's construction of the 1978 Purchase Agreement. Vangu ard Telecommunications, Inc. v. Southern New England Te l. Co., 900 F.2d 645, 650 (3d Cir. 1990). We also have plenary review of the district court's interpretation and prediction of P ennsylvania's de facto merger doctrine. Wiley v. State Farm Fire & Casualty Co., 995 F.2d 457, 459 (3d Cir. 1993). We have jur isdiction to review the district court's final judgment under 28 U.S.C.  1291 (1994).

II. Discussion A. The Indemnity Covers CERCLA

1.

Under  107(e)(1) of CERCLA, parties may provide indemnifications for environmental response costs. Section 107(e)(1) provides:No indemnification, hold harmless, or simi lar

agreement or conveyance shall be effective to transfer from the owner or operator of any vessel or facility or from any person who may be liable for a release or threat of relea se under this section, to any other person th e liability under this section. Nothing in this subsection shall bar any agreement to insure, hold harmless, or indemnify a part y to such agreement for any liability under
this section.

42 U.S.C.  9607(e)(1). We have reconciled these apparently inconsistent provisions by interpreting them to mea n "agreements to indemnify or hold harmless are enforceable betwe en the parties but not against the government." Beazer East, Inc. v. Mead Corp., 34 F.3d 206, 211 (3d Cir. 1994) (quoting Smi th Land & Improvement Corp. v. Celotex Corp., 851 F.2d 86, 89 (3d Cir. 1988), cert. denied, 488 U.S. 1029 (1989)), cert. d enied, 115 S. Ct. 1696 (1995). Thus responsible parties can lawf ully allocate CERCLA response costs among themselves while remain ing jointly and severally liable to the government for the enti re clean-up. We apply state law to determine whether a particular indemnification provision encompasses CERCLA respon se costs. Hatco Corp. v. W.R. Grace Co., 59 F.3d 400, 405 (3d Cir. 1995); Beazer East, 34 F.3d at 214. In this case, the 197 8 Purchase Agreement provides, and the parties agree, that the indemnity provision "will be governed by and construed in acc ordance with the laws of the State of New Jersey." Accordingly we must determine whether, under New Jersey law, the partie s intended to indemnify for CERCLA response costs. Contract interpretation is usually a quest ion of law in New Jersey. Dome Petroleum Ltd. v. Employers Mut. Liab. Ins. Co., 767 F.2d 43, 47 (3d Cir. 1985). Under New Jer sey law, courts should interpret a contract considering "the objective intent manifested in the language of the contract i n light of the circumstances surrounding the transaction." Id.

2. In this case the parties could not have ex pressly
included CERCLA liabilities in the indemnification clause because the 1978 Purchase Agreement pre-dates the enactment of CERCLA. But an agreement can require one party to indemnify another against CERCLA response costs even if it was execut ed before the enactment of CERCLA. Beazer East, 34 F.2d at 211. A pre-CERCLA indemnification provision covers response costs if it is either "specific enough to include CERCLA liability or gen eral enough to include any and all environmental liability . . . . " Id.
The district court held the indemnificatio n provisions in the 1978 Purchase Agreement are broad enough to incorporate CERCLA response costs. Section 3 of the 1978 Purch ase Agreement, entitled "Allocation of Liability/Indemnification," contains three subsections allocating potential liabilities between SKB
and R&H. Subsection 3.1 is entitled "Allocation of Liability." Under this subsection SKB agreed to assume "as of t he First Closing Date" certain specified liabilities of R&H pertaining tothe Business. These liabilities do not include cos ts for

environmental clean-up. The remaining two subsecti ons provide the parties' indemnifications. In subsection 3.2(a ) R&H agreed to indemnify and hold SKB harmless from: (a) All material liabilities relating to the conduct of the Business prior to the First Closing Date (regardless when the related claim may be asserted), whether accrued, absolute, contingent or otherwise, which a re not assumed by the Buyer under Subsection 3.1

. . . . Subsection 3.3(a) is a reciprocal provision in whic h SKB
indemnifies R&H for: (a) All losses, liabilities, damages or deficiencies to Seller resulting from the operation of the Business by the Buyer aft er the First Closing Date . . . . These indemnity provisions divide "all" of the "liabilities" concerning the "operation of the Busi ness" between SKB and R&H. This sort of broad language in pre-CE RCLA contracts has been construed by courts to encompass CERCLA li ability. For example, in Olin Corp. v. Consolidated Aluminum Cor p., 5 F.3d 10, 15-16 (2d Cir. 1993), the Court of Appeals for the Second Circuit held an indemnity provision covering "all liabiliti es, obligations and indebtedness of [the business] as t hey exist on the Closing Date or arise thereafter with respect t o actions or failures to act occurring prior to the Closing Date " was sufficiently broad to encompass CERCLA liability. Similarly, the District Court for the West ern District of New York held a provision indemnifying for "all liabilities and obligations . . relating to or arising out of t he Assets" was expansive enough to include CERCLA liability insofa r as such liability related to or arose out of assets transfe rred. Purolator Products Corp. v. Allied-Signal, Inc., 77 2 F. Supp. 124, 131 (W.D.N.Y. 1991); see also, American Nat'l Can Co. v. Kerr Glass Mfg. Corp., No. 89-C-0168, 1990 WL 12536 8, *3 (N.D. Ill. August 22, 1990) (indemnity provision covering "any claim of any kind or nature whatsoever with respect to the b usiness . . . arising out of facts or events occurring prior to t he Closing Time" was sufficiently broad to encompass CERCLA li ability), reconsidered in part, No. 89-C-0168, 1990 WL 129657 (N.D. Ill. August 30, 1990) (reaffirming this holding). We believe the language in the 1978 Purcha se Agreement indemnity provisions clearly expresses the parties' intent to allocate all present and future liabilities. Envir onmental liabilities are among the future unknown liabilitie s allocated by the parties. Accordingly we agree with the distric t court that the indemnity provisions are general enough to evid ence the parties intent to include CERCLA response costs. B. Temporal Scope of the Indemnity

1. Although we have found the 1978 Purchase A greement indemnity provisions encompass CERCLA response cost s, we must
still determine whether R&H indemnified SKB for tho se clean-upcosts attributable to Old Whitmoyer before R&H, thr ough its

wholly-owned subsidiary, New Whitmoyer, purchased t he assets of that company in 1964. SKB believes it is indemnifi ed against all liabilities that arose prior to its purchase of New Whitmoyer. Accordingly, it argues R&H is responsible for all o f Old Whitmoyer's CERCLA response costs. In contrast, R& H claims the indemnity provisions do not include Old Whitmoyer's liabilities and, consequently, those liabilities must be apport ioned equitably under CERCLA. In subsection 3.2(a) R&H indemnified SKB f or the liabilities of the Business "prior to the First Clo sing Date." SKB indemnified R&H for the corresponding liabiliti es "after the First Closing Date" in subsection 3.3(a). SKB argu es these provisions clearly divide all liabilities between t he parties according to the date of sale of New Whitmoyer to S KB in 1978. According to SKB, R&H is responsible for all liabil ities resulting from activities before the 1978 closing d ate, including liabilities arising from the conduct of Old Whitmoy er before New Whitmoyer's purchase of the assets of that company in 1964. R&H argues the dividing line of the date o f sale only allocated risks relating to the conduct of the busi ness by New Whitmoyer, not Old Whitmoyer. In subsection 3.2(a) , R&H agreed to indemnify SKB only for "material liabilities rel ating to the conduct of the Business" prior to the date of sale. R&H claims
the definition of "Business" does not include Old W hitmoyer and therefore R&H never agreed to indemnify SKB for the conduct of Old Whitmoyer. The definition of "Business" appears in th e first recital to the 1978 Purchase Agreement: WHEREAS, Seller manufactures and sells, an d conducts research relating to, a line of animal health products . . . and such business is conducted primarily by Whitmoy er Laboratories, Inc., a Delaware corporation ("WL"), WL's "Affiliated Laboratories" and "Barker, Moore, and Mein" divisions and certain foreign subsidiaries and distribut ors . . . The worldwide operations of such business, together with all the assets relating thereto . . . are referred to her ein
as "Business". R&H emphasizes "Business" is defined in this passag e as "Whitmoyer Laboratories, Inc., a Delaware Corporati on" and affiliates of R&H. This language suggests the term "Business" is limited to New Whitmoyer and other subsidiaries own ed by R&H at
the time of the 1978 transaction. Since R&H never owned Old Whitmoyer, R&H concludes Old Whitmoyer is not inclu ded in the
definition of "Business." SKB contends this clause is "actually more of a description than a 'definition'," serving only to d ifferentiate R&H's animal health products business from other R& H operations
not included in the sale. SKB examines the 1978 Pu rchase Agreement as a whole and argues R&H's proposed defi nition of "Business" is inconsistent with the general usage o f the termthroughout the agreement. Specifically, SKB notes the term

"Business" is modified in several locations by the words "by Seller" and "by Buyer." According to SKB, this mod ification would not be necessary if "Business" meant "busines s run by New Whitmoyer and certain other R&H subsidiaries."

2. Regardless of whether "Business" is concei ved of as a "definition" or a "description," the term clearly d oes not encompass Old Whitmoyer. If the parties intended a more general usage of "Business," they could have specifically i ncluded Old Whitmoyer in the first recital. Alternatively, the parties could have excluded the defining provision from the 1978 Purchase Agreement altogether. Instead R&H and SKB chose to capitalize the term "Business" and give it a particular, restr icted meaning. We cannot ignore the express language of t he contract. See e.g, Communications Workers of America, Local 1 087 v. Monmouth County Bd. of Social Servs., 476 A.2d 777, 782 (N.J. 1984) ("The starting point in ascertaining [the par ties'] intent is the language of the contract."). The 1978 Purch ase Agreement explicitly provides the "Business" is "Whitmoyer La boratories, Inc. a Delaware corporation ("WL")." Section 9.3 o f the 1978 Purchase Agreement states "WL is a corporation duly organized, validly existing and in good standing" under Delawa re law, with its certificate of incorporation, as amended, "atta ched hereto as
Exhibit T." That exhibit contains a certificate of incorporation for the corporation formed June 12, 1964, not the p redecessor corporation that was incorporated in 1934. Nowhere in the "definition" or "descriptio n" of "Business" is there a suggestion that the meaning o f "Business" incorporates the predecessors of, or the prior owne rs of the assets of New Whitmoyer. SKB contends the use of t he term in other sections of the 1978 Purchase Agreement indic ates the parties intended a broader meaning than the one the y expressly provided. It argues modification of "Business" wit h the words "by Buyer" creates an oxymoron under R&H's reading. In addition, it claims modification of "Business" with "by Selle r" is
redundant if "Business" is limited to "the business owned by

R&H." But SKB admits "in the large majority of i nstances, the Agreement uses the words 'the Business' without exp ress reference to Buyer or Seller." We do not think the explicit definition of "Business" should be disregarded because in a few i nstances the term was used in an incongruous or redundant manner . Examination
of the contract as a whole confirms that the term w as used appropriately throughout the document. We will not contravene the parties' apparent "objective intent" on the bas is of a few isolated phrases. See Joseph Hilton & Assocs., Inc . v. Evans, 492 A.2d 1062, 1070 (N.J. Super. Ct. App. Div.) ("I n construing
the contract the court does not focus on an isolate d phrase but reads the contract as a whole . . . .") cert. denie d, 501 A.2d 977 (N.J. 1985). Reading the contract to avoid amb iguities, we conclude the parties intended "Business" to mean ex actly what they said, "Whitmoyer Laboratories, Inc., a Delawar e corporation." See United States Bronze Powders, In c. v. Commerce& Indus. Ins. Co., 611 A.2d 667, 670 (N.J Super. Ct . Law Div.

1992) ("The court should read [contract] provisions so as to avoid ambiguities, if the plain meaning of the cont ract permits."). The first recital of the 1978 Purchase Agr eement provides a specific, and restricted, explanation of the term "Business." There is no indication in this explana tion, or in any other provision of the contract, that the term "Business" includes Old Whitmoyer. The few minor inconsistenc ies highlighted by SKB do not justify a rewriting of th e contract, particularly since the term is used appropriately t hroughout. Viewing the contract as a whole, we hold the term " Business" does not include Old Whitmoyer. C. De Facto Merger Doctrine
The district court did not decide whether the term "Business" included Old Whitmoyer because it held N ew Whitmoyer liable for Old Whitmoyer's CERCLA response cost und er Pennsylvania's de facto merger doctrine. The court held New Whitmoyer incurred Old Whitmoyer's tort liabilities by virtue of the 1964 asset purchase transaction and New Whitmoy er subsequent conduct of the business. Even under R&H's interpre tation of "Business," the court found the indemnity R&H gave for the liabilities of New Whitmoyer included successor lia bility for the conduct of Old Whitmoyer. Consequently, the court held R&H must indemnify SKB for remediation costs relating to Old Whitmoyer's

conduct. R&H does not dispute that the factors indi cative of a de facto merger are present in this case. But it a rgues the doctrine should not be applied to alter the tempora l scope of the indemnification clause. In addition, R&H contends application of successor liability in this case conflicts with pol icy considerations underlying CERCLA and the de facto m erger doctrine.

1. R&H claims the parties should be able to a llocate liability through contractual indemnities without t he hindrance of judge-made doctrine. Because the parties did no t allocate Old Whitmoyer's liabilities in the indemnification prov isions, it argues against application of the de facto merger d octrine to hold it responsible for Old Whitmoyer's clean-up co sts. In Philadelphia Elec. Co. v. Hercules, Inc ., 762 F.2d 303, 318 (3d Cir.), cert. denied, 474 U.S. 980 (198 5), we held the de facto merger doctrine will not shift environ mental liabilities where the parties were in a position to protect themselves through a contractual provision. Hercul es, 762 F.2d at 317-18. In Hercules, we found the requirement o f an express indemnification is particularly important where, as here, the parties are two sophisticated corporations of rough ly equal resources. Id. at 313 (where "corporations of roug hly equal resources contract for the sale of an industrial pr operty, and especially where the dispute is over a condition on the land rather than a structure, caveat emptor remains the rule.") (footnote omitted). In this case, the parties drafted an indem nificationprovision that excluded successor liability. SKB a nd R&H chose

to define "Business" and limit its meaning to New W hitmoyer. Under these circumstances, we believe it was not ap propriate for the district court to apply the de facto merger doc trine to alter the effect of the indemnification provision. See American Nat'l Can Co. v. Armstrong World Indus., Inc., No. 89-C-0 168, 1990 WL 125368 (N.D. Ill. Aug. 22, 1990) (no indemnificatio n because indemnity did not specifically apply to predecessor corporation's liabilities) (applying Pennsylvania law), reconside red in part, No. 89-C-0168, 1990 WL 129657 (N.D. Ill., August 30 , 1990) (addressing de facto merger). Our holding does not alter the general app licability of corporate successor doctrines in CERCLA contributio n claims. SeeSmith Land & Improvement Corp. v. Celotex Corp., 851 F.2d 86 (3d Cir. 1988) (statutory merger) (successor corporatio n was liable for prior corporation's CERCLA liability in the abs ence of an indemnification clause), cert. denied, 488 U.S. 102 9 (1989). But where two sophisticated corporations drafted an ind emnification provision that excluded the liabilities of a predec essor corporation, we will not use the de facto merger do ctrine to circumvent the parties' objective intent.

2. R&H also contends application of the de fa cto merger doctrine would undermine CERCLA's remedial policies . Under CERCLA, the cost of remediation is allocated equita bly if the parties have not apportioned it by contract. 42 U. S.C.  9613(f)(1). Of course, the parties here have alloc ated their responsibilities under the contractual indemnificat ion provisions, which exclude the liabilities of Old Wh itmoyer. In this case, the parties agree each is re sponsible for the costs of cleaning up their own contamination. But neither party caused Old Whitmoyer's contamination. Applyi ng the de facto merger doctrine to require R&H to fund all of the clean-up expenses for Old Whitmoyer's contamination would co ntravene the express terms of the indemnification provision and incidentally would "frustrate[] Congress' desire to encourage cl ean-up by any responsible party," id., and force R&H to pay for t he entire response cost despite the relative culpability of t he parties, see id. (refusing to apply the doctrine of caveat e mptor to a CERCLA cost recovery action because the doctrine "b ar[s] relief regardless of the degree of culpability of the part ies, [and therefore does] not comport with congressional obje ctives."). Our refusal to apply the de facto merger doctrine t o alter the terms of the indemnity provision leaves both SKB an d R&H responsible for their fair share of the clean-up co sts of the Myerstown site. See Beazer East, 34 F.2d at 219 (C ERCLA policy favors equitable apportionment of remediation costs ).
3. In In re Penn Cent. Sec. Litig., 367 F. Su pp. 1158, 1170 (E.D. Pa. 1973), the United States District Co urt for the Eastern District of Pennsylvania held "the de facto merger doctrine is a judge-made device for avoiding the pa tent injustice which might befall a party simply because a merger has been called something else." The doctrine is an equitab le rule, ajudicial creation to protect a particular class of plaintiffs

from the consequences of a transaction over which t hey have no
control. The doctrine should conform to the rule's remedial purpose. See Hercules, 762 F.2d at 312 ("We believ e that the de facto merger doctrine is supported by 'social polic y considerations' independent of any particular cause of action . . . .") (citations omitted). In this case SKB (together with R&H) had c ontrol over the assignment of environmental liability through t he negotiation of the 1978 Purchase Agreement. Thus, there is no third party whose interests have been impaired by forces beyond their control. We decline to apply de facto merger doctr ine under
these circumstances. SKB is not within the class o f plaintiffs
that were intended to benefit from the de facto mer ger doctrine
and use of the doctrine would contravene CERCLA's r emedial

purpose.
III. For these reasons we will reverse the judg ment of the district court and remand to determine the parties relative responsibilities for Old Whitmoyer's contamination under CERCLA's equitable apportionment provisions.

SMITHKLINE BEECHAM CORPORATION. V. ROHM AND HAAS CO MPANY V.
BUCKEYE PIPE LINE COMPANY - NO. 95-1644

STAPLETON, J., Dissenting: I join Sections I and II-A of the court's opinion. I would affirm, however, because I conclude that the 1978 purchase agreement unambiguously requires R&H to indemnify S KB for the costs of the cleanup of pre-1964 contamination. The relevant provisions of the agreement a re quite straightforward. Not surprisingly, the agreement b egins by describing in its preamble the business being trans ferred from the "Seller" to the "Buyer." That business is desc ribed in terms of business "operations" and the assets associated therewith. The preamble recites that "Seller manufactures and sells, and conducts research and development relating to, a li ne of animal health products, including veterinary pharmaceutica ls, vaccines and diet supplements." It states that "such busine ss" is currently "conducted primarily by" New Whitmoyer an d its affiliates and then lists a number of products, pro jects, and rights that are included in "such business." Final ly, the preamble stipulates that "[t]he worldwide operation s of such business, together with all of the assets relating thereto . . . , are referred to herein as the 'Business'." In section 3.1 of the agreement, the Buyer assumes specifically described liabilities. In subsection 3.2, R&H "indemnifies and holds Buyer . . . harmless from an d against and in respect of:

(a) All material liabilities relatin g to the conduct of the Business prior to th eFirst Closing Date (regardless when the

related claim may be asserted) whether accrued, absolute, contingent, or otherwis e, which are not assumed by Buyer pursuant to
Subsection 3.1." In a reciprocal section, section 3.3, Buyer "indemn ifies and holds RandH and its officers, directors and stockho lders harmless from and against and in respect of: (a) All losses, liabilities, damages or deficiencies to seller resulting from the operation of the Business by the Buyer aft er the First Closing Date . . . ." As the opinion of the court acknowledges " the language in the 1978 Purchase Agreement indemnity provisions clearly expresses the parties' intent to allocate all prese nt and future liabilities" relating to the business being transfe rred. (Maj. Op. at 11.) Putting aside the liabilities specific ally assumed in section 3.1, R&H is to bear the ultimate respons ibility for "all material liabilities relating to the conduct o f the Business" prior to the closing date and SKB is to b ear the ultimate responsibility for all liabilities "result ing from the operation of the Business by the Buyer" after that date. Insofar as liabilities arising from the business being tran sferred before the closing date are concerned, the responsibility of R&H is not limited to liabilities arising out of its operation of the business being transferred. This is in sharp contr ast to the responsibility of SKB which is limited to liabiliti es "resulting from the operation of the Business by Buyer." (Emp hasis supplied.) I do not understand R&H to dispute that th e preamble of the agreement describes the business that is being transferred. Moreover, it acknowledges, as it must, that the bus iness conducted by Old Whitmoyer from 1957 to 1964 is a p art of the business being transferred. It necessarily follows , I believe,
that the liabilities at issue here were "material l iabilities relating to the conduct of the Business prior to th e" closing

date.
The court fails to focus on the obvious fa ct that "Business" as defined or described in the preamble consists of the operations and assets being transferred by the agreement. Understandably, those operations and associated ass ets are identified in part by reference to the legal entiti es that were conducting most of those operations at the time the agreement was entered. But as the parties were aware, those oper ations had been conducted for a number of years and R&H's resp onsibilities under section 3.2 were obviously not intended to be limited to liabilities arising out of the conduct of those ope rations at the time the agreement was entered. R&H, of course, ac knowledges this. At the same time, however, it tries to limit its responsibility to those liabilities arising out of its conduct of the business between 1964 when it purchased the bus iness and the closing date in 1978. Neither the text of section 3.2 nor anything else in the agreement provides a basis for such a limitation. R&H's indemnity responsibilities under the agreementare simply not limited to liabilities relating to t he conduct of

the operations being transferred while those operat ions and assets were under its control. The parties did not leave pre1964 liabilities of the business out of their agree ment for future resolution by a court. R&H unequivocally co mmitted itself to indemnify SKB for "all material liabilities rela ting to the conduct of [the operations and assets being transfe rred] prior to the . . . Closing Date." The liabilities at issue here are clearly among those liabilities.