The court ruled that the intent of the environmental clause was not to require the tenant to spend potentially enormous sums to extract trace amounts of toxic molecules to avoid purely speculative environmental liability. The court found that the tenant did not have to clean up all the toxic chemicals no matter how slight. The court also found that the tenant had not breached the lease since no government legal action had been brought to clean-up the property. Tolo, Inc., et al., 4th App. Generally, an asset purchaser of a corporation may be liable for its environmental liabilities if the purchasing corporation is a mere continuation of the selling corporation.
Mere continuation means there is only one surviving corporation.
The substantial continuation rule is broader than the mere continuation rule. The Ninth Circuit declined to adopt the substantial continuation theory. In so doing, the court explained that successor liability should be determined by California law, and not federal common law because the formation of corporations and the continuing liability of corporations are traditional areas of state law. The court explained that California does not recognize the substantial continuation exception. Top of Page This newsletter cannot provide answers to every question which may arise in a specific circumstance and is not a substitute for professional advice in a given case.