Hydro-Manufacturing, Inc. v. Kayser-Roth Corp.

Stamina Mills owned and operated a textile manufacturing mill at which it used trichloroethylene (TCE) to clean fabric. In 1969, an accident caused TCE to leak into the ground at the site. Several years later, Stamina Mills sold the property to Roger Meunier and ceased corporate operations. The Rhode Island Health Department conducted an investigation in 1979 to determine whether the TCE spill had contaminated nearby residential wells, thereafter issuing an official report that such contamination had, in fact, occurred. The United States Environmental Protection Agency instituted cleanup measures. In 1981, Meunier sold the property to Hydro-Manufacturing (plaintiff). The United States filed suit against Hydro and Kayser-Roth Corporation (defendant), the successor of Stamina Mills, to recover costs of the remediation efforts. The government based its claims on the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), which provides that a person or entity who currently owns the site, along with the owner and operator at the time of contamination by a hazardous substance, will be liable to the government for all remediation costs. Hydro entered into a pretrial agreement whereby Hydro agreed to transfer title of the site to the government in exchange for release from further liability. In 1991, Hydro brought suit against Kayser-Roth, seeking indemnification for the costs Hydro incurred in defending the government’s CERCLA suit, as well as the value of the land Hydro forfeited pursuant to the pretrial agreement. Specifically, Hydro contended that Kayser-Roth, as Stamina Mills’s successor, was liable for Stamina Mills’s negligent breach of its duty to Hydro, as a future owner, to refrain from activities that might harm the property. The trial court granted Kayser-Roth’s motion for judgment as a matter of law. Hydro appealed.