Cooper Industries, LLC v. City of South Bend

ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
Mark E. Shere George M. Plews
Indianapolis, Indiana Jeffrey D. Featherstun
Tina M. Richards
Dale E. Stephenson Plews Shadley Racher & Braun
Allen A. Kacenjar Indianapolis, Indiana
Squire, Sanders & Dempsey L.L.P.
Cleveland, Ohio Cheryl A. Greene
South Bend, Indiana
Mary Rose Alexander
Thomas Heiden Michael Keele
Latham & Watkins, LLP Indianapolis, Indiana
Chicago, Illinois
ATTORNEY FOR ZURICH AMERICAN
Vicki Wright INSURANCE COMPANY
Libby Mote Stephen Peters
Krieg Devault, LLP Indianapolis, Indiana
Indianapolis, Indiana
ATTORNEY FOR CERTAIN
ATTORNEY FOR HARTFORD UNDERWRITERS AT LLOYD‟S OF
ACCIDENT AND INDEMNITY LONDON
COMPANY Bruce Kamplain
Knight Anderson Indianapolis, Indiana
Indianapolis, Indiana
ATTORNEY FOR COMMERCIAL
ATTORNEYS FOR CONTINENTAL LOGISTICS CORPORATION
INSURANCE COMPANY Peter Rusthoven
Mary Reeder Indianapolis, Indiana
Elizabeth Green
Indianapolis, Indiana ATTORNEY FOR ACF INDUSTRIES,
LLC
ATTORNEY FOR LEXINGTON Geoffrey Slaughter
INSURANCE COMPANY Indianapolis, Indiana
David Temple
Indianapolis, Indiana ATTORNEYS FOR INDIANA LEGAL
FOUNDATION
ATTORNEYS FOR INDIANA Bryan Babb
ASSOCIATION OF CITIES AND TOWNS Matthew Klein
Donald Snemis Indianapolis, Indiana

FILED
Brent Huber
Freedom Smith
Indianapolis, Indiana
Jan 22 2009, 3:19 pm

CLERK
of the supreme court,
court of appeals and
tax court
 In the
Indiana Supreme Court
_________________________________

No. 49S04-0711-CV-541

COOPER INDUSTRIES, LLC,
et al.,
Appellant (Plaintiff below),

v.

The CITY OF SOUTH BEND, INDIANA,
et al.,
Appellees (Defendants below).

_________________________________

Appeal from the Marion Superior Court, No. 49F12-0303-PL-752
The Honorable Michael D. Keele, Judge
_________________________________

On Petition to Transfer from the Indiana Court of Appeals, No. 49A04-0511-CV-637
_________________________________

January 22, 2009

Shepard, Chief Justice.

The City of South Bend now owns much of the land where Studebaker Corp. once

manufactured automobiles. It has sued Cooper Industries, LLC and others for environmental

damage done to the site. In this appeal, the questions are whether the applicable statute of

2
limitation bars these claims and whether appellant Cooper Industries is the corporate successor to

Studebaker such that it may be liable on these environmental claims.

We hold that the statute of limitation bars the City‟s common law claims, that its claim

under the Environmental Legal Action statute accrued at the time the statute became effective

and thus is not barred, and that Cooper is the corporate successor to Studebaker for these

purposes.

Facts and Procedural History

From before the Civil War, Studebaker operated manufacturing facilities in the City of

South Bend, eventually occupying more than a hundred acres. During the Twentieth Century,

the plant produced primarily automobiles, until 1963, when Studebaker moved these operations

to a Canadian subsidiary and disposed of its South Bend facilities. It later became apparent that

significant soil and groundwater contamination had likely occurred during Studebaker‟s

occupation of the land and buildings.

Most of the Studebaker assets and the assets of Worthington Corporation were combined

in 1967 to form Studebaker-Worthington Corporation. Studebaker officially dissolved as a

corporate entity on November 30, 1967. In 1979, McGraw-Edison Company acquired all of

3
Studebaker-Worthington‟s shares. In 2004, McGraw-Edison merged into appellant Cooper

Industries, LLC (“Cooper”).

Meanwhile, the City of South Bend began acquiring parcels of the former Studebaker

property during the mid-1980s. Suspecting the presence of environmental contamination, the

City hired two environmental consultants to conduct testing and report on their findings. On

September 30, 1988, the first consultant reported that “a source of hydrocarbons may exist below

the site or that the ground water may be transporting contaminants under the site.” (Appellant‟s

App. at 497.) On November 25, 1988, the second consultant reported “[volatile organic

compound] contamination in the groundwater sample from each boring” and “heavy metal

contamination in the groundwater sample from each boring” exceeding the EPA‟s national

drinking water standards. (Id. at 513-15.) In 1990, the South Bend Redevelopment Commission

formally declared the Studebaker property a redevelopment area. Over the next several years,

the City continued to acquire property and evaluate the contamination. By 2002, the City owned

a significant fraction of former Studebaker land.

On March 19, 2003, the City of South Bend and the South Bend Redevelopment

Commission (collectively “South Bend”) sued McGraw, contending that it was a successor to the

liability of Studebaker. It pleaded negligence, private nuisance, trespass, public nuisance,

statutory illegal dumping, and an environmental legal action (ELA) under Ind. Code § 13-30-9-2

(2009). (Appellant‟s App. at 32-50.) South Bend later substituted Cooper as defendant.

4
 In January 2005, McGraw/Cooper moved for summary judgment on all claims, and both

parties later moved for summary judgment as to whether McGraw/Cooper is the corporate

liability successor of Studebaker. The trial court granted South Bend summary judgment on the

issue of successorship. The court held that Studebaker-Worthington expressly assumed

Studebaker‟s environmental liabilities, and in any event, that the Studebaker-Worthington

combination constituted both a de facto merger and a mere continuation of Studebaker. McGraw

then succeeded to the liabilities of Studebaker-Worthington, and Cooper succeeded to the

liabilities of McGraw.

The trial court also denied McGraw/Cooper summary judgment on all but one of South

Bend‟s claims.1 In its denial, the court held that South Bend had brought all of its claims within

the six-year statute of limitation for harm to property found at Ind. Code § 34-11-2-7.

The court also declared that South Bend‟s ELA claim was timely because South Bend

filed it less than six years after the ELA statute became effective on February 28, 1998. The

court reasoned that “no cause of action accrued on behalf of South Bend prior to that date. To

find otherwise would be to preclude claims under statutes not yet enacted.” (Id. at 3225-26.)

The court further held that South Bend had authority to file an ELA claim because it is a

“person” as that term is used in the ELA statute, Ind. Code § 13-30-9-2.

1
The court granted McGraw/Cooper summary judgment only on the illegal dumping claim because South
Bend did not own the land when the illegal dumping occurred.
5
 Cooper appealed, and the Court of Appeals reversed, holding that the six-year statute of

limitation for property injuries barred all of South Bend‟s claims. Cooper Indus., LLC v. City of

South Bend, 863 N.E.2d 1253 (Ind. Ct. App. 2007), vacated. We granted transfer.

Summary judgment is appropriate only where no genuine issues of material fact exist,

and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C).

I. South Bend’s Common Law Claims

Cooper Industries contends that our statute of limitation, Ind. Code § 34-11-2-7, bars the

instant claims because South Bend did not commence its action within six years after it

discovered “some ascertainable damage” to the former Studebaker property. (Appellant‟s Br. at

12-13.) South Bend argues in reply that its common law tort claims are timely as to the property

it purchased within six years from the date of commencing the action because a statute of

limitation did not accrue until it purchased each parcel. (Appellees‟ Br. at 28-29.) The trial

court agreed with South Bend.

6
 A. Common Law Claims

The general six-year statute of limitation applies to South Bend‟s claims for negligence,

trespass, and public and private nuisance. See Ind. Code § 34-11-2-7(3); cf., Pflanz v. Foster,

888 N.E.2d 756 (Ind. 2008) (applying a ten-year statute of limitation for a contribution action,

rather than the six-year statute for property damage, because the statute of limitation did not

begin to run until after the claimant was ordered to clean up the property). The parties dispute

both when the action accrued and whether South Bend‟s claims were timely filed in light of the

accrual date.

B. Statute of Limitation

Statutes of limitation seek to provide security against stale claims, which in turn promotes

judicial efficiency and advances the peace and welfare of society. “The party pleading a statute

of limitation bears the burden of proving the suit was commenced beyond the statutory time

allowed.” In re Paternity of K.H., 709 N.E.2d 1033, 1035 (Ind. Ct. App. 1999). When

application of a statute of limitation rests on questions of fact, it is generally an issue for a jury to

decide. Fager v. Hundt, 610 N.E.2d 246 (Ind. 1993).

7
 South Bend argues that its cause of action for damages to the Studebaker property did not

accrue for limitation purposes until it became the owner of the property and had a right to

commence the action, citing Gray v. Westinghouse Elec. Corp., 624 N.E.2d 49 (Ind. Ct. App.

1993), trans. denied. We cannot agree. Indiana adheres to the rule that “third parties are usually

held accountable for the time running against their predecessors in interest.” Mack v. Am.

Fletcher Nat. Bank and Trust Co., 510 N.E.2d 725, 734 (Ind. Ct. App. 1987).2 Accepting South

Bend‟s argument would have the practical effect of allowing the mere transfer of property to

resurrect the claims of prior landowners and predecessors-in-interests who had actual knowledge

of injuries to property. It seems much more likely that the General Assembly had the opposite in

mind when enacting Ind. Code § 34-11-2-7.

Under Indiana‟s discovery rule, a cause of action accrues, and the limitation period

begins to run, when a claimant knows or in the exercise of ordinary diligence should have known

of the injury. Wehling v. Citizens Nat‟l Bank, 586 N.E.2d 840 (Ind. 1992). The determination

of when a cause of action accrues is generally a question of law. Barnes v. A.H. Robins Co., 476

N.E.2d 84 (Ind. 1985). For an action to accrue, it is not necessary that the full extent of the

damage be known or even ascertainable, but only that some ascertainable damage has occurred.

Pflanz, 888 N.E.2d at 759 (quoting Doe v. United Methodist Church, 673 N.E.2d 839, 842 (Ind.

Ct. App. 1996)). In addressing a recent claim for contribution based on an obligation to clean up

an alleged hazardous use of real property, this Court declared the “notion that the statute of

2
This has been our rule for some time. See Kennedy v. Warnica, 136 Ind. 161, 36 N.E. 22 (1894);
Hildebrand v. Kinney, 172 Ind. 447, 87 N.E. 832 (1909); 18 Elizabeth Williams, Ind. L. Encyc.
Limitation of Actions § 8 (Joseph T. Latronica, et al. eds., 2003).
8
limitation begins to run when all the elements of a cause of action can be shown is part of how

we determine when a cause accrues.” Id. at 758.

Between late 1986 and March 1997, South Bend solicited and acquired numerous

environmental reports analyzing hundreds of soil and groundwater samples throughout the

relevant area. These reports revealed the contamination that led to this litigation. Furthermore,

South Bend hired multiple environmental consultants to explain the reports and legal counsel to

analyze its rights, and South Bend acknowledges that it was aware of its consultants‟

conclusions. South Bend summarized its environmental knowledge, reciting every main premise

of this action, in an internal memorandum on October 10, 1995. Based on these facts, Cooper‟s

theory is that South Bend knew of the contamination “for well over ten years” before

commencing the action. (Appellant‟s Br. at 15.)

Cooper urges consideration of the District Court‟s reasoning in McFarland Foods Corp.

v. Chevron USA, Inc., No. IP991489CHG, 2001 WL 238084, at *4 (S.D. Ind. Jan. 5, 2001).

There, the court held that a single report demonstrating environmental contamination was

sufficient to cause the plaintiff landowner‟s claims to accrue. (Id. at *3-4.) Cooper observes that

South Bend possessed significantly more knowledge than the McFarland plaintiff, knowledge

acquired purposefully during the late 1980s and early 1990s. (Appellant‟s Br. at 15-16.) It

argues that South Bend‟s common law claims accrued long before March 1997, that is, more

than six years before they were filed. We conclude this is largely correct, representing ordinary

Indiana practice as regards the common law claims filed by South Bend.

9
 II. South Bend May Proceed With Its ELA Claim.

In 1997, the General Assembly enacted a statute providing for an “environmental legal

action” to “recover reasonable costs of a removal or remedial action” involving hazardous

substances or petroleum. Ind. Code § 13-30-9-2.

The parties join two issues pertinent to the ELA claim. First, for purposes of accrual and

the statute of limitation, is ELA largely a consolidation of existing rights to sue, such that the

statute might have begun to run decades ago, or is it a new cause of action for which the statute

of limitation could not start to run until its enactment? Second, is South Bend a party who can

file an action under ELA?

A. The ELA is a “Brownfields” Claim New in 1998.

The ELA is part of the “Brownfield Revitalization Zone Tax Abatement – Environmental
Revolving Loan Program” bill, enacted in 1997 to become effective February 28, 1998. P.L. 59-
1997, 1997 Ind. Acts 1789 (“1997 Act”). The bill‟s overall purpose was the rescue and
redevelopment of “brownfields,” which the legislation defined as:

an industrial or a commercial parcel of real estate:
(1) that:
(A) is abandoned or inactive; or
(B) may not be operated at its appropriate use; and
(2) on which expansion or redevelopment is complicated;

10
 because of the actual or perceived presence of a hazardous
substance or petroleum released into the surface or subsurface soil
or groundwater that poses a risk to human health and the
environment.
1997 Act § 3.

Section 23 of the 1997 Act did not amend any existing parts of the Code, but rather added

to the Code an entirely new chapter (consisting of eight entirely new sections). See Ind. Code §

13-30-9-1, et seq. (the “ELA Chapter”). To be sure, the ELA chapter overlaps in some ways

with enactments such as Indiana‟s Underground Storage Tank Act – Ind. Code § 13-23-13-8, the

Petroleum Release statute – Ind. Code § 13-24-1-4(b), the catch-all environmental statute – Ind.

Code § 13-30-1-1,3 and the federal Comprehensive Environmental Response, Compensation, and

Liability Act (CERCLA) – 42 U.S.C. § 9601 et seq. (2009). Still, there are certain circumstances

under which only the ELA would provide a cause of action.

3
Ind Code § 13-30-1-1 states:
Sec. 1. Under this chapter:

(1) the attorney general;
(2) a state, city, town, county, or local agency or officer vested with the authority to seek judicial
relief;
(3) a citizen of Indiana; or
(4) a corporation, a limited liability company, a partnership, or an association maintaining an
office in Indiana;

may bring an action for declaratory and equitable relief in the name of the state of Indiana against
an individual, a partnership, a copartnership, a firm, a company, a corporation, a limited liability
company, an association, a joint stock company, a trust, an estate, a state agency or an officer of
the state, a city, a town, a county, a local governmental unit, an agency, or an official of a city, a
town, a county, a local governmental unit, or an agency, or any other legal entity or their legal
representative, agent, or assigns for the protection of the environment of Indiana from significant
pollution, impairment, or destruction.
11
 In addition to the ELA Chapter, the 1997 Act included several provisions adding to and

amending the Indiana Code to further redevelopment. These provisions created certain tax

abatements (§ 1 of the Act), supplemented an existing voluntary remediation plan scheme (§§ 17

through 22 of the Act), implemented a revolving loan fund program (§ 29 of the Act; Ind. Code §

13-19-5-2), and directed IDEM to develop procedures and a brownfield redevelopment work

group (§§ 27-28 of the Act). This legislative effort to address brownfields included a set of

policies and programs designed to encourage their remediation, partly by amending existing code

and partly by adding new sections. The fact that a cause of action is embedded in a

comprehensive bill that adds new material as well as amends existing statutes does not

necessarily make it an amendment rather than the creation of a new cause of action.

Section 6 of the 1997 Act defined what the legislature meant by “Environmental Legal

Action:” “…any legal action brought to recover reasonable costs associated with a removal or

remedial action involving a hazardous substance or petroleum released into the surface or

subsurface soil or groundwater that poses a risk to human health and the environment.” Ind.

Code § 13-11-2-70.3. Cooper contends that this is a redundancy, that it merely restates all

existing causes of action. Certainly there are claims available to plaintiffs apart from the ELA in

cases similar to South Bend‟s, but together they do not exhaust the meaning given to an

environmental legal action under the 1997 Act. For instance, South Bend points out that a

proportionately small amount of its cleanup costs have been related to underground storage tanks

or petroleum, so a correspondingly low portion of the recoverable costs would have been

available under either the USTA or the petroleum release statute. Moreover, the City‟s

12
remediation efforts have been voluntary, so as to exclude a contribution claim for compelled

remedial action under contribution provisions of the USTA and CERCLA.

In the course of considering the legislation at issue, the General Assembly made various

changes to the bill as introduced that support South Bend‟s characterization of the ELA as

creating a new action. For instance, legislators added a new § 1 to the ELA Chapter as

introduced describing the general application, saying the ELA “applies to actions brought by the

state or a private person,” but does not apply to certain actions brought by the state in more

extreme environmental contamination cases: where the site is listed on the National Priorities

List, scores at least 25 on Indiana‟s solid waste management scoring model, or is deemed by the

IDEM commissioner to be an imminent threat to human health or the environment. 1997 Act §

23. In this context, we conclude the legislature contemplated ELA as creating a new cause of

action.

The legislature altered § 2 of the ELA Chapter to clarify the nature of the release of a

hazardous substance or petroleum and to place a reasonableness standard on cost recovery. Id.

It changed § 3 of the ELA Chapter to narrow one factor a court must consider in evaluating the

environmental risks posed by the activity in question by weighing the use of the site at the time

of the release against the cost effectiveness of addressing the risks imposed. Id. Furthermore,

the General Assembly inserted language providing that a contract allocating responsibility

between parties controls despite the ELA. Id. (this language appears in Ind. Code § 13-30-9-

3(b)).

13
 Most useful on the question whether the ELA is a new cause of action is § 6 of the ELA

Chapter, also added by the General Assembly to the bill as introduced. Section 6 states the same

proposition in two clear ways. First, it provides that an action to recover costs related to a

release from an underground storage tank may be brought under the ELA or the USTA. I.C. §

13-30-9-6. It then reiterates this concept: “A person may not bring the action under both this

chapter and IC 13-23-13-8,” (the USTA). Id. Requiring litigants to choose between ELA and

USTA (which unquestionably creates a cause) indicates the General Assembly clearly intended

to create a new and separate cause of action. If the ELA was intended to clarify and narrow such

claims as those under the USTA, there would be no reason to require a litigant to choose.

Cooper also contends that the language “the action” means there can only be one action

under both chapters of the code and that “the action” actually existed before the legislature

enacted the ELA. (Appellant‟s Reply Br. at 6.) Again, reading the ELA in such a way would

render the alternative ELA claim in underground storage tank cases meaningless. In fact, the

definite article in the clause “…may bring the action under…” refers to the particular action in

the previous clause: “In an action to recover costs associated with a release from an underground

storage tank….” Ind. Code § 13-30-9-6. This clause does not refer to an action brought under

the USTA but to an action brought based on facts that would also produce a claim under the

USTA. In so addressing this contingency, the General Assembly signaled it did not intend to

grant claimants two bites at the apple.

Two final changes made during the General Assembly‟s deliberations added sections to

14
the ELA Chapter: (1) clarifying that a covenant not to sue under Ind. Code § 13-25-5-18 would

exempt a party from suit as a result of the ELA and (2) excluding the ELA from affecting any

litigation filed before its effective date. 1997 Act § 23 (enacting Ind. Code § 13-30-9-7 and -8.

This provision about covenants not to sue as not being affected by the ELA Chapter further

indicates legislative intent to create a new cause of action, for to read the ELA in any other way

would not require such language, and, like § 6 of ELA, to read it as including existing claims

would render it meaningless. Similarly, stating that the ELA “may not be construed to affect any

litigation” filed before its effective date is in line with such an interpretation, particularly in light

of a situation in which the ELA would provide a more favorable alternative action to a plaintiff

after filing its suit.

B. A City can be a Plaintiff under ELA.

Cooper Industries contends that South Bend cannot bring an ELA claim because South

Bend is not “the state or a private person.” (Appellant‟s Br. at 43-44.) South Bend argues that it

is a “person” as that term is used in the section authorizing an ELA claim. (Appellees‟ Br. at 35-

36.) The trial court agreed with South Bend.

This debate focuses on the first two sections of Ind. Code § 13-30-9. Standing in

juxtaposition, they do provide something of a conundrum. When South Bend filed its case, § 1

of the ELA Chapter began by saying: “This chapter applies to actions brought by the state or a

15
private person.”4 By contrast, § 2 said: “A person may bring an environmental legal action….”5

For most purposes of Indiana‟s environmental laws, the Code defines “person” very

comprehensively, certainly in a way that includes South Bend: “„Person‟… means… a city, … a

town,… political subdivision,… or any other legal entity.” Ind. Code § 13-11-2-158(a). It does

not define “private person.”6

When courts set out to construe a statute, the goal is to determine and give effect to the

intent of the legislature. Sales v. State, 723 N.E.2d 416 (Ind. 2000). The first place courts look

for evidence is the language of the statute itself, and courts strive to give the words their plain

and ordinary meaning. We examine the statute as a whole and try to avoid excessive reliance on

a strict literal meaning or the selective reading of individual words. We presume the legislature

intended the language used in the statute to be applied logically, consistent with the statute‟s

underlying policy and goals, and not in a manner that would bring about an unjust or absurd

result. Prewitt v. State, 878 N.E.2d 184 (Ind. 2007); Sales, 723 N.E.2d at 420.

We look to the underlying purpose of these provisions and to similar Code sections for

guidance. First, it is clear from the plain language of Ind. Code ch. 13-30-9 that the legislature

enacted the ELA statute to shift the financial burden of environmental remediation to the parties

responsible for creating contaminations. In effect, this scheme creates an incentive for potential

4
Ind. Code Ann. § 13-30-9-1 (West 1998), amended by 2007 Ind. Acts 221 § 22.
5
Ind. Code § 13-30-9-2 (1998), amended by 2007 Ind. Acts 221 § 23.
6
The General Assembly subsequently amended the ELA Chapter in 2007 by deleting the word “private”
from § 1. 2007 Ind. Acts 3784.
16
buyers of contaminated land who might be deterred by the substantial costs to clean up the land,

thus preventing not only the cleanup but also redevelopment and economic renewal.

The General Assembly enacted other incentives for potential brownfield redevelopers at

the same time that it enacted ELA.7 One of those, Ind. Code ch. 13-19-5, creates the

Environmental Remediation Revolving Loan Program, and it explicitly contemplates that cities

and other local government entities will be major actors in brownfield remediation and

redevelopment. Indiana Code § 13-19-5-1 states the purpose of the Program:

The environmental remediation revolving loan program is
established to assist in the remediation of brownfields to encourage
the rehabilitation, redevelopment, and reuse of real property by
political subdivisions by providing loans or other financial
assistance to political subdivisions to conduct any of the following
activities:
(1) Identification and acquisition of brownfields... as suitable
candidates for redevelopment following the completion of
remediation activities.
(2) Environmental assessment of identified brownfields....
(3) Remediation activities conducted on brownfields.
(4) The clearance of real property… in connection with
remediation activities.
(5) Other activities necessary or convenient to complete
remediation activities on brownfields.
Ind. Code § 13-19-5-1 (1999 suppl.), amended by 2007 Ind. Acts 221 § 7.

If, as Cooper contends, cities like South Bend cannot bring ELA claims, it would mean

that most nearly anyone but cities could purchase and rehabilitate contaminated land and

consequently seek to recover remediation costs from the original contaminator. Cities, by

7
All of this legislation was passed as P.L. 59-1997. See 1997 Ind. Acts 1789.

17
contrast, would have to act solely at local taxpayer expense (though they could borrow money

from the state to finance purchases and remediation). We cannot think of a reason why the 1997

brownfields scheme would have been crafted with this result in mind.

In light of the overall objective of the 1997 bill and the apparent purpose of the ELA

Chapter, we conclude that the term “private person” in Ind. Code § 13-30-9-1 should not be read

any narrower than the more definite and generally applicable definition found in Ind. Code § 13-

11-2-158(a). The trial court correctly held that South Bend could pursue an ELA claim.

C. Statute of Limitation Runs from ELA’s Enactment.

“A statute of limitation does not begin to run against a cause of action before that cause

of action exists, i.e., before a judicial remedy is available to the plaintiff.” Martin v. Richey, 711

N.E.2d 1273, 1284 n.12 (Ind. 1999). The substance of a cause of action, rather than its form,

determines the applicability of the statute of limitation. Shideler v. Dwyer, 275 Ind. 270, 417

N.E.2d 281 (1981).

Cooper asserts that “South Bend had several ways to sue exactly the same parties for the

same contamination under the same (or more stringent) standards long before the ELA

amendments.” (Appellant‟s Br. at 21). In particular, Cooper cites Indiana‟s Underground

Storage Tank Act, Ind. Code § 13-23-13-8; the Petroleum Release Statute, Ind. Code § 13-24-1-

18
4(b); the catch-all environmental statute, Ind. Code § 13-30-1-1; and the federal Comprehensive

Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. § 9601 et seq.

(Id.) If the ELA simply amends, for clarification or other purposes, pre-existing environmental

claims, any change would apply strictly on a prospective basis. Cf. Bourbon Mini-Mart v. Gast

Fuel and Serv., Inc., 783 N.E.2d 253, 262 (Ind. 2003) (because an amendment to the USTA

expanded both “the class of corrective action for which owners and operators could seek

recovery,” and “the class of third persons from whom recovery could be sought,” the statute as

amended should be applied retroactively). On the other hand, if the ELA creates an entirely new

action, no cause of action could have existed until its effective date. ELA seems to fall

somewhere in the middle.

As South Bend points out, the USTA and the Petroleum statutes provide only a right of

contribution, whereas the ELA does not so limit seeking cost recovery from another party. See

Taylor Farms LLC v. Viacom, 234 F.Supp.2d 950, 962 (S.D. Ind. 2002). Furthermore, each of

these are limited by the type of damage done. As such, the limitation found in the ELA‟s § 6

would only have a narrowing effect in those cases involving sufficient facts to support a claim

under the USTA. If such facts existed, the plaintiff would have to choose between the ELA and

the USTA. As to Ind. Code § 13-30-1-1, it allows declaratory and equitable relief only, requires

a citizen suit notice of six months, and prohibits seeking relief when IDEM is also seeking

declaratory relief. (Appellees‟ Br. at 33). Finally, CERCLA‟s § 107(a) would require South

Bend to prove it was an innocent landowner, while the ELA explicitly permits recovery without

regard to the plaintiff‟s part in causation of the damage.

19
 Cooper argues that the “substance of a cause of action, rather than the form, determines

the applicability of the statute of limitations,” meaning South Bend‟s claim would accrue when a

substantively similar claim would accrue. (Appellant‟s Br. 20-21, quoting Rice v. Strunk, 632

N.E.2d 1151, 1153 (Ind. Ct. App. 1994), aff‟d, 670 N.E.2d 1280 (Ind. 1996), also citing King v.

Terry, 805 N.E.2d 397 (Ind. Ct. App. 2004).) For instance, Cooper cites both Shideler v. Dwyer

and Rice, in which the plaintiffs had malpractice claims but crafted their complaints in a way to

describe claims carrying a longer statute of limitation than the more obvious claim of

malpractice. The courts in both cases found that, in fact, the underlying claims were actually for

malpractice, and the two-year limitation for malpractice actions should apply. We think the case

law Cooper cites on this point addresses the question of how parties characterize facts in their

pleadings, not with a change in the underlying law.

Here, if any similar spin has occurred on South Bend‟s part, it has a limited effect, for at

least some of South Bend‟s claims could not have been brought before February 28, 1998. If the

reverse were true and South Bend could have brought the substance of its claims before the end

of an applicable statute of limitation but did not, the Shideler rule might bar the City‟s recovery.

In this case, however, South Bend did not have a complete cause of action until the ELA became

effective. Therefore, the statute of limitation could not have begun to accrue until that date.

Cooper further asserts that the statute of limitation should have run against South Bend in

accord with standard discovery rule principles – when it knew or should have known of the

injury. (Appellant‟s Br. at 13-17.) This misses a broader point about applying statutes of

20
limitation: a statute does not run until a cause of action is complete. The discovery rule may tell

us when there was sufficient knowledge about facts, but it does not apply at all to the completion

of the underlying law to a cause of action, except to the extent that the law depends on the claim

being factually complete. Indiana courts have held consistently that the discovery of a legal

theory will not serve as the accrual date, but not that a cause of action can accrue before the law

provided for such kind of claim.8

Cooper claims that under this logic a claim could be brought based on facts known for a

hundred years. Such a claim still must be brought, however, within the applicable statute of

limitation from the point of a new cause of action‟s effective date. In other words, any opening

of the floodgates would have a time limit. That time for the ELA passed either on February 28,

2004 or February 28, 2008, depending on which statute of limitation applies. Parties who newly

discover ancient contamination and seek to recover costs will be in the same position under the

ELA as they would be under the USTA: the statute of limitation will begin to run on the earlier

date of actual discovery or when a reasonable person would discover the facts.

Though the parties join in debate over whether South Bend has agreed that the property

damage statute of limitation applies in this case, we will adopt six years as the applicable time

8
In Commercial Logistics Corp. v. ACF Indus., Inc., No. 4:04-cv-00074-SEB-WGH (S.D. Ind., filed July
18, 2006), Judge Barker held that an ELA cause accrued before enactment, on the theory that the ELA
covers acts occurring before its enactment. We conclude the new nature of the ELA claim warrants
setting accrual no earlier than the date of enactment.

21
period. 9 Six years from the accrual date was February 28, 2004. Because South Bend filed this

action March 19, 2003, it filed within even the shortest arguable limitation. Because we

understand the ELA as addressing the issue of “brownfields,” that the legislature did not intend

to bar cities from bringing these actions, and that the statute of limitation did not run until the

cause existed, we hold that South Bend may proceed with its ELA claims.

III. Does Cooper Hold the Corporate Liabilities for Surviving Claims?

Both parties moved for summary judgment on whether Cooper is the corporate successor

of Studebaker with regard to the environmental liabilities involved in this case. Cooper contends

that the liabilities did not pass from Studebaker to Studebaker-Worthington in the 1967 asset sale

and therefore did not end up with Cooper. (Appellant‟s Br. at 23.) Cooper‟s theory is that asset

purchases do not transfer liability, so the liabilities stayed with Studebaker until Studebaker

terminated its corporate existence, at which point the liabilities expired. (Appellant‟s Br. at 24,

30-31; Appellant‟s Reply Br. at 13-14.) South Bend argues that the liabilities were transferred to

Studebaker-Worthington in the 1967 sale, and, in any event, the situation merits application of

either the de facto merger or the “mere continuation” doctrines. (Appellees‟ Br. at 10-11.)

9
The parties disagree over whether South Bend conceded the six-year property damage or the ten-year
“catch-all” statute of limitation applies at trial. Because we find South Bend‟s ELA claim would survive
under either proposed time period, we do not address the question of the City‟s concession but instead
limit our analysis to the accrual of the statute of limitation.
22
 The trial court held that Studebaker-Worthington expressly assumed the Studebaker

environmental liabilities. It also held that the transaction qualifies as a de facto merger or as a

“mere continuation” of the previous corporate enterprise.

The 1967 asset sale agreement contained a choice-of-law provision: “This Agreement

shall be construed in accordance with the laws of the State of New York.” (Appellant‟s App. at

1590.) As a preliminary matter, Cooper argues that the trial court should have applied New York

law to interpret the 1967 asset sale agreement and should have applied Delaware law to the de

facto merger and “mere continuation” questions. (Appellant‟s Br. at 25.) South Bend replies

that neither New York law nor Delaware law applies and furthermore that doing so would not

alter the outcome. (Appellees‟ Br. at 15, 22.) These contentions play out differently as respects

the several questions about successor liability.

A. Express Assumption

Under Indiana law, where a corporation purchases the assets of another, the buyer does

not assume the liabilities of the seller. Winkler v. G. Reed & Sons, Inc., 638 N.E.2d 1228 (Ind.

1994). One of the four well-recognized exceptions to this rule is an express or implied

agreement to assume liabilities. Id.

23
 The agreement governing the 1967 asset acquisition states the following regarding the

transfer of liabilities:

[A Studebaker-Worthington subsidiary] shall deliver to Studebaker
one or more written instruments of assumption… to effect the
assumption by [the subsidiary] of all the liabilities and obligations
of Studebaker existing at the First Closing except (x) Studebaker‟s
liability in respect of the cash dividends [to certain stockholders],
(y) [certain employee stock options] and (z) liabilities and
obligations for expenses and taxes incurred by Studebaker in
connection with this Agreement and the transactions herein
provided for, including Studebaker‟s dissolution and the
distribution of SW Corporation Common Stock and Series A and
Series B Preferred Stock to Studebaker‟s shareholders and
liabilities and obligations owing to holders of Studebaker stock in
their capacities as such holders (including amounts payable in
respect of shares of Studebaker Common Stock, First Preferred
Stock and Series A Second Preferred Stock, acquired by
Studebaker from dissenting shareholders as provided in clauses (i),
(ii) and (iii) above, hereinafter together called the “Dissenting
Shares”).
(Appellant‟s App. at 1570.)

The Instrument of Assumption of Liabilities and Obligations, of which the asset sale

agreement speaks, provides that:

[I]n consideration of the premises and in accordance with the
provisions of the Agreement, and for good and valuable
considerations, the receipt and adequacy of which is hereby
acknowledged, [a Studebaker-Worthington subsidiary] assumes
and agrees to pay, perform and discharge all obligations, contracts,
debts and other liabilities of Old Studebaker as the same exist at
the date hereof, of any kind, character or description, whether
accrued, absolute, contingent or otherwise, and whether or not
reflected or reserved against in the balance sheet, books of account
or records of Old Studebaker, except that [the subsidiary] does not
assume or agree to pay, perform or discharge any of the obligations
referred to in [clauses (x), (y), or (z)].

24
(Id. at 1533.)

Both agreements demonstrate that the parties intended to transfer all existing liabilities

from Studebaker to Studebaker-Worthington except for those listed. Neither party contends that

the listed exceptions include the environmental liabilities at issue. The question is thus whether

“all the liabilities… existing at the First Closing” and “all… liabilities… as the same exist at the

date hereof” include the liability deriving from Studebaker‟s environmental contaminations at

the South Bend plant.

The question is one on which both parties have supplied substantial argument. Because

we conclude that the trial court was correct to grant summary judgment on two other grounds

detailed next, we pass over whether the trial court was correct in granting judgment on grounds

of express assumption.

B. De Facto Merger and Mere Continuation

The trial court‟s holding that the 1967 transaction constituted a “de facto merger” and

“mere continuation” appears supportable.

As for choice of law concerning de facto merger and “mere continuation,” Cooper cites

the Indiana Code: “This article does not authorize Indiana to regulate the organization or

25
internal affairs of a foreign corporation authorized to transact business in Indiana.” I.C. § 23-1-

49-5(c). Cooper further says Delaware law must control. This provision from our Business

Corporations Law may well prevent certain regulatory actions as respects foreign corporations

granted certificates of authority to transact business in Indiana. It does not drive the judicial task

of discerning the overall effect of corporate transactions on the interests of persons and entities

who were not party to the earlier transactions. Our task is to understand what dealings have

occurred, not to order new action affecting a corporation‟s internal affairs. For at least these

reasons, Ind. Code § 23-1-49-5(c) does not affect our analysis of de facto merger or “mere

continuation” nor does the statute require Delaware law to control such discussion.

These two doctrines represent exceptions to the general rule against passing along

liabilities in the course of an asset sale are widely accepted in the law of American states,

including Indiana, New York, and Delaware.10 Courts sometimes treat asset transfers as de facto

mergers where the economic effect of the transaction makes it a merger in all but name. Some

pertinent findings might include continuity of the predecessor corporation‟s business enterprise

as to management, location, and business lines; prompt liquidation of the seller corporation; and

assumption of the debts of the seller necessary to the ongoing operation of the business. See,

e.g., AT & S Transport. LLC v. Odyssey Logistics & Tech. Corp., 22 A.D.3d 750, 803 N.Y.S.2d

10
To be sure, Delaware‟s version of de facto merger is far more restrictive, as Cooper argues. Focused as
it is on shareholder rights, Delaware may be something of an outlier on this subject, though obviously a
very influential one. See, e.g., Orzeck v. Englehart, 195 A.2d 375, 378 (Del. 1963) (affirming that de
facto is part of Delaware law, declining to embrace Pennsylvania‟s more fulsome version of the doctrine,
even as respects shareholders).
26
118 (2005); Berg Chilling Sys., Inc. v. Hull Corp., 435 F.3d 455 (3rd Cir. 2006); Beals v.

Washington Int‟l, Inc., 386 A.2d 1156 (Del. Ch. 1978).

There is only modest contest that the 1967 transaction followed this pattern. Studebaker

was founded in South Bend during the mid-1800s. For more than a century Studebaker

conducted industrial operations in 109 buildings spread across approximately twenty-five city

blocks at its headquarters in South Bend. In 1963, Studebaker began diversifying into other lines

of business and stopped manufacturing automobiles in South Bend due to a weakening

automotive market. In the fourteen months following the decision to stop manufacturing

automobiles in South Bend in December 1963, Studebaker sold its foundry, machine shop and

engine plant, stamping plant, final assembly plant, body plant, power house, engineering

building, truck plant, and several other buildings. (Appellant‟s Br. at 4.) Studebaker also set

aside a fund in the amount of sixty-four million dollars to provide for anticipated losses on the

disposal of the South Bend properties and equipment. (Id.)

Studebaker then consolidated its remaining automotive operations in Hamilton, Ontario,

to be conducted through its subsidiary, Studebaker of Canada, Ltd. (Id.) Studebaker allegedly

discontinued all automotive manufacturing in Hamilton, Ontario, on March 4, 1966. (Id.) As of

1966, Studebaker consisted of nine operating divisions – none of which allegedly were linked to

its automotive past and the properties at issue in this case. (Appellant‟s Br. at 5.)

27
 In 1967, Studebaker entered into negotiations which ultimately resulted in a series of

agreements and a plan of reorganization whereby Studebaker and Worthington Corporation

combined to form Studebaker-Worthington (“S-W”) and two subsidiaries. Studebaker and

Worthington Corporation both immediately dissolved after the combination of the two

companies.

Studebaker-Worthington expressly assumed Studebaker‟s liabilities in the 1967

agreements. (Appellant‟s Br. at 5; Appellees‟ Br. at 3.) The Instrument of Assumption of

Liabilities and Obligations provided that Saraband Properties, Incorporated, a subsidiary of S-W,

would assume all potential future arising liabilities that were existing at the first closing of the

transaction. (Appellant‟s Br. at 5-6; Appellees‟ Br. at 3.)

The Transaction Agreement provided that Studebaker-Worthington would assume the

current obligations of Studebaker naturally associated with the business at the First Closing.

(Appellees‟ Br. at 3.) The 1967 agreements also set aside a fund in the amount of $4 million

dollars to address Studebaker‟s retained liabilities occurring in the normal course of business.

(Appellant‟s Br. at 6.) This “fund” agreement expressly required Studebaker to pay for or

provide payment for all Studebaker‟s liabilities, expenses, and taxes not assumed by S-W.11

(Appellant‟s Br. at 6.)

11
The fund agreement covered the items excluded in the note above.

28
 Moreover, the Proxy Statement sent to Studebaker shareholders and the 1967 Studebaker

and 1969 Studebaker-Worthington annual reports show that the divisions, subsidiaries, and

products of Studebaker became the divisions, subsidiaries, and products of S-W. (Appellees‟

Br. at 4.) The Proxy Statement also establishes that there was a continuity of shareholders

between Studebaker and S-W. (Appellees‟ Br. at 4.) The officers and the employees of

Studebaker also became officers and employees of S-W after the reorganization. (Appellees‟

Br. at 4.)

Studebaker remained legally and financially available to satisfy its remaining liabilities

for three years after its dissolution and provided public notice regarding the expiration of any

pending claims against it. (Appellant‟s Br. at 6.) Then, after having fully met its

responsibilities, Studebaker ceased to exist. (Appellant‟s Br. at 6.)

We conclude that these facts suffice to warrant the trial court‟s finding that the 1967

transaction constituted a de facto merger such that Cooper may be held to answer South Bend‟s

claims.

The doctrine of “mere continuation” has a slightly different focus. It asks whether the

predecessor corporation should be deemed simply to have re-incarnated itself, largely aside of

the business operations. Factors pertinent to this determination include whether there is a

continuation of shareholders, directors, and officers into the new entity. See, e.g., Chicago Title

Ins. Co. v. Alday-Donaldson Title Co. of Florida, Inc., 832 So.2d 810 (Fla. Dist. Ct. App. 2002);

29
Michowski v. Visi-Trak Worldwide, LLC, 415 F.3d 501 (6th Cir. 2005). Judge Weis helpfully

laid out the development of these alternatives as respects claims by third parties. Polius v. Clark

Equip. Co., 802 F.2d 75 (3rd Cir. 1986).

In the instant case, as in some we have noted from other jurisdictions, the stockholders,

directors, and officers of old Studebaker and the former Worthington Corporation became the

respective players in Studebaker-Worthington Corporation. The officers of Studebaker became

the officers of Studebaker-Worthington. (1967 Annual Report, Appellant‟s App. 1828-1859;

1969 Annual Report, Appellant‟s App. 1891-1916.) The shareholders of the two former

corporations between them owned 100% of Studebaker-Worthington. (Appellant‟s App. 2122.)

The proxy statement told these shareholders what they were voting on was a “merger.”

(Appellant‟s App. 2815-2827.) After selling the South Bend properties and exiting the

automobile business, Studebaker entered negotiations that ultimately culminated in the

November 1967 Asset Sale in which Studebaker and Worthington Corporation sold selected

assets to Studebaker-Worthington Corporation and two subsidiaries. (Appellant‟s App. 1567-

91.) All of the acquiring entities were Delaware corporations. Id. Studebaker-Worthington did

not buy Studebaker‟s automotive business and never owned the sites at issue here. Rather, S-W

bought only the assets of Studebaker‟s separate collection of nine non-automotive businesses.

(See Appellant‟s App. 1828-59.)

The fact the successor corporation was incorporated in Delaware does not control. While

the law of the state of incorporation may determine issues relating to the internal affairs of a

corporation, different principles apply where the rights of third parties external to the corporation

30
are at issue. See, e.g., First Nat‟l City Bank v. Banco Para El Comercio Exterior, 462 U.S. 611,

621 (1983), citing Restatement (Second) of Conflict of Laws §301, which provides:

The rights and liabilities of a corporation with respect to a third
person that arise from a corporate act of a sort that can likewise be
done by an individual are determined by the same choice-of-law
principles as are applicable to non-corporate parties.

Section 302 provides:

Issues involving the rights and liabilities of a corporation, other
than those dealt with in § 301, are determined by the local law of
the state which, with respect to the particular issue, has the most
significant relationship to the occurrence and the parties… (2) The
local law of the state of incorporation will be applied to determine
such issues, except in the unusual case where, with respect to the
particular issue, some other state has a more significant
relationship to the occurrence and the parties, in which event the
local law of the other state will be applied.

Restatement (Second) of Conflict of Laws § 302.

This case is a claim about property damage. The injury occurred in Indiana. The law of

the place of the wrong occurred (lex loci delicti) governs. In disputes such as this, particularly

because it involves a third person, the law of the state with the most significant relationship to

the dispute – here Indiana – applies. See, e.g., Chrysler Corp. v. Ford Motor Co., 972 F.Supp.

1097, 1103 (E.D. Mich. 1997) (holding that the law of the state of incorporation is not entitled to

preference with respect to successor liability issues rather than under § 302; instead, the law of

the state with the greatest interest, the location of the contaminated property, should prevail over

the law of the state of incorporation). The trial court properly found that the 1967 transaction

was a mere continuation of the earlier corporate forms.

31
 Conclusion

Because we conclude that the statute of limitation has run on all of South Bend‟s tort

claims, we reverse the judgment granted to the City as respects these claims. The trial court was

correct that the ELA claim is timely, and that Cooper is the rightful corporate successor of

Studebaker. On these points, we affirm the trial court‟s order and remand for further

proceedings on the merits of the ELA claim.

Dickson, Sullivan, Boehm, and Rucker, JJ., concur.

32