LCCS Group v. A.N. Webber Logistics, Inc. et al

Filing 325

MEMORANDUM Opinion and Order Signed by the Honorable Amy J. St. Eve on 4/26/2018:Mailed notice(kef, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
LCCS GROUP,
Plaintiff,
v.
LENZ OIL SERVICE PEORIA, INC., et al.,
Defendants.

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Case No. 16 C 5827

MEMORANDUM OPINION AND ORDER
AMY J. ST. EVE, District Court Judge:
On June 3, 2016, Plaintiff LCCS Group brought a Complaint against numerous
Defendants, including Defendant Lenz Oil Service Peoria, Inc. (“Lenz Oil Peoria”), pursuant to
certain provisions of the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended, 42 U.S.C. § 9601 et seq. (“CERCLA”). In particular, Plaintiff alleges
that there has been a release and/or threat of release of hazardous substances from a facility
known as the Lake Calumet Cluster Site (“LCCS Site”) located in Chicago, Illinois, and that
these hazardous substances have contaminated the soil and groundwater threatening the public
health and environment.
Before the Court is Defendant Lenz Oil Peoria’s motion for summary judgment brought
pursuant to Federal Rule of Civil Procedure 56(a). In its motion, Lenz Oil Peoria argues that it is
a separate corporate entity from Lenz Oil Service Company, which is identified in the LCCS Site
Records. Plaintiff, on the other hand, asserts that Lenz Oil Peoria is the legal successor to Lenz
Oil Service Company. Because Plaintiff has presented sufficient evidence raising a triable issue

of fact that Lenz Oil Peoria is the legal successor to Lenz Oil Service Company, the Court denies
Defendant’s motion for summary judgment.
BACKGROUND
I.

Northern District of Illinois Local Rule 56.1
Defendant Lenz Oil Peoria did not follow the Northern District of Illinois Local Rules

when setting forth its own Rule 56.1 Statement of Facts and failed to respond to Plaintiff’s Local
Rule Statement of Additional Facts pursuant to the local rules. See Thornton v. M7 Aerospace
LP, 796 F.3d 757, 769 (7th Cir. 2015) (“This court has repeatedly held that the district court is
within its discretion to strictly enforce compliance with its local rules regarding summaryjudgment motions”). Because Lenz Peoria did not respond to Plaintiff’s Statement of Additional
Facts pursuant to Local Rule 56.1, Plaintiff’s statements are deemed admitted for purposes of
this summary judgment motion. See Cracco v. Vitran Exp., Inc., 559 F.3d 625, 632 (7th Cir.
2009) (“When a responding party’s statement fails to dispute the facts set forth in the moving
party’s statement in the manner dictated by the rule, those facts are deemed admitted for
purposes of the motion.”); N.D. Ill. L.R. 56.1(b)(3)(C) (“All material facts set forth in the
statement required of the moving party will be deemed to be admitted unless controverted by the
statement of the opposing party.”).
II.

Relevant Facts
In 1947, Frederick John Lenz, Sr. founded Lenz Oil Service, Inc., and Lenz Oil Service

was incorporated on November 17, 1961. (R. 315-1, Pl.’s Rule 56.1 Stmt. Add’l Facts ¶ 1.)
Until May 1979, Winston E. Lenz (“Winston”) and Frederick John Lenz, Jr. (“John”)
(collectively, the “Lenz Brothers”) were the principals of Lenz Oil Service. (Id. ¶ 3.) Also, until
May 1979, the Lenz Brothers jointly operated Lenz Oil Service for oil and solvent storage and
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treatment, as well as road surfacing, with locations in both Lemont and Peoria, Illinois. (Id. ¶ 4.)
As of May 1, 1979, Winston owned 55% of Lenz Oil Service shares and John owned 45%. (Id. ¶
5.) On May 1, 1979, various interested parties entered into an agreement under which Winston
would continue the road resurfacing business in Lemont and John would continue the oil storage
business in Peoria as a new company. (Id. ¶ 6.) Part of this corporate restructuring agreement
involved third-party, Charles William Russell, who bought out John’s shares of Lenz Oil Service
in late May 1979. (Id. ¶ 8.) On May 8, 1979, Lenz Oil Peoria was incorporated as an Illinois
corporation. (Id. ¶ 11; R. 303, Def.’s Rule 56.1 Stmt. Facts ¶ 11.) Pursuant to the Agreement for
Corporate Separation, John eventually became the 100% shareholder of Lenz Oil Peoria. (Id.
¶ 9.)
Lenz Oil Peoria was incorporated with a purpose to “[c]ollect, purchase, acquire, process
and sell waste oil and related materials; sell, use, store and apply waste oil, its by products, and
related materials, surface roads with asphalt, waste oil chips and related materials, and related
operations; and to do any and all things incident thereto including, but not limited to, the
acquisition and holding of real estate.” (Pl.’s Stmt. Add’l Facts ¶ 12) (citing Preorganization
Subscription Agreement & Lenz Oil Peoria Articles of Incorporation). As sole director of Lenz
Oil Peoria, John appointed his son, Michael Lenz, to various positions within Lenz Oil Peoria.
(Id. ¶ 13.) Before Plaintiff filed this lawsuit, Mike Lenz, as Secretary of Lenz Oil Peoria, wrote a
letter to Plaintiff’s counsel dated November 24, 2015, that states:
Lenz Oil Service Peoria, Inc. is based out of Peoria, IL. We have never done any
business with Chemical Incineration. We have never been in the solvent disposal
business. Lenz Oil Service Peoria, Inc. has never been affiliated with the Lenz
Oil company from Lemont, IL listed on the invoices.
(Def.’s Stmt. Facts ¶ 12; R. 303-1, LENZ 00010, 11/24/15 letter.)

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LCCS Site Records show that “Lenz Oil Service” in Lemont, Illinois disposed of
approximately 133,200 gallons of waste described as “solvents” starting on March 22, 1979 –
before Lenz Oil Peoria had been formed – through July 13, 1979 – approximately six weeks after
the incorporation of Lenz Oil Peoria. (Id. ¶ 15.) Lenz Oil Services filed for Chapter 7
bankruptcy on April 4, 1986. (Id. ¶ 21.)
SUMMARY JUDGMENT STANDARD
Summary judgment is appropriate “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 genuine dispute as to any material fact exists if “the evidence is such that a reasonable
jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). In determining summary judgment
motions, “facts must be viewed in the light most favorable to the nonmoving party only if there
is a ‘genuine’ dispute as to those facts.” Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167
L.Ed.2d 686 (2007). The party seeking summary judgment has the burden of establishing that
there is no genuine dispute as to any material fact. See Celotex Corp. v. Catrett, 477 U.S. 317,
323, 106 S. Ct. 2548, 91 L.Ed.2d 265 (1986). After “a properly supported motion for summary
judgment is made, the adverse party ‘must set forth specific facts showing that there is a genuine
issue for trial.’” Anderson, 477 U.S. at 255 (quotation omitted).
ANALYSIS
In its summary judgment motion, Defendant Lenz Oil Peoria maintains that it is a
separate legal entity from Lenz Oil Service, and therefore, the Court should grant its summary
judgment motion as a matter of law. Plaintiff, on the other hand, argues that it has presented

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sufficient evidence raising a triable issue of fact that Lenz Oil Peoria is liable under CERCLA as
a legal successor to Lenz Oil Service.
“CERCLA is strict liability statute” and “[l]iability is imposed when a party is found to
have a statutorily defined ‘connection’ with the facility; that connection makes the party
responsible regardless of causation.” United States v. Capital Tax Corp., 545 F.3d 525, 530 (7th
Cir. 2008). As the Court explained in its October 11, 2016 ruling denying Defendant S-Tech
Industries’ Rule 12(b)(6) motion to dismiss, the Seventh Circuit has held that Congress intended
that successor liability applies in the context of CERCLA, and that the “general rule is that an
asset purchaser [] does not acquire the liabilities of the seller.” N. Shore Gas Co. v. Salomon,
Inc., 152 F.3d 642, 651 (7th Cir. 1998) (applying federal common law), overruled in part on
other grounds, Envision Healthcare, Inc. v. PrefferredOne Ins. Co., 604 F.3d 983 (7th Cir.
2010); see also Dvorak v. Harley-Davidson Motor Co. Grp., LLC, No. 14 C 10045, 2016 WL
74669, at *3-4 (N.D. Ill. Jan. 7, 2016). Indeed, the “successorship doctrine under federal
common law has developed extensively over the years in an effort to protect federal rights and
effectuate federal policies.” Tsareff v. ManWeb Servs., Inc., 794 F.3d 841, 845 (7th Cir. 2015).
There are four exceptions to the general rule of successor liability: “(1) the purchaser expressly
or impliedly agrees to assume the liabilities; (2) the transaction is a de facto merger or
consolidation; (3) the purchaser is a ‘mere continuation’ of the seller; or (4) the transaction is an
effort to fraudulently escape liability.” N. Shore Gas, 152 F.3d at 651 (citing Vernon v. Schuster,
179 Ill. 2d 338, 345 (Ill. 1997)). The Seventh Circuit has also applied the “substantial
continuity” exception to successor liability when a violation of federal rights is involved. See
Tsareff, 794 F.3d at 845; E.E.O.C. v. G-K-G, Inc., 39 F.3d 740, 748 (7th Cir. 1994).

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Construing the evidence and all reasonable inferences in Plaintiff’s favor – as the Court is
required to do at this procedural posture – Plaintiff has provided sufficient evidence raising a
genuine issue of material fact for trial that Lenz Oil Peoria is a “mere continuation” of Lenz Oil
Service Company. The “mere continuation exception allows recovery when the purchasing
corporation is substantially the same as the selling corporation.” N. Shore Gas, 152 F.3d at 654.
“In other words, the purchasing corporation maintains the same or similar management and
ownership, but merely ‘wears different clothes.’” Brandon v. Anesthesia & Pain Mgmt. Assocs.,
Ltd., 419 F.3d 594, 599 (7th Cir. 2005) (quoting Vernon, 179 Ill. 3d at 346). The focus of this
inquiry is “whether the purchaser continues the corporate entity of the seller, not so much on
whether the purchaser continues the business operations of the seller.” N. Shore Gas, 152 F.3d at
654 (emphasis in original); see also Vernon, 179 Ill. 2d at 346 (“[I]f a corporation goes through a
mere change in form without a significant change in substance, it should not be allowed to
escape liability.”) (citation omitted). Courts have identified factors that suggest the mere
continuation exception applies, including “an identity of officers, directors, and stock between
the selling and purchasing corporations.” N. Shore Gas, 152 F.3d at 654 (citation omitted).
Here, Plaintiff has presented evidence that prior to May 1979, Lenz Oil Service operated
in both Lemont and Peoria, Illinois and was owned by Winston and John Lenz. Before the
corporate restructuring, Winston held 55% Lenz Oil Service shares and John owned 45%. In
early May 1979, pursuant to a corporate restructuring agreement, John took over the oil
operations in Peoria and Winston continued the road resurfacing operations in Lemont. In doing
so, a third-party, Charles William Russell, bought out John’s shares of Lenz Oil Service.
Thereafter, John ultimately became the 100% shareholder of Lenz Oil Peoria. Because John
transferred his shares of Lenz Oil Service to Russell on or near May 29, 1979, there is a
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reasonable inference that John re
etained votin rights in L
ng
Lenz Oil Serv
rvices until th especia
hen,
ally
because the relevant Sales Agree
t
ement stated that Russell could not v as a shar
l
vote
reholder unt
til
payment of the purch
hase price. (Pl.’s Stmt. Add’l Facts ¶ 10.)
(
A
Although Len Oil Peoria asserts that it had nothi to do wi the dispos of
A
nz
a
t
ing
ith
sal
approxim
mately 133, 2000 gallons of waste at the LCCS S
2
s
Site, the disp
posal occurre from Mar
ed
rch
22, 1979 until July 13, 1979, whi is during the time pe
ich
g
eriod that Len Oil Servi
nz
ices restructu
ured
its busine forming Lenz Oil Peoria. Eviden in the re
ess
nce
ecord – view in Plainti
wed
iff’s favor –
shows that Lenz Oil Peoria continued the bus
siness opera
ations of that Lenz Oil Se
t
ervices and t
that
John ran Lenz Oil Pe
eoria at the same time he was a share
e
eholder at Le Oil Serv
enz
vices for part of
t
the releva time peri
ant
iod. Under these facts, Plaintiff has established a common i
t
P
identity of
ownershi of Lenz Oil Peoria and Lenz Oil Services und the mere continuation doctrine. T
ip
O
d
S
der
n
The
Court the
erefore denie Lenz Oil Peoria’s mot
es
P
tion for sum
mmary judgm
ment.
CON
NCLUSION
N
For these reas
sons, the Court denies Defendant’s R
D
Rule 56(a) su
ummary jud
dgment motio
on.
Dated: April 26, 2018
A
ENTERED
D

__________
__________
___________
__
AMY J. ST EVE
T.
United Stat District Court Judg
tes
ge

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