Testimony from Analysis Group Affiliate R. Glenn Hubbard Supports Favorable Judgment in Environmental Liability Case

January 10, 2025

Analysis Group was retained on behalf of British corporation Hanson Building Materials Limited (HBML, formerly known as Hanson Trust), one of the defendants in an environmental pollution liability case brought by the city of Emeryville, CA, and related entities (Emeryville). The city alleged that the defendants were liable for the cost of cleaning up groundwater contamination at an Emeryville industrial manufacturing site previously owned and operated by an entity – Smith Corona Marchant (SCM) – that was later acquired by HBML. Through a series of mergers and demergers, the environmental liability for the Emeryville site allegedly became the responsibility of Millenium Capital, which became a publicly traded company separate from and independent of HBML in 1996. The contaminated site was later acquired by Emeryville in 1999.

An Analysis Group team led by Managing Principal R. Jeffrey Malinak and Vice Presidents Federico Temerlin and Yuan Tian supported academic affiliate R. Glenn Hubbard, who submitted several expert reports and testified at deposition and trial to address corporate governance and economic issues related to the plaintiffs’ arguments in the case. Specifically, Professor Hubbard assessed the management and operation of the HBML parent company and its relationship with its US subsidiaries, and also analyzed the degree to which HBML’s subsidiaries had adequate capital to cover existing liabilities. Professor Hubbard’s analysis was relevant to Emeryville’s alter ego or successor liability theory, based on its allegations that HBML engaged in asset stripping by assigning the Emeryville environmental liabilities to an undercapitalized entity.

A judge in the US District Court for the Northern District of California ruled in favor of HBML, holding that Emeryville lacked jurisdiction to bring the suit. The judge found that Emeryville could not establish personal jurisdiction through alter ego or successor liability theory and failed to show that it could pierce the corporate veil of Hanson Trust. In his subsequent discussion of the parties’ arguments, he relied upon Professor Hubbard’s testimony both in his determination that HBML was a separate corporate entity from its US subsidiary (and, accordingly, not responsible for its liabilities) and in his rejection of the plaintiffs’ argument that HBML engaged in asset stripping. The judge found that the HBML subsidiaries in the US were adequately capitalized, a determination supported by Professor Hubbard’s opinion. “I am persuaded by the testimony of HBML’s corporate expert, Hubbard. …His analysis ‘ruled out’ that asset stripping occurred because the successors to SCM always had more than enough assets to satisfy the known amounts of liabilities.”