Nearly four decades after the Carousel neighborhood in Carson had been built, residents learned that petroleum waste had saturated the soil around their homes.

Now, in the midst of a $140 million cleanup of the 285-home development, current and former homeowners are looking beyond Shell Oil Co., the source of the contamination, and moving to have Dole Food Co. pay part of the bill for the cleanup.

From Dole’s perspective, the claims are purely bananas.

Shell, which operated an oil tank farm on the 44-acre tract since the 1920s, sold the land to developer Barclay Hollander Corp. in the mid-1960s. Dole’s predecessor corporation acquired Barclay in 1969, just as the homebuilder was wrapping up construction of the last few Carousel homes.

“Dole Food acquired as a subsidiary corporation a quality homebuilder,” said Andrea Neuman, partner in the New York office of law firm Gibson Dunn & Crutcher representing Dole, the Westlake Village agribusiness and real estate giant. “It certainly had no way to assess a potential liability for something nobody considered to be an issue at the time.”

Los Angeles Regional Water Quality Control Board officials last month recommended Barclay be added to the list of parties responsible for the cleanup. The change is pending approval from the board’s chief deputy executive, so it’s possible Dole could escape further entanglement.

While Dole is arguing that it could not have known at the time about its then-new subsidiary’s exposure to liability, that kind of due diligence has become commonplace today.

Joel David Deutsch, partner in the real estate practice at Jeffer Mangels Butler & Mitchell, said he always stresses to his clients the importance of completing a preliminary environmental investigation before purchasing any piece of land for development. Still, that sometimes isn’t enough.

“Nobody has perfect information, so you have to base it on probabilities,” he said. “If the risks are too high, the buyer will just walk away and the seller will have to start looking for a new potential buyer. You do see this a lot in Southern California because we used to have a fairly heavy manufacturing base.”

These days, said Christine Scheuneman, a partner in the business litigation practice in the downtown L.A. offices of Pillsbury Winthrop Shaw Pittman, it’s common for businesses to assume the liabilities of companies they acquire – and to look for ways to shield themselves.

“The parent-subsidiary relationship is interesting,” she said. “It all depends on how much control the parent has over the subsidiary. If it’s kept truly separate, and it’s going to have its own insurance program, it’s going to be able to protect its assets from problems that way.”

Costly cleanup

The Carousel neighborhood, nestled along the southernmost edge of Carson, at first glance doesn’t appear to be contaminated with possibly cancer-causing chemicals. But the buried petroleum was rediscovered in 2008 when environmental investigators were examining nearby property.

The following year, the water board deemed Shell the responsible party for contaminating the site. The oil company and water board have both completed extensive tests on the land since the initial discovery, confirming high levels of benzene, methane and other chemicals.

Shortly thereafter, nearly 1,500 current and former Carousel homeowners teamed up with personal injury attorney Thomas Girardi, who filed a complaint against Shell and Dole in Los Angeles Superior Court in 2009.

Shell late last year proposed a $90 million settlement with residents and is working on a remedial action plan to clean the site, estimated to cost $140 million, according to court documents. If Dole eventually were forced to participate in the cleanup, the company presumably would have to pay some of the $140 million.

As part of the agreement, homeowners are prohibited from discussing the case publicly and were instructed to remove signs posted in yards and at the Carousel entrance that pertain to Shell and the contamination.

One resident, who declined to provide her name citing the agreement, said her community has been through enough and will seek compensation beyond the $90 million.

“It’s not over,” she said. “We still have Dole to deal with.”

Even though Dole hasn’t budged thus far, Girardi said he plans to drag the battle out until it reaches a jury trial, now slated for August.

“Dole is totally responsible for the activities of the company they totally acquired,” he said, pointing out that L.A. billionaire David Murdock owns both entities.

Dole executives declined to comment on the dispute, but Neuman, Dole’s attorney, said the company and its subsidiary maintain they’re not responsible.

“You’ve got a problem of an unjust attempt to impose retroactive liability,” she said. “You’re not going to sue a doctor for not doing a procedure in the 1960s that wasn’t available until 2010.”

Scheuneman, the business litigator who reviewed the case, said it can be incredibly challenging to determine levels of liability on transactions completed so long ago. Scuffles over that very issue have become increasingly popular as of late.

“In the last five years or so, there have been so many acquisitions and dissolutions and bankruptcies,” she said. “In construction, companies come and go all the time.”