UNITED STATES v BESTFOODS ET AL No 97 454 SUPREME COURT OF THE UNITED STATES 524 U S 51 118 S Ct 1876 141 L Ed 2d 43 1998 U S LEXIS 3733 66 U S L W 4439 46 ERC BNA 1673 157 A L R Fed 735 98 Cal Daily Op Service 4317 98 Daily Journal DAR 5957 28 ELR 21225 1998 Colo J C A R 2937 11 Fla L Weekly Fed S 610 March 24 1998 Argued June 8 1998 Decided PRIOR HISTORY ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT DISPOSITION 113 F 3d 572 vacated and remanded DECISION Parent corporation held 1 not subject to derivative liability for environmental cleanup costs as to subsidiary s operations unless corporate veil is pierced but 2 subject to direct liability for such costs as to parent s own operations SUMMARY Under 107 a 2 of the Comprehensive Environmental Response Compensation and Liability Act of 1980 CERCLA 42 USCS 9607 a 2 the United States may bring suit to recover the costs of cleaning up hazardous waste at a facility against a party that at the time of disposal of the waste owned or operated the facility The United States brought under 107 a 2 a suit against among others a parent corporation to recover the costs of cleaning up industrial waste generated at its subsidiary s chemical plant The United States District Court for the Western District of Michigan concluded at least in part on the basis of findings that the parent had selected the subsidiary s board of directors and had populated the subsidiary s executive ranks with officials of the parent and that a particular official of the parent had played a significant role in shaping the subsidiary s environmental compliance policy that the parent was directly liable under 107 a 2 as an operator of the facility 777 F Supp 549 After a panel of the United States Court of Appeals for the Sixth Circuit reversed in part the District Court judgment 59 F3d 584 the Court of Appeals granted rehearing en banc and vacated the panel decision 67 F3d 586 The Court of Appeals again reversing in part the District Court judgment expressed the view that although a parent conceivably might independently operate a facility in the stead of its subsidiary or as a sort of joint venturer operate the facility alongside the subsidiary 1 liability based on the parent s control of the subsidiary would occur only when the requirements necessary to pierce the corporate veil under state law were met and 2 such requirements were not met in this case 113 F 3d 572 On certiorari the United States Supreme Court vacated the judgment of the Court of Appeals and remanded the case with instructions to return it to the District Court for further proceedings In an opinion by Souter J expressing the unanimous view of the court it was held that under 107 a 2 1 a parent corporation that actively participated in and exercised control over the operations of a subsidiary may not without more be held derivatively liable as an operator of a polluting facility owned or operated by the subsidiary unless the corporate veil may be pierced as nothing in CERCLA 42 USCS 9601 et seq purports to reject the general principles of corporate law that a a parent corporation is not liable for the acts of its subsidiaries and b the corporate veil may be pierced when the corporate form would otherwise be misused to accomplish certain wrongful purposes and 2 a parent that actively participated in and exercised control over the operations of the facility itself may be held directly liable in its own right as operator of the facility as CERCLA does not bar a parent from direct liability for its own actions in operating a facility owned by its subsidiary LAWYERS EDITION HEADNOTES LEdHN1 CORPORATIONS 91 Environmental Law 6 Statutes 191 CERCLA cleanup costs facility owned or operated by corporate subsidiary parent s derivative liability Headnote 1A 1B 1C Under 107 a 2 of the Comprehensive Environmental Response Compensation and Liability Act of 1980 CERCLA 42 USCS 9607 a 2 which authorizes the United States to bring suit to recover the costs of cleaning up hazardous waste at a facility against a party that at the time of disposal of the waste owned or operated the facility a parent corporation that actively participated in and exercised control over the operations of a subsidiary may not without more be held derivatively liable for cleanup costs as an operator of a polluting facility owned or operated by the subsidiary unless the corporate veil may be pierced because 1 nothing in CERCLA 42 USCS 9601 et seq purports to reject the general principles of corporate law that a a parent corporation is not liable for the acts of its subsidiary which the parent controls through ownership of the subsidiary s stock as i the exercise of the control which stock ownership gives to the stockholders which control includes the election of directors the making of bylaws and the doing of all other acts incident to the legal status of stockholders will not create liability beyond the assets of the subsidiary and ii duplication of some or all of the directors or executive officers will not be fatal or b the corporate veil may be pierced and a stockholder such as a corporation s parent held liable for the corporation s conduct when among other things the corporate form would otherwise be misused to accomplish certain wrongful purposes most notably fraud on the stockholder s behalf and 2 the failure of CERCLA to speak to a matter as fundamental as the liability implications of corporate ownership demands application of the rule that in order to abrogate a common law principle a statute must speak directly to the question addressed by the common law LEdHN2 CORPORATIONS 91 Environmental Law 6 CERCLA cleanup costs corporate subsidiary s facility parent as operator direct liability Headnote 2A 2B Under 107 a 2 of the Comprehensive Environmental Response Compensation and Liability Act of 1980 CERCLA 42 USCS 9607 a 2 which authorizes the United States to bring suit to recover the costs of cleaning up hazardous waste at a facility against a party that at the time of disposal of the waste owned or operated the facility a parent corporation that actively participated in and exercised control over the operations of the facility itself may be held directly liable for cleanup costs in its own right as an operator of the facility because 1 liability under CERCLA 42 USCS 9601 et seq may turn on operation as well as ownership 2 nothing in the terms of CERCLA the operator provision of which is concerned
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