Cengage Advantage Books: Foundations of the Legal Environment of Business 3rd Edition by Marianne Jennings

تمرين 16

S. v. Bestfoods, Inc. 524 U.S. 51 (1998)
Lifting the Veil Is Best for Cleanup, but Not for Shareholders
Facts
In 1957, Ott Chemical Co. manufactured chemicals at its plant near Muskegon, Michigan, and both intentionally and unintentionally dumped hazardous substances in the soil and groundwater near the plant. Ott sold the plant to CPC International, Inc.
In 1965, CPC incorporated a wholly owned subsidiary (Ott II) to buy Ott's assets. Ott II then continued both the chemical production and dumping. Ott II's officers and directors had positions and duties at both CPC and Ott.
In 1972, CPC (now Bestfoods) sold Ott II to Story Chemical, which operated the plant until its bankruptcy in 1977. Aerojet-General Corp. bought the plant from the bankruptcy trustee and manufactured chemicals there until 1986.
In 1989, the EPA filed suit to recover the costs of cleanup on the plant site and named CPC, Aerojet, and the officers of the now defunct Ott and Ott II.
The District Court held both CPC and Aerojet liable. After a divided panel of the Court of Appeals for the Sixth Circuit reversed in part, the court granted a rehearing en banc and vacated the panel decision. This time, seven judges to six, the court again reversed the District Court in part. Bestfoods appealed (Ott settled prior to the appeal).
Judicial Opinion
SOUTER, Justice
The issue before us, under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), is whether a parent corporation that actively participated in, and exercised control over, the operations of a subsidiary may, without more, be held liable as an operator of a polluting facility owned or operated by the subsidiary. We answer no, unless the corporate veil may be pierced. But a corporate 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 an operator of the facility.
It is a general principle of corporate law deeply "ingrained in our economic and legal systems" that a parent corporation (so-called because of control through ownership of another corporation's stock) is not liable for the acts of its subsidiary..
But there is an equally fundamental principle of corporate law, applicable to the parent-subsidiary relationship as well as generally, that the corporate veil may be pierced and the shareholder held liable for the corporation's conduct when, inter alia, the corporate form would otherwise be misused to accomplish certain wrongful purposes, most notably fraud, on the shareholder's behalf.
Nothing in CERCLA purports to rewrite this wellsettled rule, either. If a subsidiary that operates, but does not own, a facility is so pervasively controlled by its parent for a sufficiently improper purpose to warrant veil piercing, the parent may be held derivatively liable for the subsidiary's acts as an operator.
The fact that a corporate subsidiary happens to own a polluting facility operated by its parent does nothing, then, to displace the rule that the parent "corporation is [itself] responsible for the wrongs committed by its agents in the course of its business." It is this direct liability that is properly seen as being at issue here.
Under the plain language of the statute, any person who operates a polluting facility is directly liable for the costs of cleaning up the pollution. This is so regardless of whether that person is the facility's owner, the owner's parent corporation or business partner, or even a saboteur who sneaks into the facility at night to discharge its poisons out of malice. If any such act of operating a corporate subsidiary's facility is done on behalf of a parent corporation, the existence of the parent-subsidiary relationship under state corporate law is simply irrelevant to the issue of direct liability.
With this understanding, we are satisfied that the Court of Appeals correctly rejected the District Court's analysis of direct liability. But we also think that the appeals court erred in limiting direct liability under the statute to a parent's sole or joint venture operation, so as to eliminate any possible finding that CPC is liable as an operator on the facts of this case.
In sum, the District Court's focus on the relationship between parent and subsidiary (rather than parent and facility), combined with its automatic attribution of the actions of dual officers and directors to the corporate parent, erroneously, even if unintentionally, treated CERCLA as though it displaced or fundamentally altered common-law standards of limited liability.
There is, in fact, some evidence that CPC engaged in just this type and degree of activity at the Muskegon plant. The District Court's opinion speaks of an agent of CPC alone who played a conspicuous part in dealing with the toxic risks emanating from the operation of the plant. G.R.D. Williams worked only for CPC; he was not an employee, officer, or director of Ott, and thus, his actions were of necessity taken only on behalf of CPC.
The District Court found that "CPC became directly involved in environmental and regulatory matters through the work of.. Williams, CPC's governmental and environmental affairs director. Williams.. became heavily involved in environmental issues at Ott II." He "actively participated in and exerted control over a variety of Ott II environmental matters," and he "issued directives regarding Ott II's responses to regulatory inquiries."
We think that these findings are enough to raise an issue of CPC's operation of the facility through Williams's actions, though we would draw no ultimate conclusion from these findings at this point. Prudence thus counsels us to remand [to determine] who might be said to have had a part in operating the Muskegon facility.
The judgment of the Court of Appeals for the Sixth Circuit is vacated, and the case is remanded.
Case Questions
1. Describe the corporate ownership history that surrounds the Muskegon facility.
2. Is there a special CERCLA rule for piercing the corporate veil?
3. What must be shown to hold a parent liable for the actions of the subsidiary? Is CERCLA liability determined under the same corporate veil standards as other issues?