between the parties,” Anderson v. Liberty Lobby, Inc., 477
U.S. 242, 247 (1986), or by “some metaphysical doubt as to the
material facts.” Matsushita Electric Industrial Company v. Zenith
Radio Corp., 475 U.S. 574, 586 (1986).
DISCUSSION
Mestek’s motion asserts that it may not, as a matter of law,
be held liable under either Plaintiffs’ federal CERCLA and RCRA
claims or Plaintiffs’ pendent common law claims because of its
parent-subsidiary relationship with Lockformer/Met-Coil. Mestek’s
potential liability under federal and common law theories will be
analyzed separately and taken in turn.
Parent Corporation Liability Under CERCLA and RCRA
As an initial matter, the statutory definition of “owner” and
“operator” are the same under RCRA and CERCLA, and the standards
for owner and operator liability under the two statutes are
identical. See Tanglewood East Homeowners v. Charles-Thomas, Inc.,
849 F.2d 1568, 1574 (5th Cir. 1988). The following analysis of
whether Mestek may be liable as an “owner” or “operator” of the
Lisle facility applies equally to Plaintiffs CERCLA and RCRA
claims.
Parent corporation liability under CERCLA may be predicated on
a finding that the parent is either “owner” or “operator” of the
offending facility as those terms are used in CERCLA. United

States v. Kayser-Roth Corp., 272 F.3d 89, 92 (1st Cir. 2001).


charged with derivative CERCLA liability as an “owner” of a
facility only when the conditions for piercing the corporate veil
have been met. Id. at 63-64.

The Seventh Circuit has addressed veil piercing under CERCLA,
but has not reached the precise issue here of derivative “owner”
liability in the parent-subsidiary context. See Browning-Ferris
Industries of Illinois, Inc. v. Richard Ter Maat, 195 F.3d 953
959-61 (7th Cir. 1999) (finding insufficient facts to pierce
corporate veil and hold shareholder personally liable under
CERCLA). The question of whether federal common law or state law
governs the determination to pierce the corporate veil for CERCLA
liability has likewise been left open by both the United States
Supreme Court and the Seventh Circuit. Id. at 960. There is,
however, no significant difference between Delaware and federal
common law on the application of “alter ego” analysis and piercing
the corporate veil. See Bestfoods, 524 U.S. at 64 n.9; Pearson v.
Component Technology Corp., 247 F.3d 471, 485 n.2 (3rd Cir. 2001).

Among the factors looked at under both Delaware and federal
common law are: (1) inadequate capitalization of the subsidiary;
(2) action in the interest of the parent rather than the
subsidiary; (3) failure to observe corporate formalities; (4)
payment of dividends. (4) non-functioning of officers and directors
(5) absence of corporate records. Compare Harper v. Delaware

Valley Broadcaster, Inc., 743 F. Supp. 1076, 1085 (D. Del. 1990),


immediate

and substantial actions to manage and direct

the

operations relating to the TCE leakage at the Lisle Lockformer

facility.

Specifically, Plaintiffs point to deposition testimony

and exhibits indicating that:

1)

Within ten days of Mestek’s purchase of Met-
Coil/Lockformer, Lockformer’s environmental
consultant was directed to stop sending
invoices to Lockformer and begin forwarding
all of its TCE related invoices directly to
Mestek for payment.

Mestek thereafter made the decision to fire
Lockformer’s environmental consultant, Carlson
Environmental. Ronald St. John of Clayton
Environmental was picked by Mestek’s legal
department and hired as the new environmental
consultant for Lockformer’s TCE problem.
Mestek retained St. John only after his
meeting with Reed and Mestek President Dewey
at Mestek’s headquarters in Massachusetts.

At his deposition, Lockformer/Met~Coils
President James Heitt (“Heitt”), did not now
who hired Clayton Environmental but claimed in
his deposition that he had final authority on
all environmental issues at the Lisle
facility.

Mestek President Dewey “continually” advised
Heitt on the Lisle facility TCE issue, despite
having no official operational role at
Lockformer.

Mestek employee Richard Caldwell (“Caldwell”),
worked out of the Lisle facility on Mestek’s
behalf, reviewing all vendor invoices relating
to TCE contamination before forwarding such
bills to Mestek for payments. Caldwell also
provided Reed and Dewey of Mestek with regular
reports on the TCE situation in Lisle. In
stark contrast, Lockformer/Met~-Coil President
Heitt and Lockformer Plant Manager Svehla both
stated in their depositions that they had “no
idea” regarding Caldwell’s position at the

~6-


Plaintiffs contend that Mestek is both operator and owner of the

Lisle facility. Mestek contends that it is neither. The analysis

of whether Mestek is an owner or operator of the Lisle facility for

purposes of CERCLA liability is governed by the Supreme Court’s

decision in United States v. Bestfoods, 524 U.S. 51 (1998).
Operator Liability

A parent corporation’s liability under CERCLA’s “operator”
provision is not governed by the rules of corporate veil piercing
but is premised instead on the idea of direct liability for one’s
own actions. Id. at 65. Under Bestfoods:

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 the state
corporate law is simply irrelevant to the
issue of direct liability. . . . So, under
CERCLA, an operator is simply someone who
directs the workings of, manages, or conducts
the affairs of a facility. To sharpen the
definition for purposes of CERCLA’s concern
with environmental contamination, an operator
must manage, direct, or conduct operations
specifically related to pollution, that is,
operations having to do with the leakage or
disposal of hazardous waste, or decisions
about compliance with environmental matters.
Id. at 66-67 (emphasis added).

Applying this standard and drawing all reasonable inferences
in Plaintiffs’ favor, Plaintiffs’ evidence on this issue is clearly
sufficient to create a genuine issue of material fact so as to
prevent summary judgment in Mestek’s favor. The record before the

Court indicates that, after acquiring Lockformer, Mestek took

-5-


nowhere in its briefs supporting its motion does Mestek point to
specific testimony or examples of Heitt or other Met-Coil employees
mentioned in his deposition actually exercising final authority
over TCE-related issues at the Lisle facility. Plaintiffs have met
their burden of creating a genuine issue of material fact on the
issue of Mestek’s direct liability as an “operator” under CERCLA
and RCRA. See United States v. Kayser-Roth Corp., 272 F.3d 89, 92-
93 (lst Cir. 2001); Geraghty & Miller v. Conoco, Inc., 234 F.3d
917, 928-929 (Sth Cir. 2000), cert. denied, 121 S.Ct. 2592
(2001) (reversing trial court’s entry of summary judgment that
environmental consultant was not a CERCLA operator and finding that
disputed material facts regarding control of the site precluded
summary judgment).
Owner Liability

Plaintiffs must clear a higher hurdle to hold a parent
corporation liable under CERCLA for contamination occurring at a
facility ostensibly under the control of its subsidiary. The
Supreme Court has noted that, in enacting CERCLA, Congress did not
intend to abrogate the fundamental corporate law principle that a
parent corporation is not generally liable for the acts of its
subsidiaries. Bestfoods, 524 U.S. at 60. However, this does not
prevent piercing of the corporate veil when the formalities of
corporate structure would be misused to accomplish wrongful

purposes. Id. at 62. Accordingly, a parent corporation may be


Minute Order Foran (06/97)

United States District Court, Northern District of Illinois

ned Judge i Sitting Judge if Oth
istrate Judge Harry D. Leinenweber than Assigned Sndse
CASE NUMBER 00 C 7164 DATE 4/29/2002
CASE Theresa LeClercq, et al vs. The Lockformer Company, et al
TITLE

MOTION: of the motion being presented.]

[In the following box (a) indicate the party filing the motion, e.g,, plaintiff, defendant, 3rd party plaintiff, and (b) state briefly the nature

DOCKET ENTRY:

() QO Filed motion of [ use listing in “Motion” box above.]

(2) a Brief in support of motion due

(3) i) Answer brief to motion due, . Reply to answer brief due

(4) im Ruling/Hearingon_ssetfor at

(5) im Status hearing[held/continued to] [set for/re-set for] on setfor at

(6) oO Pretrial conference[held/continued to] [set for/re-set for]on set ffor_— at
(7) oO Trial[set for/re-set for]on at.

(8) im} [Bench/Jury trial] [Hearing] held/continued to___at

(9) a This case is dismissed [with/without] prejudice and without costs[by/agreement/pursuant to]

GOFRCP4¢n) (General Rule 21 CFRCP41(a\(1) 9 FRCP41(a)(2).

Motion for Summary Judgment is DENIED.

dl) [For further detail see order attached to the original minute order.]

(10) I [Other docket entry] ENTER MEMORANDUM OPINION AND ORDER: Defendant Mestek’s

No notices required. advised in open court

| No notices required i
anumber of notices:

Document
Number

MAY 6 2002

date docketed

Notices mailed by judg

KK Notified counsel by telephone.

Docketing to mail notices.

Q5S

Mail AO 450 ryena | : osreb Asbo
courtroom LAr Bead 4 date mailed notice
Wap deputy’s
initials

\*Date/time received in
central Clerk's Office smaiting depo inials



Mestek. Such facts, and reasonable inferences from those facts,
include: (1) Met-Coil has no checking account or emergency cash
fund of its own; (2) Met-Coil must have any of its non-inventory
expenditures in excess of $1,000 approved by Mestek CEO Reed; (3)
Met-Coil’s payroll and all accounts payable are handled by Mestek;
(4) Mestek collects payments from Met-Coil’s customers; (5) Met-
Coil no longer prepares its own financial statements, Mestek does
this; (6) Met-Coil’s Board of Directors has not met since June 2000
and Met-Coil has not paid dividends since June 2000; (7) other than
approving conversion to Mestek’s 401(k) plan, Met-Coil’s Board of
Directors has taken no substantive action since June 2000 and has
never discussed or acted upon the TCE issue; and, most incredibly,
(8) Met-Coil President and Board Member Heitt, at his deposition,
stated that he does not know how Met-Coil company officers are
chosen and suggests that “some other board of directors” might
decide that.

Mestek points to case law holding that many of these facts,
taken individually, are an insufficient basis for piercing the
corporate veil. It is correct in so far as, had Plaintiffs only
established any one of these facts in isolation, summary judgment
in Mestek’s favor would be appropriate. However, when considered
together and drawing all reasonable inferences in the Plaintiffs
favor, Plaintiffs have adequately met their burden of putting

forward enough facts to create a genuine issue for trial. Mestek

-1l1-


with Pearson, 247 F.3d at 485 (applying federal common law). While
no single factor standing alone will justify disregarding the
corporate entity, some combination of these factors, along with a
general element of fraud, injustice or unfairness must be present.
Harper, 743 F. Supp. at 1085 (quoting Harco Nat’l Ins. Co. v. Green
Farms, Inc., 1989 WL 110537, at *10 (Del. Ch. Sept. 19, 1989)
Finally, there is a general sense that federal courts are more
likely to pierce the corporate veil in order to effectuate federal
policy, lest state corporate laws be permitted to frustrate federal
objectives. See Bestfoods, 524 U.S. at 64 n.9; Pearson, 247 F.3d
at 485 n.2.

Mestek claims that Plaintiff’s “have not alleged, nor can they
allege” any facts sufficient to justify piercing of the corporate
veil under the alter ego test. Mestek also claims that an Illinois
court has already found that Mestek is not liable for similarly
alleged tortious conduct. Mestek is wrong on both counts. First,
the Illinois court decision in question simply found that the
plaintiffs failed to allege facts sufficient to justify piercing
Met-Coil’s corporate veil on a motion to dismiss. Second,
Plaintiffs present numerous facts in the record sufficient to
create a genuine issue of material fact on this question.

Plaintiffs point to deposition testimony and exhibits
indicating that Met-Coil/Lockformer ceased to have a meaningful,

separate corporate existence following the June 2000 merger with

- 10 -


facility or to whom he reports, despite
Heitt’s statement in his deposition that he
and Svehla were part of a small team that
manages environmental matters at the
Lockformer facility.

6) Although not named as a party to the Illinois
Attorney General’s lawsuit seeking to enjoin
further TCE contamination at the Lisle

facility, Mestek approved and directed
Lockformer/Met-Coil to enter into the Agreed
Order.

7) Mestek manages Lockformer/Met-Coil’s

relationship with its TCE contamination
insurers, even thought Mestek is not an
insured under those policies.

8) Mestek attorney McClure was present at the
meeting with the first family to come forward
with evidence of TCE contamination. The well
water test results from this family’s well
were immediately sent for review to McClure,
seeking advice. lLockformer’s settlement with
this family could not go forward until it was
approved by Mestek Chairman and CEO Reed.

9) Before the environmental consultant forwarded
its Interim Site Investigation report to the
IEPA for approval, it first sought

authorization from Mestek.
10) Lockformer is nominally a division of Met-
Coil. However, since Mestek’s purchase of
both companies in June 2000, Met-Coil’s Board
of Directors has never met and never had any
discussions or taken any action whatsoever
regarding the TCE contamination in Lisle.
To counter this evidence, Mestek points to the affidavits of
Mestek’s CEO Reed and Met-Coil’s President Heitt. Heitt contends
that he, along with other Met-Coil employees, make all

environmental decisions at Lockformer. Beyond this bare assertion,


soil, groundwater, and domestic water supply in the area.
Plaintiffs further allege that Lockformer has known for many years
of this threat to Plaintiffs and has intentionally and knowingly
failed to notify Plaintiffs of these threats. Plaintiffs allege
that Lockformer’s negligent acts and omissions include improper
handling, storage, use, disposal, investigation and cleanup of the
hazardous substances, and improper maintenance and operation of
equipment using TCE and other hazardous substances.

MOTION FOR SUMMARY JUDGMENT

Standard

Summary judgment is appropriate where “the pleadings,
depositions, answers to interrogatories, and admissions on file
together with affidavits, if any, show that there is no genuine
issue as to any material fact and that the moving party is entitled
to judgment as a matter of law.” FeEp.R.Civ.P. 56(c). The court
must “review the record in the light most favorable to the
nonmoving party and draw all reasonable inferences in that party’s
favor.” Vanasco v. National-Louis University, 137 F.3d 962, 964
(7th Cir. 1998). Nevertheless, the party who bears the burden of
proof on an issue may not rest on the pleadings, but must
affirmatively demonstrate that there is a genuine issue of material
fact that requires trial. Warsco v. Preferred Technical Group, 258
F.3d 557, 563 (7th Cir. 2001). A genuine issue of material fact is

not shown by the mere existence of “some alleged factual dispute


misconduct (Count IX). Before the Court is Defendant Mestek’s
motion for summary judgment pursuant to FEep.R.Civ.P. 56.
BACKGROUND

Lockformer existed as an Illinois corporation from about
December 6, 1946 until October 2000 when it was merged with, and
became a division of, Met-Coil. Since about June 2000, Mestek has
owned or operated Lockformer and Met-Coil. Lockformer owns and
operates a manufacturing facility located at 711 Ogden Avenue in
Lisle, Illinois, and Met-Coil owns property directly adjacent to
the Lockformer property. Plaintiffs own and reside on property
located directly south of the Lockformer and Met-Coil properties.
Plaintiffs rely solely on private wells as their source of water
for their homes.

At all relevant times, Lockformer maintained a metal
fabrication business at the Lisle facility, and as part of that
business Lockformer maintained a metal degreasing operation.
Beginning in 1968 and continuing through at least 1997,
Lockformer’s degreaser utilized chlorinated solvents, including
trichloroethylene (“TCE”). Plaintiffs allege that the TCE was
stored in a rooftop storage tank and that when the rooftop tank was
filled, solvents, including TCE, were spilled directly onto the
ground. Plaintiffs allege that the hazardous substances released
from the Lockformer property have migrated and continue to migrate

in liquid and vapor form toward Plaintiffs’ homes contaminating the


Bog

a a “hy A 79?
IN THE UNITED STATES DISTRICT COURT 5 f ££ EB O~ 2002
FOR THE NORTHERN DISTRICT OF ILLINOIS D
EASTERN DIVISION ‘Ap 20
THERESA LeCLERCQ, AL LeCLERCQ, Use dD Leing
individually, and on behalf of Strict Coup te
all persons similarly
situated, Case No. 00 C 7164
Plaintiffs,

Hon. Harry D. Leinenweber
v.

THE LOCKFORMER COMPANY, a
division of MET-COIL SYSTEMS
CORPORATION, a Delaware
corporation, MESTEK, INC., a
Pennsylvania corporation, and
HONEYWELL INTERNATIONAL, INC.,
a Delaware corporation,

Defendants.

MEMORANDUM OPINION AND ORDER

Plaintiffs Teresa and Al LeClercq, individually and on behalf
of a class of similarly situated persons (the “Plaintiffs”), bring
this class action against Defendants, The Lockformer Co.
{(“Lockformer”), Met-Coil Systems Corp. (“Met-Coil”), Mestek, Inc.
(“Mestek”) (collectively, “the Lockformer Defendants”), seeking
entitlement to cost recovery pursuant to Section 107(a) of the
Comprehensive Environmental Response, Compensation and Liability
Act (“CERCLA”), 42 U.S.C. § 9607{(a) (Count I and X), the Resource
Conservation and Recovery Act (“RCRA”), 42 U.S.C. § 6972(a) (Counts
II, III, IV and V), and alleging negligence (Count VI), private

nuisance (Count VII), trespass (Count VIII), and willful and wanton

A5E


does dispute vigorously many of the facts and inferences put forth
by Plaintiffs, but this only adds greater weight to the conclusion
that there are genuine issues here requiring resolution at trial.
Parent Corporation Liability for Common Law Claims

The Court will not enter into a choice of law analysis of
which law applies to the alter ego question. The differences
between the Delaware and Illinois alter ego analysis are
insignificant, and the outcome would be the same under either
state’s law. See Retzler v. Pratt & Whitney Co., 309 Ill.App.3d
906, 917, 723 N.E.2d 345, 354 (1st Dist. 1999); Mobil Oil Corp. v.
Linear Films, Inc., 718 F. Supp. 260, 268 (D. Del. 1989). Based on
the factors already discussed above, and the reasonable inferences

to be drawn from those facts, a reasonable jur d find in favor

of the Plaintiffs on this issue.
CONCLUSION
For the reasons set forth above,/ Defendayt Mestek’s Motion for
Summary Judgment is DENIED.

IT IS SO ORDERED.

Harry D. Leinenweber, Judge
United States District Court

Date: Vom