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Syllabus

UNITED STATES v. BESTFOODS et al.

certiorari to the united states court of appeals for
the sixth circuit

No. 97–454. Argued March 24, 1998—Decided June 8, 1998

The United States brought this action under § 107(a)(2) of the Comprehen-
sive Environmental Response, Compensation, and Liability Act of 1980
(CERCLA) against, among others, respondent CPC International Inc.,
the parent corporation of the defunct Ott Chemical Co. (Ott II), for the
costs of cleaning up industrial waste generated by Ott II’s chemical
plant. Section 107(a)(2) authorizes suits against, among others, “any
person who at the time of disposal of any hazardous substance owned or
operated any facility.” The trial focused on whether CPC, as a parent
corporation, had “owned or operated” Ott II’s plant within the meaning
of § 107(a)(2). The District Court said that operator liability may attach
to a parent corporation both indirectly, when the corporate veil can be
pierced under state law, and directly, when the parent has exerted
power or inﬂuence over its subsidiary by actively participating in, and
exercising control over, the subsidiary’s business during a period of haz-
ardous waste disposal. Applying that test, the court held CPC liable
because CPC had selected Ott II’s board of directors and populated its
executive ranks with CPC ofﬁcials, and another CPC ofﬁcial had played
a signiﬁcant role in shaping Ott II’s environmental compliance policy.
The Sixth Circuit reversed. Although recognizing that a parent com-
pany might be held directly liable under § 107(a)(2) if it actually operated
its subsidiary’s facility in the stead of the subsidiary, or alongside of it
as a joint venturer, that court refused to go further. Rejecting the
District Court’s analysis, the Sixth Circuit explained that a parent cor-
poration’s liability for operating a facility ostensibly operated by its sub-
sidiary depends on whether the degree to which the parent controls the
subsidiary and the extent and manner of its involvement with the facil-
ity amount to the abuse of the corporate form that will warrant piercing
the corporate veil and disregarding the separate corporate entities of
the parent and subsidiary. Applying Michigan veil-piercing law, the
court decided that CPC was not liable for controlling Ott II’s actions,
since the two corporations maintained separate personalities and CPC
did not utilize the subsidiary form to perpetrate fraud or subvert justice.

Held:

1. When (but only when) the corporate veil may be pierced, a parent
corporation may be charged with derivative CERCLA liability for its