Opinion ID: 740512
Heading Depth: 4
Heading Rank: 1

Heading: the owner and operator of a vessel or a facility, [or]

Text: 99 (2) any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of[.] 100 42 U.S.C. § 9607(a) (emphasis added). The parties have stipulated that the site is a facility as defined by CERCLA, and that the site contains hazardous substances. 101 The terms owner and operator, as used in section 107(a)(2), are defined in the statute as any person owning or operating such facility, 42 U.S.C. § 9601(20)(A)(ii), a definition that is, at best, circular and unhelpful. At least one court has observed that [t]he circularity strongly implies ... that the statutory terms have their ordinary meanings rather than unusual or technical meanings. Edward Hines Lumber Co. v. Vulcan Materials Co., 861 F.2d 155, 156 (7th Cir.1988). Further, it is noteworthy that the definition of owner explicitly excludes one whose ownership interest is merely that of a stockholder and who does not participate in management of the facility, 42 U.S.C. § 9601(20)(A)(iii), suggesting that one who does participate in management is accordingly susceptible to liability, see United States v. Kayser-Roth Corp., 910 F.2d 24, 26 n. 6 (1st Cir.1990). Finally, person is defined expansively as an individual, firm, corporation, association, partnership, consortium, joint venture, commercial entity, United States Government, State, municipality, commission, political subdivision of a State, or any interstate body. 42 U.S.C. § 9601(21). The breadth of this definition plainly leaves room for a parent corporation. See Kayser-Roth, 910 F.2d at 25 n. 5. 102 The first question presented by this appeal is whether a parent corporation may be considered an operator under section 107(a)(2) when its subsidiary is the owner. The district court determined that a parent corporation may face potential liability as an operator of a contaminating facility because the plain language of section 107(a)(2) indicates that Congress intended to impose liability on any entity actually operating a facility, regardless of the nature of the entity's ostensible interest in the facility. It is a conclusion with which I agree; indeed, it is a conclusion that the vast majority of circuits--eight out of nine considering the question--have reached as well. Certain Underwriters at Lloyd's, London v. St. Joe Minerals Corp., 90 F.3d 671, 673-74 (2d Cir.1996); Schiavone v. Pearce, 79 F.3d 248, 253-55 (2d Cir.1996); FMC Corp. v. United States Dep't of Commerce, 29 F.3d 833, 842 (3d Cir.1994) (en banc ); Lansford-Coaldale Joint Water Authority v. Tonolli Corp., 4 F.3d 1209, 1221-22 (3d Cir.1993); Jacksonville Elec. Auth. v. Bernuth Corp., 996 F.2d 1107, 1110 (11th Cir.1993); John S. Boyd Co. v. Boston Gas Co., 992 F.2d 401, 408 (1st Cir.1993); see Kaiser Aluminum and Chem. Corp. v. Catellus Dev. Corp., 976 F.2d 1338, 1341-42 (9th Cir.1992); Kayser-Roth Corp., 910 F.2d at 27; see also United States v. TIC Investment Corp., 68 F.3d 1082, 1091-92 (8th Cir.1995), cert. denied, --- U.S. ----, 117 S.Ct. 50, 136 L.Ed.2d 14 (1996); Nurad, Inc. v. William E. Hooper & Sons Co., 966 F.2d 837, 842 (4th Cir.1992); cf. Sidney S. Arst Co. v. Pipefitters Welfare Educ. Fund, 25 F.3d 417, 420 (7th Cir.1994). But see Joslyn Mfg. Co. v. T.L. James & Co., 893 F.2d 80 (5th Cir.1990). 103 My colleagues offer several reasons for parting company with this impressive wealth of authority. First, they argue that courts have relied on the so-called remedial purpose of CERCLA to justify their conclusion that CERCLA should be given an expansive meaning, including a meaning that admits of liability for parent corporations as operators. Certainly, the shibboleth remedial purpose is a weak basis for legal analysis and I do not find it necessary to resort to it. But what the majority sees as the logical second step to a rejection of the remedial-purpose litany, namely, its adhere[nce] to the tenet that liability attaches only to those parties who are culpable in the sense that they, by some realistic measure, helped to create the harmful conditions, is, to put it mildly, a non sequitur. (Maj. op. at 578.) Implicit in the majority's chosen tenet is rejection of the universally accepted principle that liability under CERCLA is both strict, as well as joint and several. See, e.g., Kayser-Roth, 910 F.2d at 26; FMC Corp., 29 F.3d at 835. Whether CERCLA's purpose is remedial or not, the sounder proposition, I think, is that liability attaches only to those entities whom Congress has singled out for liability. For the reasons set forth below, the statutory language leaves no room to doubt that Congress has singled out operators for liability, irrespective of their corporate form. 104 The majority is also critical of the district court's language that liability should be predicated on a new, middle ground, and contends that this choice of language makes it unclear whether the [district court's] basis for finding parental liability as an operator ... is the actual operation of the subsidiary's business or ... the exertion of power or influence through active participation in the subsidiary's business. (Maj. op. at 579.) It may be that trial courts' inventive new, middle ground expression is more conferring than clarifying, but my colleagues' conclusion that the district court's holding threaten[s] the efficacy of time-honored liability protections afforded by the corporate form, simply does not follow. And my colleagues' ultimate conclusion, that a parent can only be found liable when the requirements necessary to pierce the corporate veil are met, contradicts the plain language of section 107(a)(2). Moreover, it is a conclusion that begs the question this case presents, which, under subsection (a)(2), is not whether a parent corporation may be held vicariously liable for abuse of its subsidiary's corporate form--clearly it may--but whether Congress has created direct liability if the facts show that the parent corporation was the actor actually operating a contaminating facility. Stated differently, the issue is whether Congress has excused a parent corporation that is in fact operating a contaminating facility from direct liability, simply because it is doing so in the name of a corporate subsidiary. The majority's belief that such an excuse may be found in the statute does not, for me, withstand close scrutiny. 105 The structure of the statute, on its face, requires a recognition that  'owner' liability and 'operator' liability denote two separate concepts and hence require two separate standards for determining whether they apply. Lansford-Coaldale, 4 F.3d at 1220.  'CERCLA's language ... indicates an intent to hold a corporation liable for the environmental violations of its subsidiaries and sister corporations, if it is otherwise determined to have operated the facility in question.'  Schiavone, 79 F.3d at 255 (quoting Lansford-Coaldale, 4 F.3d at 1221 n. 11). As the Kayser-Roth court observed, 106 Congress, by including a liability category in addition to owner (operators) connected by the conjunction or, implied that a person who is an operator of a facility is not protected from liability by the legal structure of ownership. Given this grammatical construction and the broad definition of person, corporate status, while relevant to determine ownership, cannot shield a person from operator liability. 107 Kayser-Roth, 910 F.2d at 26; see Schiavone, 79 F.3d at 254. In short, direct CERCLA liability under subsection (a)(2) may be predicated on one's status as an owner or on one's status as an operator. 108 Alternatively, of course, a parent corporation may also be derivatively liable if circumstances warrant piercing the corporate veil in order to treat that parent corporation as an owner, when its subsidiary is in fact the owner. The majority opinion conflates and confounds the two types of liability, which are analytically distinct, and erroneously concludes that the latter is the exclusive basis for liability. See Sidney S. Arst Co., 25 F.3d at 420; cf. Schiavone, 79 F.3d at 253. As a result, the majority's analysis founders on a perceived tension between the standard of a derivative liability arising out of common-law principles of corporate law and the standard of direct liability arising out of an application of the statutory language of CERCLA. The tension is chimerical. The statute explicitly provides for distinct, direct operator liability, and the basis for such operator liability is wholly independent of any liability on the part of the subsidiary, Schiavone, 79 F.3d at 254; it is a direct liability that stem[s] directly from [the parent's] control over the plant, that is, its own actions as an operator, id. The mere fact that derivative owner liability requires a veil-piercing analysis simply does not speak to the appropriate analysis of direct operator liability. 109 As previously alluded to, many courts have analyzed the issue of direct operator liability of a parent corporation. Most have followed the approach of Kayser-Roth, in which the court declared that [t]o be an operator requires more than merely complete ownership and the concomitant general authority or ability to control that comes with ownership. At a minimum it requires active involvement in the activities of the subsidiary. 910 F.2d at 27. This standard requires an investigation into the relationship between the parent and subsidiary, in order to reveal the requisite level of corporate involvement. John S. Boyd, 992 F.2d at 408. Thus, the degree of control required is more ... than simple ownership and the general authority or control that comes with it. Certain Underwriters, 90 F.3d at 674. In Lansford-Coaldale, 4 F.3d 1209, the court embraced the Kayser-Roth standard, emphasizing that operator liability may be established even without evidence that a [parent] corporation controlled the environmental decisions of an affiliated corporation as long as there exist other factors which sufficiently demonstrate pervasive control. Id. at 1222 n. 13. Similarly, in Jacksonville Electric, 996 F.2d 1107, the court agreed that the test for direct parent corporation liability as an operator was whether the parent  'exercises actual and pervasive control of the subsidiary to the extent of actually involving itself in the daily operations of the subsidiary. Actual involvement in decisions regarding the disposal of hazardous substances is a sufficient, but not a necessary, condition to the imposition of operator liability.'  Id. at 1110 (citation omitted). As is clear from the language of these cases, and as the Kayser-Roth court emphasized, it would obviously not [be] the usual case that the parent of a wholly owned subsidiary is an operator of the subsidiary. Kayser-Roth, 910 F.2d at 27; see John S. Boyd, 992 F.2d at 408. 110 Among the many courts that have recognized that a parent corporation may be directly liable as an operator under section 107(a)(2), there has been a difference of opinion as to whether operator liability should be predicated on the actual control one corporation has over the other, or whether the corporation's capacity or authority to control is sufficient. Lansford-Coaldale, 4 F.3d at 1220. The minority view has been adopted by the Fourth and Ninth Circuits, which would hold a parent corporation directly liable as an operator not because the parent corporation actually controlled the subsidiary, but rather because it had the authority to do so. See, e.g., Nurad, 966 F.2d at 842; Kaiser Aluminum, 976 F.2d at 1341. Those courts have justified their test as one which properly declines to absolve from CERCLA liability a party who possessed the authority to abate the damage caused by the disposal of hazardous substances but who declined to actually exercise that authority by undertaking efforts at a cleanup. Nurad, 966 F.2d at 842. 111 This view, I think, goes too far, because it assigns liability to the parent corporations beyond that intended by Congress. But in holding, as the majority of circuits have, that a parent corporation may be liable when it actually operates the facility in question, a court simply faithfully interprets plain statutory language. 112 Only the Fifth Circuit has adopted the limited view of operator liability described in the majority opinion here, in which the corporate form of the alleged operator is dispositive. The Joslyn court framed its inquiry as being whether to impose direct liability on parent corporation for the violations of their wholly owned subsidiaries. Joslyn, 893 F.2d at 81. This somewhat disingenuous framing of the question ignores the direct link contemplated by the majority of other courts that have discussed operator liability, and suggests that operator liability for parent corporations, like owner liability, would simply be another type of derivative liability, albeit of a less demanding nature than corporate-veil-piercing. The Joslyn court reasoned that because CERCLA does not [explicitly] define 'owners' or 'operators' as including the parent company of offending wholly-owned subsidiaries, id. at 82, there can be no operator liability for parents in the absence of veil-piercing. This analysis completely misses the point, which is that since a parent corporation is certainly within the statutory definition of person, the relevant question is simply whether the particular corporation was, in fact, an operator of the facility in question. Thus, the Joslyn court's invitation to Congress to extend liability to parent corporations if it wishes to do so, id. at 83, is simply meaningless. It is obvious that CERCLA does extend liability to all corporations, including parent corporations, so long as they satisfy the statutory prerequisite that they be operators. I note, too, that another panel of the Fifth Circuit, in a case decided after Joslyn, observed in dicta that individual shareholders or officers could be held directly liable as an operator, when they themselves actually participate in the wrongful conduct prohibited by the Act, and recognized that this personal liability is distinct from the derivative liability that results from 'piercing the corporate veil.'  Riverside Mkt. Dev. Corp. v. International Bldg. Prods., Inc., 931 F.2d 327, 330 (5th Cir.1991). The Riverside holding indicates, at a minimum, a reluctance within the Fifth Circuit to broadly apply Joslyn. 113 In sum, I conclude, as the district court did, that a parent corporation may be held directly liable as an operator of a contaminating facility under section 107(a)(2) if the facts of the case show that its domination and control of the subsidiary corporation ostensibly operating the facility is so pervasive that the parent is the operator in fact.