Opinion ID: 706842
Heading Depth: 3
Heading Rank: 2

Heading: The Liability of White and Carite as Transporters Under Sec. 107(a)(4) of CERCLA.

Text: 52 The appeal from the summary judgment ruling against White and Carite presents an issue of first impression in this Court: what standard of liability did Congress intend to establish under CERCLA for principal shareholders and officers of a closely-held corporation that transports hazardous substances? Congress did not directly address this issue in the statute itself. 19 Nor does the sparse legislative history answer the question presented here. 20 53 White and Carite argue that the district court erred in concluding that a corporate officer could be held liable for cleanup costs under CERCLA upon a showing of active involvement in the day-to-day operations of the [corporation]. (January 11, 1994 D.Ct. Slip.Op. at 6.) According to White and Carite, [a] showing of personal participation in the conduct that violated the statute should be required because it is the most consistent with corporate law principles. (Appellants' Reply Br. at 8.) 21 The United States, generally relying upon cases that address the question of who may be held liable as an operator of a hazardous waste facility, contends that the district court correctly ruled that White and Carite are liable under Sec. 107(a)(4) [b]ased on their control and intimate involvement in the waste disposal and transportation business of ADS.... (United States Br. at 22.) 54 It is axiomatic that the starting point for interpreting a statute is the language of the statute itself. Tippins, 37 F.3d at 92. Section 107(a)(4) of CERCLA provides that any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities, incineration vessels or sites selected by such person, from which there is a release, or a threatened release ... of a hazardous substance, shall be liable.... 42 U.S.C.A. Sec. 9607(a)(4) (1995). In Tippins, we held that Sec. 107(a)(4) imposed liability on a waste transportation corporation not only if it ultimately selects the disposal facility, but also when it actively participates in the disposal decision to the extent of having had substantial input into which facility was ultimately chosen. 37 F.3d at 94. We explained that this  'active participation' standard advances the objectives of CERCLA by recognizing the reality that transporters often play an influential role in the decision to dispose waste at a given facility. Id. at 95. 55 The express terms of Sec. 107(a)(4), as interpreted in Tippins, limit liability to those persons who accept hazardous substances for transport and have a substantial input into the selection of the disposal facility. Thus, Sec. 107(a)(4) plainly imposes liability on corporate officers and shareholders if they participate in the liability-creating conduct. 56 The United States contends that Congress also intended to impose liability on those who control the affairs of a responsible corporation, irrespective of whether those in control actually participate in the liability-creating conduct. According to the United States, the courts have generally construed CERCLA as permitting recovery from those corporate officers who participated in the management of or exercised control over a corporate entity. (United States Br. at 22.) Extending liability to those controlling a corporation, according to the United States, is consistent with CERCLA's goal of 'placing the ultimate responsibility for cleanup on those responsible for problems caused by the disposal of chemical poisons.'  (United States Br. at 23.) 57 CERCLA, of course, is to be construed liberally to effectuate its goals. United States v. Alcan Aluminum Corp., 964 F.2d 252, 258 (3rd Cir.1992). Liberal construction, however, may not be employed as a means for filling in the blanks so as to discern a congressional intent to impose liability under nearly every conceivable scenario. United States v. Cordova Chemical Co., 59 F.3d 584, 588 (6th Cir.1995). In light of the established principle of limited liability that protects corporate officers or employees who do not actually participate in liability-creating conduct, there must be some basis in the statute itself, beyond its general purpose, to support the conclusion that Congress intended to impose liability on those who control the corporation's day-to-day activities. 58 A statutory basis for imposing liability due to actual control of a corporation has been recognized in cases brought under Sec. 107(a)(1) and (a)(2) of CERCLA, which explicitly cover both owners and operators of hazardous waste facilities. See Lansford-Coaldale Joint Water Authority v. Tonolli Corp., 4 F.3d 1209, 1220-21 (3rd Cir.1993). As we explained in Lansford-Coaldale, by making an operator of a facility a potentially responsible party, it is at least clear that Congress has expanded the circumstances under which a corporation may be held liable for the acts of an affiliated corporation such that, when a corporation is determined to be the operator of a subsidiary or sister corporation, traditional rules of limited liability for corporations do not apply. Id. at 1221. 22 See also United States v. Kayser-Roth Corp., 910 F.2d 24, 26 (1st Cir.1990), cert. denied, 498 U.S. 1084, 111 S.Ct. 957, 112 L.Ed.2d 1045 (1991) (Congress, by including a liability category in addition to owner ('operator') ... implied that a person who is an operator of a facility is not protected from liability by the legal structure of ownership.) 59 The actual control test is a standard to be employed to determine whether a parent corporation is the actual operator of a hazardous waste facility and thus may be held directly liable without consideration of the factors necessary to pierce the corporate veil. The actual control test imposes liability which would not be consistent with 'traditional rules of limited liability for corporations'.... FMC Corp. v. U.S. Dept. of Commerce, 29 F.3d 833, 843 (3rd Cir.1994). Under the actual control test for operator liability, a corporation will be liable for the environmental violations of another corporation if there is evidence that it exercised 'substantial control' over the other corporation. At a minimum, substantial control requires 'active involvement in the activities' of the other corporation. Id. However, it is not necessary to show that a corporation controlled the environmental decisions of an affiliated corporation.... Lansford-Coaldale, 4 F.3d at 1222 n. 13. [A] company may be considered an operator even if it did not exert control over the hazardous waste disposal decisions of an affiliated corporation, as long as there is otherwise sufficient indicia of substantial management control over the affairs of the affiliate. Id. at 1224 n. 17. 23 Thus, the actual control standard of operator liability balances the benefits of limited liability with CERCLA's remedial purposes. Lansford-Coaldale, 4 F.3d at 1221. 60 Our adoption of the actual control standard was based upon a determination that 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. Id. at 1221 n. 11 (emphasis added). But we did not find congressional intent to disregard the concept of limited liability in all contexts. On the contrary, we recognized that owner and operator liability were distinct concepts, and that traditional principles of corporate law would not permit owner liability to be extended to a corporate parent unless piercing the corporate veil was warranted. Id. at 1220. In short, the long standing rule of limited liability in the corporate context remains the background norm.... Id. at 1221. 61 The cases upon which the United States relies to urge adoption of an actual control test under Sec. 107(a)(4) of CERCLA do not address the question of whether CERCLA's language permits such a result. Cases such as United States v. Carolina Transformer Co., 978 F.2d 832 (4th Cir.1992); New York v. Shore Realty Corp., 759 F.2d 1032, 1052 (2d Cir.1985); and Bowen Engineering v. Estate of Reeve, 799 F.Supp. 467, 473-74 (D.N.J.1992), are not supportive of the United States' position because they concern the liability of a corporate officer, shareholder or director as an operator of a hazardous waste facility under Sec. 107(a)(1) and (a)(2) of CERCLA, a category of potentially responsible parties not included in Sec. 107(a)(4). Cases such as United States v. Northeastern Pharmaceutical Co., 810 F.2d 726, 744 (8th Cir.1986), cert. denied, 484 U.S. 848, 108 S.Ct. 146, 98 L.Ed.2d 102 (1987); United States v. Northernaire Plating Co., 670 F.Supp. 742, 747 (W.D.Mich.1987); United States v. Bliss, 667 F.Supp. 1298, 1307 (E.D.Mo.1987); United States v. Ward, 618 F.Supp. 884, 894-96 (E.D.N.C.1985); and United States v. Mottolo, 605 F.Supp. 898, 913-14 (D.N.H.1985), essentially support the position advanced by White and Carite because these cases concern liability under Sec. 107(a)(3) for individuals who actually participated in arranging for the disposal of hazardous substances. None of these cases can be read as standing for the proposition that liability under section 107(a)(4) may be imposed based solely on control of the day-to-day activities of the corporate transporter without evidence of participation in the liability-creating conduct. 24 62 Although it may be preferable to have the same liability standard apply to individual officers, shareholders and directors under each subsection of Sec. 107(a), CERCLA's language fails to indicate that traditional concepts of limited liability are to be disregarded under Sec. 107(a)(4). The normal rule of statutory construction is that if Congress intends for legislation to change the interpretation of a judicially created concept, it makes that intent specific. Midlantic National Bank v. New Jersey Dept. of Environmental Protection, 474 U.S. 494, 501, 106 S.Ct. 755, 759, 88 L.Ed.2d 859 (1986). At the time CERCLA was enacted, it was firmly established that control of a corporation, in and of itself, was not a basis for imposing liability on a corporate officer for the actions of other corporate officers or employees. Instead, actual participation in the wrongful conduct was a prerequisite. See, generally, 3A William F. Fletcher, Fletcher Cyclopedia of the Law of Private Corporations, Sec. 1137 (perm. ed. rev. 1994); Richard G. Dennis, Liability of Officers, Directors and Stockholders Under CERCLA: The Case for Adopting State Law, 36 Vill.L.Rev. 1367, 1411 (1991). 63 Congress could have specified that majority shareholders or officers of corporations engaged in the waste hauling business are personally responsible for releases of hazardous substances from disposal facilities selected by their companies. Congress could have utilized the phrase owner or operator of a transporter, just as it used the phrase owner or operator of a facility. It did neither. On the contrary, the sparse legislative history indicates that Congress anticipated that  'issues of liability not resolved by this Act ... shall be governed by traditional and evolving principles of common law.'  Lynda J. Oswald, Strict Liability of Individuals Under CERCLA: A Normative Analysis, 20 B.C. Envtl.Aff.L.Rev. 579, 590 n. 41 (1993). Under these circumstances, it is appropriate to limit liability to those persons who are clearly made liable by the language Congress used--those who actively participate in the process of accepting hazardous substances for transport and have a substantial role in the selection of the disposal facility. 25 64 This result is not inconsistent with CERCLA's  'essential purpose' of making 'those responsible for problems caused by the disposal of chemical poisons bear the costs and responsibility for remedying the harmful conditions they created.'  Lansford-Coaldale, 4 F.3d at 1221. Our application of section 107(a)(4) as it was written does not immunize officers and directors who personally participate in liability-creating conduct. Although the scope of liability may be greater under section 107(a)(1) and (a)(2), CERCLA's language compels that result. It is not our prerogative to resolve the inconsistencies that permeate CERCLA. 26 Our task is to enforce congressional intent as it is made manifest in the language of the statute and legislative history. Our analysis of these rudimentary fonts of legislative intent compels us to apply Sec. 107(a)(4) as written, a result that comports with traditional concepts of limited liability for officers, directors and shareholders. 27 65 Accordingly, we conclude that liability may not be imposed under Sec. 107(a)(4) solely on the basis of an officer's or shareholder's active involvement in the corporation's day-to-day affairs. Instead, there must be a showing that the person sought to be held liable actually participated in the liability-creating conduct. 66 Contrary to the assertion of White and Carite, however, liability under Sec. 107(a)(4) is not limited to those who personally participated in the transportation of hazardous wastes. (Appellants' Reply Br. at 8.) 28 It is not necessary that the officer personally accept the waste for transport. Cf., United States v. Northeastern Pharmaceutical Co., 810 F.2d at 743 (proof of personal ownership or actual physical possession of hazardous substances is not a precondition for liability under Sec. 107(a)(3)). Nor is it necessary that the officer participate in the selection of the disposal facility. Liability may be imposed where the officer is aware of the acceptance of materials for transport and of his company's substantial participation in the selection of the disposal facility. An officer who has authority to control disposal decisions should not escape liability under Sec. 107(a)(4) when he or she has actual knowledge that a subordinate has selected a disposal site and, effectively, acquiesces in the subordinate's actions. Cf., Donsco, Inc. v. Casper Corp., 587 F.2d 602, 606 (3rd Cir.1978) (a corporate president's knowledge and approval of wrongful acts is sufficient actual participation in the wrongful acts to make him individually liable). 67 While the district court held that White and Carite could be held liable based upon [a]n abundance of evidence ... that White and Carite were active hands on managers of ADS during the time when the Tabernacle dumping occurred, (January 11, 1994 D.Ct. slip op. at 6), it also observed that there was even greater support for its conclusion in light of the fact that White and Carite were principals of a waste disposal company. The district court reasoned that the likelihood is greatly diminished that the owners and operators of the company would be unaware of improper dumping. (Id. at 7.) 68 Although there was indeed substantial evidence that White and Carite were actively involved in the day-to-day affairs of ADS at the time of the disposal of waste drums at the Tabernacle Site, there was also countervailing evidence that White and Carite were not hands on managers during the relevant time period. Moreover, White submitted an affidavit disavowing knowledge of disposal of drums at the Tabernacle Site. (A. 188a.) Corroboration for White's assertion may be inferred from the fact that during the relevant time frame he supervised the sales and administrative staff and did not have active involvement in operational aspects of the business. 69 Anthony Tony Carite, Jr., the younger brother of Charles Carite, testified that Charles Carite had few specific responsibilities in the day-to-day business. Tony Carite was the operations manager of ADS. The ADS dispatcher and truck drivers at the time of the Tabernacle Site dumping testified that they reported directly to Tony Carite and had little, if any, involvement with Charles Carite. 70 While testimony of some ADS drivers, laborers and other plant employees concerning the active involvement of White and Carite in the day-to-day activities of ADS, if viewed as credible, could support an inference that White and Carite knew of the decision to dump drums at the Tabernacle Site and acquiesced in that decision, the testimony of other ADS employees, if credited, would not support that inference. 29 The evidence proffered by the United States was not so overwhelming as to render White and Carite's denial of knowledge completely implausible. Under these circumstances, the United States was not entitled to summary judgment against White and Carite. See United States v. Premises Known as 717 So. Woodward St., 2 F.3d 529, 533-34 (3rd Cir.1993). Indeed, issues of knowledge and intent are particularly inappropriate for resolution by summary judgment, since such issues must often be resolved on the basis of inferences drawn from the conduct of the parties. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 2513, 91 L.Ed.2d 202 (1986). Accordingly, the declaratory judgment in favor the United States and Against White and Carite will be reversed and remanded for further proceedings. 71