Opinion ID: 199705
Heading Depth: 3
Heading Rank: 2

Heading: Direct Operator Liability

Text: 38 The Court then addressed the circumstances under which a parent company would be directly liable for its own actions in operating a facility owned by its subsidiary. Rejecting the Sixth Circuit view, the Court held that corporate veil-piercing is not a prerequisite to holding a parent directly liable as an operator: 39 Under the plain language of the statute, 40 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. 41 Id. at 65 (citation omitted). 42 At the outset of the discussion, the Court defined operator under CERCLA as someone who directs the workings of, manages, or conducts the affairs of a facility. Id. at 66. It also, however, set forth a definition more specific to pollution-related activities at the 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 regulations. 43 Id. at 66-67. Later in the opinion, the Court also recited the broader definition of operator, noting that Congress' use of the word to operate means something more than mere mechanical activation of pumps and valves, and must be read to contemplate 'operation' as including the exercise of direction over the facility's activities. Id. at 71. 44 Applying these definitions, the Court identified two flaws with the district court's treatment of direct operator liability. First, the Court rejected the district court's erroneous fusion of direct and indirect liability. Id. at 67. Rather, to keep direct and derivative liability distinct, the Court focused the direct operator liability inquiry not on the parent's interaction with the subsidiary, but rather on the parent's interaction with the facility: The question is not whether the parent operates the subsidiary, but rather whether it operates the facility, and that operation is evidenced by participation in the activities of the facility, not the subsidiary. Control of the subsidiary, if extensive enough, gives rise to indirect liability under piercing doctrine, not direct liability under the statutory language. Id. at 67-68 (internal quotation marks omitted)(quoting Lynda J. Oswald, Bifurcation of the Owner and Operator Analysis under CERCLA, 72 Wash. U.L.Q. 223, 269 (1994)). 45 Second, the Bestfoods Court noted that, [i]n addition to (and perhaps as a reflection of) the erroneous focus on the [parent-subsidiary] relationship, the district court assumed erroneously that the actions of the joint officers and directors were necessarily attributable to the parent CPC. Id. at 68. In doing so, the district court failed to recognize that it is entirely appropriate for directors of a parent corporation to serve as directors of its subsidiary, and that fact alone may not serve to expose the parent corporation to liability for its subsidiary's acts. Id. at 69 (internal quotation marks omitted). The Court stated that, 46 [s]ince courts generally presume that the directors are wearing their subsidiary hats and not their parent hats when acting for the subsidiary, it cannot be enough to establish liability here that dual officers and directors made policy decisions and supervised activities at the facility. The Government would have to show that, despite the general presumption to the contrary, the officers and directors were acting in their capacities as [parent] officers and directors, and not as [subsidiary] officers and directors, when they committed those acts. 47 Id. at 69-70 (internal quotation marks and citations omitted). 48 The Court described examples of activities that would be sufficient to find a parent directly liable as an operator of a polluting facility. The first example, identified by the Sixth Circuit, occurs when the parent operates the facility in the stead of its subsidiary or alongside the subsidiary in some sort of joint venture. Id. at 71 (citing Cordova/Michigan, 113 F.3d at 579). Another occurs when 49 a dual officer or director might depart so far from the norms of parental influence exercised through dual officeholding as to serve the parent, even when ostensibly acting on behalf of the subsidiary in operating the facility. 50 Id. In a third scenario, an agent of the parent with no hat to wear but the parent's hat might manage or direct activities at the facility. Id. 51 To distinguish a parental officer's oversight of a subsidiary from control over the operation of the subsidiary's facility, norms of corporate behavior (undisturbed by any CERCLA provision) are crucial reference points. Id. Elaborating on the general contours of these norms, the Court noted that liability would not arise out of activities involving the facility but consistent with the parent's investor status, such as monitoring of the subsidiary's performance, supervision of the subsidiary's finance and capital budget decisions, and articulation of general policies and procedures. Id. at 72 (citations and internal quotation marks omitted). 11 Thus, [t]he critical question is whether, in degree and detail, actions directed to the facility by an agent of the parent alone are eccentric under accepted norms of parental oversight of a subsidiary's facility. Id. 52 The Court found some evidence that CPC engaged in just this type and degree of activity at the plant in question. Id. Specifically, a CPC agent played a conspicuous part in dealing with the toxic risks emanating from the operation of the plant. Id. The district court found that this agent, G.R.D. Williams (Williams), served in the capacity of CPC's governmental and environmental affairs director and became heavily involved in environmental issues at CPC's subsidiary. Drawing no ultimate conclusions, the Court nevertheless found these findings sufficient to raise an issue of CPC's operation of the facility and therefore remanded to the district court for a reevaluation of CPC agents' role in operating the facility at issue. Id. at 72-73.