524 U.S. 51, 61–62 (1998)
In 1957, Ott Chemical Co. began manufacturing chemicals at a plant near Muskegon, Michigan, and its dumping of hazardous substances polluted the soil and ground water at the site.1 In 1965, CPC International Inc. incorporated a wholly owned subsidiary, Ott Chemical Co., to buy the assets of the original Ott company in exchange for CPC stock, and the new Ott company continued chemical manufacturing and pollution at the site while sharing officers and directors with CPC, including Arnold Ott.2
In 1972, CPC sold Ott II to Story Chemical Company, which operated the plant until its bankruptcy in 1977.3 The Michigan Department of Natural Resources then examined the site and found thousands of leaking drums and saturated soil and water, prompting negotiations that led Aerojet-General Corp. to arrange transfer of the site in 1977 through its subsidiaries Cordova Chemical Company and Cordova Chemical Company of Michigan, which manufactured chemicals there until 1986.4
By 1981, the Environmental Protection Agency had begun planning a long-term cleanup of the site expected to cost tens of millions of dollars.5 In 1989, the United States filed suit under CERCLA section 107 against CPC, Aerojet, their subsidiaries, and Arnold Ott to recover response costs, following stipulations that the Muskegon plant was a facility, hazardous substances had been released, and the government had incurred reimbursable costs.6
After a 15-day bench trial in 1991 on liability issues, the District Court held CPC and Aerojet liable as operators.7 A divided panel of the Sixth Circuit reversed in part, and on rehearing en banc the court again reversed the District Court in part by a 7-to-6 vote.8 The Supreme Court granted certiorari in 1997 to address the conflict among circuits regarding parent corporation liability under CERCLA.9
Whether a parent corporation that actively participated in and exercised control over the operations of a subsidiary may be held liable as an operator of a polluting facility owned or operated by the subsidiary under CERCLA?10
Under CERCLA a parent corporation is not liable for the acts of its subsidiary merely by virtue of ownership and control.11 Limited liability is the rule, and nothing in the statute rejects this bedrock principle of corporate law.12 Derivative liability arises only when the corporate veil may be pierced under state law.13
No. The established facts show that CPC International Inc. incorporated Ott II as a wholly owned subsidiary to buy the assets of the original Ott company.14 CPC shared officers and directors including Arnold Ott while Ott II continued chemical manufacturing and pollution at the Muskegon plant.15 The Supreme Court held that such participation and control over the subsidiary does not by itself constitute operation of the facility for purposes of direct liability under section 107(a)(2).16 The facts further establish that CPC sold Ott II to Story Chemical Company in 1972.17
Subsequent owners including Aerojet subsidiaries operated the plant until 1986.18 This confirms that CPC's relationship with Ott II alone cannot support operator liability without additional evidence of direct management of the facility's pollution activities.19
A parent corporation that actively participated in and exercised control over the operations of a subsidiary may not be held liable as an operator of a polluting facility owned or operated by the subsidiary under CERCLA without more.20 Liability requires additional circumstances such as piercing the corporate veil.21
Whether a parent corporation can incur direct operator liability under CERCLA by managing or directing activities at a facility owned by its subsidiary, as opposed to liability that requires piercing the corporate veil?22
CERCLA imposes direct liability on any person who operates a facility by managing, directing, or conducting operations specifically related to pollution.23 A parent corporation may therefore be held directly liable in its own right when it directs the workings of the facility itself even though the subsidiary owns the facility.24
Yes. The established facts show that the United States filed suit under CERCLA section 107 against CPC and Aerojet as parent corporations after stipulations that the Muskegon plant was a facility, hazardous substances had been released, and reimbursable response costs had been incurred.25 The Supreme Court held that direct operator liability is available on these facts if the parent managed or directed pollution-related activities at the facility rather than merely controlling the subsidiary.26 The facts further establish that after a 15-day bench trial the District Court held CPC and Aerojet liable as operators.27
The Sixth Circuit reversed en banc by a 7-to-6 vote applying only veil-piercing standards.28 The Supreme Court granted certiorari to resolve the circuit conflict.29 This confirms that the statute permits direct liability distinct from derivative liability.30
A parent corporation can incur direct operator liability under CERCLA by managing or directing activities at a facility owned by its subsidiary, as opposed to liability that requires piercing the corporate veil.31