Petition for Writ of Certiorari — Riverside Market Ltd. Partnership v. Prescott

Supreme Court brief1991

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Sy ele aye 13

91 2 ade om

— AUG 13 199%

In the OpPIGe OF THE CLERK

Supreme Court of the United Stares—

OCTOBER TERM, 1991

RIVERSIDE MARKET LIMITED

PARTNERSHIP, ET AL.,

(Philip C. Witter; Gordon H. Kolb; Hirschel T. Abbott, Jr.;

Philip Gensler, Jr.; George G. Villere;

G. Walter Loewembaum; Lillian Shaw Loewembaum;

Leon T. Reymond, Jr.; George V. Young;

Michael R. Schneider)

Petitioner

VS.

T. GENE PRESCOTT,

Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

PETITION FOR WRIT OF CERTIORARI

SCOTT R. BICKFORD, ESQ.

JOHN R. MARTZELL, ESQ.

Counsel of Record for Petitioner

MARTZELL, THOMAS & BICKFORD

338 Lafayette Street

New Orleans, Louisiana 70130

(504) 581-9065

A B Letter Service, Inc., 327 Chartres St., New Orleans, La. (504) 581-5555

QUESTIONS FOR REVIEW

WHETHER THE COURT OF APPEALS OF THE FIFTH

CIRCUIT ERRED IN UPHOLDING THE GRANT OF

SUMMARY JUDGMENT WHEN, IN CONFLICT WITH THE

EIGHTH AND SECOND CIRCUIT PRECEDENTS, IT

REASONED THAT THE MAJORITY STOCKHOLDER AND

ACTIVE MANAGER OF A CORPORATION CANNOT BE

HELD LIABLE AS AN “OWNER OR OPERATOR" FOR

THE BUSINESS' IMPROPER DISPOSAL OF

HAZARDOUS WASTE UNDER THE COMPREHENSIVE

ENVIRONMENTAL RESPONSE, COMPENSATION AND

LIABILITY ACT OF 1980 ("CERCLA"), 42

U.S.C.A. § 9601, et seg.?

Il.

IN ENACTING CERCLA, DID CONGRESS INTEND

THAT SHAREHOLDERS, OFFICERS, AND DIRECTORS

OF A CORPORATION WHO ACTIVELY PARTICIPATED

IN THE MANAGEMENT AND EFFECTIVELY

CONTROLLED THE OPERATIONS OF THE

CORPORATION, SHOULD ESCAPE LIABILITY ON THE

GROUNDS THAT ONLY THE CORPORATION, AND NOT

THE INDIVIDUALS ACTING ON BEHALF OF THE

CORPORATION, COULD BE HELD LIABLE AS OWNERS

AND OPERATORS?

TABLE OF CONTENTS

Page

QUESTIONS FOR REVIEW........- i

TABLE OF CONTENTS .......-.--- ii

INDEX OF AUTHORITIES. .......- iii

PETITION... 6 i eee ss eee

OpImtoms ORION. . 6 6 + bes eee

SURESDICTION . . 0s 6 es See ee ee

STATUTE INVOLVED ........-.- 3

STATEMENT OF THE FACTS .......- 4

STATEMENT OF THE CASE ........- 8

ARGUMENT . . . 3 6 «6 «© e562 e 3 eee

a. The legislative history of

CERCLA clearly manifests Congressional

intent to impose liability upon any

persons who are in a position to execute

the cleanup plan for the facility in

question. .....-+ +++ ++ + 16

b. Courts other than the Fifth Circuit

have uniformly and consistently

fulfilled the Congressional intent to

impose liability under CERCLA upon

shareholders, directors, and officers

of corporations who actively participate

in and manage the affairs of the

corporation. .....+ + +++ +--+ 17

c. The Fifth Circuit's declaration that

a shareholder, officer, and director

cannot be held liable under CERCLA is

in direct conflict with Fifth Circuit

holdings that corporate individuals are

potentially liable as individuals and

with the Fifth Circuit's definitions of

owner or operator in analogous contexts.

aes £ w+ wet. « 6 & « « « 25

d. The Fifth Circuit's declaration that

a shareholder, officer, and director

cannot be held liable under CERCLA is

in direct conflict with the intentions

of Congress in enacting CERCLA and with

decisions - the Second and Eighth

Circuits and several district courts

which have addressed the issue .. 28

CONCLUSION PO Re ES ee a ee a a a:

CERTIFICATE OF SERVICE = ee eee 36

gg a Sat a ae or a ee

iii

INDEX OF AUTHORITIES

Statutes and Regulations

28 U.S.C. § 33343- «© s © es © @ @

$6 0.8.0. 8 SE 4A ke

33 U.S.C. § 401, et seg.

Rivers and Harbors Act of 1899

33 U.S.C. § 1251, et seg

(West 1986 & Supp. 1990)

Federal Water Pollution

Control AGE «s+ 5+ © «© + 8 © @

42 U.S.C.A.

§ 9601, et seq.

(West 1980 & Supp. 1986)

Comprehensive Environmental

Response, Compensation and

Liability Act of 1980 ("CERCLA").

2,3,4,5,9,10,11,13,14,26,27, 33

Other Authorities

F. Anderson,

D. Mandelker &

A. Tarlock, Environmental

Protection:

S. Rep. No.

2da Sess.

848, 96th Cong.,

at 13 .

U.S. Supreme Ct. Rule 10.1(A)

Cases Cited

Joslyn Mfgq.

Co. v. T.L. James &

Co., Inc.

(5th Cir.

113 S.Ct.

893 F.2d 80

1990), cert. denied

1017 (1991).

Law and Policy (1984) 17

Cases Cited Ree

Kelley ex rel. Michigan NRC

v. Arco Industries, 721 F.Supp.

873 (W.D.Mich. 1989) ..... . 23,24

Kelley v. Thomas Solvent Co.,

727 F.Supp. 1554

(W.D. Mich. 1989) ....... a2,42

Mobay Corp. v. Allied-Signal,

Inc., 761 F.Supp. 345, 350

(eiBeds: BORE. 6s we 8 te el 30

Mozingo v. Correct Mfg. Corp.,

752 F.2d 168 (5th Cir. 1985). . 26,32

Shingleton v. Armor Velvet Corp.,

621 F.2d 180 (5th Cir. 1980). . 26,32

State of New York v. Shore

Realty Corp., 759 F.2d 1032

(2d Cir. 1985). . . . «. 16,19,20,22,30

United States v. Carolawn Co.,

14 Env't L.Rep. 20,699

(O.8.00: WO ak WW ee SC ee

United States v. Conservation

Chemical Co., 628 F.Supp. 391

Li eee eer

United States v. Fleet Factors Corp.,

724 F.Supp. 955 (S.D.Ga. 1988),

aff'd 901 F.2d 1550

(11th Cir. 1990), reh'g denied

911 F.2d 742 (11th Cir. 1990),

cert. denied 1i1 S.Ct. 752

(S908 ck S ae ee eee

pon

ere

Cases Cited Pege

United States v. Joseph G. Moretti,

ine. , 2346 F.2d 1306

(Sth Cir. 1976) .. +--+ +--+ + 31

United States v. Mobil Oil Corp.,

464 F.2d 1124 (5th Cir.

oT aerate er ee

United States v. Northeastern

Pharmaceutical, 810 F.2d 726

(8th Cir. 1986), cert. denied

484 U.S. 848, 108 S.Ct. 146

(1987) ~ «© «© = © © © © » 18,19,22,30

United States v. Sexton Cove

Estates, Inc., 526 F.2d 1293

(5th Cir. 1976) ...---+ + 30,31

PETITION FOR WRIT OF CERTIORARI

The petitioner, Riverside Market

Development Corp., et al., respectfully

prays that a writ of certiorari issue to

review the judgment and opinion of the

United States Court of Appeals for the

Fifth Circuit, entered in the above-

entitled proceeding May 15, 1991.

OPINIONS BELOW

The opinion of the Court of Appeals for

the Fifth Circuit is reported at 931 F.2a

327 (Sth Cir. 1991) and is reprinted in the

appendix, p. App. 1-16, infra.

The opinion of the Uniteda States

District Court for the Eastern District of

Louisiana (Wicker, D.J.) is reported at

1990 WL 72249 (E.D.La. May, 23, 1990) and

is reprinted in the appendix, p. App. 17-

42, infra.

JURISDICTION

Invoking federal question jurisdiction,

Petitioner brought this suit pursuant to

28 U.S.C. § 1331 and the Comprehensive

Environmental Response, Compensation and

Liability Act of 1980 ("CERCLA"), 42

U.S.C.A. § 9601, et seg., as amended,

against a corporation, International

Building Products ("IBP"), and two

individuals, T. Gene Prescott ("Prescott")

and Gerard von Dohlen ("von Dohlen").

Appended to the suit were several state law

claims that are irrelevant to these

proceedings. Von Dohlen and Prescott filed

a Motion for Summary Judgment, asserting

that, as officers, directors, and

shareholders, they were immune from

liability under CERCLA. The district court

granted in part and denied in part the

Motion for Summary Judgment, as per the

Court's Minute Entry dated May 22, 1990;

the court granted the motion as to

Petitioner's claims against Prescott under

CERCLA, but denied it as to Petitioner's

claims against von Dohlen. The District

Court entered a final judgment on July 3,

1990, amending an earlier judgment entered

on June 22, 1990. On July 13, 1990,

Petitioners appealed the District Court's

judgment dismissing the CERCLA action as

to Prescott. The Fifth Circuit affirmed

the District Court's decision on May 15,

1991.

The jurisdiction of this Court to review

the judgment of the Fifth Circuit is

invoked under 28 U.S.C. § 1254(1).

STATUTE INVOLVED

The relevant provisions of the

Comprehensive Environmental Response,

Compensation and Liability Act of 1980

("CERCLA"), 42 U.S.C.A. §§ 9601(20) (A),

9601(21), 9607(a) (1986) are reprinted in

the Appendix, p. App. 44-49, infra.

STATEMENT OF THE FACTS

This case arises from the activities

engaged in by a corporate entity, IBP,

which was formed in 1980 by two

individuals, Prescott and von Dohlen.

Prescott held eighty-five percent of the

stock and acted as Chairman of the Board,

secretary, and financial consultant; von

Dohlen held fifteen percent of the stock

and acted as president and CEO. In 1981,

IBP purchased an existing asbestos

manufacturing facility ("facility") in

uptown New Orleans; IBP continued to use

the facility to process asbestos.

Petitioner, Riverside Market Development

Corp. ("RMDC"), purchased the facility for

the purpose of converting it into its

present state, a shopping center. Pursuant

to the Comprehensive Environmental Response

Corporation and Liability Act, 42 U.S.C.A.

§ 9601, et seg., ("CERCLA"), Riverside and

its assignees sued IBP and its two

stockholders, Prescott and von Dohlen, for

the costs of cleaning up hazardous wastes.

The facts as to the IBP's ownership of

the facility are as follows. By March 11,

1981, IBP was incorporated pursuant to the

state laws of Delaware. As stated above,

IBP had only two shareholders; the

Respondent, Prescott, held eighty-five

percent ownership, and von Dohlen held

fifteen percent Ownership. On March 11,

1981, IBP purchased the asbestos facility.

Prescott signed a personal note for two

million dollars to finance the purchase of

the facility. (Record 416) (Excerpt 25).

Prescott's involvement in the corporation

also included serving in the capacities of

secretary of the corporation, Chairman of

the Board, and financial consultant.

(Record 597, 401-402) (Excerpt 31, 13-14).

As President, Von Dohlen was the only

other officer; he also served as a

director. From 1981 until 1984, or for

more than 75% of the time IBP operated the

facility, Prescott and von Dohlen remained

the only shareholders, officers and

directors. As of December 2, 1988,

Prescott and von Dohlen were still the only

officers and directors of record (Record

304) (Excerpt 4).

While IBP owned the facility, from March

1981 until May 1985, every product the

facility manufactured contained raw

asbestos fibers; the manufacturing process

resulted in the creation of asbestos

wastes. (Record 594) (Excerpt 29). (See

also Plaintiff's Statement of Undisputed

Facts not contested by the defendant). In

1987, RMDC purchased the facility and began

the cleanup for which costs are sought in

this dispute. (Record 594) (Excerpt 29).

STATEMENT OF THE CASE

The Fifth Circuit's definition of "owner

or operator" pursuant to the terms of

CERCLA is in direct conflict with the

definitions established by the Second and

Eighth Circuits. The Respondent claims

that he should not be held liable because

his position as officer, shareholder, and

director made him immune from liability as

an owner or operator of the facility in

question. Congressional intent and the

Second and Eighth Circuits' definition of

owner or operator indicates otherwise;

under these facts, the Fifth Circuit should

have held that Prescott was potentially

liable and thus reversed the grant of

summary judgment as to Prescott.

Respondent qualifies aS an owner or

operator of the facility, and, as such,

should be held liable for cleanup costs.

The question then to be addressed is did

Congress intend for the majority

stockholder, Chairman of the board,

officer, consultant, and active manager of

a corporation to escape liability for that

corporation's improper disposal of

hazardous waste? In 1980, Congress enacted

CERCLA as a solution to the environmental

problems facing the nation as a result of

the improper disposal of, and consequent

contamination from, hazardous waste.

Congress intended to liberally impose

liability upon those parties who benefitted

from the activities of a facility which

disposed of hazardous waste. Therefore,

Congress imposed Cleanup costs on any

person owning or operating a facility which

disposed of hazardous waste. 42 U.S.C.A.

§ 9607{(a) (ii) (West Supp. 1990). Congress

defined owner or operator in such a manner

as to encompass corporations and

individuals who owned or operated a

facility which disposed of hazardous waste.

CERCLA, 42 U.S.C.A. § 9601(20) (A),

9601(21). Courts would determine whether

a party was an owner or operator and

therefore liable for the cleanup costs.

ARGUMENT

THE COURT OF APPEALS OF THE FIFTH CIRCUIT

ERRED IN UPHOLDING THE GRANT OF SUMMARY

JUDGMENT WHEN, IN CONFLICT WITH THE SECOND

AND EIGHTH CIRCUIT PRECEDENTS, TT REASONED

THAT THE MAJORITY STOCKHOLDER AND ACTIVE

MANAGER OF A CORPORATION CANNOT BE HELD

LIABLE AS AN "OWNER OR OPERATOR"! FOR THE

BUSINESS' IMPROPER DISPOSAL OF HAZARDOUS

WASTE UNDER THE COMPREHENSIVE ENVIRONMENTAL

RESPONSE, COMPENSATION AND LIABILITY ACT

OF 1980 ("CERCLA"), 42 U.S.C.A. § 9601, et

seq.

IN ENACTING CERCLA, CONGRESS DID NOT INTEND

THAT SHAREHOLDERS, OFFICERS, AND DIRECTORS

OF A CORPORATION WHO ACTIVELY PARTICIPATED

IN THE MANAGEMENT AND EFFECTIVE CONTROLLED

THE OPERATIONS OF THE CORPORATION, SHOULD

ESCAPE LIABILITY ON THE GROUNDS THAT ONLY

THE CORPORATION, AND NOT THE INDIVIDUALS

ACTING ON BEHALF OF THE CORPORATION, COULD

BE HELD LIABLE AS OWNERS AND OPERATORS.

In this action, the Fifth Circuit

conferred immunity on an individual who

occupied the positions of majority

shareholder, secretary, Chairman of the

Board, and financial consultant of a

corporation that had only one other

officer/shareholder. The rationale of both

the Fifth Circuit and the district court

was that such an individual was immune from

liability under CERCLA because he was not

in direct operational control of the

corporation's disposal of asbestos, its

only product.

The Fifth Circuit's decision in this

case conflicts with the holdings of the

Second and Eighth Circuits and numerous

district courts which have addressed this

issue and with the holdings of other courts

which have addressed analogous issues. The

Second and Eighth Circuits have recognized

that shareholders, officers, and directors

of a corporation may be held liable under

CERCLA if they actively participated in the

management and operation of the

corporation; in contrast, the Fifth Circuit

held that those individuals are shielded

from liability by principles of limited

liability.

This action presents the precise

situation for review by writ of certiorari

contemplated by U.S. Supreme Court Rule

10.1(A); it presents an important question

of statutory interpretation concerning who

will bear the cost of cleaning up the

nation's hazardous waste. Specifically,

that question concerns who qualifies as an

Owner or operator of a facility as those

terms are used under 42 U.S.C.A. § 9607(a)

and as those terms are defined under 42

U.S.C.A. § 9601(20) (A). The cleanup of

hazardous waste is an expanding government

program, making resolution of the issue

increasingly crucial.

Although this case deals with the

cleanup costs of a former asbestos

manufacturing plant, the decision in this

matter as to the scope of liability as it

regards owners and operators will have

significant ramifications for a plethora

of lawsuits concerning the potential

liability of hundreds of parties for the

cleanup of waste disposal sites.

The Fifth Circuit's decisions have also

differed from other courts in another issue

of the scope of liability under CERCLA.

Specifically, the Fifth Circuit has held

that a parent corporation cannot be held

liable for the actions of its subsidiary

in failing to comply with the requirements

of CERCLA; the First Circuit and numerous

district courts have held that a parent

corporation can be held liable for its

actions in operating its subsidiary if the

subsidiary fails to comply with CERCLA's

mandates.

Congress enacted CERCLA in order to

redress problems associated with the

disposal of and contamination from

hazardous waste. The statute was remedial;

thus, liability under it should be

interpreted liberally. The Fifth Circuit

has unnecessarily construed the statute

narrowly, thus failing to impose liability

for cleanup on the parties in the best

position to remedy the situation.

Unless this Court overturns the Fifth

Circuit's narrow approach to liability, the

Fifth Circuit will persist in its refusal

to impose liability upon parties who should

be held responsible for cleanup costs and,

in many instances, there will be no one to

pay for the cleanup of hazardous

substances. Certiorari is sought in this

matter to prevent such a restricted reading

of the persons liable for cleanup costs

under CERCLA.

a. The legislative history of CERCLA

clearly manifests Congressional

intent to impose liability upon any

persons who are in a position to

execute the cleanup plan for the

facility in question.

CERCLA was enacted in response to the

increasing public concern about the

environment in general and the problems of

the disposal of and contamination from

hazardous waste in particular. CERCLA is

a remedial statute intended to improve the

environment in order to perpetuate the

health and well-being of the people. It

was designed to bring order to partly

redundant and partly inadequate federal

hazardous substances cleanup and

compensation laws. F. Anderson, D.

Mandelker & A. fTarlock, Environmental

Protection: Law. and Policy (1984).

Congress intended that those who plant

their pollutant seeds should pay for the

fruits they bear. S. Rep. No. 848, 96th

Cong., 2d Sess. at 13. Failure to apply

CERCLA to owners and operators would thwart

the congressional purpose of holding liable

for cleanup costs those who reap the

benefits of improper hazardous disposal.

b. Courts other than the Fifth

Circuit have uniformly and

consistently fulfilled. the

Congressional intent to impose

liability under CERCLA upon

shareholders, directors, and officers

of corporations who actively

participate in and manage the affairs

of the corporation.

United States Vv. Northeastern

Pharmaceutical ("NEPACCO"), 810 F.2d 726

(8th Cir. 1986), cert. denied, 484 U.S.

848, 108 S.Ct. 146 (1987) and State of New

york v. Shore Realty Corp., 759 F.2d 1032

(2d Cir. 1985) are in conflict with the

Fifth Circuit's decision in this case.

In NEPACCO, supra, the court said:

[Cjonstruction of CERCLA to impose

liability upon only the corporation

and not the individual corporate

officers and employees who are

responsible for making corporate

decisions about the handling and

disposal of hazardous’ substances

would open an enormous, and clearly

unintended, loophole inthe statutory

scheme.

Id. at 743. The court imposed liability

upon John W. Lee, the vice-president and

shareholder of the corporation and

supervisor of its manufacturing plant. Id.

at 742. Lee was found liable because, as

a plant supervisor, he actually knew about,

had immediate supervision over, and was

directly responsible for arranging for the

transportation and disposal of hazardous

waste. The court said that an individual

who actually participates in conduct that

violates CERCLA can be held personally

liable. Id. at 744.

In Shore Realty, supra, the court held

that Donald LeoGrande, an officer and

stockholder of Shore Realty Corp.

("Shore"), was jointly and severally liable

with Shore under CERCLA. The court read

the statute and, particularly, the

definition of owner and operator, which

excludes "a person, who, without

participating in the management of a ...

facility, holds indicia of ownership

primarily to protect his security interest

in the facility," to imply that an owning

stockholder who manages the corporation is

liable under CERCLA if the corporation is

liable. Id. at 1052. Since LeoGrande

incorporated Shore solely to purchase the

property at issue and since he made,

directed, and controlled all corporate

decisions, the court held that he was

liable as an operator under CERCLA. Id. at

1052.

Indeed, the vast majority of those

courts, excepting the Fifth Circuit, have

held that those persons who actively

participate in management are potentially

liable for cleanup costs incurred as a

result of improper disposal by the

corporation. The other courts have held

that persons associated with the

corporation are potentially liable as

individuals; furthermore, courts other than

the Fifth Circuit have in fact held such

persons liable in numerous cases.

In a district court decision, United

States v. Fleet Factors Corp., 724 F.Supp.

955 (S.D.Ga. 1988), aff'd 901 F.zd 1550

(llth Cir. 1990), reh'g denied 911 F.2d 742

(11th Cir. 1990), cert. denied 111 S.Ct.

752 (1991), Horowitz and Newton, the sole

shareholders of a printing facility, were

held liable under CERCLA. Id. at 962. The

court based its decision that Horowitz and

Newton qualified as owners and operators

the undisputed fact that Horowitz

Newton actively managed the facility.

961.

Kelley v. Thomas Solvent Co.,

F.Supp. 1554 (W.D.Mich. 1989), held t

corporate individuals were potentia

liable for CERCLA violations. It reason

Id.

CERCLA's statutory scheme varies the

configuration of traditional

corporate principles which prevent

individual liability absent a

conclusion that an individual engaged

in procedural irregularities

justifying a court in "piercing of

the corporate veil" or that an

individual has had close, active

involvement or direct supervision in

the events leading to the alleged

tortious harm.

at 1560. The court went on to c

and

727

hat

lly

ed:

ite

NEPACCO, supra, Shore Realty, Supra, and

several district court cases in concluding

that the weight of authority holds that,

in some circumstances, under CERCLA or

related statutory schemes, a court may find

an individual personally liable for

unlawful hazardous waste practices where

strict traditional corporate principles do

not apply. Id. at 1561. The court said the

relevant inquiry for deciding whether to

hold an individual liable is whether he

could have prevented the hazardous waste

discharge at issue.

The court refused to dismiss the

plaintiff's claim in Kelley ex rel.

Michigan NRC v. Arco Industries, 721

F.Supp. 873 (W.D.Mich. 1989), because the

court found the defendants were potential ly

liable for CERCLA violations as

shareholders or officers and directors of

Arco. The court cited numerous cases in

stating:

([Tjhe case law suggests that

corporate officers can be held liable

under CERCLA for unlawful disposal

of hazardous waste.... The decisions

that concern “owners or operators"

under § 107(a)(1) base liability

decisions on the individual officer's

knowledge, responsibility,

opportunity, control, and involvement

in the disposal process.

Id. at 878. Yefendants Matthaei and

Ferguson were potentially liable under

CERCLA because Matthaei had "overall

responsibility for operation and

management" of the _ site and Ferguson

"directly oversees the operation and

management of the plant." Id. at 879,

citing Complaint paras. 11, 12.

Numerous other district court cases have

Similarly held corporate individuals liable

under CERCLA. United States v. Carolawn

Co., 14 Env't L.Rep. 20,699 (D.S.C. 1984)

(held that three corporate officers were

personally liable under CERCLA); United

States v. Conservation Chemical Co., 628

F.Supp. 391 (W.D.Mo. 1985) (corporation's

founder, chief executive officer and

majority stockholder liable under CERCLA).

c. The Fifth Circuit's declaration

that a shareholder, officer, and

director cannot be held liable under

CERCLA is in direct conflict with

Fifth Circuit holdings that corporate

individuals are potentially liable

as individuals and with the Fifth

Circuit's definitions of owner or

operator in analogous contexts.

The Fifth Circuit has’ repeatedly

maintained that an officer of a corporation

can be held personally liable for a tort

when he participates in or authorizes the

commission of the tort, even on behalf of

the corporation. Mozingo v. Correct Mfg.

Corp., 752 F.2d 168 (5th Cir. 1985);

Shinqleton v. Armor Velvet Corp., 621 F.2d

180 (5th Cir. 1980) (officers who take part

in the commission of a tort by the

corporation may be held personally liable).

Since a corporate officer is potentially

liable, he should be held liable under

CERCLA if he fits the meaning of "owner or

operator" as used in 42 U.S.C.A. § 9607 (a)

and as defined in 42 _ U.S.C.A. §

9601(20) (A). Section 9607(a) defines

persons who are liable under private causes

of action to include "... the owner and

operator of ...a facility." § 9601(20) (A)

defines owners and operators as follows:

The term "owner or operator" means

-++ (ii) in the case of an onshore

facility or an offshore facility, any

person owning or operating such

facility.... Such term does not

include a person, who, without

participating in the management of

a vessel or facility, holds indicia

of ownership primarily to protect his

security interest in the vessel or

facility.

Providing further guidance is the Fifth

Circuit's definition of owner or operator

under the Federal Water Pollution Control

Act, 33 U.S.C. § 1251, et seq., (West 1986

& Supp. 1990), which Closely parallels

CERCLA. The Fifth Circuit defined an owner

Or operator as an individual who has the

"power to direct the activities of persons

who control the mechanisms causing the

pollution. The owner-operator has the

capacity to prevent and abate damage."

United States v. Mobil Oil Corp., 464 F.2d

1124, 1127 (5th Cir. 1972).

d. The Fifth Circuit's declaration that

a shareholder, officer, and director

cannot be held liable under CERCLA is

in direct conflict with the intentions

of Congress in enacting CERCLA and with

decisions of the Second and Eighth

Circuits and several district courts

which have addressed the issue.

The Fifth Circuit's position on this

matter is contrary to legislative and

judicial precedent. Congress has clearly

stated that those persons who incur the

benefits of improper hazardous’ waste

disposal should be held liable for their

actions. The Second and Eighth Circuits

have construed liability broadly in order

to effectuate Congress' purpose. In

contrast, the Fifth Circuit has construed

liability narrowly, allowing parties who

benefit from improper disposal to escape

liability.

For instance, in Joslyn Mfq. Co. v. T.L.

James & Co., Inc., 893 F.2d 80 (5th Cir.

1990), cert. denied, 111 S.Ct. 1017 (1991),

the Fifth Circuit declined to hold that a

parent corporation was potentially liabie

for its subsidiary's failure to comply with

the requirements of CERCLA:

Joslyn urges this court to _ read

CERCLA's definition of “owner or

operator" liberally and broadly to

reach parent corporations whose

subsidiaries are found liable under

the statute. ... We decline to do so.

ia, at 62; This decision is obviously

contrary to Congress' intent that CERCLA,

a remedial statute, be interpreted broadly.

It is likewise inimical to cases decided

by other circuit and district courts in

which those courts properly construed

liability under CERCLA broadly. See

NEPACCO, supra; Shore Realty, supra; Mobay

Corp. v. Allied-Signal, Inc., 761 F.Supp.

345, 350 (D.N.J. 1991).

Similarly, the Fifth Circuit has

declined to impose liability upon corporate

officers under the Rivers and Harbors Act

of 1899, 33 U.S.C. § 401, et seq.. Even

though that statute imposes liability upon

"Every person and every corporation that

shall violate any of the provisions of [the

River and Harbors Act]," the Fifth Circuit

denied that corporate officers were

potentially liable. United States v. Sexton

Cove Estates, Inc., 526 F.2d 1293 (5th Cir.

1976). The court said that since the Act

ine cetaieceincaliaialll

did not explicitly deem corporate officers

liable, they were protected by principles

of corporate liability.

In United States v. Joseph G. Moretti,

Inc., 526 F.2d 1306 (Sth Cir. 1976), which

was also decided under the River and

Harbors Act, the Fifth Circuit again

declined to impose personal liability, even

though the personal involvement of the

corporate officer had been Clearly

established. The court reasoned:

We have today explained in Sexton,

Supra, that the Rivers and Harbors

Act does not authorize such personal

liability.

Id. at 1310. In both Sexton, supra, and

Moretti, it is important to note that the

Fifth Circuit did not just refuse to impose

personal liability on the facts of the

case, but declared that an individual could

not be held liable for the corporation's

violations of the Act, regardless of the

facts.

In summary, the decisions of the Fifth

Circuit regarding liability of corporate

officers are clearly contrary to decisions

of the Second and Eighth Circuits and to

the intent of Congress. In addition, the

decisions run counter to the Fifth

Circuit's own precedents, set forth in

cases such as Mozingo, supra, and

Shingleton, supra, which hold that a

corporate officer may be held personally

liable for the acts of the corporation.

Thus, this Court should review this case

in order to clarify the issue of whether

a corporate individual is potentially

liable for violations of CERCLA.

If this Court finds that an individual

may be held liable for corporate

violations, then Prescott should be found

liable as an owner or operator because he

satisfies the definitions of owner or

operator set forth above. He does not

qualify for the exemption stated in 42

U.S.C.A. § 9601(20)(A) because he did in

fact participate in the management of the

facility and because the position that he

occupied within the corporate structure

was one from which he completely controlled

the corporation. The facts clearly

demonstrate his ongoing participation in

monthly management meetings discussing the

financial status of the New Orleans

asbestos operation. He received memoranda

during the operational phase of IBP which

concerned the actual operations of the

plant. (Record 425) (Excerpt 28). Finally,

not only is he the sole other officer but

von Dohlen also describes him as a

consultant for the corporation. (Record

401) (Excerpt 13).

CONCLUSION

Left standing, the Fifth Circuit's

decision amounts to a carte blanche for

individuals to shield themselves with straw

corporations in order to effect the

dastardly deed of toxic disposal. They may

own and control the company so long as they

are not the persons charged with pushing

the right buttons.

Because the Fifth Circuit's decision

conflicts with holdings of the Second and

Eighth Circuits, it will cause great

uncertainty regarding the potential

liability of shareholders, officers, and

directors of a corporation for the

corporation's failure to comply with the

requirements of CERCLA. The Fifth

Circuit's decision will allow persons to

incur the benefits of improper disposal of

hazardous wastes without paying the costs

associated with their actions.

Petitioner respectfully requests that

this Court grant certiorari on the issue

of whether it is proper to exempt

Shareholders, officers, and directors of

a corporation from liability under CERCLA.

CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correc

copy of the foregoing was mailed this |3~

~ day of Apa , 1988 to

Ralph S. Hubbar II, Friend, Wilson, &

Draper, LL&E Tower, Suite 2600, 909 Poydras

Street, New Orleans, LA 70112-1017, and to

each other party to this action by

depositing same in the United States mails,

properly addressed to his, her or its

counsel of record, first class postage

prepaid.

MARTZELL, THOMAS & BICKFORD

Counsel of Record for Petitioner

338 Lafayette Street

New Orleans, LA 70130

a (504) 581-9065

By:

SCOTT R. KFO

JOHN R. MARTZEL

STATE OF LOUISIANA )

PARISH OF ORLEANS )

SWORN TO AND SUBSCRIBED before me the

undersigned authority this _ 4744 day

of , 1991.

becca: te ow

NOTARY PUBLIC

State of Louisiana

APPENDIx

MEMORANDUM OF THE FIFTH CIRCUIT

COURT OF APPEALS .... . «+ « - 1

ORDER AND REASONS OF UNITED

STATES DISTRICT COURT FOR THE

EASTERN DISTRICT OF LOUISIANA... . 17

COMPREHENSIVE ENVIRONMENTAL RESPONSE

COMPENSATION AND LIABILITY ACT

OF 1980 (CERCLA), 42 USC §§ 9601

(20) (A), 9601(21), 9607(a) ..... 44

[FILED MAY 15, 1991]

UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

NO. 90-3531

RIVERSIDE MARKET DEVELOPMENT CORP.,

ET AL

PLAINTIFFS-APPELLANTS

INTERNATIONAL BUILDING PRODUCTS, INC.,

ET AL

Appeal from the

United States District Court

for the Eastern District of Louisiana

Honorable Veronica Wicker,

District Judge, Presiding

Argued and submitted

MEMORANDUM

Before: THORNBERRY, HIGGINBOTHAM

and BARKSDALE

CiRCUIT JUDGES

PER CURIAM:

The appellants, a group of developers,

purchased an asbestos product manufacturing

facility in New Orleans, Louisiana and

App. 1

converted the facility site into a shopping

center. invoking the Comprehensive

Environmental Response Compensation and

Liability Act ("CERCLA"), 42 U.S.C.A. §§

9601-9657 (West 1983 & Supp. 1990), the

appellants sought to recover cleanup costs

from an officer and former’ majority

shareholder of the asbestos’ product

manufacturing facility. The district court

granted the corporate officer's motion for

summary judgment finding that no genuine

issue of material fact existed to show that

the officer was an “owner or operator" of

the asbestos manufacturing facility within

the meaning of CERCLA. After conducting

a de novo review of the record, we agree

with the district court's finding, and,

therefore, we AFFIRM

App. 2

FACTS AND PROCEEDINGS BELOW

This case arises from the purchase,

demolition and cleanup of an asbestos

manufacturing plant that had been operating

on Tchoupitoulas Street at the foot of

Jefferson Avenue in the middle of uptown

New Orleans, Louisiana fer some fifty-seven

years. The plant had operated under the

control of R. J. Dorn Corporation and

Asbestone Corporation for twenty-five

years, followed by twenty-eight years of

operation under the ownership of National

Gypsum Company. In 1981, National Gypsum

sold the entire operation to International

Building Products ("IBP"), a Delaware

corporation and a defendant in the district

court. After the sale, IBP continued to

employ the entire National Gypsum work

App. 3

force, approximately 230 people, and the

facility continued to manufacture asbestos

products.

At the time of the purchase of the

asbestos plant, IBP had two shareholders,

T. Gene Prescott, holding eighty-five

percent. See Record of Appeal, Vol. 2 at

402 and 405. Prescott held the positions

of secretary of the corporation, consultant

and chairman of the board, see Record on

Appeal, Vol. 1 at 93; Vol. 2 at 304 and

401, while von Dohlen served as_ the

company's president and chief executive

officer, see Record on Appeal, Vol. 2 at

304 and 395. Prescott lived in New York

and visited the New Orleans facility only

two to four times a year. See id. at 403.

The purposes of these visits included:

attending the annual Christmas party,

App. 4

attending a meeting for an _ Erectors'

Association,s one of whose members were IBP

customer, and brief visits with executive

personnel. See Record of Appeal, Vol. 1

at... 93. As an IBP officer, Prescott

reviewed financial statements regularly and

von Dohlen testified that "(djuring

meetings of officers, [Prescott] consulted

with me or other people but that's about

it.* See id. Von Dohlen took a more

active part in the in the day-to-day

operations of the plant, spending

approximately forty percent of his work

week at the New Orleans factory and

negotiating contracts with various fiber

Suppliers to supply raw asbestos to the

plant. See id at 395-96 and 407.

IBP continued to operate the asbestos

plant until 1985 when a continuing decline

App. 5

in the market for asbestos products forced

IBP to shutdown the operation. Soon after

the closing of the facility, IBP was

contacted by Gordon Kolb, president of

Riverside Market Development Corporation

("RMDC"), who negotiated to purchase the

site in order to develop a shopping center.

IBP lowered its original asking price of

$3,400,000 by $410,000 in return for Kolb's

promise to undertake demolition of the

facility on his own and relieving IBP of

that obligation. Both Louisiana and

federal law require’ that, prior to

demolition of any building, all friable

asbestos must first be removed. RMDC

purchased the pliant site at the reduced

price in November 1985 and later

transferred title to the property to

Riverside Market Limited Partnership

App. 6

("RMLP"). Cleanup of the site was

completed in 1986. In December 1988, RMDC

sued IBP as well as its two corporate

officers, von Dohlen and Prescott, to

recover for cleanup costs. RMDC alleged

that IBP had improperly disposed of

hazardous wastes including asbestos and by-

products of the asbestos manufacturing

process. RMLP was later added as a

plaintiff by RMDC's’~— second amended

complaint. See Record on Appeal, Vol. 1

at 186. Still a third amended complaint

substituted twelve individuals, all former

partners in RMLP, as plaintiffs to replace

RMDC and RMLP. See Record on Appeal, Vol.

2 a i104. The plaintiffs based their

claims against the individual officers of

IBP on § 9607(a) of CERCLA which states in

relevant part that "any person who at the

App. 7

time of disposal of any hazardous substance

owned or operated any facility at which

such hazardous substances were disposed of

...- Shall be liable for [cleanup costs]."'

42 U.S.C.A § 9607(a) (West Supp.1990).

In March of 1990, the defendants filed

a Motion for Summary Judgment arguing among

other things that the individual officers

of IBP were not “owners or operators" as

defined by CERCLA. In response to that

motion, District Court Judge Veronica D.

Wicker dismissed plaintiffs’ complaint in

its entirety as to T. Gene Prescott. *

. Another section of CERCLA, 42

U.S.C.A. §9613 (f)(1), provides that a

party who removes hazardous wastes as

required by the Act may seek contribution

from “any other person who is liable ...

under section 9607(a)."

¢ The court did not dismiss the suit

as to von Dohlen, finding that a genuine

issue of material fact existed as to

whether or not von Dohlen was an “operator"

App. 8

Plaintiffs filed a timely appeal and now

contest the court's dismissal of their

CERCLA action only as it applies to T. Gene

Prescott. Therefore, the issue presented

for our review may be stated as whether or

not Prescott, a majority shareholder and

office of IBP, may be held personally

liable for cleanup costs as an owner or

operator of the asbestos manufacturing

facility under § 9607(a) of CERCLA.

DISCUSSION

I. Standard of Review

of the asbestos plant as defined by CERCLA.

See Record on Appeal, Vol. 3 at 598. The

district court did order a judgment in

favor of both von Dohlen and IBP with

regard to portions of the plaintiffs’

complaint that alleged causes of action for

public nuisance and causes of action

arising under the Louisiana Environmental

Quality Act. See id at 605. These

additional findings have not been contested

on appeal, and we will therefore ignore

them for purposes of this opinion.

App. 9

In reviewing a district court's grant

of summary judgment, we review the evidence

de novo and apply the same criteria as that

used by the lower court. Summary judgment

is proper if no genuine issue of material

fact exists and the moving party is

entitled to judgment as a matter of law.

See Anderson vy. Liberty Lobby, Inc. 477

U.S. 242, 250, 106 S.Ct. 2505, 2511, 91

L.Ed. 2d 202 (1986). For the purposes of

this case, the defendant, Prescott, may

rest his motion for summary judgment on the

absence of evidence to support’ the

plaintiffs' claim that he was an “owner or

operator" of the asbestos plant at the time

that the CERCLA violations took place. See

Celotex Corp. v. Catrett 477 U.S. 317, 325,

106 S.Ct. 2548, 2554, 91 L.Ed. 2d 265

(1986). The plaintiffs may not defeat

App. 10

Prescott's motion for summary judgment with

"evidence [which] is merely colorable or

is not significantly probative." Liberty

Lobby, 477 U.S. at 249-50, 106 S.Ct. at

2511 (citations omitted). The plaintiffs

must instead come forward with "significant

probative evidence demonstrating the

existence of a triable issue of fact."

Southmark Properties v. Charles House

Corp., 742 F.2d 862, 877 (5th Cir. 1984).

II. Owner or Operator under CERCLA.

[1] Under 42 U.S.C.A. §9601 (20) (A),

CERCLA defines “owner or operator" as "any

person owning or operating‘ a facility, and

it specifically excludes any "person, who,

without participating in the rn»nagement of

a vessel or facility, holds indicia of

ownership primarily to protect his security

interest in the vessel or facility."

App. 11

Prescott's position as majority shareholder

of IBP did not make him an owner of the

asbestos manufacturing plant. The plant

was purchased by the IBP corporate entity

and not by Prescott. "The property of the

corporation is its property, and not that

of the stockholders, as owners." i ¢.

Keating & G. O'Gradney, Fletcher Cyclopedia

of the Law of Private Corporations § 31 at

555 (1990).

[2] We now turn to the question whether

Prescott could have been considered an

"operator" of the asbestos plant during the

time that the plant was owned by IBP.

Because CERCLA was a hastily drafted Act

and passed through a lame-duck

Congressional session,° it is not

> See Developments in the Law - Toxic

Waste Litigation, 99 Harv. L. Rev. 1458,

1465 & n.1 (1986); United States v.

Mottolo, 605 F. Supp. 898, 902 (D.N.H.

App. 12

surprising that the statute does not

explicitly describe the defining character

of an “operator” as used within the

statute. While we can conceive of

situations where an individual director,

officer or employee of a corporation may

be considered an "operator" of a

manufacturing facility as defined by

CERCLA, this suit, does not present such

a situation.

Under traditional concepts of corporate

law, the principle of limited liability

would protect officers or employees like

Prescott from being held responsible for

the acts of a valid corporation. However,

CERCLA prevents individuals from hiding

1985) ("CERCLA has acquired a well-deserved

notoriety for vaguely drafted provisions

and an indefinite, if not contradictory,

legislative history.").

App. 13

behind the corporate shield, when as

"operators," they themselves actually

participate in the wrongful conduct

prohibited by the Act. See 42 U.S.C.A. §

9607(a) (West Supp. 1990) ("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 ... shall be liable (cleanup

costs]."); see also S. Rep. No. 848, 96th

Cong., 2d Sess. 98 (1980) (noting that

society should not bear the costs of

protecting the public from hazardous wastes

generated by an "owner or operator who ...

now wishes to be insulated from any

continuing responsibilities."). In such

cases, a defendant can be held individually

liable for his wrongful conduct. "[(T]his

personal liability is distinct from the

App. 14

derivative liability that results from

‘piercing the corporate veil'" where we

would hold the owners of a less than bona

fide corporation responsible for corporate

acts. United States v. Northeastern

Pharmaceutical & Chemical Co., Inc., 810

F.2d 726, 744 (8th Cir. 1986), cert denied,

484 U.S. 848 108 S. Ct. 146, 98 L.Ed 2d

102 (1987); cf. 3A S. Flanagan & C.

Keating, Fletcher Cyclopedia of the Law of

Private Corporations §1135 (1986)

("Corporate officers are liable for their

torts, although committed when acting

officially."). In determining liability

in cases like the one now before us, we

must look to the extent of the defendant's

personal participation in the alleged

wrongful conduct.

App. 15

The plaintiffs in this case have failed

to come forward with any evidence showing

that Prescott personally participated in

any conduct that violated CERCLA. The

record clearly indicates that Prescott

spent very little time at the asbestos

plant, and no evidence has been presented

to indicate that such visits would have

provided Prescott with the opportunity to

direct or personally participate in the

improper disposal of asbestos or asbestos

by-products. Prescott lived in New York

and only visited New Orleans two to four

times a year; and his participation in

plant operations were limited to reviewing

financial statements and attending meetings

of the officers where he consulted with

von Dohlen and others. On such sparse

evidence we find that the district court

App. 16

committed no error in granting summary

judgment in favor of Prescott.

AFFIRMED.

App. 17

[FILED 5/23/90]

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF LOUISIANA

RIVERSIDE MARKET CIVIL ACTION

DEVEL. CORP. #88-5317

VERSUS

INTERNATIONAL BUILDING SECTION "L"

PRODUCTS ET AL (6)

This case arises from the demolition and

clean-up of an asbestos manufacturing

facility located in new Orleans, Louisiana.

On March 11, 1981, the defendant

International Building Products, Inc.

("IBP"], a Delaware corporation, purchased

the National Gypsum Company plant site,

facility, equipment and materials and hired

National Gypsum's entire work force to

continue operating the plant. IBP

continued to manufacture asbestos cement

App. 18

products for four years. After the plant

closed in March, 1985, a few IBP employees

were retained to clean up the site to make

it presentable for sale. In May, 1985,

purchasers were found who wanted to build

a shopping center on the site, so the

asbestos manufacturing plant had to be

demolished. IBP agreed at first to sell

the property for $3,400,000 and to be

responsible for tearing the building down

to the slab. Later IBP reduced the selling

price by $410,000 because the buyers agreed

to demolish the building themselves.

Louisiana and federal law required that,

prior to demolition of any building, all

friable asbestos first be removed.

Riverside Market Development Corporation

{"RMDC"] purchased the plant site on

November 7, 1985. On March 20, 1986, RMDC

App. 19

transferred title to the site to Riverside

Market Limited partnership ["RMLP"] and

transferred to RMLP its claim for cleanup

costs. Clean up was completed in August,

1986. On December 2, 1988, the plaintiffs

sued IBP and its two corporate officers,

Gerard von Dohlen and T. Gene Prescott, to

recover clean up costs. By amended

complaint, RMLP and twelve individuals have

been added as plaintiffs.

The defendants filed a motion for

summary judgment asking the Court to

dismiss plaintiffs' complaint in its

entirety against von Dohlen and Prescott;

to dismiss the plaintiffs' state law claims

in Count IV (arising under the Louisiana

Environmental Quality Act ["LEQA"] and in

Count II (a claim for unjust enrichment and

public nuisance) against IBP; and to

App. 20

dismiss all claims of RMDC and RMLP with

prejudice.

Defendants' motions were submitted to

the Court on aée$former date. Having

considered the briefs and arguments of

counsel and the applicable law, the Court

ORDERS that the defendants' motion for

summary judgment BE GRANTED IN PART AND

DENIED IN PART:

Defendants' motion for summary judgment

IS GRANTED as to all of the plaintiffs'

claims against Prescott, and as to

plaintiffs' state law claims against von

Dohler and IBP contained in Count IV

(arising under the LEQA) and in Count II

(public nuisance). Defendants' motion for

summary judgment Is DENIED - as to

plaintiffs' claims against von Dohlen under

the Comprehensive Environmental Response

App. 21

Compensation and Liability Act, 42 USC §

9601 et seg. ["CERCLA"]. The Court will

defer ruling on the defendants' motion as

to plaintiffs' claim for unjust enrichment

in Court II until the time of trial. The

Court also reserves its ruling on the

defendants' motion as to all claims of RMDC

and RMLP until the Magistrate decides the

plaintiffs' motion to substitute party

plaintiffs.

LIABILITY OF PRESCOTT AND

VON DOHLEN UNDER CERCLA

"Under 42 usc §9607(A), CERCLA provides

a private cause of action where a release

or threatened release of a hazardous

substance causes response costs to be

incurred. The persons covered are:

(1) the owner and operator of ... a

facility,

App. 22

arya ace

(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,

(3) any person who by contract,

agreement, or otherwise arranged for

disposal or treatment, or arranged with

a transporter for transport for disposal

or treatment, of hazardous substances

owned or possessed by such person...,

(4) any person who accepts or accepted

any hazardous substances for transport

to disposal or treatment facilities..."

Tanglewood East Homeowners et al v.

Charles-Thomas, Inc., et al, 849 F. 2d

1568 (5th Cir. 1988)

42 USC §9707(a) (1) Covers present owners

and operators; 42 USC §9607(a)(2) covers

App. 23

past owners and operators. Neither von

Dohlen nor Prescott ever held title to the

asbestos manufacturing facility; neither

can be liable as an owner under 42 USC

§9607 (a) (1) or 42 USC §9607(a) (2).

Similarly, since demolition occurred after

the sale to the plaintiffs, neither von

Dohlen or Prescott qualify as present

operators under 42 USC §9607(a) (1).

However, CERCLA "does not limit disposal

to a one-time occurrence." Tanglewood East

Homeowners et al v. Charles-Thomas, [Inc.,

et al, 849 F. 2d 1568 (5th Cir. 1988).

"Disposal" may be merely the "placing of

any ... hazardous waste into or on any land

--" 42 USC §6903(3). Id. Therefore if

hazardous wastes were disposed of during

IBP's ownership of the New Orleans facility

and if Prescott and von Dohlen "“operated'

App. 24

the facility during that time, they would

be liable under 46 USC §9707(a) (2).

42 USC §9601(20) (A) defines "operator"

only in the negative: "Such term does not

include a person, who, without

participating in the management of a

facility, holds indicia of ownership

primarily to protect his security interest

in the ... facility." The Court then must

look at the activities of Prescott and von

Dohlen to determine their degree of

participation in the operations of the IBP

New Orleans facility.

When IBP purchased the National Gypsum

plant, Prescott and von Dohlen were the

sole shareholders: Prescott held eighty-

five per cent (85%) of the stock and served

as Chairman of the Board; von Dohlen held

fifteen percent (15%) of the stock and

App. 25

served as President. From March 1981

through December 1983, von Dohlen also

served as Chief Executive Officer. In

1984, other shareholders invested in IBP.

Prescott lived in New York and only

visited the New Orleans facility on one to

three occasions per year during the time

that IBP owned the plant: (1) annual

Christmas party; (2) attendance at a

meeting for an Erectors' Association, some

of whose members used products from the

plant and (3) brief visit with executive

personnel. (Defendants' Exhibit B.) Von

Dohlen testified that Prescott was

principally the source of money. (Von

Dohlen deposition, August 21, 1987, p.

130). Von Dohlen further explained that

as an IBP officer, Prescott reviewed

financial regularly. "During meeting of

App. 26

officers, he consulted with me or other

people but that's about it." (Id. at p.

131.) The Court finds no evidence that

Prescott was an operator of the asbestos

manufacturing facility within the meaning

of CERCLA.

As to von- Dohlen, however, the Court

finds that a genuine issue of material fact

exists as to whether or not he was an

"operator" under CERCLA. Unlike Prescott,

von Dohlen spent forty percent (50%) of his

time in New Orleans. He testified that

from March 1981 through December, 1984, he

spent ten percent (10%) of his time each

month at the New Orleans factory. (Von

Dohlen Deposition, August 21, 1987, p. 16).

Although he states in his affidavit that

his major duties involved sales, he

testified earlier that he was occasionally

App. 27

involved in the actual day-to-day

operations of the factory, that he may have

operated some of the machines himself from

time to time in order to solve problems in

manufacturing processes, and that he was

actually out on the plant floor supervising

at other times. (76. at p. 17.) Ray

Plauche confirmed that through 1984, von

Dohlen had an office at the plant, and was

at the plant "almost every week -- for all

practical purposes, three weeks out of the

month." (Plauche deposition, September 24,

1987, p. 36.) Ina later deposition, von

Dohlen testified that from December, 1983,

until the plant was sold, he visited it

twice: once to meet with the buyer while

operations were either still going on or

had just ceased [April or May of 1985] and

once for the auction/sale. (Von Dohlen

App. 28

deposition, December 7, 1989, p. 23.)

As to his role in the sale of asbestos

products and the disposal of hazardous

wastes, von Dohlen testified that he

ordered asbestos fiber from various

companies and negotiated contracts with

various fiber suppliers to supply raw

asbestos to the plant. (Id. at p. 26.)

He also explained that he participated in

altering the formulations of products

previousiy produced by National Gypsum and

participated in decisions as to which

formulations were to be used in those

products. Despite his assertions that he

was not involved in decisions’ about

compliance with environmental regulations

except for getting the required by the

Environmental Protection Agency ["EPA"]

permit (Id. at p. 34), von Dohlen admitted

App. 29

that during his tenure, "We disposed of

asbestos pursuant to licenses in the

regular course of business in the plant.

And we were familiar with those." Von

Dohlen was not sure whether there were

different regulations for removing asbestos

when the plant was demolished. (Von Dohlen

deposition, August 21, 1987, p. 43.)

Other evidence shows that when IBP

bought the plant from National Gypsum, von

Dohlen wrote the cover letter and signed

IBP's application for an identification

number from the Louisiana Hazardous Waste

Management Program for Tchoupitoulas

facility. (Plaintiffs' Exhibits 6 and 7.)

Also on March 15, 1983, the State of

Louisiana sent a warning letter to von

Dohlen, as president of IBP, stating that

an inspection revealed that a "container

App. 30

of hazardous waste was not marked with

required information" and giving IBP thirty

(30) days to correct the violation.

(Plaintiffs' Exhibit 11.). Later von

Dohlen received a copy of a June 22, 1983,

letter to Ray Plauche about OSHA citations.

(Plaintiffs' Exhibit 16.) Then in January

and March of 1984, the New Orleans Sewerage

and Water Board wrote to von Dohlen, as

president of IBP, about the lack of

compliance with zero discharge of asbestos

requirement into the public’ drainage

system. (Plaintiffs' Exhibits 14 and 15.)

All of the foregoing evidence raises a

Significant question about the extent of

von Dohlen's participation in the

operations of the IBP plant.

Recently, the Fifth Circuit refused to

extend CERCLA liability to parent

App. 31

corporations for the acts of their

subsidiaries absent some evidence that the

corporate veil had been pierced. Joslyn

Manufacturing Company v. T. L. James & Co.,

ine, F. 2d (5th Cir. Jan. 19, 1990).

Movers would have this Court extend Joslyn

to cover corporate officers as well. This

Court declines to do so for the following

reasons. In the first place, even though

the district court opinion in Joslyn

contained dicta about corporate officer

liability,’ The Fifth Circuit confined

itself to the issue of parent/subsidiary

liability. Accordingly, Joslyn is clearly

distinguishable; there is no

. 2. Stagg stated that "[n]Jeither the

clear language of CERCLA nor its

legislative history provide authority for

imposing individual liability on corporate

officers." Joslyn Corp. v. R. L. James &

Company, Inc., et al, 696 F. Supp. 222, 226

(W.D. La. 1988).

App. 32

parent/subsidiary question here. In the

second place, this Court is not convinced

that the dicta in the district court

opinion requires a different result in this

case. Even though Judge Stagg declined

under the facts of Joslyn to follow other

Circuits which had held corporate officers

liable for hazardous waste clean up under

CERCLA, he nonetheless recognized that

those cases represented an exception to the

general rule of limited liability for

corporate officers. Joslyn Corp. v. T. L.

James & Company, Inc., et al 696 F. Supp.

222, 224 (W.D. La. 1988).

These cases [State of N.Y. v. Shore

Realty Corp. 759 F.2d 1032 (2d Cir.

1985); United States v. Conservation

Chemical Co. 619 F. Supp. 162 (W.D.

Mo. 1985); United States v. Carolawn

App. 33

Company, 21 Env't Rep. Cas (BNA) 2124

(D.S.C. 1984); United States v.

Northeastern Pharmaceutical, 810 F.

2a 726 (8th Cir. 1986) ]} involved

factual situations where the personal

participation in the illegal disposal

of hazardous waste by the corporate

officers was significant. As one

commentator has noted, these "courts

have avoided the common law rule of

limited liability by either

explicitly or implicitly applying a

generally recognized exception: a

corporate officer is liable for the

wrongful acts of a corporation when

he personally participates in the

wrongful conduct." Comment, 38

Mercer L. Rev. at 685. a - ae a

James & Company and its officers and

App. 34

directors had been actively involved

in the day-to-day operations of

Lincoln, including the disposal of

hazardous waste, then, arguably,

liability would attach. See

generally Shingleton v. Armor Velvet

Corp., 621 F.2d 180 (5th Cir. 1980)

L.C.L. Theatres, Inc. v. Columbia

Pictures Industries, Inc. 619 F.2d

455 (5th Cir. 1980); 'Tillman v.

Wheaton-Haven Recreation

Associations, Inc., 517 F.2d 1975.°

. 0 Shingleton, corporate officers

approved the use of fraudulent

misrepresentations to induce the sale of

an electrostatic decorating service. In

L.C.L. Theatres, Inc., the president and

principal shareholder approved and

participated in fraudulently underreported

box office receipt in order to avoid rent

obligations. The Court said "in these

circumstances, '[i]t is not necessary that

the corporate veil be pierced or even

discussed. An officer of any other agent

of a corporation may be personally as

responsible as the corporation itself for

App. 35

ifs, He 206,

If, as in the cases cited by Judge

Stagg, von Dohlen personally participated

in the disposal of hazardous wastes, then

he may be liable for the wrongful acts of

the corporation even under Judge Stagg's

Joslyn opinion. There are still

significant unresolved questions of fact

over von Dohlen's personal participation

in IBP's activities. Those disputes of

fact prevent the Court's granting summary

judgment in von Dohlen's favor on the

CERCLA issue.

LIABILITY OF ALL DEFENDANTS

tortious acts when participating in the

wrongdoing [Citations omitted.]* 619 F. 2d

at 457. In Tillman,, the directors of

community swimming pool association were

found to be personally liable _ for

unlawfully discriminating against black

applicants because the directors’ had

knowingly voted for discriminatory

policies.

App. 36

UNDER LEQA

Even though the Court finds material

disputes of fact which preclude the

granting of the motion for summary judgment

in von Dohlen's favor based on CERCLA, the

Court agrees with the defendants that there

can be no liability on the part of

Prescott, von Dohlen or IBP under LEQA.

Those responsible under LEQA are similar

to those responsible under CERCLA® so

> La. B.S. 3052273 "persons who must

comply with requirements of this Chapter,"

provides:

(1) The owners, operator, or lessee of

any pollution source or facility.

(2) Any person who generated a

hazardous waste which was eventually

transported, stored, disposed of or

discharged at a pollution source or

facility.

(4) Any other person who disposed of

or discharged a hazardous substance at

a pollution source or facility.

App. 37

Prescott bears no liability as_ an

"operator" under either statute.

Plaintiffs also have no claim under LEQA

against IBP as owner and against von

Dohlen, even if he were found to be an

"operator" under CERCLA and LEQA, for the

following reasons.

LEQA is designed primarily as a remedy

for the state of Louisiana. It allows the

: Chapter aes "Liability for

Hazardous Substance Remedial Action, La.

R.S. 30:2271 Findings and _ Purpose"

provides:

A(4) The state cannot and should not

bear the costs associated with a private

profit making venture.

(B) The purpose of this Chapter is to

encourage prompt notification to the

department of any hazardous substance ...

disposal, to identify locations at which

a... disposal of a hazardous substance may

have occurred at any time in the past, to

provide a mechanism to the department to

insure that the costs of remedial actions

are borne by those who contributed to the

.-- disposal, and to allow the department

to respond as quickly as possible to

App. 38

State to "make a written demand on every

owner,... operator, or other responsible

person who has participated in the disposal

or discharge of a hazardous substance at

the site to undertake remedial actions at

the site in accordance with a plan approved

by the secretary or pay to the secretary

the cost of the remedial action to be taken

by the secretary." La. R.S. 30:2275. La.

R.S. 30:2276 allows the state to recover

the costs of remedial action. [-. RS.

hazardous substance discharges while

retaining the right to institute legal

actions against those responsible for

remedial costs.

5 La. R.S. 30:2276(A) provides

The court shall find the defendant liable

to the state for the costs of remedial

action taken because of any actual or

potential discharge or disposal which may

present an imminent and_= substantial

endangerment to health or the environment

at a pollution source os facility if the

court finds that the defendant performed

any of the following: ...

App. 39

30:2276(F) recognizes that there may be

several sources of hazardous wastes and

creates a presumption of in _ solido

liability among those sources for the costs

of recovery, which presumption may be

App. 40

rebutted in a court proceeding.° La. R. S.

30:2276(G) is the penalty provision

designed for those who fail to respond to

the state's demands. La. R.S. 30:2276(G)

provides:

Those participating parties who agree

to clean up the pollution source or

facility prior to the initiation of

suit [by the State] may sue and

recover from any other

6 La. R.S. 30:2276(F) provides:

All persons who have generated a hazardous

substance disposed of at the site,... or

disposed of a hazardous substance at the

pollution source or facility shall be

presumed to be liable in _solido by the

court for the cleanup of the site unless

a party shows by a preponderance of the

evidence that the costs of remediation

should be apportioned and there is a

reasonable basis of determining the amount

of the contribution of each party to the

discharge of disposal. [H]owever, any

party shall have the right to establish

his proportionate contribution to the site

and his liability shall be limited to his

degree of contribution.

App. 41

nonparticipating party who shall be

liable for twice their portion of the

remedial costs.

A "participating party" is a "person who

undertakes remedial action after receiving

a demand from the secretary in compliance

with the demand and as approved by the

secretary." La. R.S. 30:2272(7). In this

case, the buyers of the property qualify

as participating parties under the statute.

They received written demand from the State

to clean up the facility, which they

subsequently did to the state's

satisfaction. (Plaintiffs' Exhibits 19,

20°24.) Prescott, von Dohlen and IBP,

however, do not qualify as either

participating or nonparticipating parties

under the statute. A “nonparticipating

party" is "a person who refuses to comply

App. 42

with the demand of the secretary, or fails

to respond to the demand, or against whom

a suit has been filed by the secretary."

La. R.S. 30:2272(6). There is no evidence

that IBP or Prescott or von Dohlen -- the

sellers -- ever received any written demand

from Louisiana. To the contrary, the

affidavits attached to movers' motion

attest that, in fact, no written demand was

received by IBP from Louisiana Department

of Environmental Quality. (Defendants'

Exhibits A and B.) Accordingly, the

plaintiffs may not sue the defendants under

LEQA and Cont IV is dismissed in its

entirety.

As to the remaining claims, there was

no opposition to the dismissal of the state

public nuisance claim; the Court will

decide at a later date the other two issues

App. 43

(unjust enrichment in Count II_ and

dismissal of RMDC and RMLP).

New Orleans, Louisiana, this 22nd day

of May, 1990.

VERONICA D. WICKER

App. 44

§9601 (20) (A) The term "owner or operator

means (i) in the case of a vessel, any

person owning, operating, or chartering by

demise, such vessel, (ii) in the case of

an onshore facility oor an _ offshore

facility, any person owning or operating

such facility, and (iii) in the case of

any facility, title or control of which was

conveyed due to bankruptcy, foreclosure,

tax delinquency, abandonment, or similar

means to a eunit of State or local

government, any person who owned, operated

or otherwise controlled activities at such

facility immediately beforehand. Such term

does not include a person, who, without

participating in the management of a vessel

or facility, holds indicia of ownership

primarily to protect his security interest

in the vessel or facility.

App. 45

§9601 (21) The term "person" means 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.

§9607 (a) Covered persons; scope,

recoverable costs and damages; interest

rate; "comparable maturity" date.

Notwithstanding any other provision or rule

of law, and subject only to the defenses

set forth in subsection (b) of this section

(1) the owner and operator of a vessel

or a facility,

App. 46

(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.

(3) Any person who by contract,

agreement, or otherwise arranged for

disposal or treatment, or arranged with a

transporter for transport for disposal or

treatment, of hazardous substances owned

or possessed by such person, by any other

party or entity, at any facility or

incineration vessel owned or operated by

another party or entity and containing such

hazardous substances, and

(4) 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,

App. 47

or a threatened release which causes the

incurrence of response costs, of a

hazardous substance, shall be liable for -

(A) all costs of removal or remedial

action incurred by the United States

Government or a State or an Indian tribe

not inconsistent with’ the national

contingency plan;

(B) any other necessary costs of

response incurred by any other person

consistent with the -national contingency

plan;

of, or loss of natural resources including

the reasonable costs of assessing such

injury, destruction or loss resulting from

such a release; and

(D) the costs of any health assessment

or health effects study carried out under

App. 48

—

section 9604(i) of this title.

This amounts recoverable in an action

under this section shall include interest

on the amounts recoverable under

Subparagraphs (A) through (D). Such

interest shall accrue from the later of (ij

the date payment of a specified amount is

demanded in writing, or (ii) the date of

the expenditure concerned. The rate of

interest on the outstanding unpaid balance

of the amounts’ recoverable under this

section shall be the same rate as is

specified for interest on investments of

the Hazardous Substance Superfund

established under subchapter A of Chapter

98 of Title 26. For purposes of applying

such amendments to interest under this

subsection, the term "comparable maturity"

shall be determined with reference to the

App. 49

date on which interest accruing shall be

determined with reference to the date on

which interest accruing under the

subsection commences.

App. 50

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.