Amicus Curiae Brief — United States v. Bestfoods

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No. 97-454 \' J

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In The JAN 23.

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Supreme Court of the United States _..

October Term, 1997 i

Ee OEE TE Re

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UNITED STATES OF AMERICA,

y. Petitioner,

CPC INTERNATIONAL, INC., et al.,

Respondents.

;

On Writ Of Certiorari To The United States

Court Of Appeals For The Sixth Circuit

7

BRIEF OF THE STATES OF MINNESOTA,

ALASKA, ARIZONA, ARKANSAS, CONNECTICUT,

FLORIDA, GEORGIA, HAWAII, IDAHO,

ILLINOIS, MAINE, MARYLAND, MASSACHUSETTS,

MONTANA, NEVADA, NEW JERSEY, NEW MEXICO,

NEW YORK, NORTH CAROLINA, OREGON,

RHODE ISLAND, TENNESSEE, TEXAS, UTAH,

VERMONT, WASHINGTON, WEST VIRGINIA,

WISCONSIN, AND WYOMING AS AMICI CURIAE

IN SUPPORT OF RESPONDENT MICHIGAN

DEPARTMENT OF ENVIRONMENTAL QUALITY

*

Husert H. Humpnurey II

Attorney General

State of Minnesota

Jocetyn F. OLson

Assistant Attorney General

445 Minnesota Street, Suite 900

St. Paul, Minnesota 55101-2127

(612) 296-7703 (Voice)

(612) 296-1410 (TTY)

Counsel of Record

PascHaAL O. NwoKkocHa

AtaNn C. WiuiAMs

Assistant Attorneys General

Of Counsel

[Additional Counsel Listed

On Inside Cover And Following Page]

OME OR CALL COMBCT a2) S420)

BEST AVAILABLE COPY’

Supreme Court, U.5 .

-

ADDITIONAL COUNSEL FOR AMICI STATES

Bruce M. BoTELHo

Attorney General

State of Alaska

Grant Woops

Attorney General

State of Arizona

WINSTON BRYANT

Attorney General

State of Arkansas

RICHARD BLUMENTHAL

Attorney General

State of Connecticut

Rosert A. BuTTERWORTH

Attorney General

State of Florida

THursBert E. BAKER

Attorney General

State of Georgia

Marcery S. BRONSTER

Attorney General

State of Hawaii

ALAN G. LANCE

Attorney General

State of Idaho

James E. Ryan

Attorney General

State of Illinois

Drew KETTERER

Attorney General

State of Maine

’

oC ~

J. Josep Curran, Jr.

Attorney General

State of Maryland

Scott HARSHBARGER

Attorney General

Commonwealth of

Massachusetts

JoserpH P. Mazurek

Attorney General

State of Montana

Frankie Sue Det Papa

Attorney General

State of Nevada

Peter VERNIERO

Attorney General

State of New Jersey

Tom UDALL

Attorney General

State of New Mexico

Dennis C. Vacco

Attorney General

State of New York

** —aaeL F. Eastey

Attorney General

State of North Carolina

Harpy Myers

Attorney General

State of Oregon

Jerrrey B. Pine

Attorney General

State of Rhode Island

JoHN Knox WaALKuP

Attorney General

State of Tennessee

Dan MORALES

Attorney General

State of Texas

JAN GRAHAM

Attorney General

State of Utah

WiiwiaM H. Sorrei

Attorney General

State of Vermont

Curistine O. Grecorre

Attorney General

State of Washington

Darrett V. McGraw

Attorney General

State of West Virginia

James E. Doyte

Attorney General

State of Wisconsin

Wriua U. Haw

Attorney General

State of Wyoming

i

TABLE OF CONTENTS

Page

STATEMENT OF INTEREST ...................0.: 1

SUMMARY OF ARGUMENT....................... 2

GE ib ee eine Sean AsO d hn 5840s ed knee dabdase 3

AN UNDULY NARROW JUDICIAL INTER-

PRETATION OF THE CERCLA LIABILITY PRO-

VISIONS WILL IMPOSE GREATER

ADMINISTRATIVE AND FINANCIAL BUR-

inc nnnns vasenasatcondes tans

THE LANGUAGE, STRUCTURE AND PUR-

POSES OF CERCLA SUPPORT IMPOSITION OF

OPERATOR LIABILITY ON PARENT CORPO-

RATIONS THAT ACTUALLY PARTICIPATE IN

THE MANAGEMENT OF THEIR SUBSIDIARIES

A. A Broad Interpretation Of “Operator” That

Includes A Parent Corporation That Partici-

ates In The Management Of A Subsidiary

s Consistent With The Text And Structure of

Reredapbudedeketeequesseseecpansuses<

B. The Interpretation Of “Operator” Urged By

Amici States Is Supported By The Policies

And Purposes Of CERCLA ................

C. The Remedial Purpose Of CERCLA Gives

Further Sup Ay To An Expansive Interpreta-

tion Of CERCLA’s Liability Provisions .....

D. The Court Should Adopt The Parent Corpo-

ration Liability Rule Under CERCLA

Adopted By The} a

Appeals Deciding This Issue ..............

SES 660. cdne b6kbe pseneendessysecccauces

13

15

TABLE OF AUTHORITIES

Page

Cases

Abbott Laboratories v. Portland Retail Druggists

fase, GIB GB. 1 (IBD. oc cccccvctvsecccccssecess 16

B.F. Goodrich Co. v. Murtha, 958 F.2d 1192 (2d Cir.

Dod n0 scab sanbecss tapetdcd ccdeudeedeneedeas 8, 14

Bailey v. United States, __ U.S. ___, 116 S. Ct. 501

CRDUER. « o div codace vabédcvtidtdesccbebtdecs doevigsded on 11

Dedham Water Co. v. Cumberland Farms Dairy, Inc.,

805 F.2d 1074 (ist Cir. 1986)...............54.. 14, 15

Jacksonville Elec. Auth. v. Bernuth Corp., 996 F.2d

1107 (11th Cir. 1993)...... i ode cbcussebodsphédnebes 17

John S. Boyd Co. v. Boston Gas Co., 992 F.2d 401 (1st

COR TED nndccdebsabdade ced cconsennevenbespeterss 14

Joslyn Mfg. Co. v. T.L. James & Co., 893 F.2d 80 (Sth

GE oo. ks dane ocd ccnectccccadqsuusevbadevesede 17

Lansford-Coaldale Water Auth. v. Tonolli Corp., 4

RDS 1200 Ce Che. BOG) .. noc ccccccsecvvcceness 14, 17

New York v. Shore Realty Corp., 759 F.2d 1032 (2d

Ee BENE ccc ccdcccoscéccvtenndundetcdedutesessie’s 10

Nurad, Inc. v. William E. Hooper & Sons Co., 966

F.2d 837 (4th Cir. 1992), cert. denied, 506 U.S. 940

GRRE o wbccccceccecquacghheqeuackasanecds Ghpes voce 17

Pennsylvania v. Union Gas, 491 U.S. 1 (1989), over-

ruled by Seminole Tribe of Florida v. Florida, __

US. 5 TOD BGR. TERS GHGs ob lec cceccccesce. 13

Rose v. Lundy, 455 U.S. 509 (1982)................4.- 13

Schiavone v. Pearce, 79 F.3d 248 (2d Cir. 1996)... 14, 15, 17

Tcherepnin v. Knight, 389 U.S. 332 (1967)............. 16

United States v. Kayser-Roth Corp., 910 F.2d 24 (1st

Cir. 1990}, cert. denied, 498 U.S. 1084 (1991)

PreTTiTiTriTitriiiii i 12, 15, 17

TABLE OF AUTHORITIES — Continued

Page

STATUTES

Comprehensive Environmental Response, Com-

tion, and Liability Act of 1980, 42 U.S.C.

fs 9601 et seq. (1994) (CERCLA) ...............5. 1, 7

42 U.S.C. § 9601 (1994), amended by Omnibus Con-

solidated Appropriations Act, 1997, Pub. L. No.

104-208, § 2502(b), 110 Stat. 3009-464 to

ee eee hana’ banvee 7, 10

I cdnicoaisnssbach oases 8

WUE OHNE. io id cick cic cteid 8

42 U.S.C. § 9601(20)(A) (1994)...........0ceceeeeeeeee 9

42 U.S.C. § 9601(20)(E)-(G), added by Omnibus

Consolidated Appropriations Act, 1997, Pub. L.

No. 104-208, § 2502(b), 110 Stat. 3009-464 to

~~ | Sa irae Spree 10

42 U.S.C. § 9601(20)(E)(i) (100 Stat. 3009-464)........ 10

42 U.S.C. § 9601(20)(F)-(G) (100 Stat. 3009-465 -

OS" DECREE SE AEE CES Oe 10

42 U.S.C. § 9601(20)(F)(ii) (100 Stat. 3009-465) ....... 10

42 U.S.C. § 9601(20)(G)(v) (100 Stat. 3009-467)....... 11

Oe ARM, Oe I IIs coc cv aces shovespccecss bon .

a ik. pind ch waseacons save 4, 13

nn csc okascasncovecsgons 5

42 USC. § SEOUL CHS) (1994)... cee ccc ccccccseneees 5

Cee eee»... oie 4

ee cen sthanvapadaboon ers 4

iv

TABLE OF AUTHORITIES —- Continued

42 U.S.C. § 9605(a)(8)(B) (1994) ...........000000:

USE CME iA TES

42 U.S.C. § 9607(a) (1994).........ccceeeeceeeeees

42 U.S.C. § 9607(a)(1)-(4) (1994)... 2.2.6... cece.

42 U.S.C. § 9607(a)(1) (1994) .........ccceceeeee es

42 U.S.C. § 9607(a)(2) (1994)... 0.06. c cece cece eee.

8 UBL. & W068 CHOI ockks conevindstdaeemas

OrHer AUTHORITIES

American Heritage Dictionary of English Lan-

guage, 1268 (3d ed. 1992)....... 0.2... eee eeues

Blake A. Watson, Liberal Construction of CERCLA

under the Remedial Purpose Canon: Have the Lower

Courts Taken a Good Thing Too Far?, 20 Harv.

ee UF ee eee

Office of Emergency Response, United States

Environmental Protection Agency, An Analysis

of State Superfund Programs: 50-State Study, 1991

Update, Pub. No. 9375.6-08B (1991), Table V-6,

FEPUE 0.0.666060500000 0565 0Ck 0b bes bed padbU Ree hOs<

Report of the Committee on Environment and

ublic Works on S. 1480, S. Rep. No. 848, 96th

Cong., 2d Sess. 12-15 (1980) ...........66c cee.

Rebert B. McKinstry, Jr., The Role of State “Little

Superfunds” In Allocation and Indemnity Actions

Under the Comprehensive Environmental Response.

Compensation and Liability Act, Vill. Envtl. L. J.

GD CEO ov ccccsccccecsscdvpsccumeadaubedeesncs

STATEMENT OF INTEREST

The amici curiae states (Amici States), through their

attorneys general, respectfully submit this brief in sup-

port of Respondent Michigan Department of Environ-

mental Quality. Amici States support reversal of the

decision of the Sixth Circuit Court of Appeals holding

that, where a release occurs from a subsidiary’s facility, a

parent corporation is not liable as an “operator” for

cleanup costs under the Comprehensive Environmental

Response, Compensation, and Liability Act of 1980, 42

U.S.C. §§ 9601 et seq. (1994) (CERCLA), unless liability

can be imposed under the common law doctrine of pierc-

ing the corporate veil.

Amici States have a strong interest in the implemen-

tation of CERCLA and the scope and interpretation of

CERCLA’s liability provisions. Protection of public health

and the environment from the polluting effects of uncon-

trolled releases of hazardous substances is a respon-

sibility of federal and state government. States play a

raajor administrative and financial role in responding to

releases within their borders. The principal federal law

on this subject is CERCLA. In addition, most of the states

have enacted their own cleanup laws, which generally

mirror the elements of CERCLA, including imposing lia-

bility for cleanup costs on a broad spectrum of persons

connected to the releases.

States rely on both federal and state cleanup laws in

carrying out their cleanup responsibilities, and especially

in recovering state cleanup costs from those legally

responsible for the releases. By directly affecting the

application and interpretation of CERCLA, and indirectly

affecting parallel state cleanup laws, federal court inter-

pretations of CERCLA’s liability and cost recovery provi-

sions have important legal, financial and practical

implications for states. Thus, states have a very important

interest in an interpretation of the CERCLA liability pro-

visions that enhances and preserves the vitality of

CERCLA’s cost recovery remedy. The Sixth Circuit's

unduly narrow approach to construction of CERCLA’s

liability provisions is at odds with the language and

purposes of the statute and threatens the vitality of

CERCLA’s cost recovery remedy, which is critical to the

success of the national effort to clean up hazardous waste

releases.

SUMMARY OF ARGUMENT

This case involves interpretation of the operator lia-

bility provisions of CERCLA and application of those pro-

visions to a parent corporation that actively participates in

the management of a subsidiary whose facility is the

source of a release. The scope of interpretation given to

CERCLA’s liability provisions may significantly affect the

financial and administrative obligations of states in

addressing cleanup of releases. Amici States urge the

Court to adopt a broad interpretation of the CERCLA

liability provisions that is consistent with the text and

purposes of the statute, and that is followed by the major-

ity of the courts of appeals that have decided this question.

The term “operator” is not separately and expressly

defined in CERCLA. Interpreting “operator” under

CERCLA to include any person who actively participates

in the management of a business or other entity where a

release occurs is in accord with the ordinary and natural

meaning of the word “operator,” with implications about

the meaning of “operator” that can be discovered in the

text of CERCLA, and with the larger context of the

CERCLA liability provisions, which are based on many

broadly defined terms.

Applying CERCLA cost recovery liability to a parent

corporation whose actions make it an “operator,” as

broadly and properly construed under CERCLA,

advances the underlying purpose of the statute to assure

that responsible persons, rather than the public, should

bear the cost of cleanup. The correctness of this inter-

pretation and the resulting rule of liability is confirmed

by the broad remedial purpose of CERCLA. That reme-

dial purpose is found in the statute’s general goal of

protecting public health and the environment. It is fur-

ther reflected in the more specific goals of remedying the

effects of past releases of hazardous substances, and cre-

ating new statutory remedies to assign liability for

cleanup.

ARGUMENT

I. AN UNDULY NARROW JUDICIAL INTERPRETA-

TION OF THE CERCLA LIABILITY PROVISIONS

WILL IMPOSE GREATER ADMINISTRATIVE AND

FINANCIAL BURDENS ON STATES.

Judicial interpretations of CERCLA that unduly nar-

row the scope of statutory cleanup liability not only

undermine the clear purpose of the statute that those

responsible for hazardous substance releases should bear

the burden of cleanup costs, but also significantly affect

states by shifting cleanup costs and responsibilities from

responsible persons to states and their taxpayers. Uncon-

trolled releases of hazardous substances pose a massive

environmental problem, causing pollution of the nation’s

air, land, and water, and threatening the health of its

citizens. CERCLA, together with state cleanup laws, pro-

vides the legal framework for states to respond to this

problem.

CERCLA provides powerful legal authorities to the

President to select, enforce and oversee response actions

to address the highest priority releases throughout the

country. See 42 U.S.C. §§ 9604, 9605, 9606 (1994). CERCLA

also provides a federal source of public funding for

cleanups (the “Superfund” for which the cleanup pro-

gram is named), and provides a broad system of statutory

liability by which cleanup costs incurred by the federal

government and by states can be recovered from those

responsible for the release. See 42 U.S.C. § 9607 (1994),

amended by Omnibus Consolidated Appropriations Act,

1997, Pub. L. No. 104-208, § 2502(a), 110 Stat. 3004-462 to

3004-464 (1996); and 42 U.S.C. § 9611 (1994).

CERCLA includes an important role for the states in

implementating and funding cleanups under the federal

Superfund program. Under cooperative agreements with

the United States Environmental Protection Agency

(EPA), states may take many of the response actions

which the President is authorized to take under CERCLA.

See 42 U.S.C. § 9604(d) (1994). By 1991, all fifty states had

entered into some type of cooperative agreement to take

actions authorized under CERCLA, effectively creating a

partnership between states and the federal government to

address the national cleanup problem. Office of Emer-

gency and Remedial Response, United States Environ-

mental Protection Agency, An Analysis of State Superfund

Programs: 50-State Study, 1991 Update, Pub. No.

9375.6-08B (1991), Table V-6, 75-77 (EPA 50-State Study).

States also must agree to shoulder significant finan-

cial and administrative obligations before EPA can take

federally-funded remedial actions. Specifically, states

must agree to assure payment of 10 percent of remedial

construction cost and assure performance of all operation

and maintenance. 42 U.S.C. § 9604(c)(3) (1994). Because

federally-funded cleanups address the most seriously

contaminated sites in the nation - those listed on the

National Priority List under 42 U.S.C. § 9605(a)(8)(B)

(1994) — these cleanups are often very expensive and

complex. Thus, the state share of remedial cost and the

administrative obligations for operation and maintenance

of federally-funded cleanups can be substantial. An

unduly narrow interpretation of the scope of CERCLA

cleanup liability will shift a greater share of the financial

and administrative burdens of cleanup from responsible

persons to the states.

The legal framework for responding to hazardous

substance releases also includes state cleanup laws

enacted by at least thirty-six states to authorize state

participation in the federal cleanup program and to

empower states to respond to sites not listed as the high-

est national priorities for cleanup. See Robert B. McKins-

try, Jr., The Role of State “Little Superfunds” In Allocation

and Indemnity Actions Under the Comprehensive Environ-

mental Response, Compensation and Liability Act, Vill. Envtl.

L. J. 83, 84-85 n.3 (1994). Most of these state cleanup laws

are similar to CERCLA in their key provisions relating to

liability, enforcement and funding. See McKinstry, supra,

at 85; and EPA 50-State Study, supra, at 32-33. States

incurring costs for federal and state cleanups may use

CERCLA as their principal legal basis for recovery, as a

supplement to state liability laws or, by citing CERCLA

case law, as authority to support interpretation of compa-

rable state liability laws. Thus, any judicial holding that

construes CERCLA liability too narrowly may diminish

the ability of states to recover state cleanup costs under

CERCLA and under state laws patterned after CERCLA.

In both cases, states rather than responsible parties will

end up bearing more of the cleanup costs and respon-

sibilities, and some hazardous substance releases may go

unremedied.

Il. THE LANGUAGE, STRUCTURE AND PURPOSES

OF CERCLA SUPPORT IMPOSITION OF OPERA-

TOR LIABILITY ON PARENT CORPORATIONS

THAT ACTUALLY PARTICIPATE IN THE MAN-

AGEMENT OF THEIR SUBSIDIARIES.

The central question in this case is who is an “opera-

tor” under CERCLA and, more specifically, whether and

under what circumstances a parent corporation may be

considered an “operator” and therefore liable for the cost

of remedying a release from a subsidiary’s facility. The

Sixth Circuit decided this question erroneously. The

Amici States urge the Court to approve the rule adopted

by the majority of the courts of appeals that have decided

this question: that a parent corporation is liable for

cleanup costs as an operator under CERCLA when it

—

exercises actual control or actively participates in the

management of its subsidiary whose facility is the source

of a release. For the reasons given below, this rule of

operator liability under CERCLA best comports with the

text and structure of the statute, the underlying policies

which the statute embodies, and the overall remedial

purpose of CERCLA.

A. A Broad Interpretation Of “Operator” That

Includes A Parent Corporation That Partici-

pates In The Management Of A Subsidiary Is

Consistent With The Text And Structure of

CERCLA.

The language and structure of CERCLA show that

key terms used by the statute, particularly the words

used to describe the problems to be remedied and those

who may be held liable for cleanup costs, are intended to

be construed broadly. CERCLA imposes liability for the

costs of removal or remedial action which are incurred to

address a release of a hazardous substance from a facility.

42 U.S.C. § 9607(a) (1994). Each of the key terms,

“release,” “hazardous substance,” and “facility,” along

with other important terms used in the CERCLA liability

provisions, are very broadly defined in CERCLA. 42

U.S.C. § 9601 (1994), amended by Omnibus Consolidated

Appropriations Act, 1997, Pub. L. No. 104-208, § 2502(b),

110 Stat. 3009-464 to 3009-467 (1996).

For example, “release” includes a wide range of

active and passive methods by which polluting sub-

stances may enter the environment, such as “spilling,

leaking ... escaping . . . leaching, dumping or disposing.”

42 US.C. § 9601(22) (1994). “Hazardous substance” is

defined as any substance designated as hazardous under

CERCLA or any of four other environmental statutes. 42

U.S.C. § 9601(14). This definition “covers a vast array” of

substances, including over 700 hazardous substances lis-

ted pursuant to CERCLA alone. B.F. Goodrich Co. v. Mur-

tha, 958 F.2d 1192, 1200 (2d Cir. 1992). “Facility” is

defined to include not only a long list of specific types of

structures or equipment such as buildings, pipelines,

wells, pits, and storage containers, but also to include

“any site or area where a hazardous substance has been

deposited, stored, disposed of, or placed or otherwise

come to be located.” 42 U.S.C. § 9601(9) (1994).

Likewise, CERCLA identifies a wide range of persons

who are liable for cleanup costs, including facility owners

and operators, those who arranged for disposal of haz-

ardous substances, and transporters of hazardous sub-

stances to the facility. 42 U.S.C. § 9607(a)(1)-(4) (1994).

The class of liable persons includes all present owners

and operators of the facility where the release occurred,

and all who owned or operated the facility at the time of

disposal of a hazardous substance. 42 U.S.C. § 9607(a)(1)

and (2) (1994). These examples show that Congress

intended to cast a very wide net of liability by broadly

defining the key terms used in CERCLA’s liability provi-

sions. The meaning of the term “operator” must be con-

sidered in this context as another key term in the broadly

defined CERCLA statutory liability system.

However, the meaning of “operator” under CERCLA

is not as easy to determine as most of the key terms used

en _———>

in CERCLA. CERCLA does not define the term “opera-

tor,” but rather defines the term “owner or operator.”

That definition provides in pertinent part as follows:

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 or 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 tu bankruptcy, fore-

closure, tax delinquency, abandonment, or simi-

lar means to a unit of State or local government,

any person who owned, operated or otherwise

controlled activities at such facilities immediately

beforehand. Such term does not include a person,

who, without participating in the management of a

vessel or facility, holds indicia of ownership pri-

marily to protect his security interest in the ves-

sel or facility.

42 U.S.C. § 9601(20)(A) (1994) (emphasis added).

This largely circular definition of “owner or opera-

tor” offers important, but limited, guidance in determin-

ing what the term “operator” means. For example, with

respect to certain facilities that have reverted to state or

local control, “owner or operator” is defined as the imme-

diately prior owner or operator, including one who “oth-

erwise controlled activities at such facilities immediately

beforehand.” This language implies that control of activ-

ities at a facility is a sufficient basis to determine that a

person is an owner or operator. Similarly, in excluding

certain holders of secured interests from the definition of

“owner or operator,” CERCLA limits the exclusion to

10

those who hold such indicia of ownership “without par-

ticipating in the management of a . . . facility.” Thus, by

implication, participating in management is a factor in

determining a person's status as “owner or operator.” See

New York v. Shore Realty Corp., 759 F.2d 1032, 1052 (2d Cir.

1985).

The most recent amendments to the CERCLA defini-

tion of “owner or operator” offer some further assistance

in construing the term “operator.” Omnibus Consolidated

Appropriations Act, 1997, Pub. L. No. 104-208, § 2502(b),

110 Stat. 3009-464 to 3009-467 (1996), to be codified at 42

U.S.C. § 9601(20)(E)-(G). Similar to the pre-existing

secured interest holder exclusion, these amendments

exclude from liability a “lender, that without participating

in management of a vessel or facility, holds indicia of

ownership primarily to protect the [lender’s] security

interest... .” Id., 110 Stat. 3009-464, to be codified at 42

U.S.C. § 9601(20)(E)(i) (emphasis added). The amend-

ments go on to describe several levels of activity that will

be considered participation in management by a lender.

Id., 110 Stat. 3009-465 to 3009-467, to be codified at 42

U.S.C. § 9601(20)(F)-(G). These activities range from the

exercise of narrow authority to control specific environ-

mental compliance matters related to a facility, to the

exercise of more general authority to “control at a level

comparable to that of a manager . . . such that the person

has assumed or manifested responsibility . . . over all or

substantially all of the operational functions (as distin-

guished from financial or administrative functions) of

the . . . facility other than the function of environmental

compliance.” Id., 110 Stat. 3009-465, to be codified at 42

U.S.C. § 9601(20)(F)(ii). The term “operational function”

7

11

is further defined to include “a function such as that of a

facility or plant manager, operations manager, chief oper-

ating officer, or chief executive officer.” Id., 110 Stat.

3009-467, to be codified at 42 U.S.C. § 9601(20)(G)(v).

While these lender liability provisions apply only in

the unique context of a lender who may come to possess

and operate a facility of a debtor by exercise of its rights

as a creditor on a defaulted loan, the language is instruc-

tive about what operational activities are sufficient to

negate a lender’s exclusion from CERCLA liability. A

lender will lose its liability exclusion and become liable

as an “owner or operator” if its actions are like those of

an operations manager or chief executive officer of the

debtor, even if those actions do not include management

of environmental compliance or practices. The clear

implication of this language is that those who actually

manage or control the operations of the entity or business

where a release occurs are liable for cleanup costs under

CERCLA.

Thus, while the CERCLA definition of “owner or

operator” provides important clues to the meaning of the

term “operator,” it lacks any express language from

which to determine the meaning of the term. For this

reason, the Court should look to the “ordinary and natu-

ral” meaning or use of the word “operator” when con-

struing this term in CERCLA. See Bailey v. United States,

—_— US. __, 116 S. Ct. 501, 506-507 (1995) (using ordinary

and natural meaning in construing a statute criminalizing

the use of a firearm related to a drug trafficking offense).

Ordinarily, “to operate” means “to conduct the affairs of;

12

manage; operate a business.” American Heritage Diction-

ary of English Language, 1268 (3d ed. 1992) (emphasis in

original).

Hence, in the ordinary meaning of the term, an

“operator” is a person who manages or conducts the

affairs of a business or other entity. This broad definition

is consistent with what can be learned by implication

from the CERCLA definition of “owner or operator,”

including the recent lender liability amendments. It is

also consistent with the statutory context in which key

terms of the CERCLA liability provisions are broadly

defined.

Therefore, as used in CERCLA, “operator” should

include any person that manages or actively participates

in the operational affairs of a business or other entity

whose facility is the source of a release or threatened

release. Nothing in CERCLA precludes the application of

this definition of “operator” to any person whose actions

meet the statutory test. Thus, nothing in CERCLA

excludes a corporation from liability as an operator

because it is a parent corporation to a subsidiary where

the release occurred. See United States v. Kayser-Roth Corp.,

910 F.2d 24, 26 (1st Cir. 1990), cert. denied, 498 U.S. 1084

(1991) (“Our analysis of the statute and its legislative

purpose and history reveals no reason why a parent

corporation cannot be held liable as an operator under

CERCLA”). All that CERCLA requires is a factual show-

ing that the parent corporation actually controlled or

managed the operations of the subsidiary. Operator lia-

bility is solely a matter of the construction and applica-

tion of CERCLA, and does not require a court to apply

13

any other law, including the common law of corporate

veil-piercing, to impose liability.

B. The Interpretation Of “Operator” Urged By

Amici States Is Supported By The Policies And

Purposes Of CERCLA.

Construing the term “operator” to include those who

actually manage or control the affairs of the entity whose

facility is the source of a release, and imposing cleanup

cost liability on a parent corporation whose actions meet

this test, is further supported by the statutory design and

purposes of CERCLA. This Court has recognized that

consideration of statutory policies and purposes is appro-

priate when determining the proper scope of a statute.

Rose v. Lundy, 455 U.S. 509, 517 (1982) (construing federal

statute requiring dismissal of certain habeas corpus writs

by federal district courts). In this case, where the inter-

pretation urged by Amici States is solidly grounded in

the text and structure of CERCLA, additional consider-

ation of the underlying policies of CERCLA is appropri-

ate to further confirm the correctness of this

interpretation.

This Court has recognized that “CERCLA both pro-

vides a mechanism for cleaning up hazardous-waste sites

... and imposes the costs of the cleanup on those respon-

sible for the contamination.” Pennsylvania v. Union Gas

Co., 491 U.S. 1, 7 (1989) (citing 42 U.S.C. §§ 9604, 9606;

holding that CERCLA abrogated states’ 11th Amendment

immunity), overruled by Seminole Tribe of Florida v. Flor-

ida, ___ U.S. ___, 116 S. Ct. 1114 (1996). Since the earliest

cases involving judicial construction of CERCLA, federal

14

courts have cited two specific purposes of the statute — to

foster prompt and effective cleanup and to impose

cleanup costs on those responsible for the release — as a

basis for expansive construction of the statute, including

its liability provisions. Dedham Water Co. v. Cumberland

Farms Dairy, Inc., 805 F.2d 1074, 1081 (1st Cir. 1986) (citing

United States v. Reilly Tar & Chem. Corp., 546 F. Supp. 1100

(D. Minn. 1982)). Similarly, the Second Circuit, in impos-

ing corporate parent liability under CERCLA as urged by

Amici States in this case, cited in support of its holding

the congressional purpose of CERCLA to ensure “that

those responsible for any damage, environmental harm,

or injury from chemical poisons bear the costs of their

actions.” Schiavone v. Pearce, 79 F.3d 248, 253 (2d Cir. 1996)

(quoting S. Rep. No. 848, 96th Cong., 2d Sess. 13 (1980)).

See also, John S. Boyd Co. v. Boston Gas Co., 992 F.2d 401,

405 (1st Cir. 1993); Lansford-Coaldale Water Auth. v. Tonolli

Corp., 4 F.3d 1209, 1221 (3d Cir. 1993); and B.F. Goodrich

Co. v. Murtha, 958 F.2d at 1198 (“Congress envisioned that

EPA's costs would be recouped, the Superfund preserved,

and the taxpayers not required to shoulder the burden of

a nation-wide cleanup.”).

A broad interpretation of “operator” liability under

CERCLA, which holds a parent corporation liable for its

own acts as an operator, clearly advances CERCLA’s stat-

utory purpose of placing the burden of cleanup costs on

those connected to the release rather than publicly-

funded cleanup programs supported by state or federal

taxpayers. Given the solid support for this interpretation

of operator liability in the text and structure of CERCLA,

its effect in advancing the key policies of the statute

ED

15

further confirms and strengthens the correctness of the

interpretation.

C. The Remedial Purpose Of CERCLA Gives Fur-

ther Support To An Expansive Interpretation Of

CERCLA’s Liability Provisions.

The interpretation of CERCLA urged by Amici States

finds further support in the clearly remedial nature and

purpose of CERCLA. CERCLA has frequently been cited

by federal courts as a remedial statute which should be

broadly construed. Several of the courts of appeals which

have adopted the rule of corporate parent liability urged

by Amici States have cited the remedial niture of

CERCLA in support of their construction of the statute.

Kayser-Roth, 910 F.2d at 26 (“Because CERCLA is a reme-

dial statute, we . . . construe its provisions liberally to

avoid frustration of the beneficial legislative purpose.”

(citation omitted)); Schiavone, 79 F.3d at 253 (“An inter-

pretation of CERCLA that imposes operator liability

directly on parent corporations whose own acts violate

the statute is consistent with the general thrust and pur-

pose of the legislation.”); see also, Dedham Water Co., 805

F.2d at 1081 (“CERCLA is essentially a remedial statute

designed by Congress to protect and preserve public

health and the environment.”). Indeed, the courts that

have construed CERCLA have consistently acknowl-

edged the remedial nature of the statute, and have done

so more frequently in CERCLA cases than in cases involv-

ing other environmental statutes. See, Blake A. Watson,

Liberal Construction of CERCLA under the Remedial Purpose

Canon: Have the Lower Courts Taken a Good Thing Too Far?,

20 Harv. Envtl. L. Rev. 199, 262 nn.269-70 (1996) (The

16

author answers the question posed in the title by con-

cluding that it is appropriate for courts to aggressively

interpret CERCLA to effectuate its remedial goals.).

Amici States believe that CERCLA should be con-

strued expansively as a remedial statute for two reasons.

First, CERCLA focuses on the abatement of long-standing

environmental and public health threats posed by histori-

cal releases of hazardous substances. Second, CERCLA

embodies a unique liability approach which builds upon

pre-existing common law legal remedies, such as nui-

sance and other strict liability principles, to create power-

ful new remedies that place the burden of cleanup on

responsible persons. See Report of the Committee on

Environment and Public Works on S. 1480, S. Rep. No.

848, 96th Cong., 2d Sess. 12-15 (1980). Thus, CERCLA is

an eminently appropriate statute for application of the

well-recognized canon of statutory construction that

remedial statutes should be given a broad or expansive

construction to further their remedial purposes. See,

Tcherepnin v. Knight, 389 U.S. 332, 336 (1967) (construing

the Security and Exchange Act of 1932, and recognizing

the “familiar canon of statutory construction that reme-

dial legislation should be construed broadly to effectuate

its purposes.”) See also, Abbott Laboratories v. Portland

Retail Druggists Ass'n, 425 U.S. 1 (1976).

The application of the remedial purpose canon in

construing the term “operator” and determining the

scope of operator liability under CERCLA reinforces and

confirms the correctness of the parent liability rule urged

by Amici States, which is already firmly supported by the

text and structure of the statute, and serves to advance

CERCLA’s underlying statutory purposes.

Pere |

17

D. The Court Should Adopt The Parent Corpora-

tion Liability Rule Under CERCLA Adopted By

The Majority Of The Courts Of Appeals Decid-

ing This Issue.

Of the seven courts of appeal that have considered

this specific issue, four have interpreted CERCLA to

impose operator liability on parent corporations that

actively participate in management or exercise actual

control of their subsidiaries. United States v. Kayser-Roth

Corp., 910 F.2d 24 (1st Cir. 1990); Schiavone v. Pearce, 79

F.3d 248 (2d Cir. 1996); Lansford-Coaldale Joint Water Auth.

v. Tonolli Corp., 4 F.3d 1209 (3d Cir. 1993); Jacksonville Elec.

Auth. v. Bernuth Corp., 996 F.2d 1107 (11th Cir. 1993). One

has imposed operator liability on a parent corporation

based on authority to control, rather than actual control,

of the subsidiary’s operations. Nurad, Inc. v. William E.

Hooper & Sons Co., 966 F.2d 837 (4th Cir. 1992), cert. denied,

506 U.S. 940 (1992). Only one court of appeals other than

the Sixth Circuit has held that a parent corporation is not

liable under CERCLA for a release from a subsidiary’s

facility unless the corporate veil can be pierced under

common law principles. Joslyn Mfg. Co. v. T.L. James & Co.,

893 F.2d 80 (5th Cir. 1990). The Joslyn case, however, is

distinguishable from the Sixth Circuit decision here

because, in Joslyn, there was little, if any, evidence that

the parent corporation had actually participated by its

own acts in managing the operations of the subsidiary.

Instead, the question centered on the parent corporation’s

derivative liability for acts of its subsidiary, based on the

parent’s financial and administrative control rather than

operational control of the subsidiary. That is not the issue

in this case, where the question is whether a parent

corporation can be held directly liable as an operator

ls

under CERCLA because of its own acts involving man-

agement and operational control of its subsidiary

[he Amici States urge the Court to adopt the rule

followed by the majority of the courts of appeals that

have decided the question, by holding that a parent cor

poration is liable as an operator under CERCLA when the

parent corporation actually controls or actively partici-

pates in the management of its subsidiary. The specifics

of what constitute actual control or active participation in

management is generally a “fact-intensive inquiry” and

should be left for the district courts to decide on the facts

of each case

CONCLUSION

For the reasons stated above, the judgment of the

Sixth Circuit Court of Appeals should be reversed

Respectfully submitted,

Husert H. Humpureey Iii

Attorney General

State of Minnesota

JOCELYN F. OLSON

Assistant Attorney General

445 Minnesota Street, Suite 900

St. Paul, Minnesota 55101-2127

(612) 296-7703 (Voice)

(612) 296-1410 (TTY)

Counsel of Record

PASCHAL O. NwoKOcHA

ALAN C. WILLIAMS

Assistant Attorneys General

Of Counsel

(Additional Counsel Listed On Inside Front Cover

And Following Page)