# Amicus Curiae Brief — United States v. Bestfoods

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1998
- **Citation:** 524 U.S. 51

## Text

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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

o
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)

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0121%3A18. Public record. Not legal advice.