Amicus Curiae Brief — United States v. Bestfoods

bee Supreme Court, U.S.

Ss By T $4 E D

FEB 20 1998

CLERK

IN THE

Supreme Court of the United States

OCTOBER TERM, 1997

UNITED STATES OF AMERICA, PETITIONER

Vv.

CPC INTERNATIONAL, INC., ET AL., RESPONDENTS

On Writ of Certiorari

To The United States Court of Appeals

For The Sixth Circuit

BRIEF FOR

ATLANTIC RICHFIELD COMPANY AND

NEWMONT MENING CORPORATION AS

AMICI CURIAE SUPPORTING RESPONDENTS

SHANE R. SWINDLE

KARL M. TILLEMAN

DALTON GOTTO SAMSON

& KILGARD, P.L.C.

3101 N. Central Ave.

Suite 900

. Phoenix, AZ 85012

(602) 248-0088

MICHAEL J. GALLAGHER

ANDREW M. LOW

Counsel of Record

DAVIS, GRAHAM

& STUBBS LLP

370 17th St., Suite 4700

Denver, CO. 80202

(303) 892-9400

Page

INTEREST OF THE AMICI CURIAE .... 2... cccceces l

TRIE PINAL CREER LITIGATION .........cceceeees 2

SUMMARY OF ARGUMENT ....ccccccccsccceccess 4

AIRING 66-6650 60 bbs tig gu Sabeadaede een baened 6

b,. - SRS EEDS sho in Ss cbse acanteck teeves 6

Il. THE SIXTH CIRCUIT'S DECISION

| FERRI reed eer ert ped eer 7

A. CERCLA Is Presumed Not To Nullify

Well-Established Common Law Rules .... 7

III.

TABLE OF CONTENTS

B. Applying The Principle “Expressio Unius

Est Exclusio Alterius,” The Text Of

CERCLA Shows That Congress Did Not

Intend To Abrogate The Common Law

Rule of Limited Shareholder Liability .. . .

THE UNITED STATES RELIES ON

UNSUPPORTED AND ERRONEOUS

ASSERTIONS ABOUT THE “TYPICAL”

RELATIONSHIP BETWEEN A PARENT

ARG) TED TAROUOAS sc cccvcctecetcnensus

10

IV. THE UNITED STATES CONFUSES DIRECT

AND DERIVATIVE LIABILITY, AND USES

EVIDENCE OF ONE TO SUPPORT THE

SPUUUEED. bob kbar AUSGdus sh bOU Nees Ke daee be oe 21

A. The United States Does Not Identify

Sufficient Evidence Of Actual Operation

Of The Facility By CPC To Prove Direct

OF SEDI. Cate SOTTO 23

B. __ Direct Liability Of A Parent Must Be

Based On A Showing That The Parent

Independently Operated The Facility ..... 25

ET ES SESS Ee hans 27

TABLE OF AUTHORITIES

Cases

Akzona Inc. v. E.l. du Pont de Nemours & Co.,

607 F. Supp. 227 (D. Del. 1984) ...........

American Tel. & Tel. Co. v. Compagnie

Bruxelles Lambert,

94 F.3d 586 (9th Cir. 1996) ...............

Anderson v. Abbott,

Se PEED co kSscccovmencesecs

Astoria Fed. Sav. & Loan Ass'n v. Solimino,

Ps GEES oe ccc cerevesbeccsouss

Atherton v. FDIC,

SEE A PGEOOED. ccccvccccsccwcesees

Burnet v. Clark,

ee EE SUDO NOEED wv ecetcdecccewcccses

C M Corp. v. Oberer Dev. Co.,

631 F.2d 536 (7th Cir. 1980) ..............

Craig v. Lake 4 bestos of Quebec, Lid.,

843 F.2d 145 (3d Cir. 1988) ..............

Edwards Co. v. Monogram Indus., Inc.,

730 F.2d 977 (Sth Cir. 1984) (en banc) ......

Esmark, Inc. v. N.L.R.B.,

887 F.2d 739 (7th Cir. 1989) ..............

ill

Fletcher v. Atex, Inc.,

68 F.3d 1451 (2d Cir. 1995) .... 2... ee ee eee eens 18

Gibraltar Sav. v. LDBrinkman Corp.,

860 F.2d 1275 (Sth Cir. 1988),

cert. denied, 490 U.S. 1091 (1989) ........ 6-65 6-6- 18

Group Life & Health Ins. Co. v. ®eyal Drug Co.,

440 U.S. 205 (1979) 20. ccc ccc c cece ee ee renencees 7

Gustafson v. Alloyd Co.,

$13 U.S. 561 (1995) . 2... eee eee ee eee ee eres 11

In re Silicone Gel Breast implants Prods. Liab. Litig.,

837 F. Supp. 1128 (N.D. Ala. 1993) ......----.005> 20

Isbrandtsen Co. v. Johnson,

343 U.S. 779 (1952)... cere c cc cccecncces 7-8, 14

Jacksonville Elec. Auth. v. Bernuth Corp.,

996 F.2d 1107 (11th Cir. 1993) ...... 0... - eee eee 14

Jarecki v. G.D. Searle & Co.,

367 U.S. 303 (1961) 2.2... cece eee eee e eee eees 11

Joslyn Mfg. Co. v. T.L. James & Co.,

893 F.2d 80 (Sth Cir. 1990)

cert. denied, 498 U.S. 1108 (1991). .......-- 13-14, 21

Keene Corp. v. United States,

508 U.S. 200 (1993) ... 2... 2c ee eee eee eee eens 13

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

4 F.3d 1209 (3d Cir. 1993) ..... 2... e eee eee ees 9,14

iv

Lusk v. Foxmeyer Health Corp.,

om pel. le ee errr r rr 17, 25, 26

McCarthy v. Azure,

Re GE DEED oo o.cecneeGaccndeebosees 20

Milwaukee v. Illinois,

SUS GARD POO OCREEEED 9 dnt cWccecésodens cedvtenace 14

Mobil Oil Corp. v. Linear Films, Inc.,

718 F. Sapp. 260 (D. Dal. 1909) ... 0. cc cccecceces 9

Morris v. New York State Dept. of Tax. & Fin.,

sh tk fo 4 8 | ee ee 9

Moskal v. United States,

— i) & |. Gere oO re ee 15

Norman v. Del Elia,

Se GE ocddcevindée ckatatanceses y

Pinal Creek Group, et al. v. Newmont Mining Corp., et al.,

926 F. Supp. 1400 (D. Ariz. 1996), rev'd on other

grounds, 118 F.2d 1298 (9th Cir. 1977), petition for

cert. filed, 66 U.S.L.W. 3364 (U.S. Nov. 10, 1997)

SR DONE KA dice ectusuedendee€be euleweses 2-4

Radaszewski v. Telecom Corp.,

981 F.2d 305 (8th Cir. 1992),

cert. denied, 508 U.S. 908 (1993) .................. 9

Rake v. Wade,

SPEED pnenscbduneuees dua teskses 15

Vv

Russello v. United States,

— ft RAI Ee SEE Seer ee! Ts 13

Topp v. CompAir Inc.,

FeSO CEED bob uwasvdncevctwres ts 18

United States v. Cordova Chem. Co. of Mich.,

113 F.3d 572 (6th Cir. 1997)

RE ir: ae 6, 9-10, 14, 19, 21, 22, 25-26

United States v. Fabe,

er ee ED. cd, hwoedentede dbase rawarsh 7,15

United States v. Kayser-Roth Corp.,

910 F.2d 24 (Ist Cir. 1990), cert. denied,

Se as SPEED. a 00bestepsckbebecnaccsccuade 14

United States v. Texas,

Sy EE ciduandidebéuahisdauel 7, 10,14

Wallis v. Pan Am. Petroleum Corp.,

Fe a UU chant bnsedncénvasindvadwavaes 7

Washington Mkt. Co. v. Hoffman,

ee es STO, wh Wacendieaet pextane candebud 15

Western Pac. R.R. Corp. v. Western Pac. R. Co.,

197 F.2d 994 (9th Cir. 1951),

cert. denied, 346 U.S. 910 (1953) .............24.. 24

Williams v. McAllister Bros. Inc.,

Fy Fo ot Se er ee 20

—~ nce

Statutes

CN a Pre eer 1-2

EU BE. BPs ex dceisieitevscedovencess 1

42 U.S.C. § 9601(20)A)i)-{ili) ........... 10-12, 14, 15

ae rere ered re rrr Tee 10

SEG, Be hod ev cderecesdvcecsdbaus 6, 10, 11

GEER. COPED cece dvenvccentsccvesvess 20

Other Authoriti

1 William M. Fletcher, Fletcher Cyclopedia

of the Law of Private Corporations

§ 41.10 (perm. ed. rev. vol. 1990) ...............-. 21

Lynda J. Oswald, Strict Liability of Individuals

Under CERCLA: A Normative Analysis,

20 B.C. EnvTt’L AFF. L. REV. 579 (1993) ............ 8

P. Blumberg, The Law of Corporate Groups: Tort,

Contract, and Other Common Law Problems in the

Substantive Law of Parent and Subsidiary Corporations

CREED bheccvecncsispcdbbondsctcudivces 18

vii

Legislative Hi |

126 Cong. Rec. $15006 (Nov. 24, 1980) ............... 8 |

126 Cong. Rec. $14964 (Dec. 3, 1980) ..............., 8

126 Cong. Rec. $16427 (Dec. 12, 1980) ............... 8

S. Rep. No. 96-848, at 31 (1980) ..................... 8

Hearing on H.R. 85 and H.R. 7020 Before the House Comm.

on Ways and Means, 96th Cong. (June 2, 1980) ...... 8

Court Rules

Ge OO aris bed capeeknsb es tickeeus uae l

GS, Cee POEM Win Ag sake weed Whee l

.

.

Vili

In The Supreme Court of the United States

OCTOBER TERM, 1997

No. 97-454

UNITED STATES OF AMERICA, PETITIONER

Vv.

CPC INTERNATIONAL, INC., ET AL., RESPONDENTS

On Writ of Certiorari

To The United States Court of Appeals

For The Sixth Circuit

BRIEF FOR

ATLANTIC RICHFIELD COMPANY AND

NEWMONT MINING CORPORATION AS

AMICI CURIAE SUPPORTING RESPONDENTS

INTEREST OF THE AMICI CURIAE'

Atlantic Richfield Company (“ARCO”) and Newmont

Mining Corporation (“Newmont”) are defendants in litigation

»rought under the Comprehensive Environmental Response,

Compensation, and Liability Act, 42 U.S.C. § 9601, ef seq.

' Pursuant to Rule 34.6, amici state: (i) that no counsel for

any party authored this brief in whole or in part; and (ii) that no

persons or entities other than amici made a monetary contribution to

the preparation or submission of this brief. Pursuant to Rule

37(2\a), letters from counsel for all parties consenting to the filing

of this brief have been filed with the Clerk of the Court.

2

(“CERCLA”). The case is Pinal Creek Group, et all. v.

Newmont Mining Corp., et al., No. CIV-91-1764-PHX-ROS

(D. Ariz.) (the “Pinal Creek” case).’ The plaintiffs in the case

are not the United States or any state, but rather are current and

former owners of copper mines in Arizona. These plaintiffs

assert that their own former shareholders, ARCO and

Newmont, should be held liable under CERCLA as “operators”

based on their alleged control of the plaintiffs.

The Court’s decision here probably will set the standard

by which the operator issue in Pinal Creek will be resolved.

Consequently, ARCO and Newmont have a critical interest in

the outcome of this case.

THE PINAL CREEK LITIGATION

The Pinal Creek litigation arises from copper mining in

the Pinal Creek Drainage Basin (the “Site”) in eastern Arizona.

Mining operations at the Site have resulted in groundwater

pollution that must be cleaned up.

Plaintiffs in the case are Cyprus Miami Mining

Corporation (“Cyprus”), BHP Copper Company, formerly

known as Magma Copper Company (“Magma”), and

Inspiration Consolidated Copper Company (“Inspiration”). For

more than a decade, Cyprus and Magma have been mining and

processing minerals at various facilities within the Site.

Inspiration, Cyprus’s immediate predecessor, owned and

operated facilities within the Site for more than 70 years.

* As of the date of this brief, a petition for certiorari in the

Pinal Creek case was pending in this Court. Pinal Creek Group,

et al. v. Newmont Mining Corp., et al., No. 97-795 (petition filed

Nov. 10, 1997).

i a A tt

3

ARCO’s connection to the case stems from its acquisition

of the Anaconda Company (“Anaconda”). From 1915 to 1978,

Anaconda owned stock in Inspiration, one of the plaintiffs.

While the number of outstanding shares of Inspiration stock

fluctuated, Anaconda never owned more than 27.58 percent of

Inspiration. ARCO is alleged to be the successor of Anaconda

as the owner of this minority interest in Inspiration.

Newmont’s connection to the case is that it is the former

parent company of one of the plaintiffs. In 1983, a Newmont

subsidiary, Pinto Valley Copper Company, acquired mining

properties within the Site. In 1986, Pinto Valley was merged

into Magma, another Newmont subsidiary. The combined

company continued to own the mining properties as a

Newmont subsidiary until 1987, when Magma was spun off as

an independent company.

Faced with certain liability under CERCLA, plaintiffs

began incurring costs to investigate contamination at the Site.

In 1991, they brought the Pinal Creek case against ARCO,

Newmont, and others, seeking to recover these costs from their

former shareholders. Neither ARCO nor Newmont themselves

ever owned or operated any mines at the Site. Instead, they are

alleged to be liable because, as a former minority shareholder

of one plaintiff (in the case of ARCO) and as a former parent

of another plaintiff (in the case of Newmont), they allegedly

“controlled” these two plaintiffs.

Based on the longstanding rule that a corporation cannot

pierce its own veil, ARCO filed a motion to dismiss

Inspiration’s CERCLA claim. See Pinal Creek Group v.

Newmont Mining Corp., 926 F. Supp. 1400, 1414 (D. Ariz.

1996), rev ‘d on other grounds, 118 F.2d 1298 (9th Cir. 1997),

petition for cert. filed, 66 U.S.L.W. 3364 (U.S. Nov. 10, 1997)

(No. 97-795). The district court refused to dismiss the claim,

however, reasoning that ARCO can be held “directly” liable as

4

an operator because of Anaconda’s involvement in the affairs

of Inspiration. Jd. The Court brushed aside the common law

principle raised by ARCO with nothing more than the comment

that CERCLA’s provision for “owner or operator” liability

“may occasionally conflict with state corporate law” but that

this conflict is simply “unavoidable under the broad liability

provisions of CERCLA.” /d. at 1415. As a result, plaintiffs are

proceeding on their claims against ARCO and Newmont based

on the “control” theory.

SUMMARY OF ARGUMENT

As illustrated by the Pinal Creek case, the argument raised

here by the United States is being used in litigation among

private parties in unprecedented and pernicious ways. In Pinal

Creek, the “control” theory is not being used by a government

to reimburse its environmental response fund. Instead, the

theory is being used by highly profitable mining companies in

an attempt to shift all or part of their environmental response

costs to certain of their former shareholders. The question is

not whether the Site will be cleaned up, but rather which

corporation(s) should pay.

Amici submit that the en banc decision of the Sixth

Circuit was correct. Both the legislative history of CERCLA

and the specific language of the statutory sections at issue here

show that merely by using the word “operator,” Congress did

not intend to overrule more than a century of common law

establishing that, absent a showing of the recognized grounds

for piercing the corporate veil, shareholders are not liable for

the actions of a corporation.

The brief of the United States — and the decision of the

district court with which it agrees — rely on sweeping and

unsupported statements about what is “normal” and “typical”

in the relationship between a parent and a subsidiary. The

- a IE tc ly

A ee RC ee .

5

United States asserts without support in the record or in the law

that CPC International, Inc. (“CPC”) went beyond some

undefined threshold of what the United States deems to be an

appropriate level of involvement by a parent in the affairs of its

subsidiary. Similar allegations have been made about amici in

the Pinal Creek case as a purported justification for holding

them liable for the acts of corporations in which they owned

stock.

In this brief, amici address the misconceptions of the

United States about the normal involvement of a parent or

controlling shareholder in the affairs of a subsidiary. So long

as corporate formalities are observed and the corporate form is

not used to perpetrate a fraud, it is entirely appropriate for a

parent or substantial shareholder to be closely involved in a

corporation’s affairs. The unwritten assumption underlying the

arguments of the United States — that control is somehow

wrongful or that it should lead to liability of the shareholder —

is a startling departure from well-settled law. Amici therefore

support the decision of the Sixth Circuit and oppose the United

States’ effort to punch a hole through the previously sturdy wall

protecting shareholders from liability for the acts of the

corporation.

The United States also confuses the two distinct theories

on which operator liability of a parent corporation could be

premised. The United States alternates between arguing

(1) that the parent should be liable for the acts of the subsidiary

based on the parent’s control of the subsidiary’s affairs (a

derivative theory of liability) and (2) that the parent should be

liable for its own actions in directly operating a facility (a direct

theory of liability). The Sixth Circuit recognized that these two

theories are distinct. As to derivative liability, the Sixth Circuit

correctly held that a parent cannot be liable for the actions of its

subsidiary unless grounds exist for piercing the corporate veil

under state law. As to direct liability, the Sixth Circuit

6

correctly stated that the parent can be liable only if it

“independently” operates the facility “in the stead of its

subsidiary” or “actually operate[s] the facility alongside its

subsidiary.” 113 F.3d at 579.

ARGUMENT—

I. INTRODUCTION.

Under CERCLA, a past or present “owner or operator” of

a hazardous waste facility is liable for cleanup costs paid by the

government. 42 U.S.C. § 9607(a). The question presented by

this case is whether a parent corporation becomes an “operator”

under CERCLA by participating in and exerting some degree

of control over the affairs of a subsidiary that owns such a

facility. Pet. Br. at 1. The answer hinges, in large measure, on

whether Congress meant to sweep away traditional common

law principles of limited shareholder liability merely by using

the word “operator” in CERCLA.

ARCO and Newmont urge the Court to affirm the

decision of the Sixth Circuit. The court’s interpretation of

CERCLA is sound, and it appropriately refused to nullify

time-honored principles of common law without more

indication that Congress intended to do so when it enacted

CERCLA. United States v. Cordova Chem. Co. of Mich.,

113 F.3d 572, 579 (6th Cir. 1997) (en banc). The Sixth Circuit

also re “used to impose an amorphous standard of corporate

shareholder liability because of the dangers inherent in such an

approach. /d. at 580. Not the least of these concerns is the

substitution of “the relatively bright line provided by the

traditional doctrine of piercing the corporate veil with a

nebulous ‘control’ test.” Jd.

The Pinal Creek case aptly demonstrates the dangers

inherent in this slippery-slope approach. There, the plaintiffs

Se er ee ey

7

are private mining corporations that own and operate (and

generate huge profits from) copper mines that produce

hazardous wastes. Having admitted liability under CERCLA,

these corporations are using a “control” theory to sue their own

former shareholders for the cleanup costs at the site. Such a

lawsuit would be forbidden by the common law, but it is

precisely the type of litigation being generated by the “control”

standard.

Il. THE SIXTH CIRCUIT'S DECISION IS SOUND.

A. CERCLA Is Presumed Not To _ Nullify

Well-Established Common Law Rules.

The starting point in this case, “like the starting point in

any case involving the meaning of a statute, is the language of

the statute itself." United States v. Fabe, 508 U.S. 491, 500

(1993) (quoting Group Life & Health Ins. Co. v. Royal Drug

Co., 440 U.S. 205, 210 (1979)). When reviewing the text of a

federal statute, a court must keep in mind that “Congress does

not write upon a clean slate.” United States v. Texas, 507 U.S.

529, 534 (1993) (citing Astoria Fed. Sav. & Loan Ass'n

v. Solimino, 501 U.S. 104, 108 (1991)). Rather, “Congress acts

against the background of the total corpus juris of the states.”

Atherton v. FDIC, 117 S. Ct. 666, 670 (1997) (ellipsis omitted)

(quoting Wallis v. Pan Am. Petroleum Corp., 384 U.S. 63, 68

(1966)). Because the common law exists as a backdrop to all

congressional acts, and because Congress has limited

constitutional powers, this Court presumes that a federal statute

retains “‘long-established and familiar principles’” of the

common law. United States v. Texas, 507 U.S. at 534 (quoting

Isbrandtsen Co. v. Johnson, 343 U.S. 779, 783 (1952)). This

Court will not read an act of Congress as overcoming this

presumption and abrogating the common law, unless the act

“speak[s] directly” to the common-law principle and

congressional intent to override it is “evident.” /d. (citations

omitted).

Here, there is no evidence of any congressional intent to

override the common law. On the contrary, the Senate sponsor

of the bill stated: “It is intended that issues of liability not

resolved by this act, if any, shall be governed by traditional and

evolving principles of common law.” 126 Cong. Rec. $14964

(Dec. 3, 1980) (Statement of Sen. Randolph) (emphasis added).

The legislative history of CERCLA is replete with references

to adopting and following common law principles.’

The principle at issue here is a basic tenet of the common

law. Limited liability of corporate shareholders is the

“keystone” of American corporation law. Lynda J. Oswald,

Strict Liability of Individuals Under CERCLA: A Normative

Analysis, 20 B.C. ENvVT’L AFF. L. REV. 579, 622-23 & n.156

(1993) (collecting authorities). To encourage business in the

corporate form, every state has passed laws under which the

> E.g., 126 Cong. Rec. $15006 (Nov. 24, 1980) (“Under

the bill, no obligations or liabilities of any person under other

Federal or State law, including common law, are diminished by the

provisions of this bill.”) (Statement of Sen. Randolph, sponsor of the

bill); 126 Cong. Rec. $16427 (Dec. 12, 1980) (“I want to make it

clear that section 302 of H.R. 7020 [the CERCLA bill passed by the

House] provides that nothing in the act affects or modifies in any

way rights or liabilities under other State or Federal law, including

common law.) (Statement of Sen. Randolph); S. Rep. No. 96-848, at

31 (1980) (““[CERCLA’s] liability scheme essentially codifies the

common law liability standard applicable in cases involving

hazardous substances and materials.”); Hearing on H.R. 85 and H.R.

7020 Before the House Comm. on Ways and Means, 96th Cong.

(June 2, 1980) (“Well, in 7020, what we are doing, is clearly making

the statutory law the same as the common law in certain states.”’)

(Statement of Rep. Florio, sponsor of the bill). :

_— a

9

“shareholders of the corporation, including, if there is one, its

parent corporation, are not responsible” for injuries caused by

the corporation. Radaszewski v. Telecom Corp., 981 F.2d 305,

306 (8th Cir. 1992), cert. denied, 508 U.S. 908 (1993). Thus,

“{a] corporation and its stockholders are generally to be treated

as separate entities. Only under exceptional circumstances .. .

can the difference be disregarded.” Burnet v. Clark, 287 U.S.

410, 415 (1932).*

With these principles in mind, the Sixth Circuit carefully

reviewed CERCLA's language and legislative history. Initially,

the court found what many other courts have recognized: that

many of its provisions are vague, its legislative history is

sparse, and its “specific” as opposed to “general” goals are

difficult to discern because the statute represents an

eleventh-hour compromise. Cordova, 113 F.3d at 578. This

point cannot be reasonably disputed; even courts that have

eschewed the common law in this context readily acknowledge

that CERCLA is “notorious for its lack of clarity and poor

draftsmanship.” Lansford-Coaldale Joint Water Auth. v.

Tonolli Corp., 4 F.3d 1209, 1221 (3d Cir. 1993). Upon

reviewing the liability provisions im CERCLA, the Sixth Circuit

found nothing in the statute that “warrants the invocation by

courts of vague, expansive concepts . . . which threaten the

efficacy of time-honored limited liability protections afforded

by the corporate form.” Cordova, 113 F.3d at 579. The Sixth

: Piercing the corporate veil is difficult to accomplish and

generally requires a showing that the corporation was the mere alter

ego of the shareholder, that the shareholder disregarded the corporate

form, and that the corporate form was used to perpetrate a fraud or

injustice. See, e.g., Morris v. New York State Dept. of Tax. & Fin.,

623 N.E.2d 1157, 1160-61 (N.Y. 1993); Mobil Oil Corp. v. Linear

Films, Inc., 718 F. Supp. 260, 267 (D. Del. 1989, (Delaware law);

Norman v. Del Elia, 533 P.2d 537, 539 (Ariz. 1975).

10

Circuit accordingly held that a parent corporation is liable

under CERCLA, based upon the extent of its control and

involvement in an offending subsidiary, “only when the

requirements necessary to pierce the corporate veil are met.”

Id. at 580.

Unless there is sufficient evidence in CERCLA

demonstrating that Congress did, in fact, intend to disrupt this

fundamental principle of common law, the Sixth Circuit's

decision must stand. See United States v. Texas, 507 U.S. at

534; Astoria, 501 U.S. at 108. Not only is such evidence

lacking, the legislative history reveals the clear intent of

Congress to preserve and incorporate common law principles.

See supra n.3 & accompanying text. Moreover, as explained

in the next point, the language and structure of CERCLA show

that Congress intended to preserve longstanding protections

afforded to shareholders that exert control over the activities of

a corporation that owns or operates a hazardous waste disposal

facility.

B. Applying The Principle “Expressio Unius Est

Exclusio Alterius,” The Text Of CERCLA

Shows That Congress Did Not Intend To

Abrogate The Common Law Rule of Limited

Shareholder Liability.

The United States contends that the answer to the question

presented by this case lies strictly within the text of CERCLA

~ without reference to the common law. The United States’

argument goes as follows. CERCLA defines a corporation as

a “person,” 42 U.S.C. § 9601(21), and then imposes liability on

any person that “owns or operates” a facility. 42 U.S.C.

§ 9607(a); see Pet. Br. at 18-19. CERCLA then defines the

phrase “owner or operator” circularly, as any person “owning

or operating [a] facility.” 42 U.S.C. § 9601(20)A\ii). From

this, the United States argues that liability attaches to any

11

person — including the shareholders of a corporation — if their

activities fall within one of several broad dictionary definitions

of the term “operator.” Pet. Br. at 20-22. According to the

United States, moreover, creating an extremely broad liability

net by defining the term expansively is permissible as it

furthers the statute’s goal of promoting cleanup of hazardous

waste disposal sites. /d. at 26.

By relying on this expansive definition of the term

“operator,” the United States ascribes to one word “a meaning

so broad that it is inconsistent with its accompanying words,

thus giving ‘unintended breadth’” to CERCLA. Gustafson v.

Alloyd Co., 513 U.S. 561, 575 (1995) (quoting Jarecki v. G.D.

Searle & Co., 367 U.S. 303, 307 (1961)). It is not surprising

that CERCLA, like many other federal statutes, includes

corporations as potentially liable “persons” under the act. As

such, CERCLA establishes with relative clarity that a

corporation that actually owns or directly operates a hazardous

waste disposal facility can be held liable under the act.

42 U.S.C. §§ 9601(20)(A) & 9607(a). But this conclusion

merely begs the question presented here: when shareholders

choose to conduct business using the corporate form, and that

corporation owns or operates a hazardous waste disposal

facility, does CERCLA impose liability not only on the

corporation, but also on the shareholders of the corporation if

they exercise some degree of “control” over and “actively

participate” in the affairs of the corporation? By using the

single word “operator,” did Congress intend to nullify the

time-honored protections that the common law otherwise

affords corporate shareholders, merely because the corporation

owns or operates a hazardous waste disposal facility? On this

question, the text of CERCLA provides a very different answer

than that posited by the United States.

12

Congress did not employ the same definition in CERCLA

for all owners or operators of facilities. Rather, § 9601(20)A)

defines the phrase “owner or operator” as follows:

(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 to bankruptcy, foreclosure,

tax delinquency, abandonment, or similar means to

a unit 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.

42 USC. § 9601(20A\i)-(iii) (emphasis added).

Subsection (iii) defines an “owner or operator” of a facility

conveyed to a state or local government by means of

foreclosure or otherwise to include not only those who actually

“owned” or “operated” a facility, but also any person who

“otherwise controlled activities at such facility.” But

subsection (ii) defines an “owner or operator” of all other

facilities as only those persons “owning or operating” the

facility. As such, Congress expressly made both “owners or

operators” and those who “otherwise controlled activities”

liable with respect to government-owned facilities. Congress

excluded any such “control” group, however, from its

definition of those who are liable as operators of other

facilities, such as the facility at issue here.

This distinction cannot be ignored without violating the

cardinal principle of statutory construction, “expressio unius est

13

exclusio alterius” — the incl’ sion of one is the exclusion of

another. In other words, “{w)..re Congress includes particular

language in one section of a statute but omits it in another

section of the same Acct, it is generally presumed that Congress

acts intentionally and purposefully in the disparate inclusion

and exclusion.” Russello v. United States, 464 U.S. 16, 23

(1983) (citation omitted). That Congress made both actual

owners or operators and those who “otherwise controlled

activities” liable only for state-owned facilities “underscores

[the courts’] duty to refrain from reading [that] phrase into the

statute when Congress has left it out." Keene Corp. v. United

States, 508 U.S. 200, 208 (1993). The Fifth Circuit aptly

summarized the point as follows:

Significantly, CERCLA does not define “owners” or

“operators” as including the parent company of

offending wholly-owned subsidiaries. Nor does the

legislative history indicate that Congress intended to

alter so substantially a basic tenet of corporation

law.

.. . . Congress is quite capable of creating statutes

that hold shareholders or controlling en* ties liable

for the acts of valid corporations. In fact, Congress

adopted a “control” test in the next subsection of the

statute. Under CERCLA, the term “owner or

operator” is defined for facilities conveyed to state

or local governments by bankruptcy, tax delinquency

or abandonment, as “any person who owned,

operated or otherwise controlled activities at such

facility immediately” before conveyance. No such

“control” test appears in subsection (ii), the

subsection at issue in this case, and we will imply

none.

14

Joslyn Mfg. Co. v. T.L. James & Co., 893 F.2d 80, 82-83

(Sth Cir. 1990) (emphasis in original), cert. denied, 498 U.S.

1108 (1991). Accord Cordova, 113 F.3d at 579.

Those courts that have eschewed traditional common law

principles in favor of a control test simply have failed to square

their analysis with the “otherwise controlled activities”

language found in subsection (iii) but not in subsection (ii).

E.g., Lansford-Coaldale Joint Water Auth. v. Tonolli Corp.,

4 F.3d 1209, 1221-22 & n.11 (3d Cir. 1993); Jacksonville Elec.

Auth. v. Bernuth Corp., 996 F.2d 1107, 1109-10 (11th Cir.

1993); United States v. Kayser-Roth Corp., 910 F.2d 24, 26-27

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

when discussing the text of CERCLA, the First Circuit in

Kayser-Roth deleted from its analysis any reference to

subsection (iii). 910 F.2d at 27 n.7.

These courts have reasoned that in their view the text of

CERCLA “provide[s] no reason why a parent corporation

cannot be held liable as an operator under CERCLA.” /d.

at 26. This analysis has the rule backwards. Traditional

common law rules apply unless Congress has spoken directly

to the issue and congressional intent to nullify it is evident, not

the other way around. United States v. Texas, 507 U.S. 529,

534 (1993); Milwaukee v. Illinois, 451 U.S. 304, 315 (1981);

Isbrandtsen Co. v. Johnson, 343 U.S. 779, 783 (1952).

The United States touches briefly on this subject in its

brief, but its analysis is unpersuasive. The United States

initially reviews the amendments Congress has made to the

definition of “owner or operator” in section 9601(20)(A (iii),

Pet. Br. at 26-28, but fails to mention that Congress has a/ways

imposed liability on those who “otherwise controlled activities”

in subsection (iii), and has never imposed liability on this group

for facilities that fall within the scope subsection (ii). This fact

actually reinforces the conclusion that Congress has

15

purposefully excluded a “control” group from those liable for

facilities covered by subsection (ii). In the end, the United

States is forced to argue that Congress placed the “otherwise

controlled activities” language in subsection (iii) merely “to

make clear that the term ‘owner or operator’ includes persons

who ‘controlled activities’ at an inactive facility.” Pet. Br. at

28.

That cannot be the correct interpretation of this provision.

The United States’ proposed definition of “operator” clearly is

broad enough to cover both persons who actually operate a

facility as well as persons who “otherwise controlled activities

at such a facility.” Pet. Br. at 20-21. To construe the term

“operator” in this manner renders the language “or otherwise

controlled activities” in subsection (iii) entirely superfluous.

The United States’ interpretation also ignores the distinction

Congress made in its definition of “owner or operator” in

subsections 9601(20)(A (ii) and (iii). Courts do not “constru[e]

one provision in a statute so as to suspend or supersede another

provision. To avoid denying effect to a part of a statute, [courts

should] accord ‘significance and effect . . . to every word.’

Rake v. Wade, 508 U.S. 464, 471-72 (1993) (quoting

Washington Mkt. Co. v. Hoffman, 101 U.S. 112, 115 (1879)).

Accord United States v. Fabe, 508 U.S. 491, 504 n.6 (1993);

Moskal v. United States, 498 U.S. 103, 109-10 (1990).

In sum, no principle of law is more fundamental than that

of limited liability of corporate shareholders. If Congress

intended to abrogate this rule in CERCLA’s definition of

“owner or operator,” it surely would have done so with more

clarity than one can discern in the statute. In fact, the text,

structure, and legislative history of CERCLA evince a clear

congressional intent to leave this common law rule intact with

respect to facilities other than those conveyed to a state or local

government by foreclosure or similar means.

16

lil, THE UNITED STATES '- RELIES ON

UNSUPPORTED AND ERRONEOUS ASSERTIONS

ABOUT THE “TYPICAL” RELATIONSHIP

BETWEEN A PARENT AND ITS SUBSIDIARY.

Both the United States and the district court rely upon

unsupported — and wholly erroneous — assertions about the

“typical” degree of control exercised over a corporation by its

parent or controlling shareholder. Inherent in this reasoning is

the assumption that a parent’s normal “control” of its

subsidiary is somehow wrongful and justifies a court in

stretching a statute to impose liability on the entity exercising

such control.

On the contrary, so long as the corporate formalities are

observed, and the corporate form is not used to perpetrate a

fraud, it is normal and proper for a parent or controlling

shareholder to oversee its investment through careful

supervision of the subsidiary’s affairs. In so doing, the

shareholder depends on the traditional rule of limited liability.

As this Court has observed: “Limited liability is the rule not

the exception; and on that assumption large undertakings are

rested, vast enterprises are launched, and huge sums of capital

attracted.” Anderson v. Abbott, 321 U.S. 349, 362 (1944).

Indeed, “one of the primary purposes of the corporate form of

business is to insulate shareholders from unlimited liability

....” CM Corp. v. Oberer Dev. Co., 631 F.2d 536, 541

(7th Cir. 1980).

The United States argues that a parent corporation

normally restricts itself to exercising “general authority over a

wholly-owned subsidiary” and that a parent should decide only

a subsidiary’s “general matters of corporate governance put

forward by the board.” Pet. Br. at 43 (emphasis added). The

United States then asserts that it is not “usual” or “typical” for

a parent to go beyond such “general” supervision by placing its

- — es ol eS

17

own employees in executive positions at a subsidiary and that

doing so should subject the parent to CERCLA liability:

Thus, in the usua/ situation, the subsidiary’s

own executive officers, acting on behalf of the

subsidiary, are responsible for managing the

subsidiary and “operating” the subsidiary’s facility.

If the parent corporation, however, departs from the

typical practice and employs its own agents as

executive officers (or as board members performing

the typical functions of an executive officer) to

manage the subsidiary, then a court may conclude

that the parent corporation is, in fact, “operating” the

subsidiary’s facility.

Pet. Br. at 44 (emphasis added). The district court employed a

similar distinction.”

The United States cites neither support in the record nor

precedent in the law for the notion that it is “typical” for a

parent or controlling shareholder to refrain from direct

involvement in the affairs of a subsidiary. In fact, the law is

decidedly to the contrary. Numerous courts have recognized

that parent companies necessarily control all important

decision-making by their subsidiaries, and that such control

does not lead to liability of the parent. F.g., Lusk v. Foxmeyer

Health Corp., 129 F.3d 773, 778 (5th Cir. 1997) (“Common

management and ownership are ordinary aspects of a parent-

* The district court held: “A parent’s actual participation

in and control over a subsidiary’s functions and decision-making

creates ‘operator’ liability under CERCLA; a parent’s mere

oversight of a subsidiary’s business in a manner appropriate and

consistent with the investment relationship between a parent and its

wholly owned subsidiary does not.” 777 F. Supp. at 573 (emphasis

added).

18

subsidiary relationship.”); American Tel. & Tel. Co. vy.

Compagnie Bruxelles Lambert, 94 F.3d 586, 591 (9th Cir.

1996) (“The circumstances relied upon to establish GBL’s

‘domination’ over Keystone reflect no more than a normal

parent-subsidiary relationship.”); Fletcher v. Atex, Inc., 68 F.3d

1451, 1459-60 (2d Cir. 1995) (parent’s control over

subsidiary’s leases, major capital expenditures, and other

business affairs held to be “typical of a majority shareholder or

parent corporation”); Gibraltar Sav. v. LDBrinkman Corp.,

860 F.2d 1275, 1287 (Sth Cir. 1988), cert. denied, 490 U.S.

1091 (1989) (operating a subsidiary “in close concert with the

interests of the owners” is “perfectly natural and proper and

provides no basis for ignoring legal independence”); Craig v.

Lake Asbestos of Quebec, Ltd., 843 F.2d 145, 150 (3d Cir.

1988) (“It is assumed to be the norm that a parent will have

‘not only . . . the potential to exercise control [over the

subsidiary], but to exercise it to a substantial degree.”’) (quoting

P. Blumberg, The Law of Corporate Groups: Tort, Contract,

and Other Common Law Problems in the Substantive Law of

Parent and Subsidiary Corporations § 10.02, at 187 (1987)

(alterations in original)); Topp v. CompAir Inc., 814 F.2d 830,

837 (1st Cir. 1987) (“[T]he fact that a parent corporation

exercises the control which is necessarily incident to the full

ownership of its subsidiary is insufficient, without more, to

justify ignoring the separate corporate entities.”); Edwards Co.

v. Monogram Indus., Inc., 730 F.2d 977, 986 (Sth Cir. 1984)

(en banc) (“Undoubtedly, Monotronics was ultimately

controlled by Monogram. This will always be the case where

a parent corporation has a wholly-owned subsidiary.”).

The district court did not purport to find grounds

sufficient to pierce the corporate veil between CPC and its

subsidiary. Instead, the district court concluded that CERCLA

authorized the creation of “a new, middle ground” on which a

parent corporation could be found liable as an “operator” based

on an ill-defined set of “factors.” 777 F. Supp. at 573. These

oe ey I ec

19

“factors,” as identified by the district court, consist of: “the

parent’s participation in the subsidiary’s board of directors,

management, day-to-day operations, and specific policy

matters, including areas such as manufacturing, finances,

personnel and waste disposal.” /d.° As the Sixth Circuit

correctly pointed out, however, “these activities are not grounds

traditionally relied upon as warranting the disregard of separate

corporate existences.” 113 F.3d at 580.

Parent corporations routinely participate in and direct

those phases of a subsidiary’s business identified by the district

court, and it has never been thought improper for parents to do

so. For example, as to the district court’s first factor

(participation in the subsidiary’s board of directors), even the

United States recognizes that “stock ownership . . . allows the

parent to choose the subsidiary’s board of directors and to vote

on general matters of corporate governance put forward by the

board.” Pet. Br. at 43. The other “factors” relied on by the

district court have come up frequently in the lower courts in

contexts other than CERCLA and have not been found to be

grounds for disregarding a subsidiary’s corporate form.’

® The district court’s only other suggested guidelines were

that “determining the origin and business function of the subsidiary

in the context of the parent corporation’s business may be helpful

....” Other evidence, the court observed, “may be less probative if

it is simply indicative of the actions of a prudent investor, rather than

an active operator ....” 777 F. Supp. at 573.

7 See, e.g., American Tel..& Tel. Co., 94 F.3d at 589 n.4,

591 (corporate form cannot be disregarded to exercise jurisdiction

over parent, even where parent had participated in detailed

management decisions such as spending money on anti-pollution

equipment, subsidiary was included in parent’s consolidated tax

returns, and an employee of the parent attended all meetings of the

subsidiary’s board of directors); Edwards Co., 730 F.2d at 979 (no

(continued...)

20

Moreover, because CERCLA imposes liability on both

current and past operators of hazardous-waste facilities (see

42 U.S.C. § 9607(a)(1), (2)), the test advocated by the United

States would encourage current operators of facilities to sue

their own former shareholders, based on their alleged “control”

over the offending corporation. This tactic may seem absurd

because “the accepted rule is that the corporate veil will only be

pierced to protect the interests of third parties; the separate

corporate entity will not be disregarded to allow the corporation

to escape its obligations.” Esmark, Inc. v. N.L.R.B., 887 F.2d

739, 751 (7th Cir. 1989).* Nonetheless, this is precisely the

(...continued)

liability of parent even though all officers and directors of subsidiary

were either officers or directors of parent, subsidiary did not have its

own payroll or office space, and all bookkeeping was handled by

parent); Williams v. McAllister Bros. Inc., 534 F.2d 19, 21-22

(2d Cir. 1976) (no liability of parent even though key officers and

directors of subsidiary were all employees of the parent, and the

parent required that it be informed of and consent to major repairs

to the subsidiary’s tugboats); /n re Silicone Gel Breast Implants

Prods. Liab. Litig., 837 F. Supp. 1128, 1134-35 (N.D. Ala. 1993) (no

liability of corporate parents despite “their providing technology,

research, testing, personnel, and facilities to Dow Corning; their

control and election of Dow Corning’s board of directors; [and] their

management of Dow Corning’s financial affairs,” and observing that

“the sharing of directors is a practice frequently found in parent and

subsidiary relationships” ); Akzona Inc. v. E.1. du Pont de Nemours

& Co., 607 F. Supp. 227, 237-40 (D. Del. 1984) (corporate form

cannot be disregarded to exercise jurisdiction over parent, even

where parent was 100% owner of subsidiary, there were common

directors, and parent required that it approve significant

expenditures).

* Accord McCarthy v. Azure, 22 F.3d 351, 362-63 (1st Cir.

1994) (“the [alter-ego] doctrine can be invoked ‘only where equity

(continued...)

21

theory that the plaintiffs are pursuing in the Pinal Creek

litigation. Despite the common law rule against a corporation

suing its own shareholders, plaintiffs’ theory that CERCLA’s

use of the word “operator” authorizes just such a claim so far

has survived a motion to dismiss.

The Court should stop this derogation of longstanding

common law protections afforded to corporate shareholders and

hold, as the Fifth and Sixth Circuits have held, that “[iJf

Congress wanted to extend [CERCLA] liability to parent

corporations” — and if it wanted to allow corporations to pierce

their own veils and impose CERCLA liability on their own

shareholders — “it could have done so, and it remains free to do

so.” Cordova, 113 F.3d at 579-80 (quoting Joslyn Mfg.,

893 F.2d at 83). But Congress has not done so, and neither

should the federal courts. “[A]ny bold rewriting of corporation

law in this area is best left to Congress.” Joslyn Mfg., 893 F.2d

at 83.

IV. THE UNITED STATES CONFUSES DIRECT AND

DERIVATIVE LIABILITY, AND USES EVIDENCE

OF ONE TO SUPPORT THE OTHER

Throughout its brief, the United States intertwines and

confuses two concepts that are central to this case: a parent’s

derivative liability (if any) for the actions of its subsidiary and

a parent’s direct liability for its own actions. When the facility

is owned and operated by the subsidiary, and the parent is

alleged to be liable simply because it participated in and

* — (...continued)

requires the action to assist a third party’”); | William M. Fletcher,

Fletcher Cyclopedia of the Law of Private Corporations § 41.10, at

615, 634 n.13 (perm. ed. rev. vol. 1990) (the corporate form may be

disregarded only where equity requires doing so to assist a third

party).

22

controlled the business affairs of the subsidiary, any liability of

the parent is completely derivative. For example, the United

States poses the question presented strictly in terms of

derivative liability: “Whether a corporation that . . . exercised

control over . . . the operations of a subsidiary may be held

liable . . . as an operator of the subsidiary’s facility.” Pet. Br.

at I.

At times, however, the United States drops its derivative

theory and argues instead for direct liability: “CERCLA

subjects entities to direct liability, without regard to corporate

form, based on the entity’s own actions in operating the

facility.” Pet. Br. at 17 (emphasis in original). See also Pet. Br.

at 34. The United States switches back and forth between the

two theories and finally settles on a hybrid: “When a parent

corporation . . . actually participates in the day-to-day operation

of a subsidiary and its facility, CERCLA dictates that the

corporation should be responsible . . . for the costs of cleanup.”

Pet. Br. at 41 (emphasis added).

Amici suggest that the two concepts are distinct and

should be analyzed differently. If a parent corporation is

alleged to be liable because of claimed control over the

subsidiary’s business affairs and decision-making, the theory is

derivative. ARCO and Newmont support the analysis of the

Sixth Circuit and the position of CPC that under CERCLA, a

parent is derivatively liable for its subsidiary’s operation of a

facility only when there exist grounds for piercing the corporate

veil under state law. See Cordova, 113 F.3d at 580. If a parent

corporation is alleged to be liable because of its own conduct,

the theory is direct liability. The Sixth Circuit observed that

direct liability conceivably might be found where a parent

“independently operates the facility in the stead of its

subsidiary.” /d. at 579. The task facing the court under such a

theory is to determine whether the evidence shows independent

23

operation of the facility by the parent itself — not by the

subsidiary.

The district court did not purport to find grounds for

piercing the corporate veil between CPC and its subsidiary, and

consequently there is no basis for imposing derivative liability

on CPC. As we show in the next point, the United States also

has failed to identify evidence that would support a cenclusion

that CPC should be directly liable for operating the facility

itself.

A. The United States Does Not Identify Sufficient

Evidence Of Actual Operation Of The Facility By

CPC To Prove Direct Liability.

Despite the efforts of the United States to marshal the

evidence (Pet. Br. at 45-47), it is apparent that the record falls

well short of demonstrating that CPC itself actually operated

the facility. According to the United States, CPC “placed its

own high level officers in key management positions of its

subsidiary” and “made loans to its subsidiary . . . and assumed

several of the subsidiary’s loans.” Pet. Br. at 45,47. But these

facts pertain solely to the parent’s general oversight of the

subsidiary’s business and are relevant, if at all, only to a theory

of derivative liability.

When it comes to actual involvement at the facility,

petitioner cites only two items. First, the United States points

to decisions made by individuals who were officers of both the

subsidiary and CPC. Pet. Br. at 45-46. Just like the plaintiffs

in Pinal Creek, the United States automatically attributes to the

parent the actions of any person who was an officer of both the

subsidiary and the parent. In so doing, the United States

effectively ignores the corporate existence of the subsidiary —

its argument assumes that the subsidiary’s corporate veil is to

be pierced, merely because employees of the subsidiary also

24

hold positions with the parent. But the existence of such dual

employees is insufficient under state law to pierce the veil. See

Edwards Co., 730 F.2d at 979, and other cases cited at supra n.7.

Thus, the United States’ argument again depends on

disregarding fundamental principles of common law.

However, in enacting CERCLA Congress demonstrated no

intent to alter basic principles of state corporation law, but

instead evinced a clear intent to adopt and incorporate state

common law principles. See supra n.3. Thus, when the

subsidiary is the owner of a facility, and its employees make

day-to-day decisions about operations at the facility, the parent

cannot be saddled with liability as an operator merely by

ignoring the separate existence of the subsidiary and attributing

to the parent all actions of dual employees.”

Second, the United States points to involvement in

environmental issues of CPC's environmental affairs director,

G.R.D. Williams. Even accepting the best case that the United

States can make for Williams’ involvement, it appears that he

was involved only in particular decisions from time to time.

There is no claim that he exercised either day-to-day

operational control at the facility or that he set and enforced

long-term policy for operations at the facility.

9

Dual officers and directors are “very common in the

realm of business.” Western Pac. RR Corp. v. Western Pac. R. Co.,

197 F.2d 994, 1000 (9th Cir. 1951), cert. denied, 346 U.S. 910

(1953). Persons who hold such dual positions are not liable to either

corporation as a result of such duality unless they “favor the interests

of one corporation while sacrificing or betraying those of the other.”

Id. Thus, state common law recognizes no reason why dual officers

and directors cannot faithfully discharge their fiduciary duties fo the

subsidiary, while retaining positions with the parent. Absent a

breach of fiduciary duty, a dual employee's actions on behalf of the

subsidiary must be attributed solely to the subsidiary.

25

B. Direct Liability Of A Parent Must Be Based On

A Showing That The Parent Independently

Operated The Facility.

Amici submit that the evidence cited by the United States

is insufficient to show that CPC — and not its subsidiary —

independently operated the facility. As shown in this brief,

parent corporations typically are closely involved im the

operations of their subsidiaries. As shown above (supra n.3),

it is common for a single individual to hold a position with both

companies. Because parent corporations are entitled to create

such dual positions without losing the protection of the

subsidiary’s corporate shield, amici submit that acts of dual

employees cannot be attributed automatically to the parent for

purposes of attempting to establish the liability of a parent. See

Lusk v. Foxmeyer Health Corp., 129 F.3d 773, 778 (Sth Cir.

1997) (“[MJere existence of common management and

ownership are not sufficient to justify treating a parent

corporation and its subsidiary as a single employer.”).

Similarly, a parent’s oversight of its investment in a

subsidiary’s business naturally leads many parent corporations

to provide technical advice and assistance to their subsidiaries,

to send employees to inspect and report on operations at a

facility, or even to become involved in particular decisions at

a facility. An example is Williams’ involvement in particular

environmental matters. Pet. Br. at 46. Amici submit that these

discrete, episodic kinds of involvement at a facility are

insufficient to establish that a parent actually has become the

“operator” of a facility.

As the Sixth Circuit acknowledged, a parent might

become liable as an operator of a facility owned by a subsidiary

if the parent “independently operate[s]} the facility in the stead

of its subsidiary; or, as a sort of joint venturer, actually

operate[s] the facility alongside its subsidiary.” 113 F.3d at

26

579. In order to meet this test, the evidence must be

unequivocal that the acts relied upon truly were acts of the

parent. An act of a person employed by both the parent and the

subsidiary cannot be attributed to the parent unless there are

grounds for piercing the corporate veil. In addition, the

evidence must be sufficient for the finder of fact to conclude

that the parent itself operated the facility, independently of the

subsidiary, during a period of hazardous waste disposal.

Evidence that employees of the parent exercised some measure

of influence or control over the facility, provided services or

assistance, made visits to the facility, or decided certain issues

pertaining the facility are insufficient to prove that the parent

was an operator of the facility.

This standard for measuring direct liability prevents

imposition of operator liability merely by attributing to a parent

conduct that under common law must be attributed to a

subsidiary. Respect for the corporate veil and the traditional

rule of limited shareholder liability demands that liability of a

parent be based on either: (1) facts sufficient to justify piercing

the corporate veil; or (2) facts demonstrating that the parent

itself has engaged in the conduct that serves as the basis for

liability. A parent is entitled to own a subsidiary that operates

a facility, and to exercise “normal incidents of stock ownership,

such as the right to select directors and set general policies,”

Lusk, 129 F.3d at 778, without thereby becoming liable under

CERCLA as an operator of the facility.

Amici submit that both the derivative and the direct

theories of liability.are presented by this appeal, and that both

should be addressed. If the Court were to hold only that a

parent cannot be derivatively liable as an operator for the acts

of its subsidiary unless there are grounds for piercing the

corporate veil under state law, plaintiffs simply would switch

to a theory of direct liability. Plaintiffs would assert, as they do

here and in Pinal Creek, that acts of the subsidiary should be

27

attributed to the parent and that the parent should be “directly”

liable for those acts.

CONCLUSION

Nothing in CERCLA'S text or legislative history suggests

that Congress intended to substitute the relatively bright line

test provided by the traditional doctrine of piercing the

corporate veil with an amorphous control test. This Court

should reject the control test because it is leading to absurd and

unfair results, as demonstrated by the Pinal Creek litigation,

where corporations are attempting to impose operator liability

on their former shareholders in derogation of the common law

principle that bars such actions. As the Sixth Circuit

appropriately held, parent corporations are not liable as

operators for the conduct of their subsidiaries unless there exist

sonny iach a te. nt rag te

t corporation independently operates a facility. Because

so Uelond Stanee did mat annet ts bandon under olther dhecry,

the judgment of the Sixth Circuit should be affirmed.

Respectfully submitted,

WINDLE MICHAEL J. GALLAGHER

KARL M. TILLEMAN ANDREW M. Low

DALTON GOTTO SAMSON Counsel of Record

& KILGARD, P.L.C. DAVIS, GRAHAM

3101 N. Central Ave. & STUBBS LLP

Suite 900 370 17th St., Suite 4700

Phoenix, AZ 85012 Denver, CO 80202

(602) 248-0088 (303) 892-9400

Counsel for Amici Curiae

February 18, 1998