Petition for Writ of Certiorari — Joslyn Manufacturing Co. v. James
Supreme Court brief1991
Ask Donna
What actually matters in this document.
Text
IN THE
Supreme Court of the United States
OCTOBER TERM, 1989
JOSLYN MANUFACTURING COMPANY,
Petitioner,
Vv.
T. L. JAMES & COMPANY, INC.,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT
OF APPEALS FOR THE FIFTH CIRCUIT
JAY A. CANEL
Counsel of Record
STEPHEN D. DAVIS
CaANEL, Davis & KING
30 North LaSalle Street
Suite 1730
Chicago, Illinois 60602
(312) 372-4142
Attorneys for Petitioner
JOSLYN MANUFACTURING COMPANY
JAMES L. ADAMS
MIDDLEBERG RiIpDLE & GIANNA
31st Floor
Place St. Charles
201 St. Charles Avenue
New Orleans, Louisiana 70170
(504) 525-7200
Of Counsel to Lance D. Alworth,
Joining in the Petition
Midwest Law Printing Co., Chicago 60611, (312) 321-0220
i
QUESTIONS PRESENTED FOR REVIEW
Hazardous waste sites present a national problem that
will cost billions to rectify.1 Congress passed CERCLA
to provide a national plan in which “owners or operators”
of hazardous waste facilities are liable (to the government
or to private parties for contribution) for a share of the
cleanup cost.
Many sites now being cleaned up were owned or oper-
ated by corporations which have been dissolved or are
otherwise unable to pay their fair share of CERCLA lia-
bility. In this contribution case, the Fifth Circuit held a
parent corporation could only be liable for cleanup costs
at such a site if its dissolved subsidiary had been a sham
under state law.
The Fifth Circuit expressly declined to follow the Second
Circuit and other federal courts which have held share-
holders and parent corporations liable under CERCLA by
reading “owner or operator” to include those who actively
participated (or could have) in the management of the
facility.
The Fifth Circuit also chose not to follow decisions of
this Court and other circuits in which a valid corporate
1 For example, one Congressiona! study estimates that the amount
of federal funds needed to clean up sites listed on the NPL would
“rangle] from about $16.7 to $23.8 billion, far in excess of the
available $8.5 billion.” Survey & Investigations Staff, Report to
the House Committee on Appropriations on the Status of the Envi-
ronmental Protection Agency’s Superfund Program, at Summary
(March 1988) (emphasis in original), reprinted in Practicing Law
Institute, Practical Approaches To Reduce Environmental Cleanup
Costs 409 (1988).
ii
form under state law is disregarded under federal common
law to serve the purpose of a federal statute; here, the
subsidiary’s separate identity might have been disregarded
to fulfill CERCLA’s purpose of having a person which
profited from the disposal of hazardous waste, the parent
corporation, help clean up the disposal site.
Joslyn believes the lower courts’ refusal to even con-
sider whether a parent corporation could be directly liable
under CERCLA as an “owner or operator” is inconsistent
with C&RCLA’s purposes. Joslyn believes it was further
error to apply a state’s rigid alter ego analysis, as such
an approach threatens CERCLA’s status as a truly na-
tional plan. The present uncertainty encourages litigation
and discourages voluntary cooperation in cleanup efforts.
The Court can resolve these conflicts by deciding this
case, specifically:
1. Under what circumstances is a parent corporation
directly responsible for environmental remediation costs
as an “owner or operator” of its subsidiary’s hazardous
waste facility under the Comprehensive Environmental
Response, Compensation and Liability Act (““CERCLA”’),
42 U.S.C. Section 9601, et seq.?
2. In determining whether to disregard a subsidiary’s
separate corporate form to hold its parent corporation
responsible for environmental remediation costs under
CERCLA, should CERCLA’s purpose of having persons
who benefited from the disposal of hazardous waste also
share in the cleanup costs be considered under a federal
common law analysis, rather than state law?
ili
LIST OF ALL PARTIES TO THE PROCEEDINGS
IN THE COURT WHOSE
JUDGMENT IS SOUGHT TO BE REVIEWED
Joslyn Manufacturing Co.
T. L. James & Co., Inc.
Powerline Supply Co., Inc.
Nelda S. Elliott and Bill Elliott
Louisiana & Arkansas Railway Co.
Lance D. Alworth
Floyd Benjamin James
George William James
RULE 28.1 LISTING
Petitioner Joslyn Manufacturing Company is a wholly
owned subsidiary of Joslyn Corporation, a publicly held
and traded corporation with outstanding securities in the
hands of the public. Affiliates of Petitioner include other
subsidiaries of Petitioner’s parent corporation, being Joslyn
Clark Controis, Inc., Joslyn Canada Inc., Joslyn Hi- Voltage
Corporation, Joslyn Electronic Systems Corporation, Joslyn
Power Products Corporation, Joslyn Research and Develop-
ment Corporation, ADK Pressure Equipment Corporation,
ADK Pressure Equipment Limited, Sunbank Family of
Companies, Inc., Sunbank Electronics, Inc., Air-Dry Cor-
poration of America, Royal Diecasting Corporation and
Joslyn Foreign Sales Corporation.
iv
TABLE OF CONTENTS
QUESTIONS PRESENTED FOR REVIEW ..
LIST OF ALL PARTIES TO THE PROCEED-
INGS IN THE COURT WHOSE JUDGMENT
IS SOUGHT TO BE REVIEWED ..........
SPE EE eho 8 oa sc reccrccevcccacas
JURISDICTION OF THIS COURT ...........
FEDERAL STATUTES INVOLVED .........
STATEMENT OF THE CASE ...............
oe oe guna aka
I
The Decision Below Creates A Conflict Among
The Federal Courts As To What Degree Of
Involvement In The Management Of A Sub-
sidiary’s Hazardous Waste Facility Will
Render A Parent Corporation Directly Liable
As An “Owner Or Operator” Under CERCLA .
A. The Statutory Framework ............
B. Some Courts, Notably The Second Cir-
cuit, Have Adopted An Interpretation Of
“Owner Or Operator” Which Can Include
A Parent Corporation Without Finding
Its Subsidiary To Be A Sham........
PAGE
i
ili
ili
iv
vi
Do NW WS =
Vv
C. Both The Trial Court And The Fifth Cir-
cuit Expressly Declined To Apply This
Interpretation Of “Owner Or Operator”’ . . )
Il.
The Decision Below Creates A Conflict In The
Federal Courts As To The Respect Afforded
The Corporate Form Of A Responsible Party
CF Ss Carve catakabewe wee sees cae 10
A. This Court Has Applied A Federal Com-
mon Law Rule In Which A Valid Cor-
porate Form Under State Law Is Disre-
garded When Necessary To Fulfill The
Purpose Of A Federal Statute ........ 10
B. Neither The Trial Court Nor The Fifth
Circuit Applied This Federal Rule And
Instead Relied Solely On A State Law
“Gr Gv kn ec cde weivinss 12
Il.
This Court Should Resolve These Conflicts . . 12
COTE RPRMGEE wow 6-5xannsscbatisbiueeeeebenuas 13
APPENDICES
A— Joslyn Manufacturing Co. v. T. L. James &
Company, 893 F.2d 80 (5th Cir. 1990) ..... la
B— Joslyn Corp. v. T. L. James & Co., Inc., 696
F.Supp. 222 (W.D. La. 19GB)... nc. ceeesss 9a
C— Fifth Circuit Order denying Petition for re-
hearing (unreported) .............. eAweenes 32a
DGB CUA GR Fe oh vec icenecccncuss 34a
a GR TED, GUID: Te 6 oa vce ccannscdunns 35a
P—@ UBC. Beetiem BES... ccc ccccccaccces 37a
vi
TABLE OF AUTHORITIES
CASES: PAGE
‘Anderson v. Abbott, 321 U.S. 349 (1944) ....... 10
First National City Bank v. Banco Para El Com-
ercio Exterior De Cuba, 462 U.S. 611 (1983) .. 10
Idaho v. Bunker Hill Co., 635 F.Supp. 665 (D.
EE tine ks bd Gna Aas hRewe dea genchewee )
Joslyn Corp. v. T. L. James & Co., Inc.. 696 F.
Supp. 222 (W.D. La. 1988) ....... POU ree 1,5
Joslyn Manufacturing Co. v. T. L. James & Com-
pany, 893 F.2d 80 (5th Cir. 1990) .......... 1,6
New York v. Shore Realty Corp., 759 F.2d 1032
o£: ere rere Teeter 7
Town of Brookline v. Gorsuch, 667 F.2d 215 (ist
Se ES babs oko T RR SARAA AOR AES ORR Sa 10, 11
United States v. Carolawn, 21 ERC 2124 (D.S.C.
USS cui cas koksceenbnsaethawinakeaees )
United States v. Conservation Chemical Co., 628
F.Supp. 391 (W.D. Mo. 1985) .............. 9
United States v. Jon-T Chemicals, 768 F.2d 686
(5th Cir. 1985), cert. denied, 475 U.S. 1014, 106
S.Ct. 1194, 89 L.Ed.2d 309 (1986) .......... 5, 12
United States v. Kayser-Roth Corp., 724 F.Supp.
Se EWS aA 8 Sain vcen eed se adapes 8, 11, 12
United States v. Mirabile, 15 E.L.R. 20994 (E.D.
ie We ci ccnnnscnebekannss 9
United States v. Mirabile, 23 ERC 1511 (B.D. Pa.
SENS D3 oe eh Ae a CeX REMAN ESE Ea Ores ee eae i)
vii
United States v. Mottolo, 695 F.Supp. 615 (D. N. H.
EEE Seok p56 tie Ch Nha CaaS eR AOR Laws oes 11
United States v. Nicolet, Inc., 712 F.Supp. 1193
ME AAS 5450060 skeen densa eeoees 8, 12
United States v. Northeastern Pharmaceutical and
Chemical Company, Inc., 579 F.Supp. 823 (W.D.
Mo. S.D. 1984), aff'd in part and rev'd in part,
810 F.2d 726 (8th Cir. 1986), cert. denied, 108
EE cv ckcuvranvis cetearwecaeens 7,8
STATUTES:
42 U.S.C. Section SGDIGOMA) ............0085. 2,7
Se Ue Py ED 6 bv a os cee ccncueteiude 2,6
Ge SF CE EE oi ve Nev cuweuccunees 2,6, 10
IN THE
Supreme Court of the United States
OcTOBER TERM, 1989
JOSLYN MANUFACTURING COMPANY,
Petitioner,
Vv.
T. L. JAMES & COMPANY, INC.,
Respondent.
PETITION FOR A WRIT OF CERTIORARI
TO THE UNITED STATES COURT
OF APPEALS FOR THE FIFTH CIRCUIT
OPINIONS BELOW
Joslyn Manufacturing Co. v. T. L. James & Co., Inc.,
893 F.2d 80 (5th Cir. 1990), remroduced herein as Appen-
dix A; and Joslyn Corp. v. T. Lb. Jemes & Co., Inc., 696
F.Supp. 222 (W.D. La. 1988), reproduced herein as Ap-
pendix B.
JURISDICTION OF THIS COURT
The opinion of the United States Court of Appeals for
the Fifth Circuit was entered on January 29, 1990. A peti-
tion for rehearing filed by Powerline Supply Company was
wilbiis
denied on March 26, 1990, and is reproduced herein as
Appendix C. This Court has jurisdiction to issue the re-
quested writ of certiorari under 28 U.S.C. Section 1254(1).
FEDERAL STATUTES INVOLVED
42 U.S.C. Section 9601(20\A)
42 U.S.C. Section 9607(a)
42 U.S.C. Section 9613(f\1)
(See Appendices D, E & F)
STATEMENT OF THE CASE
Factual Background
In 1935, T. L. James & Company, Inc. (“James Com-
pany’’) of Ruston, Louisiana paid $20,110 for 120 shares
of voting common stock and 200 shares of non-voting pre-
ferred stock in Lincoln Creosoting Co., Inc. (“Lincoln’’).
While 80 shares of voting common stock were given to
Messrs. Tooke and Hayes, the men who would directly
supervise operation of Lincoln’s wood-treating facility in
Bossier City, Louisiana, they endorsed their shares back
to James Company until such time as dividends repaid
the original value of their shares (which never occurred).
During Lincoln’s entire operating life from 1935 until 1950,
James Company controlled 100% of Lincoln’s stock.
It is undisputed that Lincoln disposed of hazardous
waste at the Bossier City facility. Lincoln contaminated
E
its drainage ditch, large drainage slough, and its treated
wood railroad track area. It paved blacktop roads on the
site with creosote sludges. This contamination was readily
visible and could not have gone unobserved. The minutes
of Lincoln’s 1944 shareholder meeting reflect that spend-
ing money to improve drainage was discussed, but no ac-
tion was ever taken by Lincoln or James Company.
James Company profited from Lincoln. While no divi-
dends were ever paid on common stock, James Company
received dividend income from its sole ownership of Lin-
coln’s preferred stock.
James Company provided all of Lincoln’s financing, with
credit running as high as $800,000. Lincoln had an open
line of credit with James Company. James Company guar-
anteed Lincoln’s larger credit accounts.
T. L. James was president of both James Company and
Lincoln until his death in 1944. He was also James Com-
pany’s major shareholder and voted James Company’s
stock in Lincoln by proxy. Until his death, five of the
seven members of Lincoln’s Board of Directors were of-
ficers, directors and/or shareholders of James Company.
T. L.’s son, G. W. James, served as Lincoln’s president
from 1944 to 1950. G. W. James was also an officer of
James Company. James Company bought out Hayes in
1944 and sold his stock at cost to G. W. James’ cousin,
J. E. Lacy. Lacy then became Lincoln’s head of produc-
tion and a Lincoln director. With Lacy’s vote, James Com-
pany continued to control Lincoln’s Board of Directors for
the remainder of its existence.
Lincoln’s registered office with the Louisiana Secretary
of State was the James Building in Ruston; Lincoln had
no lease and paid no rent at that address. A common em-
ployee of the two companies, V. A. Davidson, worked at
_
James Company headquarters and served as liaison be-
tween Lincoln personnel at the treatment plant and T. L.
James or G. W. James. Davidson received daily reports
from the plant and an itemized statement of all collec-
tions and disbursements by Lincoln’s plant personnel.
When the I.R.S. sought to disallow his salary as Lin-
coln president, G. W. James stated that from 1944 through
1950 he was in constant contact with plant management
by phone and held conferences with them in Ruston not
less than once a month and as often as once a week.
Lincoln sold the facility to Joslyn in 1950. Lincoln then
repurchased 41 shares of common stock held by certain
Lincoln employees and Tooke’s heirs for $2250 a share.
In 1951, James Company donated its 120 shares of Lincoln
common stock to Centenary College which then received
the largest share of Lincoln’s assets on its dissolution.
James Company received a tax benefit from the donation.
Lincoln’s Certificate of Dissolution was executed on De-
cember 19, 1952.
Joslyn owned and operated the facility until 1969 when
it sold the property to Koppers, Inc.
In 1986 and 1987, the Louisiana Department of Environ-
mental Quality issued orders directing James Company,
Joslyn and subsequent site owners to clean up the Lin-
coln site pursuant to the Louisiana Environmental Quali-
ty Act (“LEQA”). These state administrative proceedings
have been inactive during the course of this case. Joslyn
has begun remedial action and expects the cleanup to cost
several million dollars. ;
Proeeedings Below
Joslyn brought suit in the United States District Court
for the Western District of Louisiana against James Com-
a
pany and others seeking contribution for cleanup costs in-
curred to date and a declaratory judgment of liability for
future contribution under both CERCLA and LEQA. Juris-
diction was based on 42 U.S.C. Section 9613(b).
Other defendants (including Third-Party Defendant Lance
D. Alworth who joins this petition) cross-claimed against
James Company. Defendants Powerline Company, Nelda
Elliott and Bill Elliott also filed third-party actions against
G. W. James and F.B. James (G. W.’s brother, James
Company’s president and a former Lincoln Director).
The trial court, Stagg, J., granted summary judgment
in favor of James Company, G. W. James and F. B. James
on the ground that the facts would not support piercing
the corporate veil under Louisiana law, relying on United
States v. Jon-T Chemicals, 768 F.2d 686 (5th Cir. 1985),
cert. denied, 475 U.S. 1014, 106 S.Ct. 1194 (1986). The Jon-T
analysis does not include any consideration of CERCLA’s
purposes in determining whether a subsidiary’s corporate
identity should be disregarded to reach its parent.
Judge Stagg expressly declined to follow the analysis
of other federal courts, including the Second Circuit, in
which corporate officers and parent corporations have
been held directly liable as an “owner or operator’’ under
CERCLA. Joslyn Corp. v. T. L. James & Co., Inc., 696
F.Supp. 222 (W.D. La. 1988).
The Fifth Circuit affirmed in all respects.? It also ex-
pressly declined to follow other federal courts’ reading of
“owner or operator”:
2 The lower courts granted summary judgment against Joslyn on
its CERCLA and LEQA claims under the same analysis. Joslyn
also seeks review of the judgment entered against it on its claims
under LEQA.
»
Joslyn urges this court to read CERCLA’s definition
of “owner or operator” liberally and broadly to reach
parent corporations whose subsidiaries are found
liable under the statute. In doing so, Joslyn urges
us to follow the several courts, including the Second
Circuit, which have extended CERCLA liability to
parents. See New York v. Shore Realty Corp., 759
F.2d 1032 (2d Cir. 1985); United States v. Mottolo,
695 F.Supp. 615 (D. N. H. 1988); Colorado v. Idarado
Mining .“— 707 F.Supp. 1227 (D. Col. 1989); Vermont
v. Staco, Inc., 684 F.Supp. 822 (D. Vt. 1988); Idaho
v. Bunker Hill Co., 635 F.Supp. 665 (D. Idaho 1986).
We decline to do so.
Joslyn Manufacturing Co. v. T. L. James & Company,
893 F.2d 80, 82 (5th Cir. 1990).
ARGUMENT
I.
The Decision Below Creates A Conflict Among The Fed-
eral Courts As To What Degree of Involvement In The
Management Of A Subsidiary’s Hazardous Waste Facility
Will Render A Parent Corporation Directly Liable As An
“Owner Or Operator’’ Under CERCLA.
A. The Statutory Framework.
CERCLA Section 113(f1) provides that “[aIny person
may seek contribution from any other person who is liable
or potentially liable under Section 107(a)’’ for site clean-
ups, and that “(sjuch claims ... shall be governed by fed-
eral law.” 42 U.S.C. Section 9613(fX1). CERCLA Section
107(a), 42 U.S.C. Section 9607(a), in relevant part, imposes
liability on the following persons:
AY
(1) the owner and operator of a vessel or facility,
[or]
(2) any person who at the time of disposal of any
hazardous substance owned or operated any facil-
ity at which such hazardous substances were dis-
posed of...
CERCLA Section 101(20XA), 42 U.S.C. Section 9601(20XA)
defines “owner or operator” in relevant part as:
(ii) in the case of an onshore facility ... any person
owning or operating such facility... Such term does
not include a person who, without participating in the
management of a vessel or facility, holds indicia of
ownership primarily to protect his security interest
in the vessel or facility.
B. Some Courts, Notably The Second Circuit, Have Adopted
An Interpretation Of ‘‘Owner Or Operator’’ Which Can
Include A Parent Corporation Without Finding Its Sub-
sidiary To Be A Sham.
In New York v. Shore Realty Corp., 759 F.2d 1032 (2d
Cir. 1985), the Second Circuit imposed direct CERCLA
liability on a corporate officer and shareholder, Leo-
Grande. It did so by finding that the exclusion from
“owner or operator” set forth in Section 9601(20XA) of
‘“‘a person who, without participating in the management
of a... facility, holds indicia of ownership primarily to
protect his security interest in the facility,” implies that
a shareholder who participates in the management of the
corporation is liable under CERCLA. /d., 1052. LeoGrande’s
liability was “direct” in the sense that he was held liable
because of his personal role and responsibility in the
management of the facility, not because the corporation
(which technically owned the facility) was a sham.
This analysis was derived from United States v. North-
eastern Pharmaceutical and Chemical Company, Inc., 579
a
F.Supp. 823 (W.D. Mo. S.D. 1984), aff'd in part and rev’d
in part, 810 F.2d 726 (8th Cir. 1986), cert. denied, 108
S.Ct. 146 (1987) (““NEPACCO”’):
The statute literally reads that a person who owns
interest in a facility and is actively participating in
its management can be held liable for the disposal
of hazardous waste. Such a construction appears to
be supported by the intent of Congress. CERCLA
promotes the timely cleanup of inactive hazardous
waste sites. It was designed to insure, so far as possi-
ble, that the parties responsible for the creation of
hazardous waste sites be liable for the response costs
in cleaning them up. Congress has determined that
the persons who bore the fruits of hazardous waste
disposal also bear the costs of cleaning it up. The
Eighth Circuit adopted the definition given ‘‘owner
or operator”, 33 U.S.C. Section 1321(aX6), by the
Fifth Circuit in United States v. Mobil Oil Corpora-
tion, 464 F.2d 1124, 1127 (5th Cir. 1972):
The owner-operator of a vessel or a vacility [sic]
has the capacity to make timely discovery of oil
discharges. The owner-operator has power to di-
rect the activities of persons who control the
mechanisms causing the pollution. The owner-
operator has the capacity to prevent and abate
damage. Accordingly, the owner-operator of a
facility governed by the WPCA, such as the
Mobil facility here, must be regarded as a “per-
son in charge” of the facility for the purposes
of Section 1161. A more restrictive interpreta-
tion would frustrate congressional purpose by
exempting from the operation of the Act a large
class persons who are uniquely qualified to as-
sume the burden imposed by it.
Id., 579 F.Supp. 823, 848-849. Accord: United States v.
Nicolet, Inc., 712 F.Supp. 1193 (E.D. Pa. 1989); United
States v. Kayser-Roth Corp., 724 F.Supp. 15 (D.R.I. 1989);
iis
United States v. Conservation Chemical Co., 628 F.Supp.
391 (W.D. Mo. 1985); United States v. Carolawn, 21 ERC
2124 (D.S.C. 1984); United States v. Mirabile, 15 E.L.R.
20994 (E.D. Pa. Sept. 4, 1985); United States v. Mirabile,
23 ERC 1511 (E.D. Pa. 1985).
This analysis has been used to find a parent corpora-
tion directly liable as an owner or operator with respect
to a subsidiary’s facility where the parent had the capacity
to make timely discovery of waste disposal at the facil-
ity; the power to direct the activities of persons who con-
trolled the mechanisms causing the pollution; and the
capacity to prevent and abate damage. Idaho v. Bunker
Hili Co., 635 F\Supp. 665 (D. Idaho 1986).
C. Both The Trial Court And The Fifth Circuit Expressly
Declined To Apply This Interpretation Of ‘“‘Owner Or
Operator.”’
Joslyn argued below that James Company was directly
liable as an owner or operator because it owned a con-
trolling interest in Lincoln; had actual knowledge of the
disposal of chemicals at the site; had and exercised power
over the persons who controlled the mechanisms causing
the pollution (and therefore had the capacity to prevent
and abate damage); and had earned substantial income
from Lincoln.
Both the district court and the Fifth Circuit expressly
declined to follow this approach and limited their atten-
tion to whether Lincoln’s corporate veil should be pierced
under state law. This Court should decide whether this
was error and, if so, further determine the level of par-
ticipation which will render a parent corporation directly
liable as an “owner or operator” under CERCLA.
- =
II.
The Decision Below Creates A Conflict In The Federal
Courts As To The Respect Afforded The Corporate Form Of
A Responsible Party Under CERCLA.
A. This Court Has Applied A Federal Common Law Rule
In Which A Valid Corporate Form Under State Law Is
Disregarded When Necessary To Fulfill The Purpose Of
A Federal Statute.
CERCLA Section 113(f1), 42 U.S.C. Section 9613(fK1),
expressly provides that federal law shall apply in CERCLA
contribution actions. This Court has recognized a federal
common law rule in which the corporate form is disregarded
to fulfill a federal legislative policy. First National City
Bank v. Banco Para El Comercio Exterior De Cuba, 462
U.S. 611 (1983); Anderson v. Abbott, 321 U.S. 349 (1944).
The First Circuit applied this rule in an environmental
context in Town of Brookline v. Gorsuch, 667 F.2d 215
(1st Cir. 1981). In that case, the court was asked to review
a decision of the acting regional administrator (“ARA”’)
of the Environmental Protection Agency that MATEP,
a corporation organized under the laws of Massachusetts
whose stock was owned by Harvard, qualified for the PSD
exemption in the Clean Air Act as a nonprofit health or
education institution. Brookline challenged that finding on
the grounds that MATEP was organized as a Massachu-
setts for-profit corporation and that its corporate veil could
not be pierced to find a “joint arrangement” with Harvard
under Massachusetts law.
In upholding the ARA’s decision, the court relied on
this federal rule:
The general rule adopted in the federal cases is that
“a corporate entity may be disregarded in the inter-
ests of public convenience, fairness and equity.”’ Jd.
at 738 (citations omitted). In applying this rule, fed-
|
eral courts will look closely at the purpose of the fed-
eral statute to determine whether the statute places
importance on the corporate form, see Schenley Dis-
tillers Corp. v. United States, 326 U.S. at 437, 66
S.Ct. at 249; Flink v. Paladini, 279 U.S. 59, 62, 49
S.Ct. 255, 255, 73 L.Ed. 613 (1929), an inquiry that
usually gives less respect to the corporate form than
does the strict common law alter ego doctrine, Capi-
tal Telephone Co. v. FCC, 498 F.2d at 738-39. ‘As we
observed above, the purposes of the PSD exemption
are not affected by the corporate form of the non-
profit health or education institution. The ARA acted
in accordance with federal law in looking beyond
MATEP to Harvard’s ownership and the relationship
with the hospitals.
Id., 221.
Courts applying this analysis have found CERCLA also
does not place importance on the corporate form:
As stated above, one of CERCLA’s expressed goals
is to ensure “‘that those responsible for problems
caused by the disposal of chemical poisons bear the
costs and responsibility for remedying the harmful
conditions they created.” Dedham Water Co., supra,
805 F.2d at 1081 (quoting Reilly Tar & Chem. Corp.,
supra, 546 F.Supp. at 1112). This goal would be frus-
trated if the mere act of incorporation were allowed
to impede the recovery of response costs, for a nonin-
corporated violator could avoid liability simply by
changing company structure. Furthermore, the ab-
sence of explicit statutory language addressing the
effect of incorporation, the Act’s strict liability
scheme, and the broad and encompassing categories
of potentially responsible parties ineluctak'y lead the
Court to the conclusion that CERCLA plz.ces no im-
portance on the corporate form.
United States v. Mottolo, 695 F.Supp. 615, 624 (D.N.H.
1988). See also United States v. Kayser-Roth Corp., 724
= SS
F.Supp. 15 (D.R.I. 1989); United States v. Nicolet, Inc.,
712 F.Supp. 1193 (E.D. Pa. 1989).
B. Neither The Trial Court Nor The Fifth Circuit Applied
This Federal Rule And Instead Relied Solely On A-State
Law ‘‘Alter Ego’’ Analysis.
The lower courts did not discuss petitioner’s citation of
the cases set forth in the preceding subsection. The dis-
trict court did find that federal law applied, but concluded
that the Fifth Circuit used the same alter ego test in both
federal question and diversity cases, citing United States
v. Jon-T Chemicals, Inc., 768 F.2d 686, 690 n.6 (5th Cir.
1985), cert. denied, 475 U.S. 1014, 106 S.Ct. 1194, 89 L.Ed.
2d 309 (1986). Although Jon-T involved Texas law, the
district court used Jon-T’s laundry list of 12 technical fac-
tors to determine whether to pierce Lincoln’s corporate
veil under Louisiana law. This analysis gave no weight
to CERCLA’s purposes or the equity of having James
Company contribute to the cleanup to the extent it was
involved in, and benefited from, the disposal of hazardous
waste at Lincoln’s plant.
The Fifth Circuit approved this approach, rejecting not
only the federal common law approach but also the argu-
ments of petitioner and the State of Louisiana (as amicus)
that Louisiana law also allows a court to disregard the
separate corporate identity of even a valid corporation
when necessary to serve a compelling state interest.
Il.
This Court Should Resolve These Conflicts.
The scope of ‘owner or operator” under CERCLA is
important not only to private CERCLA contribution ac-
tions but also to the government’s actions for environ-
mental remediation costs. Joslyn believes the lower courts
=_ =
erred in refusing to even consider whether a parent cor-
poration could be directly liable under CERCLA as an
“owner or operator” without “piercing the corporate veil.”
Joslyn believes it was further error to apply a state’s
rigid alter ego analysis, as such an approach threatens
CERCLA’s status as a truly national plan. The present
uncertainty encourages litigation and discourages volun-
tary cooperation in cleanup efforts. This Court should
decide these issues.
CONCLUSION
Joslyn respectfully requests the Court to grant this peti-
tion and issue a writ of certiorari to the United States
Court of Appeals for the Fifth Circuit.
Respectfully submitted,
JAY A. CANEL
Counsel of Record
STEPHEN D. DAVIS
CaneEL, Davis & KING
30 North LaSalle Street
Suite 1730
Chicago, Illinois 60602
Attorneys for Petitioner
JOSLYN MANUFACTURING COMPANY
JAMES L. ADAMS
MIpDLEBERG RippLE & GIANNA
3lst Floor
Place St. Charles
201 St. Charles Avenue
New Orleans, Louisiana 70170
Of Counsel to Lance D. Alworth,
Joining in the Petition
APPENDICES
—1a—
APPENDIX A
JOSLYN MANUFACTURING COMPANY,
Plaintiff-Appellant,
v.
T.L. JAMES & CO., INC.,
Defendant-Appellee,
v.
POWERLINE SUPPLY CO., INC.,
Defendant Third Party
Plaintiff-Appellant,
and
Nelda S. ELLIOT, Bill Elliott, and Lance
D. Alworth, Louisiana and Arkansas Railroad Co.,
Defendants-Appellants,
v.
Floyd Benjamin JAMES and George
William James, Sr.,
Third Party
Defendants-Appellees.
No. 88-4901.
United States Court of Appeals,
Fifth Circuit.
Jan. 29, 1990.
* * KK K *
Appeals from the United States District Court for the
Western District of Louisiana.
Before GEE and JONES, Circuit Judges, and HUNTER,
District Judge:*
* District Judge of the Western District of Louisiana, sitting
by designation.
—_'.
GEE, Circuit Judge:
Appellant contends that the Comprehensive Environmen-
tal Response, Compensation, and Liability Act (““CERCLA”’)
and the Louisiana Environmental Quality Act (““LEQA’’)
impose direct liability on parent corporations for violations
of their wholly-owned subsidiaries. Appellant further con-
tends that, absent such liability, the corporate veil should
be pierced to impose liability in the instant case. We dis-
agree with both contentions.
Facts
This case arises from the environmental cleanup of a
former creosoting plant constructed by the Lincoln Creo-
soting Company, Inc. (“‘Lincoln’’) in Bossier City, Loui-
siana. Under Lincoln’s creosoting recovery system, raw
creosoting chemicals dripped from the treating cylinders
to a sump pit located underneath the system. Lincoln re-
covered some creosoting chemicals from the sump. The
remaining chemicals were discharged into an open ditch
and flowed to the eastern portion of the site, where the
chemicals collected in a slough. From the slough, the creo-
soting chemicals were washed away by rain to the sur-
rounding land areas and waterways.
Lincoln was incorporated in 1935 when C.A. Tooke and
J.R. Hayes proposed a business arrangement with T.L.
James whereby T.L. James Co., (“James Co.”) would put
up the initial capital in return for stock in the company.
Under the arrangement, Tooke and Hayes wouid purchase
40% of the 200 shares of common voting stock and James
Co. would own 60% of the common stock and all 200
shares of the non-voting preferred stock of Lincoln. Tooke
and Hayes endorsed their shares over as security for their
unpaid capital subscription.
ii
At the initial Board of Directors meeting, Tooke was
elected Vice President and designated ‘“‘General Manager
with full power and discretion to conduct the affairs’ of
Lincoln. T.L. James was elected President; his son G.W.
James later succeeded him. Lincoln originally established
a seven member Board of Directors. Five of these direc-
tors were associated with James Co., Tooke and Hayes
held the other two seats. Lincoln maintained separate
financial books and a separate corporate banking account.
Only Hayes and Tooke had check-signing authority. Lin-
coln regularly held shareholders and directors meetings.
Dissatisfied with Lincoln’s performance in the mid-1940’s,
G.W. James bought out Hayes, G.W. James, then presi-
dent of Lincoln, hired Lacy, a former James Co. employee
to replace Hayes. In 1945 Lincoln reduced its Board of
Directors to five. The new Board consisted of three Lin-
coln employees who had no ties to James Co. and two
persons associated with James Co. In 1947, the Board ex-
panded to eight members and consisted of four Lincoln
employees and four persons associated with James Co.
Lincoln owned its own property and equipment, and
maintained its own employees, payrolls, insurance, pen-
sion system, and workman’s compensation program. Lin-
coln filed its own tax returns.
In 1950 Tooke died and Lincoln was sold to Joslyn Man-
ufacturing Co. (“Joslyn’’). Joslyn owned and operated the
plant until Koppers Company, Inc. (“‘Koppers’’) purchased
it in 1969. Koppers owned the plant until 1971. The prop-
erty then passed through five separate owners, the last
of which subdivided the property. Appellant Powerline
Supply Company (‘‘Powerline”) purchased one of the sub-
divided lots in 1982. Appellant Alworth purchased one
such lot in 1983. Appellant Louisiana and Arkansas Rail-
~~
way Company (“Railway’’) owned property adjoining the
plant site from 1923 through 1972.
Joslyn filed this action in the district court invoking that
court’s exclusive jurisdiction under Section 113(b) of the
CERCLA. 42 U.S.C. Section 9613(b). Joslyn brought this
action claiming that James Co. was liable under 42 U.S.C.
Section 9607(aX2) as an “owner or operator.” Joslyn also
advanced claims under the Louisiana Environmental Quali-
ty Act (““LEQA”). La.Rev.Stat.Ann. Section 30:2001 (West
Supp. 1989). The defendants included James Co., Railway,
and Powerline. Powerline filed third-party complaints
against, inter alia, Lance Alworth; Alworth then filed a
cross-claim against James Co.
The district court granted James Co.’s motion for sum-
mary judgment, concluding that Congress, in enacting
CERCLA, did not intend an exception to the general rule
in corporation law of limited liability. 696 F.Supp. 222.
Discussion
CERCLA provides in relevant part:
Section 107(aX2), 42 U.S.C. Section 9607(aX2), makes
liable:
(a) any person who at the time of disposal of any
hazardous substance owned or operated any facility
at which such hazardous substances were disposed
cass
“Owner or operator” is defined in the statute as:
(20XA\ii) in the case of an onshore 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 delin-
quency, 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... facility, holds indicia of owner-
ship primarily to protect his security interest in the
facility.
42 U.S.C. § 9601(20).
Joslyn urges this court to read CERCLA’s definition
of “owner or operator” liberally and broadly to reach
parent corporations whose subsidiaries are found liable un-
der the statute. In doing so, Joslyn urges us to follow
the several courts, including the Second Circuit, which
have extended CERCLA liability to parents. See New
York v. Shore Realty Corp., 759 F.2d 1032 (2d Cir. 1985);
United States v. Mottolo, 695 F.Supp. 615 (D. N.H. 1988);
Colorado v. Idarado Mining Co., 707 F.Supp. 1227 (D.
Col. 1989); Vermont v. Staco, Inc., 684 F.Supp. 822 (D.
Vt. 1988); Idaho v. Bunker Hill Co., 635 F.Supp. 665 (D.
Idaho 1986). We decline to do so.
Significantly, CERCLA does not define “owners” or
“operators” as including the parent company of offend-
ing wholly-owned subsidiaries. Nor does the legislative
history indicate that Congress intended to alter so sub-
stantially a basic tenet of corporation law. “It is elemen-
tary that the meaning of a statute must, in the first in-
stance, be sought in the language in which the act is framed,
and if it is plain ... the sole function of the courts is to
enforce it according to its terms.”’ Caminetti v. United
States, 242 U.S. 470, 485, 37 S.Ct. 192, 194, 61 L.Ed. 442
(1917). Joslyn asks this court to rewrite the language of
the Act significantly and hold parents directly liabe for
their subsidiaries’ activities. To do so would dramatically
alter traditional concepts of corporation law. The “normal
=
rule of statutory construction is that if Congress intends
for legislation to change the interpretation of a judicially
created concept, it makes that intent specific.”” Midlantic
Nat'l Bank v. New Jersey, 474 U.S. 494, 501, 106 S.Ct.
755, 759, 88 L.Ed.2d 859 (1986). Any bold rewriting of
corporation law in this area is best left to Congress.
Appellants have pointed this court to little in the legis-
lative history of CERCLA to indicate that Congress in-
tended to make such a significant chance in corporation
law principles. Powerline points to an “inherent” under-
lying intent of Congress to hold those who profited from
hazardous waste sites responsible for the cost of cleanup
and a desire to effectuate a timely cleanup of these sites.
As the Court noted in Edmonds v. Compagnie Generale
Transatlantique, 443 U.S. 256, 267, 99 S.Ct. 2753, 2759,
61 L.Ed.2d 521 (1979), reh. denied, 444 U.S. 889, 100 S.Ct.
194, 62 L.Ed.2d 126 (reviewing Court of Appeals’ decision
modifying longshoreman’s preexisting rights), “(Slilence is
most eloquent, for such reticence while contemplating an
important and controversial change in existing law is un-
likely.” Without an express Congressional directive to the
contrary, common-law principles of corporation law, such
as limited liability, govern our court’s analysis. See Berger
v. Iron Workers Reinforced Rodmen Local 201, 843 F.2d
1395, 1428 (D.C. Cir. 1988).
If Congress wanted to extend liability to parent corpora-
tions it could have done so, and it remains free to do so.
The Seventh Circuit recently declined to expand the ‘owner
or operator” definition, although it recognized the policy
benefits inherent in a broad reading of the Act’s scope.
Edward Hines Lumber Co. v. Vulcan Materials Co., 861
F.2d 155 (7th Cir. 1988) (‘‘To the point that courts could
achieve ‘more’ of the legislative objectives by adding to
—— f{a—
the lists of those responsible, it is enough to respond that
statutes have not only ends but also limits.’’).
As the district court observed, Congress is quite capable
of creating statutes that hold shareholders or controlling
entities 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 oper-
ator” is defined for facilities conveyed to state or local
governments by bankruptcy, tax delinquency or abandon-
ment, as “any person who owned, operated or otherwise
controlled activities at such facility immediately” before
conveyance. 42 U.S.C. Section 9601(20XAiii) (emphasis
added). No such “control” test appears in subsection (ii),
the subsection at issue in this case, and we will imply
none. Similarly, La.Rev.Stat.Ann. Section 30:2276 (West
1989 Supp.) does not impose direct liability on parent cor-
porations for the acts of their subsidiaries.
Further, the facts here militate against piercing the cor-
porate veil. Lincoln faithfully adhered to basic corporate
formalities by keeping its own books and records and hold-
ing frequent shareholder and directors meetings. The daily
operations of Lincoln and James Co. were separate. Hayes
and Tooke were the most involved in the operations of
Lincoln; neither was employed by James Co. Lincoln
owned its own property, and the property was not used
by James Co. Lincoln filed separate tax returns. Lincoln
paid its own bills and made its own arrangement for em-
ployee benefits. Tne notes from the 1950 special share-
holders meeting indicate that Lincoln operated quite inde-
pendently from James Co.
The district court was correctly guided by our court’s
prior decision in United States v. Jon-T Chemicals, Inc.,
768 F.2d 686 (5th Cir. 1985), cert. denied, 475 U.S. 1014,
—fa—
106 S.Ct. 1194, 89 L.Ed.2d 309 (1986). There are Circuit
set out criteria for analyzing the issue of ‘‘control” in the
parent/subsidiary context. In this case, the district court
ran through the “laundry list” and properly found that
the facts did not justify piercing the corporate veil. Veil
piercing should be limited to situations in which the cor-
porate entity is used as a sham to perpetrate a fraud or
avoid personal liability. See Jon-T, supra at 691 (quoting
Baker v. Raymond International, 656 F.2d 173, 179 (5th
Cir. 1981) (“control required for liability under the ‘instru-
mentality’ rule amounts to total domination of the subser-
vient corporation, to the extent that the subservient cor-
poration manifests no separate corporate interests of its
own and functions solely to achieve the purposes of the
dominant corporation’’). The facts in this case do not sup-
port a finding that Lincoln was designed as a bogus shell
for James Co. to hide behind.
The district court allowed extensive discovery in this
case. Appellants have pointed to those matters that they
believe constitute a material issue of fact for determin-
ing whether James Co. can be held indirectly liable for
Lincoln’s activities. Those facts, if true, do not justify
piercing the corporate veil. Therefore, the district court’s
grant of Jame Co.’s summary judgment motion was proper.
We AFFIRM.
niin
APPENDIX B
JOSLYN CORPORATION
v.
T.L. JAMES & COMPANY, INC., et al.
Civ. A. No. 87-2054.
United States District Court,
W.D. Louisiana,
Shreveport Division.
Sept. 19, 1988.
* * * * *
MEMORANDUM RULING
STAGG, Chief Judge.
Joslyn Corporation (hereinafter ‘“‘Joslyn’’) initiated this
action against, inter alia, T.L. James & Company, Inc.
(hereinafter “T.L. James” or “James Company’”’), assert-
ing an action under the Comprehensive Environmental
Response, Compensation and Liability Act (hereinafter
“CERCLA’’)! and the Louisiana Environmental Quality
Act (hereinafter “LEQA”’).? The suit was instituted by
Joslyn after the Louisiana Department of Environmental
Quality had issued several orders to certain parties, in-
cluding Joslyn, requiring the investigation and cleanup of
a contaminated site in Bossier Parish, Louisiana that was
1 42 U.S.C. §§ 9601-9657 (1982) and (Supp. V. 1987), as amended
by Superfund Amendments and Reauthorization Act of 1986,
Pub.L. No. 99-499, 100 Stat. 1613 (1986).
2 La.Rev.Stat. 30:1051 et seq.
—10a—
formerly a wood-treating and/or creosoting operation. The
claims, cross claims, counterclaims and third party de-
mands involved in this action are too numerous to list.
Presently under advisement are the following:
1. T.L. James’s motion and renewed motion to dismiss
plaintiffs complaint or, in the alternative, for summary
judgment;
2. T.L. James’s motion and renewed motion to dismiss
the cross claim of Powerline Supply Company;
3. T.L. James’s motion to dismiss the cross claim of the
Louisiana and Arkansas Railway Company for failure
to state a claim or, in the alternative, for summary
judgment;
4. T.L. James’s motion to dismiss the counterclaim of
Lance D. Alworth; and
5. T.L. James’s motion to dismiss the amended cross claim
of Lance D. Alworth.
Though these motions present several issues, they all re-
quest the court to determine whether CERCLA imposes
direct liability upon a parent corporation or requires a
claimant to pierce the corporate veil before liability may
attach. A recitation of material facts will be deferred un-
til the court completes its analysis of this legal issue.
DIRECT OR DERIVATIVE LIABILITY?
Section 107(a) of CERCLA, 42 U.S.C. § 9607(a), provides,
in relevant part:
Notwithstanding any other provision or rule of law,
and subject only to the defenses set forth in subsec-
tion (b) of this Section—
* * * * * *
—lla—
(2) any person who at the time of disposal of any
hazardous substance owned or operated any facility
at which such hazardous substances were disposed
of [shall be liable under this Section].
Under 42 U.S.C. § 9601(20XA), the term “owner or op-
erator’ means “in the case of an onshore facility or an
offshore facility, any person owning or operating such
facility.” “Person” includes an “individual, firm, corpora-
tion, association, partnership . . . commercial entity. . . .”’
Id. at § 9601.
Joslyn® argues that T.L. James must be deemed an
“owner or operator” under CERCLA § 107(a) and is,
therefore, directly liable. CERCLA does not specifically
address the question of whether a court may hold a par-
ent corporation or corporate officers liable for clean-up
costs without first piercing the corporate veil. Several
courts addressing the issue have held that corporate of-
ficers may be individually liable for hazardous waste clean-
up under CERCLA.# The undersigned respectfully declines
to adopt the analysis utilized by these courts because they
* For the sake of brevity, reference will only be made to Joslyn’s
position which has been adopted by all the nonmoving parties
against whom motions are presently under consideration.
4 State of New York v. Shore Realty Corp., 759 F.2d 1032 (2d
Cir.1985); United States v. Ward, 618 a 884 (E.D.N.C. 1985);
United States v. Conservation Chemical Company, 619 F.Supp.
162 (W.D.Mo.1985); United States v. Mottolo, 605 F.Supp. 898
(D.N.H.1985); United States v. Carolawn Company, 21 Env’t Rep.
Cas. (BNA) 2124 (D.S.C.1984); United States v. Northeastern Phar-
maceutical & Chemical Company (NEPAC-CO), 579 F.Supp. 823
(W.D.Mo.1984), affirmed in part, reversed in part, 810 F.2d 726
(8th Cir.1986); United States v. Wade, 577 F.Supp. 1326 (E.D.Pa.
1983). Also, in Idaho v. The Bunker Hill Company, 635 F.Supp.
665 (D.1d.1986), liability was imposed, without piercing the cor-
porate veil, under CERCLA on a parent corporation held to be
the “owner or operator” of a disposal facility.
—12a—
have chosen to ignore the corporate form without an ex-
press congressional directive.
In Berger v. Columbia Broadcasting System, Inc., 458
F.2d 991, 994 (5th Cir.1972), the Fifth Circuit made clear
the importance of the corporate structure:
It is elemental jurisprudence that a corporation is a
creature of the law, endowed with a personality sepa-
rate and distinct from that of its owners, and that
one of the principal purposes for legal sanctioning of
a separate corporate personality is to accord stock-
holders an opportunity to limit their personal liability.
See also, Baker v. Raymond International, Inc., 656 F.2d
173, 179 (5th Cir.1981) (“[t}he principle of limited liability
remains a dominant characteristic of American corporate
law.”), cert. denied, 456 U.S. 988, 102 S.Ct. 2256, 72
L.Ed.2d 861 (1982); and Krivo Industrial Supply Com-
pany v. National Distillers and Chemical Corp., 4&3 F.2d
1098, 1102 (5th Cir.1973) (“the corporate form . . . is not
lightly disregarded since limited liability is one of the prin-
cipal purposes for which the law has created the corpora-
tion.’’). In Cort v. Ash, 422 U.S. 66, 84, 95 S.Ct. 2080,
2090, 45 L.Ed.2d 26 (1975), the Supreme Court refused
to create a federal private right of action for allegedly
illegal corporate campaign contributions, holding that:
Corporations are creatures of state law, and investors
commit their funds to corporate directors on the un-
derstanding that, except where federal law express-
ly requires certain responsibilities of directors with
respect to stockholders, state law will govern the in-
ternal affairs of the corporation.
In Homan & Crimen, Inc. v. Harris, 626 F.2d 1201,
1205 (5th Cir.1980), cert. denied, 450 U.S. 975, 101 S.Ct.
1506, 67 L.Ed.2d 809 (1981), Medenco, Inc. owned 100 per
cent of the stock of Homan & Crimen, Inc., an unrelated
—]3a—
corporation doing business as Southwestern General Hos-
pital. The hospital submitted its Medicare cost reports for
two years, claiming $830,000 as a step-up in the cost basis
of its assets. /d.5 These were costs incurred by Medenco,
Inc. In claiming entitlement to this amount, plaintiffs
argued under 42 C.F.R. § 405.427 that “costs applicable
to services, facilities, and supplies furnished to the pro-
vider by organizations related to the provider by common
ownership or control are includable in the allowable cost
to the provider at the cost to the related organization.”
Id. at 1208 (emphasis added).
Based upon this regulation, Homen & Crimen contended
that “form should not be exalted over substance and the
fiction of the separateness of the corporation and its share-
holders should not be used to reach an unfair and unjust
result.”” /d. The United States Court of Appeals for the
Fifth Circuit rejected this argument:
To this contention, the response must be that if the
separateness of the corporation and its shareholders
is a fiction, it is one which the law has long recognized
and will not lightiy go behind. [Citations omitted.| For
the regulation to cut through or ignore that mass of
established corporate law upon which the Secretary
relied would require at the very least a clear inten-
tion, a compelling case. It cannot be done by implica-
tion as plaintiffs suggest here.
Id. (emphasis added.) Stated differently, “{wJhether latent
federal power should be exercised to displace state law
is primarily a decision for Congress.” Wallis v. Pan Amer-
ican Petroleum Corp., 384 U.S. 63, 6%, 86 S.Ct. 1301,
1304, 16 L.Ed.2d 369 (1966). “Even where there is related
federal legislation in an area, as is true in this instance,
5 See, 42 U.S.C. §§ 1395X and 1395F.
—l4a—
it must be remembered that ‘Congress acts . . . against
the background of the total corpus juris of the states... .”’
Id., quoting from Wart and Wechsler, The Federal Courts
and the Federal System at p. 435 (1953).®
Based upon the foregoing authorities, this court holds
that the corporate form, including limited liability for
shareholders, is a doctrine firmly entrenched in American
jurisprudence that may not be disregarded absent. a spe-
cific congressional directive. Neither the clear language
of CERCLA nor its legislative history provides authority
for imposing individual liability on corporate officers or
direct liability on parent corporations.? Though it is rec-
ognized that CERCLA was enacted in the “waning hours
of the 96th Congress,” and was “the product of apparent
legislative compromise [that] is not a model of clarity,”
Tanglewood East Homeowners v. Charles-Thomas, Inc.,
849 F.2d 1568, 1572 (5th Cir.1988), this court will not read
into the statute a provision disregarding decades of cor-
porate law. The court’s conclusion is buttressed by the
fact that Congress has, in the past, specified that share-
® See also, Burks v. Lasker, 441 U.S. 471, 478-79, 99 S.Ct. 1831,
1837-38, 60 L.Ed.2d 404 (1979) (holding that in actions asserting
violations under the Investment Company Act and the Investment
Advisors Act, federal courts must apply state corporate law gov-
erning the authority of independent directors to discontinue share-
holders’ derivative actions because corporate law is not an area
in which these statutes authorize federal courts of “fashion a com-
plete body of federal law); Pipefitters Local Union No. 562 v.
United States, 407 U.S. 385, 413-14, 92 S.Ct. 2247, 2263-64, 33
L.Ed.2d 11 (1972) (refusing to pierce veil of union political fund
despite evidence of control and domination, in view of compliance
with formal statutory requirements).
7 Comment, Corporate Officer Liability for Hazardous Waste Dis-
posal: What Are the Consequences?, 38 Mercer L.Rev. 677, 679
(1987).
—1l5a—
holders or controlling parties are to be held responsible
for the acts or debts of a valid corporation. See, e.g.,
Depository Institution Management Interlocks Act, 12
U.S.C. §§ 3201-3207; I.R.C. § 1239(b\2), (3) (1976); Fair
Labor Standards Act § 3(r), 29 U.S.C. § 203(r); and ERISA
§ 4001(b), 29 U.S.C. § 1301(bX1); see also, 16 C.F.R.
§ 15.482 (1981). Absent a similar provision in CERCLA,
this court finds no direct liability against James Company
THE RULE OF DECISION
It is undisputed that federal law governs in actions aris-
ing under nationwide federal programs. United States v.
Kimbell Foods, Inc., 440 U.S. 715, 726, 99 S.Ct. 1448,
1457, 59 L.Fd.2d 711 (1979). The question is whether state
law should be adopted as the rule of decision or whether
federal common law should control. As the Supreme Court
has noted:
That the statutes authorizing these federal lending
programs do not specify the appropriate rule of deci-
sion in no way limits the reach of federal law. It is
precisely what Congress had not spoken “in any area
comprising issues substantially related to an estab-
lished program of governmental operation, [citation
omitted,] that Clearfield [Trust Company v. United
States, 318 U.S. 363, 367, 63 S.Ct. 573, 575, 87 L.Ed.
838 (1943)] directs federal courts to fill the interstices
of federal legislation according to their own standards.”
440 U.S. at 727, 99 S.Ct. at 1458, quoting from Mishkin,
The Variousness of ‘‘Federal Law’’: Competence and Dis-
cretion and the Choice of National and State Rules for
Decision, 105 U.Pa.L.Rev. 797, 800 (1957). The normal
course of analysis would require this court to apply the
test set forth in United States v. Kimbell Foods, Inc.,
supra, as explained by Georgia Power Company v. San-
—l6a—
ders, 617 F.2d 1112 (5th Cir.1980) (en banc), cert. denied,
450 U.S. 936, 101 S.Ct. 1403, 67 L.Ed.2d 372 (1981). This
inquiry, however, is unnecessary because the Fifth Cir-
cuit has held:
[W]e find no need to determine whether a uniform
federal alter ego rule is required, since the federal
and state alter ego tests are essentially the same.
Our non-diversity alter ego cases have rarely stated
whether they were applying a federal or state stan-
dard, and have cited federal and state cases inter-
changably.
United States v. Jon-T Chemicals, Inc., 768 F.2d 686, 690
n. 6 (5th Cir.1985), cert. denied, 475 U.S. 1014, 106 S.Ct.
1194, 89 L.Ed.2d 309 (1986) (citations omitted).
The Fifth Circuit in Jon-T Chemicals then proceeded
to set forth general standards of piercing the corporate
veil that have evolved in this circuit. In Krivo Industrial
Supply Company v. National Distillers & Chemical
Corp., 483 F.2d 1098, 1102 (5th Cir.1973), the Fifth Cir-
cuit noted: ‘oJne of the most difficult applications of the
rule permitting the corporate form to be disregarded arises
when one corporation is sought to be held liable for the
debts of another corporation.” Unless the parent corpora-
tion expressly or impliedly assumes responsibility for the
debts of the subsidiary, liability will attach only when the
parent “‘misuses that corporation by treating it, and by
using it, as a mere business conduit for the purposes of
8 For a view that state alter ego, as opposed to federal common
law, will conflict with the purposes of CERCLA, see, Note, Liabil-
ity of Parent Corporations for Hazardous Waste Cleanup and
Damages, 99 Harv.L.Rev. 986 (1986). Though the Court in Jon-T
was faced with Texas law, the undersigned is satisfied that the
principles utilized in this opinion would control whether Louisiana
or federal common law governs. See, infra, at 232-33.
—17a—
the dominant corporation.”’ Jd. Two elements are held to
be essential:
First, the dominant corporation must have controlled
the subservient corporation, and second, the dominant
corporation must have proximately caused plaintiff
harm through misuse of this control.
Id. at 1103, citing, inter alia, Berger v. Columbia Board-
casting System, Inc., 453 F.2d 991 (5th Cir.), cert. denied,
409 U.S. 848, 93 S.Ct. 54, 34 L.Ed.2d 89 (1972). The Court
further held:
The control required for liability . . . amounts to total
domination of the subservient corporation, to the ex-
tent that the subservient corporation manifests no
separate corporate interests of its own and functions
solely to achieve the purposes of the dominant cor-
poration.
Krivo, 483 F.2d at 1106. In so holding, the Fifth Circuit
adopted the recommendation of Professor Fletcher:
The control necessary to invoke what is sometimes
called the ‘instrumentality rule’ is not mere majority
or complete stock control but such domination of fi-
nances, policies and practices that the controlled cor-
poration has, so to speak, no separate mind, will or
existence of its own and is but a business conduit
for its principal.
Id., quoting from 1 W. Fletcher, Cyclopedia of the Law
of Private Corporations § 43 (Perm. ed. rev. 1963). See
also, Jon-T Chemicals, 768 F.2d at 691; and Baker v. Ray-
mond International, Inc., 656 F.2d 173, 180 (5th Cir.1981).
In determining whether a parent corporation has exer-
cised the requisite degree of control over a subsidiary to
pierce the corporate veil, the Fifth Circuit has developed
a laundry list of factors. These include whether:
(1)
(2)
(3)
| (4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
—18a—
the parent and the subsidiary have common
stock ownership;
the parent and the subsidiary have common
directors or officers;
the parent and the subsidiary have common
business departments;
the parent and the subsidiary file consolidated
financial statements and tax returns;
the parent finances the subsidiary;
the parent caused the incorporation of the sub-
sidiary;
the subsidiary operates with grossly inadequate
capital;
the parent pays the salaries and other expenses
of the subsidiary;
the subsidiary receives no business except that
given to it by the parent;
the parent uses the subsidiary’s property as its
own;
the daily operations of the two corporations are
not kept separate; and
the subsidiary does not observe the basic cor-
poration formalities, such as keeping separate
books and records and holding shareholder and
board meetings.
Jon-T Chemicals, 768 F.2d at 691-92 (citations omitted).
Resolution of the alter ego issue is “heavily fact-specific”’
and requires an evaluation of the totality of the aforemen-
tioned factors. Jd. at 694.
—19a—
THE FACTS
This dispute is over the materiality of facts, not their
existence. Lincoln Creosoting Company, Inc. (hereinafter
“Lincoln”’) was incorporated in the State of Louisiana on
December 4, 1935. The idea to form Lincoln came from
Messrs. Tooke and Hayes, who approached Mr. T.L. James.
Mr. James paid $20,110 for 120 shares of voting common
stock of Lincoln and 200 shares of non-voting preferred
stock. C.A. Tooke and J.R. Hayes received 40 shares each
of the voting common stock of Lincoln for a total of 40
per cent of the Lincoln stock. All outstanding stock cer-
tificates, however, were accompanied by endorsements
back to the James Company. The endorsements of Tooke
and Hayes were to the effect that they have endorsed
the stock to T.L. James “where it shall remain until such
time as their earnings from dividends on the stock shall
have repaid the par value of the stock.’® Since Lincoln
never paid any common stock dividends, James Company
had control over 100 per cent of Lincoln’s stock.
Lincoln’s first board of directors consisted of seven mem-
bers: Mr. T.L. James, Mrs. T.L. James Jr., Mr. G.W. James,
Mr. Floyd B. James, Mr. C.A. Tooke, Mr. J.R. Hayes and
Mr. V.A. Davidson. Excluding Messrs. Tooke and Hayes,
all were officers, directors and/or shareholders of T.L.
James & Company. At the first meeting of the Lincoln
Board of Directors, Mr. Tooke, who was vice president
% This is evidenced by a letter from J.C. Love Jr. of T.L. James
to the vice president of the National Surety Corporation dated
May 25, 1948. The letter goes on to state: “While actually T.L.
James & Company only owns 60 per cent of the capital stock, they
do, as of this time, control the full 100 per cent and will continue
to do so until such time as dividends may have repaid all the
original value of 40 per cent owned by the operators.”’ Joslyn Ex-
hibit 8.
—20a—
of Lincoln, was designated as general manager with full
power and discretion to conduct the corporation’s affairs.
The property at issue in this suit was purchased in Lin-
coln’s name on December 17, 1935. At least since 1936,
Lincoln had its own bank account at the Commercial Na-
tional Bank in Shreveport. Checks were signed jointly by
Messrs. Tooke and Hayes. From its inception, Lincoln fre-
quently and periodically held separate meetings of the
directors and shareholders. At the annual shareholders
meetings, Mr. Tooke was responsible for making the re-
port of the preceding year and outlining policy for the
coming year.
Mr. T.L. James died in July of 1944. On September 11,
1944, the Lincoln directors met and chose Mr. G. William
James as the successor-president of Lincoln. Mr. G. Wil-
liam James served as president of Lincoln from 1944 through
1950.
In 1943 and 1944, Lincoln lost money. In the summer
or fall of 1944, Mr. G.W. James approached J.E. Lacy con-
cerning employment with Lincoln. James offered Lacy
$1,000 a month for three months to “go over there [to
Lincoln] and see what was the matter with this plant, why
it wasn’t making any money.’® Lacy accepted the job
and worked for three weeks. Lacy surmised that the prob-
lem at Lincoln was an internal fight between Messrs.
Tooke and Hayes. According to Lacy, ‘“Hayes’s ambition
was to get out and get a plant of his own. So he was
not doing the things he should be doing, and that left
Tooke with the inability to make the plant operate prop-
erly.””!!
10 Deposition of Lacy at 15, Joslyn Exhibit 15.
~, Id. at 16.
—2Zla—
Subsequent thereto, Lacy was employed by Lincoln.
This came about after G.W. James bought out Hayes’ in-
terest. Lacy was placed in charge of production. Lacy,
however, was only on Lincoln’s payroll and not that of
T.L. James & Company. At a shareholders meeting on
March 13, 1945, a resolution was passed thanking Hayes
for his service to Lincoln and noting that Hayes was “the
originator of the ideas which developed Lincoln.’’!2 At the
same meeting, G.W. James was reelected president and
Tooke was reelected vice president. V.A. Davidson was
elected secretary, replacing Mr. Hayes.
At a directors meeting on October 8, 1945, a new resolu-
tion was passed pursuant to which Messrs. Tooke, Lacy
and Plummer were authorized to sign checks on behalf
of Lincoln.
At a special shareholders meeting on March 3, 1947, the
number of directors was increased to eight. Four of these
were Lincoln employees and four were affiliated with
James Company. The four Lincoln employees were Tooke,
Freeman, Lacy and Plummer.
A special board meeting was held on December 29, 1947,
at which time it was agreed that due to rather substan-
tial obligations of Lincoln, it would not be advisable to
consider any common stock dividends on account of the
1947 earnings. Upon the motion of J.C. Love, however,
it was agreed that $20,000 be presented to Centenary Col-
lege toward the T.L. James Memorial Fund.
At the regular annual meeting of stockholders on March
9, 1948, Tooke reported that the ‘future of the treating
12 See Attachment “C”’ to T.L. James’ Statement of Undisputed
Facts at 67.
—22a—
business is rather a vague picture.” !* The vagueness was
due to the declining demand for creosoted products as the
result of consumers’ inability to secure wire and trans-
formers. In addition, the creation of new creosoting plants
was noted to have caused the supply of creosoted items
to be unreasonably large. Despite this, Tooke stated his
belief that the 1948 operations would be profitable. G.W.
James commented at this meeting that he felt “the man-
agement of the creosoting business was to be commended
for assuming such a logical attitude with reference to the
forthcoming problems.”’!4
At a special directors meeting held on December 16,
1949, a resolution was passed granting authority to any
two among C.A. Tooke (vice president), H.R. Freeman
(director) and W.W. Colbert (purchasing agent) to make
withdrawals from Lincoln’s corporate account at Commer-
cial National Bank in Shreveport. This resolution was ap-
proved by G.W. James and Mr. Davidson.
Mr. Tooke died on May 4, 1950. As a result, a special
meeting of Lincoln’s Board of Directors was held on May
15, 1950. G.W. James stated that he “felt very keenly the
loss of not only the sincere friendship, but the keen busi-
ness judgment of C.A. Tooke.’”!5 Mr. James further stated
that the purpose of the meeting was to try to decide what
course should be followed without the leadership of Mr.
Tooke. James stated that: ‘“‘As everyone knew, Lincoln
Creosoting Company had originally been organized through
the efforts of Mr. Tooke and that it had been the attitude
of those in Ruston that it was Mr. Tooke’s enterprise and
13 Td. at 84.
14 Jd. at 8&5.
15 Id. at 98.
—23a—
had been since it was first organized.” Without the leader-
ship of Mr. Tooke, it was G.W. James’ opinion and the
opinion of those in Ruston that the business should be
sold. It was agreed at the meeting that every effort
should immediately be made to sell Lincoln. In the event
that a purchaser could not be secured, it was agreed that
plans would be made for an orderly liquidation. Since Mr.
Lacy was most familiar with the general management of the
business, it was agreed that he would assume the posi-
tion formerly held by Mr. Tooke. It was then approved
that Lacy’s name would be added to the list of names
of any two required signatures to withdraw funds from
Lincoln’s account. Floyd B. James stated that, “it was
his opinion and that of the members he had spoken with
that the corporation was indebted to Mr. Tooke for the
development of the corporation from its infancy to its
present status and that in view of these facts he moved
that the corporation pay to Mrs. Tooke, the widow of C.A.
Tooke, his salary for a period of twelve months. . . .’’?6
A special meeting of stockholders was held on July 20,
1950 for the purpose of considering the sale of Lincoln’s
principal assets. Mr. Lacy outlined a proposition to pur-
chase Lincoln that had been made by Joslyn Manufactur-
ing & Supply Company. After a general discussion of the
proposal, a resolution was introduced by Mr. Plummer
which authorized G.W. James to execute a memorandum
agreement with Joslyn Manufacturing & Supply Company
for the sale of Lincoln’s physical plant and real estate,
the entire black stock inventory, the entire white stock
inventory, the entire stock of creosote oil and the entire
account of usable transient freight. This resolution was
16 Jd. at 99.
—24a—
unanimously adopted by the Board of Directors on July
20, 1950.
The shareholders voted on December 27, 1950 to repur-
chase as treasury stock 41 shares of common stock held
by Messrs. Lacy, Freeman and Plummer, and the Tooke
heirs. The shareholders also agreed that all 200 shares of
preferred stock held by James Company, which were the
original capitalization of Lincoln, should be redeemed at
par value of $100 a share plus accrued dividends to the
next dividend date.
At the March 20, 1951 annual meeting of the Board of
Directors, Lacy advised that the transfer of Lincoln’s
properties to Joslyn Manufacturing Company was nearly
complete and that all miscellaneous items of charge and
credit had been settled. The only matter remaining to con-
summate the sale was the payment of the monthly amount,
as provided for in the memorandum agreement. Mr. Lacy
then summarized the outstanding business matters to be
resolved and stated that, in his estimation, the entire af-
fairs of the creosoting company should be completed well
in advance of the close of the 1951 calendar year. The
same eight directors who had served since 1947 were re-
elected, with the exception of C.A. Tooke Jr., who was
elected to replace the late C.A. Tooke.
On November 26, 1951, the shareholders of T.L. James
& Company, Inc. held a special meeting “‘to consider the
desirability . . . of mak{ing] a contribution or donation
from T.L. James & Company, Inc. to Centenary College
of Louisiana . . . consisting of all shares of stock of Lin-
coln Creosoting Company, Inc. presently owned” by James
Company.!7 A resolution was unanimously passed authoriz-
17 See, Attachment “D”’ at 195 to T.L. James’ Statement of Un-
disputed Facts.
—25a—
ing this donation. The James Company Board of Directors
approved this resolution on December 10, 1951.
On December 19, 1952, a Certificate of Dissolution was
signed dissolving Lincoln. According to the Certificate, ‘all
debts, obligations and liabilities of this corporation have
been paid and discharged,” that “there are no suits pend-
ing against this corporation in any Court,” and that the
assets have been distributed to the shareholders “‘in ac-
cordance with their respective rights and interests.’’8
ANALYSIS OF LAW AND FACTS
Joslyn urges that six of the twelve factors cited in Jon-T
Chemicals, supra, support the conclusion that the cor-
porate veil should be pierced. Specifically, Joslyn points
out that the parent and subsidiary have common stock
ownership as well as common directors. It is further urged
by Joslyn that the positions held by G.W. James and Mr.
Davidson constituted direct control over Lincoln’s finances.'®
These facts are undoubtedly true and material:
18 Attachment “A” to T.L. James’ Statement of Undisputed
Facts.
18 In support of this contention, Joslyn refers to two letters from
G.W. James and V.A. Davidson to their accountant. The letters
were written in regard to an IRS audit concerning these individ-
uals’ salaries from Lincoln. Contained in the letters are statements
that these directors were consistently involved in the financial af-
fairs of Lincoln, and that Mr. Davidson served as a contact be-
tween plant personnel and G.W. James. Though these letters evi-
dence minimal control in financial affairs, they bear no weight in
determining control over the nuts and bolts of Lincoln’s operations
and the day-to-day affairs. It must be remembered that the cor-
porate veil will not be pierced unless the parent’s contro! “amounts
to total domination of the subservient corporation, to the extent
that the subservient corporation manifests no separate corporate
interest of its own and functions solely to achieve the purposes
of the dominant corporation. Krivo, 483 F.2d at 1106. “Merely tak-
ing an active part in the management of the debtor corporation
does not automatically constitute control. .. .” Jd. at 1105.
—26a—
Nevertheless, our cases are clear that 100 per cent
ownership and identity of directors and officers are,
even together, an insufficient basis for applying the
alter ego theory to pierce the corporate veil. [Citing
Nelson v. International Paint Company, 734 F.2d
1084, 1092 (5th Cir.1984) and Miles v. AT & T, 703
F.2d 198, 195 (5th Cir.1983).] Instead, we maintain
the fiction that an officer of director of both corpora-
tions can ch hats and represent the two corpora-
tions separately, despite their commen ownership.
Jon-T Chemicals, 768 F.2d at 691; see also, Baker, 656
F.2d at 180 (“Ownership of a controlling interest in a cor-
poration entitles the controlling shareholder to exercise
the normal incidence of stock ownership . . . without for-
feiting the protection of limited liability.”); and Berger,
453 F.2d at 994 (same).
Joslyn also points out that James Company made sub-
stantial loans to Lincoln, including the initial capitaliza-
tion. The uncontroverted record establishes, however, that
these loans were repaid. In any event, “the general rule
is that the mere loan of money by one corporation to an-
other does not automatically make the lender liable for
the acts and omissions of the borrower.” Krivo, 483 F.2d
at 1104, citing Peterson v. Chicago, Rock Island and Pa-
cific Company, 205 U.S. 364, 27 S.Ct. 513, 51 L.Ed. 841
(1907). Joslyn also asserts that the James Company hired
and fired Lincoln’s executive officers. This allegation is
based upon the hiring of Lacy and the resignation of
Hayes. Though this is minimally indicative of control, it
can hardly be said to rise to the level justifying disregard
of the corporate form. Indeed, “‘to justify a judicial dero-
gation of the separateness of a corporate creature, an ag-
grieved party must prove something more than. . . the
parent’s use of its power as an incident of its stock owner-
—27a—
ship to elect officers and directors of the subsidiary.”
Berger, 453 F.2d at 994.
Joslyn also takes issue with the fact that T.L. James
Sr., G.W. James and V.A. Davidson worked out of James
Company’s corporate offices. Lincoln neither had a lease
nor paid rent for the use of these offices. Once again, this
is only marginally relevant. These individuals were officers
of both corporations. Clearly, they had to work some-
where. That they chose to work out of James Company’s
corporate offices simply is not sufficient to disregard the
separate corporate structures.
The lengthy factual account set forth above establishes
beyond doubt that Lincoln strictly adhered to basic cor-
porate formalities by keeping its own books and records
and frequently and periodically holding shareholder and
director meetings. The daily operations of Lincoln and
James Company were kept separate. The driving forces
behind Lincoln were Messrs. Hayes and Tooke, neither
of whom was employed by James Company. Lincoln owned
its own property where the physical plant was situated.
This property was not utilized for the business of James
Company. None of Lincoln’s employees were on the pay-
roll of James Company. Though James Company provided
capital for Lincoln’s initial incorporation, it was the ef-
fort and initiative of Messrs. Tooke and Hayes that re-
sulted in the formation of Lincoln. Lincoln filed separate
income tax returns.
In addition to these compelling facts, it should also be
noted that Lincoln paid its own bills and made arrange-
ments for employee benefits such as sick pay, retirement
and profit sharing. Lincoln Creosoting’s invoices directed
that payment be made to Lincoln and not to James Com-
pany.
—28a—
SUMMARY JUDGMENT STANDARDS
The purpose of summary judgment is to isolate and dis-
pose of factually unsupported claims or defenses in the
spirit of the rule requiring a just, speedy and inexpen-
sive determination of every action. Celotex Corp. v. Cat-
rett, 477 U.S. 317, 106 S.Ct. 2548, 2555, 91 L.Ed.2d 265
(1986); Meyers v. M/V Eugenio C, 842 F.2d 815, 816-17 (5th
Cir.1988). Indeed, “summary judgment procedure is prop-
erly regarded not as a disfavored procedural shortcut, but
rather as an integral part of the Federal Rules as a whole.
... Celotex, 106 S.Ct. at 2555, citing Fed.R.Civ.P. 1 and
Schwarzer, Summary Judgment Under The Federal Rules:
Defining Genuine Issues of Material Fact, 99 F.R.D. 465
(1984).
A party seeking summary judgment always bears the
initial burden of informing the district court of the basis
for its motion, and identifying those portions of the record
which it believes demonstrate the absence of a genuine
issue of material fact. Celoter, 106 S.Ct. at 2553. A defen-
dant moving for summary judgment may rest on the ab-
sence of evidence to support an essential element of the
plaintiff's case. Celoter, 106 S.Ct. at 2554; International
Association of Machinists and Aerospace Workers, AF L-
CIO, Lodge No. 2504 v. Intercontinental Manufacturing
Company, Inc., 812 F.2d 219, 222 (Sth Cir.1987). Once this
burden has been established, the burden shifts to the non-
moving party to demonstrate a genuine issue of material
fact. Matsushita Electric Industrial Company v. Zenith
Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 1355-56, 89
L.Ed.2d 538 (1986). If the evidence is merely colorable
or not significantly probative, summary judgment may be
granted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). In fact, the
nonmoving party has an affirmative duty to come forth
—29a—
with “significant probative evidence demonstrating the ex-
istence of a triable issue of fact.”’ Southmark Properties
v. Charles House Corp., 742 F.2d 862, 877 (5th Cir.1984).
The summary judgment standard has been said to mir-
ror that of Fed.R.Civ.P. 41(b) for involuntary dismissal
in nonjury cases. Professional Managers v. Fawer, Brian,
Hardy & Zatzkis, 799 F.2d 218, 223 (5th Cir.1986). In this
respect, Judge Rubin has noted:
If the decision is to be reached by the court, and
there are no issues of witness credibility, the court
may conclude on the basis of the affidavits, deposi-
tions, and stipulations before it, that there are no
genuine issues of material fact, even though decision
may depend on inferences to be drawn from what
has been incontrovertibly proved . . . even if that
conclusion is deemed ‘factual’ or involves a ‘mixed
question of law and fact.’ A trial on the merits would
reveal no additional data. Hearing and viewing the
witnesses subject to cross-examination would not aid
the determination if there are neither issues of cred-
ibility nor controversies with respect to the substance
of the proposed testimony. The judge, as trier of fact,
is in a position to and ought to draw his inferences
without resort to the expenses of trial.
Nunez v. Superior Oil Company, 572 F.2d 1119, 1123-24
(5th Cir.1978).
The court is satisfied that James Company fulfilled its
initial burden by first proving that liability will attach only
if the corporate veil is pierced and then by establishing,
through competent proof, facts showing that under the
governing substantive law the corporate form should not
be disregarded. Joslyn’s rebutting facts and arguments,
even considered in their totality, simply do not constitute
significant probative evidence demonstrating a triable is-
sue of fact. This is especially true in this nonjury case
a
—30a—
where substantial discovery has been conducted. This court
was particularly liberal in affording the parties ample op-
portunity to brief the legal issues and provide support-
ing documentation. Joslyn has not made the court aware
of any uncompleted discovery which would be relevant
toward the issue of derivative liability. Stated different-
ly, Joslyn has not come forward with proof demonstrating
a triable issue of fact as to whether the James Company
exercised total domination over Lincoln to the extent that
Lincoln manifested no separate corporate interest of its
own and functioned solely to achieve the purposes of
James Company. Jon-T Chemicals, 768 F.2d at 691; Krivo,
483 F.2d at 1106. There is simply no proof that James
Company had complete domination of finances, policies and
practices to cause Lincoln to be not a separate business
entity but a mere conduit of James Company. Jd.
Based on the foregoing, the court concludes that sum-
mary judgment be GRANTED in favor of T.L. James &
Company, and that all claims against it be DISMISSED
WITH PREJUDICE.” Assuming, without deciding, that
20 Though this court declined to follow that analysis utilized by
the cases cited in footnote 4, supra, it is noteworthy that this court
would have likely reached the same result under applicable cor-
— law at least in Conservation Chemical, Mottolo and Shore
ty. These cases involved factual situations where the personal
participation in the illegal disposal of hazardous waste by the cor-
porate officers was significant. As one commentator has noted,
these “courts have avoided the common law rule of limited liability
by either explicitly or implicitly applying a generally recognized ex-
ception; a corporate officer is liable for the wrongful acts of a cor-
poration when he personally participates in the wrongful conduct.”
Comment, 38 Mercer L.Rev. at 685. If T.L. James & Company
and its officers and directors had been actively involved in the
day-to-day operations of Lincoln, including the disposal of hazard-
ous waste, then, arguably, liability would attach. See, generally,
Shingleton v. Armor Velvet Corp., 621 F.2d 180 (5th Cir.1980);
L.C.L. Theatres, Inc. v. Columbia Pictures Industries, Inc., 619
F.2d 455 (5th Cir.1980); Tillman v. Wheaton-Haven Recreation
Associations, Inc., 517 F.2d 1141 (5th Cir.1975).
—3la—
the LEQA is constitutional and Joslyn has satisfied pre-
requisites to filing an action, the foregoing analysis estab-
lishes that Joslyn cannot pierce the corporate veil under
Louisiana law, which utilizes a similar if not more strin-
gent rule than that applied in this opinion. See, generally,
GRW Engineers, Inc. v. Elam, 504 So.2d 117, 120 (La.
App. 2d Cir.1987), writ denied, 506 So.2d 1230 (La.1987);
Harris v. Best of America, Inc., 466 So.2d 1309, 1315 (La.
App. Ist Cir.1985), writ denied, 470 So.2d 121 (La.1985);
Kingsman Enterprises, Inc. v. Bakersfield Electric Com-
pany, Inc., 339 So.2d 1280, 1282 (La.App. Ist Cir.1976);
Menard v. Associated Royal Crown Bottling Company,
249 So.2d 363, 364-65 (La.App. 4th Cir.1971). According-
ly, summary judgment must be GRANTED in favor of
T.L. James. & Company with respect to claims against
it under LEQA.
An order consistent with the terms of this memoran-
dum ruling shall issue herewith.
—32a—
APPENDIX C
[Dated March 26, 1990]
IN THE
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 88-4901
JOSLYN MANUFACTURING COMPANY,
Plaintiff-Appellant,
v.
T.L. JAMES & CO., INC.,
Defendant-Appellee,
v.
POWERLINE SUPPLY CO., INC.,
Defendant Third Party
Plaintiff-Appellant,
and
Nelda S. ELLIOT, Bill Elliott, and Lance
D. Alworth, Louisiana and Arkansas Railroad Co.,
Defendants-Appellants,
v.
Floyd Benjamin JAMES and George
William James, Sr.,
Third Party
Defendants-Appellees.
Appeal from the United States District Court
for the Western District of Louisiana
—33a—
ON PETITION FOR REHEARING
(March 26, 1990)
Before GEE and JONES, Circuit Judges, and HUNTER,
District Judge:*
PER CURIAM:
IT IS ORDERED that the petition for rehearing filed
in the above entitled and numbered cause be and the
same is hereby DENIED.
ENTERED FOR THE COURT:
/s/
United States Circuit Judge
CLERK’S NOTE:
SEE FRAP AND LOCAL
RULES 41 FOR STAY OF
THE MANDATE
* District Judge of the Western District of Louisiana sitting
by designation.
—34a—
APPENDIX D
CERCLA
42 U.S.C. § 9601
(9) “facility” means (A) any building, structure, installa-
tion, equipment, pipe or pipeline (including any pipe into
a sewer or publicly owned treatment works), well, pit,
pond, lagoon, impoundment, ditch, landfill, storage con-
tainer, motor vehicle, rolling stock, or aircraft, or (B) any
site or area where a hazardous substance has been de-
posited, stored, disposed of, or placed, or otherwise come
to be located; but does not include any consumer product
in consumer use or any vessel;
(20XA) The term “‘owner or operator’? means (i) in the
case of a vessel, any person owning, operating, or charter-
ing by demise, such vessel, (ii) in the case of an onshore
facility or an offshore facility, any person owning or oper-
ating such facility, and (iii) in the case of any facility, title
or control of which was conveyed due to bankruptcy, fore-
closure, 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 in-
clude a person, who, without participating in the manage-
ment of a vessel or facility, holds indicia of ownership pri-
marily to protect his security interest in the vessel or
facility.
(21) The term “person” means an individual, firm, cor-
poration, association, partnership, consortium, joint ven-
ture, commercial entity, United States Government, State,
municipality, commission, political subdivision of a State,
or any interstate body.
—35a—
APPENDIX E
CERCLA
42 U.S.C. § 9607
§ 9607. Liability
(a) Covered persons; scope; recoverable costs and dam-
ages; interest rate; ‘“‘comparable maturity” date
Notwithstanding any other provision or rule of law, and
subject only to the defenses set forth in subsection (b)
of this section—
(1) the owner and operator of a vessel or a facility,
(2) any person who at the time of disposal of any
hazardous substance owned or operated any facility
at which such hazardous substances were disposed of,
(3) any person who by contract, agreement, or other-
wise arranged for disposal or treatment, or arranged
with a transporter for transport for disposal or treat-
ment, of hazardous substances owned or possessed
by such person, by any other party or entity, at any
facility or incineration vessel owned or operated by
another party or entity and containing such hazard-
ous substances, and
(4) any person who accepts or accepted any hazard-
ous substances for transport to disposal or treatment
facilities, incineration vessels or sites selected by such
person, from which there is a release, or a threat-
ened release which causes the incurrence of response
costs, of a hazardous substance, shall be liable for—
(A) all costs of removal or remedial action in-
curred by the United States Government or a
State or an Indian tribe not inconsistent with the
national contingency plan;
—36a—
(B) any other necessary costs of response in-
curred by any other person consistent with the
national contingency plan;
(C) damages for injury to, destruction of, or
loss of natural resources, including the reason-
able costs of assessing such injury, destruction,
or loss resulting from such a release; and
(D) the costs of any health assessment or health
effects study carried out under section 9604(i) of
this title.
The amounts recoverable in an action under this section
shall include interest on the amounts recoverable under
subparagraphs (A) through (D). Such interest shall accrue
from the later of (i) the date payment of a specified
amount is demanded in writing, or (ii) the date of the ex-
penditure concerned. The rate of interest on the outstand-
ing unpaid balance of the amounts recoverable under this
section shall be the same rate as is specified for interest
on investments of the Hazardous Substance Superfund es-
tablished under subchapter A of chapter 98 of Title 26.
For purposes of applying such amendments to interest
under this subsection, the term “comparable maturity”
shall be determined with reference to the date on which
interest accruing under this subsection commences.
—37a—
APPENDIX F
CERCLA
42 U.S.C. § 9613
(f) Contribution
(1) Contribution
Any person may seek contribution from any other per-
son who is liable or potentially liable under section 9607(a)
of this title, during or following any civil action under sec-
tion 9606 of this title or under section 9607(a) of this title.
Such claims shall be brought in accordance with this sec-
tion and the Federal Rules of Civil Procedure, and shall
be governed by Federal law. In resolving contribution
claims, the court may allocate response costs among liable
parties using such equitable factors as the court deter-
mines are appropriate. Nothing in this subsection shall
diminish the right of any person to bring an action for
contribution in the absence of a civil action under section
9606 or section 9607 of this title.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.