Amicus Curiae Brief — Joslyn Manufacturing Co. v. James

FILED

; ee :

Ce) ee, JAN 25 91

Nos. 89-1973 and 90-69 YOSEPH F. SPANIOL, JR

cremate eater acer EEK

In the Supreme Court of the nites States

OCTOBER TERM, 1990

JOSLYN MANUFACTURING COMPANY, PETITIONER

VY.

T.L. JAMES & COMPANY, INC.

POWERLINE SUPPLY COMPANY, INC. ET AL., PETITIONERS

v.

T.L. JAMES & COMPANY, INC.

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

KENNETH W. STARR

Solicitor General

RICHARD B. STEWART

Assistant Attorney Genera!

LAWRENCE G. WALLACE

Deputy Solicitor General

JEFFREY P. MINEAR

Assistant to the Solicitor General

ANNE S. ALMY

BRADLEY M. CAMPBELL

Attorneys

Department of Justice

Washington, D.C. 20530

(202) 514-2217

QUESTION PRESENTED

Whether a parent corporation is liable under the Com-

prehensive Environmental Response, Compensation, and

Liability Act for response costs resulting from the release

of hazardous substances at a subsidiary corporation’s facility

where the parent maintained a separate corporate identity

and had no actual involvement in the operation of the sub-

sidiary’s facility.

(I)

TABLE OF CONTENTS

eS a a ee he

ae ek 0 Re

a aroun ries yt he ee ae Ce,

TABLE OF AUTHORITIES

Cases:

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

Bell v. Wolfish, 411 U.S. 520 (1979) ..........

Capital Telephone Co. v. FCC, 498 F.2d 734 (D.C.

oO a ee es a ams a hn

Chicago M. & St. P. Ry. v. Minneapolis Civic &

Comm. Ass’n, 247 U.S. 490 (1918) ..........

Conway v. California Adult Auth., 396 U.S. 107

RR ee eS hn ee i eas

First Nat'l City Bank v. Banco Para El Comercio Ex-

terior de Cuba, 462 U.S. 611 (1983) .........

Knetch v. United States, 364 U.S. 361 (1960) ...

O'Neill v. Picillo, 883 F.2d 176 (1st Cir. 1989), cert.

Gemeeg, 110-5. -<t. Libs (1990) ... 2.65.50 ess.

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

he bani sy k WAS Se aS, O

Pennsylvania v. Union Gas Co., 491 U.S. 1

ne rl, Dhan g gts ime Caries

Riverside Market Devel. Corp. v. International Bldg.

Products, No. 88-5317 (E.D. La. May 23, 1990)

Me SoG ka bbs eu kaeh a ya

Tanglewood East Homeowners v. Charles-Thomas,

Inc., 849 F.2d 1568 (Sth Cir. 1988) ..........

Town of Brookline v. Gorsuch, 667 F.2d 215 (lst

iE ee BS ae eae wa

United Mine Workers v. Coronado Coal Co., 259

es ae oar We are in asi Ws

United Parcel Service, Inc. v. Mitchell, 451 U.S. 56

I Eat Pee ee he he oe

13

10

IV

Cases — Continued: Page

United States vy. Chem-Dyne Corp., 572 F. Supp. 802

ads sw we See Aree a 8 3

United States v. Jon-T Chemicals, Inc , 768 F.2d 686

(Sth Cir. 1985), cert. denied, 475 U.S. 1014

Res er LR nllanh sly Aee ae ae ee 14

United States v. Kayser-Roth Corp., 724 F. Supp.

15 (D.R.I. 1989), aff'd, 910 F.2d 24 (Ist Cir. 1990),

petition for cert. pending, No. 90-816 ....... 8, 11,

13, 15

United States v. Monsanto Co., 858 F.2d 160 (4th

Cir. 1988), cert. denied, 491 U.S. 600 (1989) . 3

United States v. Northeastern Pharmaceutical &

Chem. Co., 810 F.2d 726 (8th Cir. 1986), cert.

denied, 484 U.S. 848 (1987) .............. 8, 11, 15

United States v. South Carolina Recycling &

Disposal, Inc., 653 F. Supp. 984 (D.S.C. 1989),

aff'd sub nom., United States v. Monsanto Co.,

858 F.2d 160 (4th Cir. 1988), cert. denied, 491 U.S.

SE h'n-b GLH nlkk-r 0 0009408 b R60 54064 ORO OS® 3

Statutes:

Clean Air Act, 42 U.S.C. 7601 ef seq. ......... 15

Comprehensive Environmental Response, Compen-

sation and Liability Act, 42 U.S.C. 960i ef

eee oh eee eke eas ©. eeeees's

ee atk te 6). era

§ 101(20)(A), 42 U.S.C. 9601(20)(A) .......

Bee Boa eae. | ee

§ 104(a)(i), 42 U.S.C. 9604(a)(1) ..........

S 1GWied. G2 UGC. Fire «sss. a ones.

§ 107(a)(1), 42 U.S.C. 9607(a)(1) ..........

§ 107(a)(1)-(4), 42 U.S.C. 9607(a)(1)-(4) ....

§ 107(a)(2), 42 U.S.C. 9607(a)(2) .........-. 4,

§ 107(a)(4)(A), 42 U.S.C. 9607(a)(4)(A) ....

§ 107(a)(4)(B), 42 U.S.C. 9607(a)(4(B) .....

Bis Re Se ie. eer

- Tk iL arreerreerr TT eer ere ree

NY NNN YI WW ON W WW PV

Miscellaneous: Page

1 Fletcher Cyclopedia on the Law of Private Cor-

powatsoms (rev. WOOO)... <i oc cc ccc cnn 14, 15

10 Fletcher Cyclopedia on the Law of Private Cor-

pretvams Grav. BUG) 5. cc ks vce wi ccaececs 9

W. Knepper & D. Bailey, Liability of Corporate Of-

ficers and Directors (4th ed. 1988) .......... 9

R. Stevens, Handbook on the Law of Private Cor-

poratsons CoG G6. THOR) 2 inn cs occ vc cuccs )

Jn the Supreme Court of the Anited States

OCTOBER TERM, 1990

No. 89-1973

JOSLYN MANUFACTURING COMPANY, PETITIONER

Vv.

T.L. JAMES & COMPANY, INC.

No. 90-69

POWERLINE SUPPLY COMPANY, INC. ET AL.. PETITIONERS

Vv.

T.L. JAMES & COMPANY, IN«

ON PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

BRIEF FOR THE UNITED STATES AS AMICUS CURIAE

[his brief is submitted in response to the Court’s invita-

tion to the Solicitor General to express the views of the

United States.

STATEMENT

Petitioners Joslyn Manufacturing Company, Inc. and

Powerline Supply Company, Inc. are, respectively, a past

owner and a present partial owner of the “Lincoln” site,

located in Bossier Parish, Louisiana, that was formerly used

to treat wood and to process creosoting chemicals. Respond-

ent T.L. James & Company, Inc. (James Company) is a

past owner of a dissolved corporate subsidiary, Lincoln

(1)

ty

Creosoting Co., that conducted wood treating and

creosoting operations at that site. In 1986 and 1987, the

Louisiana Department of Environmental Quality ordered

petitioners, respondent, and other parties to clean up haz-

ardous substance contamination at the site. Joslyn filed this

action under the Comprehensive Environmental Response,

Compensation, and Liability Act (CERCLA), 42 U.S.C.

9601 ef seq., and state law against Powerline, the James

Company, and others to require those parties to share in

the clean-up costs. The United States District Court for the

Eastern District of Louisiana en!ered summary judgment

for the James Company, holding that it was not liable under

CERCLA for the cost of clean-up. 89-1973 Pet. App.

9a-3la. The court of appeals affirmed. /d. at la-8a.

1. CERCLA enhances the Environmental Protection

Agency’s (EPA’s) authority to deal effectively with the

release of hazardous substances into the environment. See

generally Pennsylvania v. Union Gas Co., 491 U.S. 1 (1989).

Under Section 104(a)(1) of CERCLA, 42 U.S.C. 9604(a)(1),

EPA may take direct “response” actions to abate any ac-

tual or threatened release of any hazardous substance. 42

U.S.C. 9604(a)(1). Congress has established the Hazardous

Substance Superfund to pay for federal response actions.

See 26 U.S.C. 9507. CERCLA provides that the federal

government may bring cost recovery actions pursuant to

Section 107(a)(4)(A), 42 U.S.C. 9607(a)(4)(A), to replenish

the fund when EPA has expended money in performing

response actions. Sections 107(a)(4)(B) and 113(t) of

CERCLA also authorize non-governmental parties to

recover their necessary costs of response in certain cir

cumstances. See 42 U.S.C. 9607(a)(4)(B); 42 U.S.C. 9613(1.

A party seeking recovery of response costs under

CERCLA must establish four elements: (1) the defendant

falls within one or more of the classes of liable persons

described in Section 107(a); (2) the site is a “facility” as

detined in Section !01(9); (3) a “release” or “threatened

release” of a “hazardous substance” has occurred or is oc-

curring; and (4) the release or threatened release has caused

the party to incur “response costs.” 42 U.S.C. 9607(a). See,

e.g., United States v. South Carolina Recycling & Disposal,

Inc., 653 F. Supp. 984, 991-992 (D.S.C. 1984), aff'd sub

nom. United States vy. Monsanto Co., 858 F.2d 160 (4th

Cir. 1988), cert. denied, 491 U.S. 600 (1989).'

As to the first of these four elements, CERCLA

establishes four broad classes of liable persons: (1) the

owners and operators of hazardous substance facilities and

sites; (2) persons who owned or operated a facility at the

time hazardous substances were disposed of at that facili-

ty; (3) persons who arranged for disposal or treatment of

the hazardous substances; and (4) persons who transported

the hazardous substances and selected the disposal facility.

§ 107(a)(1)-(4), 42 U.S.C. 9607(a)(1)-(4). CERCLA defines

the term “owner or operator” to include “any person own

Ing Or Operating such facility,” § 101(20)(A), 42 U.S.C.

9601(20)(A), and it defines the term “person” to include “an

individual, firm, corporation, association, partnership, con

sortium, [or] joint venture,” § 101(21), 42 U.S.C. 9601(21)

Petitioner Powerline does not dispute that it currently

owns a portion of the Lincoln site and is therefore liable.

under Section 107(a)(1), for clean-up expenditures at the

site. Similarly, petitioner Joslyn does not dispute that it

It is well settled that responsible parties are strictly liable under

CERCLA. E.g., Monsanto, 858 F.2d at 167: Tanglewood East

Homeowners v. Charles- Thomas, Inc. 849 F.2d 1868, 1572 (Sth Cir.

1988); New York v. Shore Realty Corp. , 739 F.2d 1032, 1042 (2d Cir

1985). In addition, they are jointly and severally liable when the en

\ironmental harm is indivisible. E.g., O'Neil v. Picillo, 883 F.2d 176.

178 (ist Cir. 1989), cert. denied, 110 S. Ct. L11S (1990): Vonsanto,

8S8 F.2d at 172; United States v. Chem-Dyne Corp., 572 | Supp. 802,

S10-811 (S.D. Ohio 1983)

4

owned and operated the wood treating and creosote proc-

essing facility at the Lincoln site from 1950 through 1969

and is therefore liable, under Section 107(a)(2), for clean-

up expenditures at the site. However, petitioners assert that

respondent James Company is also liable under Section

107(a)(2) because its now dissolved subsidiary, Lincoln

Creosoting Co., owned and operated the wood treating and

creosote processing facility from the fazility’s inception in

1935 until its sale to Joslyn in 1950.

Joslyn filed its action against the James Company on

September 18, 1987. After extensive discovery as to the rela-

tionship of the various parties to the Lincoln site, the parties

moved for summary judgment. The district court granted

summary judgment for the James Company. The court

assumed, as a matter of general, pre-CERCLA, corporate

law, that the James Company could not be heid liable for

Lincoln Creosoting Co.’s activities at the site without “first

piercing the corporate veil.” 89-1973 Pet. App. 10a-15a.

Surveying several cases recognizing the limited liability of

shareholders (id. at 12a-14a), the court stated:

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 specific 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.

Id. at 14a.

The district court “decline{d] to adopt the analysis”

set forth in other cases, including New York v. Shore Realty

Corp., 759 F.2d 1032 (2d Cir. 1985), imposing CERCLA

liability on corporate officers and shareholders who par-

ticipate in the operation of facilities that release hazardous

substances. 89-1973 Pet. App. lla & n.4, 30a n.20. The

court explained that those cases “involved factual situations

where the personal participation in the illegal disposal of

hazardous waste by the corporate officers was significant.”

Id. at 30a n.20. The court stated that if the James Com-

pany and its officers and directors “had been actively in-

volved in the day-toxlay operations of Lincoln, including

the disposal of hazardous waste, then, arguably liability

would attach.” Jbid.

The district court next examined whether the James Com-

pany’s relationship with Lincoln Creosoting Co. provided

a basis for “piercing the corporate veil” and holding the

parent corporation liable for the actions of its subsidiary.

The court first observed that it was “undisputed” that federal

law would govern that question in this case. 89-1973 Pet.

App. I5a. The court concluded, however, that the federal

and state tests, which turn on the degree of the parent’s in-

volvement in the subsidiary’s operations, are used “inter-

changeably” and are “essentially the same.” /d. at 16a. The

court identified a list of factors relevant to that “heavily

fact-specific” inquiry (/d. at 17a-18a) and then examined the

relationship between the parent and its subsidiary in this

case (id. at 19a-27a). The court found that while the James

Company provided capital for Lincoln’s initial incorpora-

tion, the James Company had virtually no involvement in

Lincoln’s actual operations:

The lengthy factual account set forth [in the district

court’s opinion] establishes beyond doubt that Lincoln

strictly adhered to basic corporate formalities by keep-

ing 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

NA

6

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

payroll of James Company. Though James Company

provided capital for Lincoln’s initial incorporation, it

was the effort and initiative of Messrs. Tooke and

Hayes that resulted in the formation of Lincoln.

Id. at 27a. The court concluded that despite “substantial

discovery” Joslyn produced no triable issue of fact as to

the separate identities of the James Company and Lincoln,

and thus there was no legal basis for piercing the corporate

veil. Jd. at 29a-30a.

3. The court of appeals affirmed. 89-1973 Pet. App.

la-8a. The court stated that the issues presented were

whether CERCLA imposes “direct liability on parent cor-

porations for violations of their wholly-owned subsidiaries”

and whether “absent such liability, the corporate veil should

be pierced to impose liability in the instant case.” Jd. at 2a.

As to the first issue, the court of appeals observed that

CERCLA does not expressly “hold parents directly liable

for their subsidiaries’ activities” and that imposing liability

on that theory “would dramatically alter traditional con-

cepts of corporation law.” Jd. at Sa. The court concluded

that in the absence of “an express Congressional directive

to the contrary, common-law principles of corporation law,

such as limited liability, govern [the] court’s analysis.” Jd.

at 6a. As to the second issue, the court of appeals agreed

with the district court that the ‘undisputed facts here “militate

against piercing the corporate veil” and that the disputed

facts, even if resolved in petitioners’ favor, would not alter

the result. Jd. at 6a-7a. The court of appeals accordingly

held that the district court properly entered summary judg-

ment. /d. at 8a.’

DISCUSSION

Petitioners contend that the court of appeals’ decision

creates a conflict among the federal courts of appeals as

to the scope of CERCLA liability. We disagree. In our view,

the decision does not create a genuine conflict. Moreover,

although its analysis is incomplete, the court’s ultimate

resolution, based on the record before it, is not necessarily

incorrect. The decision is unlikely to affect government and

other private cost recovery actions and, indeed, contributes

little in defining the contours of CERCLA liability. Accord-

ingly, the petitions for a writ of certiorari should be denied.

1. CERCLA imposes liability on persons — including

corporations — “who at the time of disposal of any hazard-

ous substance owned or operated any facility at which such

hazardous substances were disposed of.” § 107(a){2), 42

U.S.C. 9607(a)(2). The court of appeals plairily perceived

the question in this case as whether CERCLA imposes

liability on a parent corporation merely because the parent

corporation owns a subsidiary that is itself liable under the

statute. The court repeatedly framed the question presented

in terms of whether CERCLA imposes “direct liability on

parent corporations for violations of their wholly-owned

subsidiaries.” 89-1973 Pet. App. 2a.* And it provided its

? The United States participated as amicus curiae in the court of ap-

peals, identifying its theories of parent corporation liability and sug-

gesting that the case be remanded for further factual development rele-

vant to those theories. See C.A. Amicus Br. for the United States; C.A.

Amicus Reply. Br. for the United States.

3 See also 89-1973 Pet. App. Sa (“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.”); ibid. (“Joslyn asks this court to rewrite the language of

answer in those terms as well: “CERCLA does not define

‘owners’ or ‘operators’ as including the parent company of

offending wholly-owned subsidiaries.” /d. at Sa.* Instead,

the court ruled, a parent corporation may be held liable for

its subsidiary’s acts only if the separate incorporation “is

used as a sham to perpetrate a fraud or avoid personal

liability.” /d. at 8a. In those circumstances, a court could

“pierc[e] the corporate veil” and hold the parent corpora-

tion “indirectly liable for [the subsidiary’s] activities.” /bid.

The court of appeals thus rejected the theory that

CERCLA imposes liability on a parent corporation by vir-

tue of the parent’s mere ownership of a liable subsidiary.

Whatever the merits of that broad theory, no court of ap-

peals has accepted it. Rather, the courts have indicated, as

in this case, that a parent corporation may be held liable

based on its ownership of a liable subsidiary only by “pierc-

ing the corporate veil.”

Petitioners are thus mistaken in suggesting that the court

of appeals’ ruling conflicts with decisions of other courts

of appeals. As we explain below, petitioners rely on cases

that address a question distinct from that presented here:

whether parent corporations and stockholders who them-

the Act significantly and hold parents directly liable for their sub-

Sidiaries’ activities.”).

* See also 89-1973 Pet. App. 7a (“Congress is quite capable of creating

statutes that hold shareholders or controlling entities liable for the acts

of valid corporations.”); bid. (“Similarly, La. Rev. Stat. Ann. Section

30:2276 (West 1989 Supp.) does not impose direct liability on parent

corporations for the acts of their subsidiaries.”).

See, e.g., United States v. Northeastern Pharmaceutical & Chem

Co., 8310 F.2d 726, 744 (8th Cir. 1986), cert. denied, 484 U.S. 848 (1987):

New York \. Shore Realty Corp., 759 F.2d 1032, 1082 (2d Cir. 1985);

see also United States \. Kayser-Roth Corp., 724. Supp. 18, 23 (D.R.1

1989), atf'd on other grounds, 910 F.2d 24 (Ist Cir. 1990), petition for

vert. pending, No. 90-816 (filed Nov. 23, 1990)

9

selves participate in the operation of the subsidiary’s facili-

ty are directly liable under Section 107(a) of CERCLA as

operators of the facility. Indeed, we expect that the ques-

tion whether a parent corporation may become liable under

CERCLA by virtue of mere ownership of a liable subsidiary

is unlikely to generate a conflict among the courts of ap-

peals. It is not the policy of the United States, which is the

usual plaintiff in CERCLA cost recovery actions, to seek

cost recovery from a parent corporation based solely on the

parent’s ownership of a liable subsidiary. There is, accord-

ingly, no warrant for further review of the court of appeals’

decision.

2. Although the United States does not seek cost

recovery from parent corporations based on their mere

ownership of liable subsidiaries, the government may seek

cost recovery from a parent corporation based on 2 number

of other established theories of corporate liability. For ex-

ample, it “is a well-established rule that a corporation will

be held liable for the torts and wrongful acts of its direc-

tors, officers, and employees within the scope of their

authority.” W. Knepper & D. Bailey, Liability of Corporate

Officers and Directors § 2.11 (4th ed. 1988).° Accordingly,

® See, e.g., United Mine Workers v. Coronado Coal Co., 259 U.S.

344, 395 (1922) (“A corporation is responsible for the wrongs commit-

ted by its agents in the course of its business, and this principle is en-

forced against the contention that torts are u/tra vires of the corpora-

tion.”); see also, e.g., 10 Fletcher Cyclopedia on the Law of Private

Corporations § 4877, at 323 (rev. 1986) (“corporations can commit

almost any kind of a tort that individuals can commit, and are liable

for the acts of their agents and servants in the same degree as natural

persons are liable for the acts of their servants and agents * * *; that

is now hornbook law, unless changed by statute”); R. Stevens, Hand-

book on the Law of Private Corporations 359 (2d ed. 1949) (“In ap-

plying the doctrine of respondeat superior to any master, corporate or

noncorporate, the fundamental question is whether the servant acted

within the actual or apparent scope of is employment.”).

10

in an amicus curiae brief filed in this case, the United States

suggested that the court of appeals consider whether the

James Company is liable based on any activities of its of-

ficers or employees in operating the Lincoln facility. See

C.A. Amicus Br. for the United States 14-25.

The court of appeals did not discuss or dircctly

acknowledge the government’s theory. Rather, it limited its

discussion to the theory advanced by Joslyn: namely, that

a parent corporation is liable under CERCLA based on its

power to control its subsidiary —a power that will always

exist where the parent owns a majority of the subsidiary’s

stock.’ As we have explained (pp. 7-8, supra), the court of

appeals rejected that theory. Although it would have been

proper for the court of appeals to consider the government’s

alternative theory, we cannot say that the court of appeals

erred in failing to do so, or that the matter raises any issue

warranting this Court’s review. A court is not obligated,

of course, to consider issues raised by amici.’ And the

government expressly acknowledged in its amicus brief that

Joslyn had not squarely presented the government’s theory

\o the court of appeals.’ Furthermore, the government

Joslyn argued that CERCLA “imposes liability on parent corpora-

tions if they knew or should have known about the pollution and had

the authority to control or abate it, but did not.” Joslyn C.A. Br. 19.

See also Powerline C.A. Br. 34-36. Joslyn makes a similar argument

in this Court. See 89-1973 Pet. 9. Powerline’s position on the merits

in this Court is unclear. See 90-69 Pet. 6-11.

* See, e.g., United Parcel Service, Inc. v. Mitcne 4, 451 U.S. 56, 60

n.2 (1981); Bell v. Wolfish, 441 U.S. 520, 530 n.13 (1979); Knetch v.

United States, 364 U.S. 361, 370 (1960).

* The government stated below that “[t]he specific positions asserted

by the United States in [its] brief are not presented by and, in at least

One respect, are in direct conflict with the positions pressed by the ap

pellants in their briets.” C.A Amicus Br. tor the United States, State

ment Regarding Oral Argument. While statements in Joslyn’s court of

appeals brief might be interpreted to coincide with the government's

1]

conceded that the factual record before the court of appeals

might not support imposition of liability under that theory

in this case.!°

At all events, we do not interpret the court of appeals’

decision as rejecting the government’s theory, which has

been adopted by three other courts of appeals and rejected

by none. See United States v. Kayser-Roth Corp., 910 F.2d

24, 26-27 (Ist Cir. 1990), petition for cert. pending, No.

90-816 (filed Nov. 23, 1990); United States v. Northeastern

Pharmaceutical & Chem. Co., 810 F.2d 726, 744 (8th Cir.

1986), cert. denied, 484 U.S. 848 (1987); New York v. Shore

Realty Corp. , 759 F.2d 1032, 1052 (2d Cir. 1985). The court

of appeals “declined” Joslyn’s suggestion that the court

“follow the several courts, including the Second Circuit,

which have extended CERCLA liability to parents.” 89-1973

Pet. App. Sa. The court’s decision, however, cannot

reasonably be read as rejecting the standard of liability set

forth by the Second Circuit in Shore Realty Corp.; rather,

the court of appeals apparently agreed with the district court

that the Second Circuit’s Shore Realty Corp. standard was

simply not apposite on the record in this case.

In Shore Realty Corp., the Second Circuit held the cor-

porate officer and shareholder who “made, directed, and

controlled” all corporate decisions and actions, who was “in

charge of the operation of the facility in question,” and who

“specifically directs, sanctions, and actively participates

theory, the court of appeals did not interpret Joslyn’s argument in that

manner, and its failure to do so does not present any question war-

ranting review,

* The government explained that its interest was limited to an ar-

ticulation of “the proper /ega/ standard” and that “the tacts related to

James Compe ny’s participation in the management of Lincoln should

be tully deve oped and assessed by the district court after the proper

legal standard is articulated by this Court.” C.A. Amicus Reply Br.

tor the United States 7-8.

12

in Shore’s maintenance of the nuisance” to be directly liable

as an “operator” under CERCLA. 759 F.2d at 1038, 1052.

In this case, the district court concluded that while the James

Company participated in the initial capitalization of the

Lincoln Creosoting Co., there was no showing that the

James Company or its officers participated in the opera-

tion of the Lincoln facility. See 89-1973 Pet. App. 27a. The

district court accordingly declined to adopt the Second Cir-

cult’s analysis. /d. at 30a n.20. The district court explained,

however, that the Shore Realty Corp. analysis would likely

control if the James Company had actively participated in

the operation of the Lincoln facility:

If T.L. James & Company and its officers and direc-

tors had been actively involved in the day-to-day opera-

tions of Lincoln, including the disposal of hazardous

waste, then, arguably, liability would attach.

Ibid. We believe that the court of appeals likewise declined

to follow Shore Realty Corp. because the Second Circuit’s

liability standard was simply not applicable to the facts

before the court in this case.!!

In sum, the court of appeals’ decision in this case holds

that the James Company may not be held directly liable

under CERCLA by virtue of its mere ownership of a liable

subsidiary. The decision does not address the distinct (and

in this case purely hypothetical) question whether a parent

corporation may be held directly liable based on its own

activities at the facility. As the First Circuit recently ex-

plained, the court of appeals’ decision in this case does not

A district court in the Firth Circuit has since similarly observed

that “fi]t, as in the cases cited by Judge Stagg, [a shareholder] personally

participated in the disposal of hazardous wastes, then he may be liable

for the wrongtul acts of the corporation even under Judge Stagg’s Jos/vn

opinion.” See Riverside Market Devel. Corp, \. International Bldg.

Products, No. 88-5317 mem. op. (6.D. La. May 23, 1990) (1990 WI

he «

2249, *3-*4).

13

conflict with the uniform view of the First, Second, and

Eighth Circuits that corporate parents or their officers may

become directly liable as operators under CERCLA if they

actively participate in operating a subsidiary’s facility.

Kayser-Roth Corp., 910 F.2d at 26-27. There is, accordingly,

no occasion for this Court to address that issue (or other

non-applicable theories of direct corporate liability) in this

case. Cf. Conway v. California Adult Auth. , 396 U.S. 107,

110 (1969) (review of a “hypothetical issue” would constitute

“an advisory opinion” and “an unjustifiable intrusion on

the time of the Court”).

3. The court of appeals recognized that a parent cor-

poration may be held liable for its subsidiary’s activities if

there are grounds for disregarding the parent’s and the sub-

sidiary’s separate corporate identities. See pp. 6-7, supra.

The court agreed with the district court, however, that “the

facts here militate against piercing the corporate veil.”

89-1973 Pet. App. 7a. Powerline does not challenge this

aspect of the court of appeals’ decision. Joslyn contends,

however, that the court of appeals erred by employing an

unduly restrictive standard to make that determination. /d.

at 11, 9, 12.

There is no real disagreement as to the broad principles

that determine whether corporate forms should be dis-

regarded. This Court has recognized on numerous occasions

that an incorporated entity “is not to be regarded as legally

separate from its owners in all circumstances.” First Nat’l

City Bank v. Banco Para El Comercio Exterior de Cuba,

462 U.S. 611, 629 (1983). “In particular, the Court has con-

sistently refused to give effect to the corporate forrn where

it is interposed to defeat legislative policies.” /d. at 630. See,

e.g., Anderson v. Abbott, 321 U.S. 349, 362-363 (1944).

Where, as here, the legislative policies are expressed in a

federal statute, the question whether separate corporations

14

should be treated as one is determined as a matter of federal

law. /d. at 365.

As we have expiained (pp. 7-8), the court of appeals re-

jected the notion that a parent corporation “owns” or

“operates” a facility, for purposes of CERCLA, by virtue

of its mere ownership of a subsidiary that holds title to the

facility. The question, then, is what additional factors would

justify treating a parent —that is not directly liable based

on its actuai participation in the operation of the facility —

indirectly liable for its subsidiary’s actions. Under traditional

corporate law principles (which inform interpretation of the

federal statute), the separate corporate identities of a parent

and its subsidiary may be disregarded in a number of cir-

cumstances, including where “stock ownership has been

resorted to, not for the purpose of participating in the af-

fairs of the corporation in the normal and usual manner,

but for the purpose * * * of controlling a subsidiary com-

pany so that it may be used as a mere agency or instrumen-

tality of the owning company or companies. ” Chicago M.

& St. P. Ry. v. Minneapolis Civic & Comm, Ass’n, 247 U.S.

490, S501 (1918). See, e.g., United States v. Jon-T Chemicals,

Inc., 768 F.2d 686, 691 (Sth Cir. 1985), cert. denied, 475

U.S. JO14 (1986); 1 Fletcher Cyclopedia on the Law of

Private Corporations § 43, at 729-731 (rev. 1990). Apply-

ing that standard, the court of appeals affirmed the district

court’s determination that, in this case, the corporate veil

should not be pierced.

We agree that CERCLA liability may be imposed on a

parent corporation if a subsidiary that functions as the

parent's “alter ego,” “agent,” or “instrumentality” is found

liable. See Jon-T Chemicals, Inc., 768 F.2d at 691. Those

metaphorical terms, however, derive their meaning largely

through “a careful review of the entire corporate relation-

ship between various corporate entities, their directors and

otficers” (1 Fletcher Cyclopedia on the Law of Private

15

Corporations, supra, at 731). Corporate forms might be

disregarded under CERCLA in other circumstances as well,

depending on the manner in which those forms are employed

in the CERCLA context. Cf. Capital Telephone Co. v.

FCC, 498 F.2d 734, 738 (D.C. Cir. 1974). This case,

however, does not present an appropriate occasion to ad-

dress that topic.

First, there currently is no conflict among the courts of

appeals on the extent to which corporate forms may be

disregarded under CERCLA. Indeed, the Fifth Circuit is

the first court of appeals to rule on the issue.'? Second, in

many cases where it would be appropriate to disregard

separate corporate identities, the parent corporation may

be held directly liable, without piercing the corporate veil,

based on its own actual participation in the operation of

the facility in question. See Kayser-Roth Corp., 910 F.2d

at 26-28 & n.11; United States v. Northeastern Phar-

maceutical & Chem. Co., 810 F.2d at 744; Shore Realty

Corp., 759 F.2d at 1052. See 1 Fletcher Cyclopedia on the

Law of Private Corporations, supra, § 41.27. Thus, the issue

may have limited practical importance. Finally, “the ques-

tion of corporate identity is normally one of fact; each case

is determined according to its own circumstances.” /d. at

§ 43, at 730. In this case, the district court found that Joslyn

fell far short of establishing the factors normally associated

with “piercing the corporate veil,” 89-1973 Pet. App.

25a-27a, and the court of appeals affirmed, without ex-

tended discussion, the district court’s “heavily fact specific”

determination (id. at 18a). In view of (1) the absence of a

‘2 The case that Joslyn cites as presenting a conflict, Town of

Brookline v. Gorsuch, 667 F.2d 215 (ist Cir. 1981), involved the ques-

tion whether a university-owned corporation qualified as a non-profit

health or educational institution for the purpose of a regulatory ex-

emption under the Clean Air Act, 42 U.S.C. 7601 ef seq.

16

conflict among the courts of appeals, (2) the possibility that

the issue may have limited importance in many cases, and

(3) the fact-specific nature of the inquiry, this Court’s review

is not warranted at this time.

CONCLUSION

The petitions for a writ of certiorari should be denied.

Respectfully submitted.

KENNETH W. STARR

Solicitor General

RICHARD B. STEWARI

Assistant Attorney General

LAWRENCE G. WALLACI

Deputy Solicitor General

TEEEREY P. MINEAR

Assistant to the Solicitor General

ANNE S. ALMY

BRADLEY M. CAMPBELL

Attorneys

JANUARY 199]