Petition for Writ of Certiorari — Joslyn Manufacturing Co. v. James
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éF Supreme Court, U.S.
90 ss 6 9 FILED
No.
JUN 25 1990
JOSEPR-F-SPANION, JA
CLERK
In The
Supreme Court of the United States
October Term, 1989
>
POWERLINE SUPPLY COMPANY, INC.,
NELDA S. ELLIOTT AND BILL ELLIOTT
Petitioners,
versus
T. L. JAMES & COMPANY, INC.
Respondent.
*
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
He
Davip F. ButterFIELD
Counsel of Record
Mayer, SMITH & ROBERTS
1550 Creswell
Shreveport, LA 71101
(318) 222-2135
COCKLE LAW BRIEF PRINTING CO., (800) 225-6964
OR CALL COLLECT (402) 342-2831
QUESTION PRESENTED
1. Cana corporation establish a wholly owned sub-
sidiary to operate a hazardous waste facility in order to
profit from the operation of the facility while at the same
time insulating itself from potential environmental lia-
bility under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. 9601,
et seq.?
ii
LIST OF PARTIES
The parties to the proceeding below were:
Joslyn Manufacturing Co.
T. L. James & Company, Inc.
Powerline Supply Co., Inc.
Nelda S. Elliott and Bill Elliott
Louisiana & Arkansas Railway Co.
Lance D. Alworth
F. B. James
G. W. James .
STATEMENT UNDER RULE 29.1
Elliott Electric Supply Company, Inc., merged with its
wholly owned subsidiary, Powerline Supply Company,
Inc., on or about November 19, 1986, and Elliott Electric
Supply Company, Inc., was the surviving corporate
entity. Elliott Electric Supply Company, Inc., subse-
quently dissolved Powerline Supply Company, Inc., on
August 13, 1987.
iii
TABLE OF CONTENTS
Page
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Statement under Rule 29.1.....................008- ii
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Reasons for Granting the Writ
I.
II.
III.
The United States Court Of Appeals For The
Fifth Circuit Has Rendered A Decision In
Conflict With Decisions Of Other Federal
Courts Of Appeals On The Same Matter ....
The Ultimate Resolution Of The Issue Raised
In This Case Will Have Far-Reaching Implica-
tions For Corporate America And For The
Es so ine 5 ds be Unsanscecsenay cs
The Issue In This Case Must Be Resolved Uni-
formly To Insure The Proper Functioning Of
Financial Markets And To Provide Guidance
for Economic Expansion ....................
sg ROE ER an A ee ee rE:
iv
TABLE OF AUTHORITIES
Page
Cases:
Colorado vs. Idarado Mining Co., 18 Envtl.L.Rep.
(Envtl.L.Inst.) 20578 (D. Col. 1987).............. 7, 10
idaho vs. Bunker Hill C»., 635 FSupp. 665 (D.
Gs cai 4 as nae CakUbSss caaekieaencsass Fe,
Joslyn Corporation vs. T. L. James & Company,
Inc., 696 FSupp. 222 (W.D. La. 1988)............... 4
Josiyn Manufacturing Company vs. T. L. James &
Company, 893 F.2d 80 (5th Cir. 1990) .............. 4
New York vs. Shore Realty Corporation, 759 F.2d
POE WE US I ono kin hencccdcvacecnceccas 6, 7,9
United States vs. Carolawn Company, 21 E.R.C.
Se ES SG CLG Aah eadntaeeddadWetbaessicess 9
United States vs. Chem-dyne Corp., 572 F.Supp.
802 (S.D. Ohio 1983)
7S O@6886646066468068468066666 86 6668 66 6 8 6 6
United States vs. Conservation Chemical Co. 628
WUE, GPR COWRA BOND. BOUDD. ccc nncccccccceccscas MW
United States vs. Kayser-Roth Corp., 724 F.Supp.
Oe RIN WON A bikie 55 40.05 «EY N55 so cdccasnnnccees 10
United States vs. McGraw Edison Company, et al
Cu GB-SE20 (W.D. NY 29GB) ww ww ccc ccc cc cccn 10
United States vs. Mirabal, 23 E.R.C. 1511 (E.D. Pa.
Pet eo bidet iki S tee ee 10
United States vs. Mottolo, 629 F.Supp. 56 (D.N.H.
1984), 605 F.Supp. 898 (D.N.H. 1985), 695
Pomp. GIS (ON. 1908) 2... ccc cece scenes 3
United States vs. Nicolet, Inc., No. 85-3060 (E.D.
Se id 10
Vv
TABLE OF AUTHORITIES - Continued
Page
United States vs. Northeastern Pharmaceutical &
Chemical Company, Inc., 579 F.Supp. 823 (W.D.
Mo. 1984), aff’d in part, rev’d in part, 810 F.2d
Ce ee Pe SN Kk Rbknweaadaaadaunckarces 6, 7,9
United States vs. Reilly Tar and Chem. Corp. 546
F.Supp. 1100 (D. Minn. 1982) .................000.. 8
Vermont vs. Staco, Inc., 684 FSupp. 822 (D. Vt.
MOB AHNGV NAN ScdR ee SES cava GineseuemedeeReet 7, 10
STATUTORY PROVISIONS:
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FEDERAL RULEs:
Rule 54(b) Federal Rules of Civil Procedure
No.
-.
—_
In The
Supreme Court of the United States
October Term, 1989
vr
POWERLINE SUPPLY COMPANY, INC.,
NELDA S. ELLIOTT AND BILL ELLIOTT
Petitioners,
versus
T. L. JAMES & COMPANY, INC.
Respondent.
>
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
-.
The Petitioners, Powerline Supply Company, Inc.
(hereinafter referred to as “Powerline”), Nelda S. Elliott
and Bill Elliott, respectfully pray that a writ of certiorari
issue to review the Judgment and Opinion of the United
States Court of Appeals for the Fifth Circuit entered in
the above entitled proceeding on January 29, 1990.
,
—_
i
OPINIONS BELOW
The opinion of the United States Court of Appeals for
the Fifth Circuit is reported at 893 F2d 80, and is
reprinted in the Appendix hereto, App. 1, inj/ra.
The Fifth Circuit’s denial of Petitioners’ application
for rehearing is unreported, but reprinted in the Appen-
dix hereto, App. 11, infra.
The opinion of the District Court for the Western
District of Louisiana is reported at 696 F.Supp. 222, and is
reprinted in the Appendix hereto, App. 13, infra.
_+
JURISDICTION
Invoking federal jurisdiction under 42 U.S.C. Section
9613(b), Joslyn Corporation (hereinafter referred to as
“Joslyn”) brought this action in the United States District
Court for the Western District of Louisiana, Shreveport
Division. On September 19, 1988, the district court
granted summary judgment in favor of respondent T. L.
James & Company, Inc. (hereinafter referred to as “James
Company”). On November 16, 1988, the district court
granted Joslyn’s motion for entry of judgment pursuant
to FR.C.P. 54(b).
On Joslyn’s appeal, the United States Court of
Appeals for the Fifth Circuit entered an opinion affirming
the district court’s ruling on January 29, 1990. The Fifth
Circuit denied Petitioners’ timely application for rehear-
ing on March 26, 1990. The jurisdiction of this court to
review the judgment of the Fifth Circuit is invoked under
- 28 U.S.C. Section 1254(1).
>
STATUTES INVOLVED
The following statutory provisions involved have
been printed in the Appendix: 42 U.S.C. Section 9607(a),
42 U.S.C. Section 9601(20).
=
STATEMENT OF THE CASE
In 1985, the Louisiana Department of Environmental
Quality, Inactive and Abandoned Sites Division, issued a
compliance order to Joslyn, Powerline, James Company,
Lance D. Alworth, Louisiana & Arkansas Railway Com-
pany, and to multiple other potentially responsible par-
ties requiring environmental remediation at a former
wood creosoting facility located in Bossier City, Louisi-
ana. The facility is commonly referred to as the “Lincoln
Creosote site.” Lincoln Creosote Company, Inc. (hereinaf-
ter referred to as “Lincoln”), a wholly owned subsidiary
of James Company, operated the creosote facility from
1935 to 1950. Lincoln subsequently sold the facility to
Joslyn. Joslyn operated the facility from 1950 through
1969. Thereafter, the facility was dismantled by Koppers
Company, Inc., and abandoned. After abandonment, the
site was subdivided and sold to numerous individuals
and legal entities, including Powerline and Lance D.
Alworth. Louisiana & Arkansas Railway Company
owned land adjacent to the site and provided rail trans-
port services to and from the facility during its operation.
Joslyn filed suit against James Company, Powerline,
Koppers Company, Inc., Lance D. Alworth and the Loui-
siana & Arkansas Railway Company under the Compre-
hensive Environmental Response, Compensation and
Liability Act of 1980 (“CERCLA”), 42 U.S.C. 9601, et seq.,
and under the Louisiana Environmental Quality Act
(“LEQA”), LA-R.S. 30:2001, et seq. The suit sought contri-
bution for environmental remediation at the site.
James Company filed motions to dismiss all claims
against it for failure to state claims upon which relief
could be granted and for summary judgment. All parties
with claims against James Company argued that James
Company was “directly” liable for Lincoln’s environmen-
tal torts as an owner or operator of the facility pursuant
to 42 U.S.C. Section 9607(a) and LA-R.S. 30:2276(A)(5).
James Company argued that it was to be afforded the
traditional protection of shareholder immunity for the
environmental torts of its subsidiary and that the record
would not support piercing Lincoln’s corporate veil to
impose environmental liability on James Company. The
district court granted summary judgment in favor of
James Company. Joslyn Corporation vs. T. L. James & Com-
pany, Inc., 696 F.Supp. 222 (W.D. La. 1988).
Upon Joslyn’s motion, the district court entered final
judgment in favor of James Company pursuant to F.R.C.P.
54(b). Upon appeal to the United States Court of Appeals
for the Fifth Circuit, the decision of the district court was
affirmed. Joslyn Manufacturing Company vs. T. L. James &
Company, 893 F.2d 80 (5th Cir. 1990).
Whether by outright ownership or by endorsement,
James Company owned all of the common and preferred
stock in Lincoln and provided all of the capital necessary
for Lincoln’s operation. Specifically, James Company
guaranteed Lincoln’s purchases of creosote oil and lent
Lincoln approximately $500,000 in order to purchase a
reliable source of timber.
At all iimes, James Company controlled a majority of
Lincoln’s directors. James Company and Lincoln had
interlocking directors and officers. James Company’s
executive officers were advised and informed as to Lin-
coln’s operation on a frequent, if not daily, basis and
reserved the right to confirm and ratify Lincoln’s top
level management decisions. In order to protect its invest-
ment in Lincoln, James Company hired and fired on-site
managers.
James Company consistently received dividends on
Lincoln’s preferred stock and profited from its loans to
Lincoln. James Company purchased creosote products
from Lincoln, and Lincoln purchased materials from
James Company. Lincoln made charitable contributions at
the request and direction of Lincoln’s board members
controlled by James Company.
Lincoln’s corporate headquarters were located in the
James Building in Ruston, Louisiana. Lincoln never paid
any rent for the use of James Company’s facilities. in the
interest of convenience, Lincoln often held its corporate
meetings immediately following the corporate meetings
of the James Company.
Lincoln’s creosote operation spilled creosote residue
at various places around the site. The site also developed
6
a creosote drainage problem that was never corrected,
despite the recommendations of on-site managers.
,%
a al
REASONS FOR GRANTING THE WRIT
I.
The United States Court Of Appeals For The Fifth Cir-
cuit Has Rendered A Decision In Conflict With Deci-
sions Of Other Federal Courts Of Appeals On The Same
Matter.
In the case of New York vs. Shore Realty Corporation,
759 F.2d 1032 (2nd Cir. 1985), (hereinafter cited as Shore
Realty), the court noted that CERCLA’s definition of the
phrase “owner or operator” excluded a “person who,
without participation in the management of a... facility,
(held) indicia of ownership primarily to protect his secu-
rity interest in the facility.” The court concluded the use
of this exception implied that an owning stockholder who
managed the corporation was liable under CERCLA as an
Owner or operator. The court held a corporate share-
holder who managed the facility directly liable for his
corporation’s environmental tort without resorting to a
corporate veil piercing analysis.
sn the case of United States vs. Northeastern Phar-
maceutical & Chemical Co., Inc., (hereinafter cited as NEP-
PACCO), 810 F.2d 726 (8th Cir. 1986), the court held an
individual named John W. Lee liable for environmental
remediation as person who had arranged for the disposal
of hazardous substances in violation of 42 U.S.C. Section
|
9607(a)(3). The court expressly noted that Mr. Lee’s lia-
bility was distinct from the derivative liability that results
from piercing the corporate veil.
In direct contrast to Shore Realty, and NEPPACCO, the
court below in the instant case stated:
Joslyn urges this Court to read CERCLA’s defi-
nition of “owner or operator” liberally and
broadly to reach parent corporations whose sub-
Sidiaries 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 vs. Shore Realty Corporation, 759 F.2d
1032 (2d Cir. 1985); United States vs. Mottolo, 695
F.Supp. 615 (D.N.H. 1988); Colorado vs. Idarado
Mining Co., 18 Envtl.L.Rep. (Envtl.L.Inst.) 20578
(D. Col. 1987); Vermont vs. Staco, Inc., 684
F.Supp. 822 (D.Vt. 1988); Idaho vs. Bunker Hill
Co., 635 F.Supp. 665 (D.Idaho 1986). We decline
to do so.
893 F.2d at 82
The Fifth’s Circuit’s opinion expressly rejected exis-
ting precedent in other federal appellate courts. The
importance of the issue raised by the conflicting opinions
requires that this Court grant this writ application to
settle the issue. Otherwise owners and operators of haz-
ardous waste facilities within the jurisdictional bound-
aries of the Fifth Circuit will have significantly greater
protections over owners and operators of hazardous
waste facilities in other parts of the country.
II.
The Ultimate Resolution Of The Issue Raised In This
Case Will Have Far-Reaching Implications For Corpo-
rate America And For The Public In General
If the decision of the court below is correct, corporate
America, particularly those corporations involved in haz-
ardous waste activities, should form subsidiaries to con-
duct operations with potential environmental
consequences. Under such arrangements, the parent cor-
poration would be able to profit from the hazardous
waste activity while incurring none of the potential lia-
bilities. So long as the parent corporation’s conduct with
respect to the subsidiary is not so outrageous as to justify
piercing the subsidiary’s corporate veil under traditional
notions of corporate law, the parent corporation can com-
pletely avoid CERCLA liability.
On the other hand, the incorporation of subsidiary
corporations to operate hazardous waste facilities could
have a devastating impact upon the public. Even a small
hazardous waste facility might generate an environmen-
tal disaster. The operating subsidiary corporation might
not have the financial ability or insurance to bring about
environmental remediation. The cost of the clean up
would then be forced upon the taxpayers, a result never
intended by Congress in enacting CERCLA. As the court
pointed out in the case of United States vs. Reilly Tar and
Chem. Corp., 546 F.Supp. 1100 (D. Minn. 1982), CERLC'A
was designed to insure that those responsible for prob-
lems caused by the disposal of chemical poisons bear the
costs and responsibility for remedying the harmful condi-
tions they created.
-
ee -
Ill.
The Issue Raised In This Case Must Be Resolved Uni-
formly To Insure The Proper Functioning Of Financial
Markets And To Provide Guidance For Economic Expan-
sion
Enormous amounts of corporate stock are bought
and sold based upon the belief that the investor does not
stand personally liable for the corporation’s debt. But is
this belief justified in the context of environmental lia-
bility? Congress expected the Courts to develop a Federal
common law to supplement the statutory provisions of
CERCLA. United States vs. Chem-dyne Corp., 572 F.Supp.
802 (S.D. Ohio 1983). However, the decision of the Court
below flies in the face of a developing body of Federal
common law holding corporate shareholders directly lia-
ble for corporate environmental torts under certain cir-
cumstances.!
' In all of the cases below, shareholders who were directly
involved in a corporate hazardous waste activity or who were
actively involved in the management of the facility were found
directly liable, expressly or by implication, for the corpora-
tion’s environmental tort: United States vs. Northeastern Phar-
maceutical & Chemical Company, Inc., 579 F.Supp. 823 (W.D. Mo.
1984), aff'd in part, rev’d in part, 810 F.2d 726 (8th Cir. 1986):
Idaho vs. Bunker Hill Co., 635 F.Supp. 665 (D. Idaho 1986);
United States vs. Mottolo, 629 F.Supp. 56 (D.N.H. 1984), 605
F.Supp. 898 (D.N.H. 1985), 695 F.Supp. 615 (D.N.H. 1988);
United States vs. Conservation Chemical Co., 628 F.Supp. 391
(W.D. Mo. 1985); New York vs. Shore Realty Corp., 759 F.2d 1032
(2d Cir. 1985); United States vs. Carolawn Company, 21 E.R.C.
(Continued on following page)
10
Because of the decision of the Court below, financial
markets still lack the high degree of certainty necessary
for proper functioning. When compared to the decisions
of other Federal Courts on the same issue, the decision in
this case makes it impossible to predict whether a share-
holder can rely on traditional principles of corporate law
or whether a shareholder may be directly liable for the
corporation’s environmental torts. When investors cannot
precisely calculate the amount of their potential liability,
they are less willing to invest the capital necessary for
economic expansion.
Given the widespread institutional and individual
ownership of corporate stock, and given the percentage
of the gross national product directly or indirectly related
to the production, disposal and consumption of hazard-
ous waste products, the issue raised by this case requires
resolution by this Honorable Court. Environmental reme-
diation is such an expensive proposition that economic
planning for all segments of the national economy is
frustrated in the absence of a clear understanding as to
potential liability under CERCLA’s statutory provisions.
Those called upon to resolve key issues in CERLCA’s
liability scheme cannot be guided by the current uncer-
tainty and conflict existing in the federal jurisprudence.
(Continued from previous page)
2124 (D.S.C. 1984); United States vs. Mirabal, 23 E.R.C. 1511
(E.D. Pa. 1985); Colorado vs. Idarado Mining Co., 18 E.L.R. 20578
(D. Co. 1987); Vermont vs. Staco, Inc., 684 F.Supp. 822 (D. Vt.
1988); United States vs. Kayser-Roth Corp., 724 F.Supp. 15 (D.R.I.
1989); United States vs. McGraw Edison Company, et al, Cv
88-542C (W.D. NY 1989); United States vs. Nicolet, Inc., No.
85-3060 (E.D. Pa. 1989).
11
Because of the economic, political and social sensitivity of
envirenmental remediation, CERLCA’s liability scheme
requires uniform resolution, and the necessary uniformity
can only be supplied by this Court.
a
4
CONCLUSION
The conflicting messages being sent by the federal
courts concerning shareholder liability for corporate
environmental torts require that this Court grant this
Petition for Writ of Certiorari.
Respectfully submitted,
Mayer, SmitH & Roserts
Attorneys for Powerline Supply
Company, Inc., Nelda S. Elliott and
Bill Elliott
By /s/ David F. Butterfield
Davip F. ButterFiELD
1550 Creswell
Shreveport, LA 71101
(318) 222-2135
INDEX TO APPENDIX
Opinion of the Fifth Circuit Court of Appeals..... App. 1
Denial of Petitioners’ Application For Rehearing . . .App. 6
Opinion of the United States District for the West-
ern District of Louisiana...................... App. 7
App. 1
JOSLYN MANUFACTURING COMPANY,
Plaintiff-Appellant,
Vv.
T.L. JAMES & CO., INC.,
Defendant-Appellee,
Vv.
POWERLINE SUPPLY CO., INC.,
Defendant Third Party
Plaintiff-Appellant.
and
Nelda S. ELLIOT, Bill Elliot, and Lance
D. Alwosth, Louisiana and Arkansas
Railroad Co., Defendants-Appellants,
Vv.
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.
Corporation ordered to clean up contaminated site of
former wood treating and/or creosoting operation initi-
ated action under Comprehensive Environmental
Response, Compensation, and Liability Act and Louisiana
Environmental Quality Act. The United States District
Court for the Western District of Louisiana, Shreveport
Division, Tom Stagg, Chief Judge, 696 F.Supp. 222,
entered summary judgment for defendants, and corpora-
tion appealed. The Court of Appeais, Gee, Circuit Judge,
held that: (1) the Acts did not impose direct liability on
parent corporations for violations of their wholly owned
App. 2
subsidiaries, and (2) the corporate vei! could not be
pierced to impose liability on the parent corporation.
Affirmed.
Robert E. Holden, Mary S. Johnson, Liskow & Lewis,
New Orleans, La., for plaintiff-appellant.
David F. Butterfield, Mayer, Smith & Roberts, Shre-
veport, La., for Elliot & Powerline Supply.
Kevin M. Ward, Cogswell & Wehrle, Denver, Colo.,
James L. Adams, Brook, Morial, Cassibry, Fraiche &
Pizza, Shreveport, La., for Lance D. Alworth.
Bobby S. Gilliam, Jerald N. Jones, Wilkinson, Car-
mody & Gilliam, Shreveport, La., for Louisiana and
Arkansas Railroad Co.
William F. Ridlon, II, Asst. Atty. Gen., Baton Rouge,
La., for amicus curiae, State of La.
Donald A. Carr, U.S. Dept. of Justice, Michael P.
Healy, Anne S. Almy, Appellate Section, Land & Natural
Resources Div., Washington, D.C., for amicus curiae U.S.
Donald B. Mitchell, Jr, Stephen J. Weiss, James P.
Mercurio, Arent, Fox, Kintner, Plotkin & Kahn, Washing-
ton, D.C., and Robert G. Dawkins, Dawkins, Coyle &
Carter, Ruston, La., for defendant-appellee, T.L. James &
Co., Inc.
Appeals from the United States District Court for the
Western District of Louisiana.
App. 3
Before GEE and JONES, Circuit Judges and
HUNTER, District Judge:*
GEE, Circuit Judge:
Appellant contends that the Comprehensive Environ-
mental Response, Compensation, and Liability Act
(“CERCLA”) and the Louisiana Environmental Quality
Act ("LEQA”) impose direct liability on parent corpora-
tions for violations of their wholly-owned subsidiaries.
Appellant further contends that, absent such liability, the
corporate veil should be pierced to impose liability in the
instant case. We disagree with both contentions.
Facts
This case arises from the environmental cleanup of a
former creosoting plant constructed by the Lincoln Cre-
osoting Company, Inc. (“Lincoln”) in Bossier City, Louisi-
ana. Under Lincoln’s creosoting recovery system, raw
creosoting chemicals dripped from the treating cylinders
to a sump pit located underneath the system. Lincoln
recovered 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
creosoting chemicals were washed away by rain to the
surrounding land areas and waterways.
Lincoln was incorporated in 1935 when C.A. Tooke
and J.R. Hayes proposed a business arrangement with
* District Judge of the Western District of Louisiana, sitting by
designation.
App. 4
T.L. James whereby T.L. James Co., (“James Co.”) would
put up the initial capital in return for stock in the com-
pany. Under the arrangement, Tooke and Hayes would
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 Lin-
coln. Tooke and Hayes endorsed their shares over as
security for their unpaid capital subscription.
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. Lincoln regularly held shareholders and direc-
tors meetings.
|
Dissatisfied with Lincoln’s performance in the
mid-1940’s, G.W. James bought out Hayes. G.W. James,
then president 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 Lincoln employees who had no ties to James Co.
and two persons associated with James Co. In 1947, the
Board was expanded to eight members and consisted of
four Lincoln employees and four persons associated with
James Co.
App. 5
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
Manufacturing Co. (“Joslyn”). Joslyn owned and oper-
ated the plant until Koppers Company, Inc. (“Koppers”)
purchased it in 1969. Koppers owned the plant until 1971.
The property then passed through five separate owners,
the last of which subdivided the property. Appellant
Powerline Supply Company (“Powerline”) purchased one
of the subdivided lots in 1982. Appellant Alworth pur-
chased one such iot in 1983. Appellant Louisiana and
Arkansas Railway 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(a)(2) as an “owner or operator.” Jos-
lyn also advanced claims under the Louisiana Environ-
mental Quality 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
summary judgment, concluding that Congress, in enact-
ing CERCLA, did not intend an exception to the general
rule in corporation law of limited liability. 696 F.Supp.
222.
App. 6
Discussion
CERCLA provides in relevant part:
Section 107(a)(2), 42 U.S.C. Section 9607(a)(2), makes
liable:
(2) any person who at the time of disposal
of any hazardous substance owned or opperated
[sic] any facility at which such hazardous subs-
tances were disposed of... .
“Owner or operator” is defined in the statute as:
(20)(A)(ii) in the case of an onshore facili-
ty . . . any person owning or operating such
facility, and (iii) in the case of any facility, title
or control of which was conveyed due to bank-
ruptcy, foreclosure, tax delinquency, abandon-
ment, 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
ownership 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
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 Co., 18 Envtl.L.Rep. (Envtl.L.Inst.) 20578
(D.Col.1987); Vermont v. Staco, Inc., 684 FSupp. 822
App. 7
(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 offen-
ding 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
instance, 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 liable
for their subsidiaries’ activities. To do so would dramati-
cally 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
legislative history of CERCLA to indicate that Congress
intended to make such a significant change 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,
App. 8
62 L.Ed.2d 126 (reviewing Court of Appeals’ decision
modifying longshoreman’s preexisting rights), “[SJilence
is most eloquent, for such reticence while contemplating
an important and controversial change in existing law is
unlikely.” 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
1427-1430 (D.C.Cir.1988).
If Congress wanted to extend liability to parent cor-
porations 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 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 corpora-
tions. In fact, Congress adopted a “control” test in the
next subsection of the statute. Under CERCLA, the term
“owner or operator” is defined for facilities conveyed to
state or local governments by bankruptcy, tax delin-
quency or abandonment, as “any person who owned,
operated or otherwise controlled activities at such facility
immediately” before conveyance. 42 U.S.C. Section
9601(20)(A)(iii) (emphasis added). No such “control” test
appears in subsection (ii), the subsection at issue in this
App. 9
case, and we will imply none. Similarly, La.Rev.Stat.Ann.
Section 30:2276 (West 1989 Supp.) does not impose direct
liability on parent corporations for the acts of their sub-
sidiaries.
Further, the facts here militate against piercing the
corporate veil. Lincoln faithfully adhered to basic corpo-
rate formalities by keeping its own books and records
and holding frequent shareholder and directors meetings.
the daily operations of Lincoln and James Co. were sepa-
rate. 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 employee benefits. The notes from the
1950 special shareholders meeting indicate that Lincoln
operated quite independently 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, 106 S.Ct.
1194, 89 L.Ed.2d 309 (1986). There, our 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 pierc-
ing should be limited to situations in which the corporate
entity is used as a sham to perpetrate a fraud or avoid
personal liability. See Jon-T, supra at 691 (quoting Krivo v.
Industrial Supply Co. v. National Distillers & Chem. Corp.,
483 F.2d 1098, 1106 (5th Cir.1973)) (“control required for
liability under the ‘instrumentality’ rule amounts to total
domination of the subservient corporation, to the extent
App. 10
that the subservient corporation 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 support 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 determining
whether James Co. can be held indirectly liable for Lin-
coln’s activities. Those facts, if true, do not justify pierc-
ing the corporate veil. Therefore, the district court’s grant
of James Co.’s summary judgment motion was proper. We
AFFIRM.!
1 Because it was not ruled on below we do not here pass
on Powerline’s “corporate distributee theory of liability - Pow-
erline asserts that James Co. was Lincoln’s corporate distrib-
utee and that, as such, James Co. may be responsible.
App. 11
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 Elliot, 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
ON PETITION FOR REHEARING
(Filed March 26, 1990)
Before GEE and JONES, Circuit Judges, and HUNTER,
District Judge:*
* District Judge of the Western District of Louisiana sitting by
designation.
App. 12
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.
CLERK’S NOTE:
SEE FRAP AND LOCAL
RULES 41 FOR STAY OF THE
MANDATE.
ENTERED FOR THE COURT:
Thomas Gibbs Gee
United States Circuit Judge REHG-4
App. 13
JOSLYN CORPORATION
A
T.L. JAMES & COMPANY, INC. et al.
Civ. A. No. 87-2054.
United States District Court,
W.D. Louisiana,
Shreveport Division.
Sept. 19, 1988.
Corporation ordered to clean up contaminated site of
former wood treating and/or creosoting operation initi-
ated action under Comprehensive Environmental
Response, Compensation, and Liability Act and Louisiana
Environmental Quality Act. In memorandum ruling on
various motions, the District Court, Stagg, Chief Judge,
held that: (1) individual liability could not be imposed on
corporate officers under CERCLA for hazardous waste
cleanup, nor could parent corporation be held directly
liable without first piercing the corporate veil, and (2)
that veil would not be pierced, absent proof that parent
had complete domination of finances, policies, and prac-
tices of subsidiary.
Summary judgment for defendant.
Robert E. Holden, J. Berry St. John Jr., William Craig
Wyman, Liskow & Lewis, New Orleans, La., James W.
Hailey Jr., Hailey, McNamara, Hall, Larmann & Papale,
Metaire, La., Liskow & Lewis, Lafayette, La., for plain-
tiffs.
Robert G. Dawkins, Dawkins, Coyle & Carter, Ste-
phen J. Weiss and Donald B. Mitchell, Arent, Fox, Kintner,
App. 14
Plotkin and Kahn, Washington, D.C., for T.L. James & Co.
Inc.
Bobby S. Gilliam, Wilkinson, Carmody & Gilliam,
Shreveport, La., for La. & Ark. Ry. Co.
James B. Gardner, Lunn, Irion Johnson, Salley & Car-
lisle, Shreveport, La., for Commercial Union Ins. Co.
Philip C. Stahl, Katherine E. Rakowsky, Grippo &
Elden, Chicago, Ill., Redoux R. Provosty Jr., F. Rae Swent,
Provosty, Sadler & deLaunay, Alexandria, La., for Nat.
Sur. Corp.
J. Fleet Howell, Wiener, Weiss, Madison & Howell,
Shreveport, La., for Koppers Co., Inc.
David F. Butterfield, Mayer, Smith & Roberts, Shre-
veport, La., for Powerline Supply Co.
Kevin M. Ward, Michael C. Donovan, Charles Kevin
Cahill, Denver, Colo., James L. Adams, Kennedy, Good-
man & Donovan, Shreveport, La., for Lance D. Allworth:
(defendant & third party).
James L. Nelson, Shreveport, La., for Graham W.
Rogers and John Walker Price: (third parties).
Gary M. Zwain, Duplass, Witman & Zwain, Metairie,
La., for Wesley D. Burdine: (third party).
Jerald Harper, Cook, Yancey, King & Galloway,
Shreveport, La., for David Myatt: (third party).
MEMORANDUM RULING
STAGG, Chief Judge.
App. 15
Joslyn Corporation (hereinafter “Joslyn”) initiated
this action against, inter alia, T.L. James & Company, Inc.
(hereinafter “T.L. James” or “James Company”), asserting
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
Josiyn after the Louisiana Department of Environmental
Quality had issued several orders to certain parties,
including Joslyn, requiring the investigation and cleanup
of a contaminated site in Bossier Parish, Louisiana that
was formerly a wood-treating and/or creosoting opera-
tion. The claims, cross claims, counterclaims and third
party demands 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
plaintiff’s complaint or, in the alternative, for sum-
mary 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;
1 42 U.S.C. §§ ©601-9657 (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.
a
App. 16
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
request 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 until
the court completes its analysis of this legal issue.
DIRECT OR DERIVATIVE LIABILITY?
Section 107(a) of CERCLA, 42 U.S.C. § 9607(a), pro-
vides, in relevant part:
Notwithstanding any other provision or ruie of
law, and subject only to the defenses set forth in
subsection (b) of this Section -
> * . * » .
(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 Sec-
tion].
Under 42 U.S.C. § 9601(20)(A), the term “owner or opera-
tor” 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.
|
App. 17
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
parent corporation or corporate officers liable for clean-
up costs without first piercing the corporate veil. Several
courts addressing the issue have held that corporate offi-
cers 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 have chosen to ignore the corporate form
without an express congressional directive.
In Berger v. Columbia Broadcasting System, Inc., 453
F.2d 991, 994 (Sth Cir. 1972), the Fifth Circuit made clear
the importance of the corporate structure:
* 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 consider-
ation.
* State of New York v. Shore Realty Corp., 759 F.2d 1032 (2d
Cir.1985); United States v. Ward, 618 F.Supp. 884 (E.D.N.C.1985);
United States v. Conservation Chemical Company, 619 FSupp. 162
(W.D.Mo.1985); United States v. Mottolo, 605 F.Supp. 898
(D.N.H.i985); United States v. Carolawn Company, 21 Env’t Rep.
Cas. (BNA) 2124 (D.S.C.1984); United States v. Northeastern
Pharmaceutical & Chemical Company (NEPPACCO), 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 corpo-
rate veil, under CERCLA on a parent corporation held to the
“owner or operator” of a disposal facility.
App. 18
It is elemental jurisprudence that a corporation
is a creature of the law, endowed with a person-
ality separate and distinct from that of its
owners, and that one of the principal purposes
for legal sanctioning of a separate corporate per-
sonality is to accord stockholders an oppor-
tunity to limit their personal liability.
See also, Baker v. Raymond International, Inc., 658 F.2d 173,
179 (Sth Cir.1981) (“[t]he principle of limited liability
remains a dominant characteristic of American corporate
law.”), cert. denied, 456 U.S. 983, 102 S.Ct. 2256, 72 L.Ed.2d
861 (1982); and Krivo Industrial Supply Company v. National
Distillers and Chemical Corp., 483 F.2d 1098, 1102 (5th
Cir.1973) (“the corporate form . . . is not lightly disre-
garded since limited liability is one of the principal pur-
poses for which the law has created the corporation.”). 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 to action for allegedly illegal corporate cam-
paign contributions, holding that:
Corporations are creatures of state law, and
investors commit their funds to corporate direc-
tors on the understanding that, except where
federal law expressly requires certain respon-
sibilities of directors with respect to stock-
holders, state law will govern the internal affairs
of the corporation.
In Homan & Crimen, Inc. v. Harris, 626 F.2d 1201, 1205
(Sth 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 corpora-
tion doing business as Southwestern General Hospital.
The hospital submitted its Medicare cost reports for two
years, claiming $830,000 as a step up in the cost basis of
App. 19
4
its assets. Id.5 There 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 ser-
vices, facilities, and supplies furnished to the provider by
organizations related to the provider by common owner-
ship 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, Homan & Crimen con-
tended that “form should not be exalted over substance
and the fiction of the separateness of the corporation and
its shareholders should not be used to reach an unfair
and unjust result.” Id. 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 lightly go
behind. citations omitted.] For the regulation to
cut through or ignore that mass of established corpo-
rate law upon which the Secretary relied would
require at the very least a clear intention, a compel-
ling case. It cannot be done by implication as plain-
tiffs suggest here.
Id. (emphasis added.) Stated differently, “[w]hether latent
federal power should be exercised to displace state law is
primarily a decision for Congress.” Wallis v. Pan American
Petroleum Corp., 384 U.S. 63, 68, 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, it must be
° See, 42 U.S.C. §§ 1395X and 1395F.
App. 20
remembered that ‘Congress acts . . . against the back-
ground of the total corpus juris of the states... .” Id.
quoting from Hart and Wechsler, The Federal Courts and the
Federal System at p. 435 (1953).6
Based upon the foregoing authorities, this court
holds that the corporate form, including limited liability
for shareholders, is a doctrine firmly entrenched in Amer-
ican jurisprudence that may not be disregarded absent a
Specific congressional directive. Neither the clear lan-
guage of CERCLA nor its legislative history provides
authority for imposing individual liability on corporate
officers or direct liability on parent corporations.” Though
it is recognized 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,
6 See also, Burks v. Lasker, 441 US. 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 Advisers Act, federal courts must apply state
corporate law governing the authority of independent direc-
tors to discontinue shareholders’ derivative actions because
corporate law is not an area in which these statutes authorize
federal courts to “fashion a complete body of federal law”):
Pipefitters Local Union No. 562 v. United States, 407 U.S. 385,
413-14, 92 S.Ct. 2247-2263, 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).
” Comment, Corporate Officer Liability for Hazardous Waste
Disposal: What Are the Consequences?, 38 Mercer L.Rev. 677, 679
(1987).
App. 21
Inc., 849 F.2d 1568, 1572 (5th Cir.1988), this court will not
read into the statute a provision disregarding decades of
corporate law. The court’s conclusion is buttressed by the
fact that Congress has, in the past, specified that share-
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. §§ 8201-3207; LR.C. § 1239(b)(2), (3) (1976); Fair
Labor Standards Act § 3(r), 29 US. § 203(r); and ERISA
§ 4001(b), 29 U.S.C. § 1301(b)(1); see also, 16 C.ER. § 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
arising under nationwide federal programs. United States
v. Kimbell Foods, Inc., 440 U.S. 715, 726, 99 S.Ct. 1448, 1457,
59 L.Ed.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 lend-
ing programs do not Specify the appropriate
rule of decision in no way limits the reach of
federal law. It is precisely when Congress has
not spoken “in an area comprising issues sub-
Stantially related to an established program of
government 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 inter-
Stices of federal legislation according to their
own standards.”
App. 22
440 U.S. at 727, 99 S.Ct. at 1458, quoting from Mishkin, The
Variousness of “Federal Law”. Competence and Discretion 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 State v. Kimbell Foods, Inc., supra, as explained by
Georgia Power Company v. Sanders, 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 Circuit has held:
[W]e find no need to determine whether a uni-
form 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 fed-
eral or state standard, and have cited federal
and state cases interchangably.
United States v. Jon-T Chemicals, Inc. 768 F.2d 685, 690 n.6
(5th Cir.1985), cert. denied, 475 U.S. 1014, 106 S.Ct. 1194, 89
L.Ed.2d 309 (1986) (citations omitted)8.
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 Circuit noted: “[o]ne of
8 For a view that state Alter ego, as opposed to federal
common law, will conflict with the purposes of CERCLA, see,
Note, Liability 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.
Ee |
|
App. 23
the most difficult applications of the rule permitting the
corporate form to be disregarded arises when one corpo-
ration is sought to be held liable for the debts of another
corporation.” Unless the parent corporation expressly or
impliedly assumes responsibility for the debts of the sub-
Sidiary. Liability will attach only when the parent “mis-
uses that corporation by treating it, and by using it, as a
mere business conduit for the Purposes of the dominant
corporation.” Id. Two elements are held to be essential:
First, the dominant corporation must have con-
trolled the subservient corporation, and second,
the dominant corporation must have prox-
imately caused plaintiff harm through misuse of
this control.
Id. at 1103, citing, inter alia, Berger v. Columbia Broadcasting
System, Inc., 453 F.2d 991 (5th Cir.), cert. denied, 409 US.
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 extent that the subservient corporation
manifests nc separate corporate interests of its
own and functions solely to achieve the pur-
poses of the dominant corporation.
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 some-
times called the ‘instrumentality rule’ is not
more majority or complete stock control but
such domination of finances, policies and prac-
tices that the controlled corporation has, so to
speak, no separate mind, will or existence of its
own and is but a business conduit for its princi-
pal.
Id. quoting from 1 W. Fletcher, Cyclopedia of the La of Private
Corporations § 43 (Perm. ed. rev. 1963). See also, John-T
Chemicals, 768 F.2d at 691; and Baker v. Raymond Interna-
tional, Inc., 656 F.23d (sic) 173, 180 (5th Cir.1981). In
determining whether a parent corporation has exercised
the requisite degree of control over a subsidiary to pierce
the corporate veil, the Fifth Circuit has developed a laun-
App. 24
dry list of factors. These included whether:
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
:
the parent and the subsidiary have com-
mon stock ownership;
the parent and the subsidiary have com-
mon directors or officers;
the parent and the subsidiary have com-
mon business departments;
the parent and the subsidiary file consoli-
dated financial statements and tax returns;
the parent finances the subsidiary;
the parent caused the incorporation of the
subsidiary;
the subsidiary operates with grossly inade-
quate 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 corpora-
tions are not kept separate; and
the subsidiary does not observe the basic
corporation formalities, such as keeping
App. 25
separate books and records and holding
shareholders and board meetings.
Jon-T Chemieals, 768 F.2d at 691-92 (citations omitted).
Resolution of the alter ego issues is “heavily fact-specific”
and requires an evaluation of the totality of the aforemen-
tioned factors. Id. at 694.
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 certificates, however, were accompanied by
endorsements back to 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.”9 Since
° 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 g0es 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 Exhibit 8.
App. 26
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
members: 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 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
Lincoln’s name on December 17, 1935. At least since 1936,
Lincoln had its own bank account at the Commercial
National Bank in Shreveport. Checks were signed jointly
by Messrs. Tooke and Hayes. From its inception. Lincoln
frequently and periodically held separate meetings of the
directors and shareholders. At the annual shareholders
meetings, Mr. Tooke was responsible for making the
report 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
concerning employment with Lincoln. James offered Lacy
$1,000 a month for three months to “go over there [to
App. 27
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
problem at Lincoln was an internal fight between Messrs.
Tooke and Hayes. According to Lacy, “Hayes’ 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 properly.”™!
Subsequent thereto, Lacy was employed by Lincoln.
This came about after G.W. James bought out Hayes’
interest. 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.”12 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
resolution 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
1° Deposition of Lacy at 15, Joslyn Exhibit 15.
1 Td. at 16.
12 See Attachment “C” to TLL. James’ Statement of Undis-
puted Facts as 67.
App. 28
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
substantial obligations of Lincoln, it would not be advis-
able 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 Cen-
tenary College 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 business is rather a vague picture.”'!3 The vague-
ness was due to the declining demand for creosoted
products as the result of consumers’ inability to secure
wire and transformers. 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 management of the creosoting business was to
be commended for assuming such a logical attitude with
reference to the forthcoming problems.” 14
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
13 Td. at 84.
14 Id. at 85.
|
App. 29
withdrawals from Lincoln’s corporate account at Com-
mercial National Bank in Shreveport. This resolution was
approved 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
business judgment of C.A. Tooke.”15 Mr. James further
stated that the purpose of the meeting was to try to
decide what course should be followed without the lead-
ership 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 had been since it was first orga-
nized.” Without the leadership 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 position 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
15 Id. at 98.
App. 30
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... . “16
A special meeting of stockholders was held on July
20, 1950 for the purpose of considering the sale of Lin-
coln’s principal assets. Mr. Lacy outlined a proposition to
purchase Lincoln that had been made by Joslyn Manufac-
turing & Supply Company. After a general discussion of
the proposal, a resolution was introduced by Mr. Plum-
mer which authorized G.W. James to execute a memoran-
dum 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 unanimously adopted by the Board of Directors on
July 20, 1950.
The shareholders voted on December 27, 1950 to
repurchase 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 re-
deemed at par value of $100 a share plus accrued divi-
dends 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
16 Id. at 99.
App. 31
complete and that all miscellaneous items of charge and
credit had been settled. The only matter remaining to
consummate the sale was the payment of the monthly
amount, as provided for in the memorandum agreement.
Mr. Lacy then summarized outstanding business matters
to be resolved and stated that, in his estimation, the entire
affairs 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
reelected, 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 TL.
James & Company, Inc. held a special meeting “to con-
sider 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 Lincoln Creosoting Company, Inc. presently owned”
by James Company.'? A resolution was unanimously
passed authorizing 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 Certifi-
cate, “all debts, obligations and liabilities of this corpora-
tion have been paid and discharged,” that “there are no
suits pending against this corporation in any Court,” and
that the assets have been distributed to the shareholders
17 See, Attachment “D” at 195 to TLL. James’ Statement of
Undisputed Facts.
App. 32
“in accordance with their respective rights and inter-
ests.” 16
ANALYSIS OF LAW AND FACTS
Joslyn urges that six of the twelve factors cited in Jon-
T Chemicals, supra, support the conclusion that the corpo-
rate veil should be pierced. Specifically, Joslyn points out
that the parent and subsidiary have common stock own-
ership 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.!9 These facts are undoubtedly true and material:
Nevertheless, our cases are clear that 100 per
cent ownership and identity of directors and
8 Attachment “A” to T.L. James’ Statement of Undisputed
Facts.
19 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
individuals’ salaries from Lincoln. Contained in the letters are
statements that these directors were consistently involved in
the financial affairs of Lincoln, and that Mr. Davidson served
as a contact between plant personnel and G.W. James. Though
these letters evidence 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 corporate veil will not be pierced unless
the parent’s control “amounts to total domination of the sub-
servient corporation, to the extent that the subservient corpo-
ration manifests no separate corporate interest of its own and
functions solely to achieve the purposes of the dominant cor-
poration. Krivo, 483 F.2d at 1106. “Merely taking an active part
in the management of the debtor corporation does not auto-
matically constitute control... .” Id. at 1105.
App. 33
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 193, 195 (5th
Cir.1983).] Instead, we maintain the fiction that
an officer or director of both corporations can
change hats and represent the two corporations
separately, despite their common ownership.
Jon-T Chemicals, 768 F.2d at 691; see also, Baker, 656 F.2d at
180 (“Ownership of a controlling interest in a corporation
entitles the controlling shareholder to exercise the normal
incidence of stock ownership . . . without forfeiting the
protection of limited liability.”); and Berger, 453 F.2d at
994 (same).
Joslyn also points out that James Company made
substantial loans to Lincoln, including the initial capital-
ization. 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
another 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 Pacific
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 deroga-
tion of the separateness of a corporate creature, an
aggrieved party must prove something more than... the
parent’s use of its power as an incident of its stock
App. 34
ownership to elect officers and directors of the subsid-
iary.” 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 offi-
cers of both corporations. Clearly, they had to work
somewhere. That they chose to work out of James Com-
pany’s corporate offices simply is not sufficient to disre-
gard the separate corporate structures.
The lengthy factual account set forth above estab-
lishes beyond doubt that Lincoln strictly adhered to basic
corporate formalities by keeping its own books and
records and frequently and periodically holding share-
holder 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 Com-
pany. 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 Linco!n’s initial incorpora-
tion, it was the effort and initiative of Messrs. Tooke and
Hayes that resulted in the formulation 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
arrangements for employee benefits such as sick Pay,
retirement and profit sharing. Lincoln Creosoting’s
App. 35
invoices directed that payment be made to Lincoln and
not to James Company.
SUMMARY JUDGMENT STANDARDS
The purpose of summary judgment is to isolate and
dispose 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. Catrett,
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
properly regarded not as a disfavored procedural short-
cut, 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. Celotex, 106 S.Ct. at 2553. A
defendant moving for summary judgment may rest on
the absence of evidence to support an essential element of
the plaintiff’s case. Celotex, 106 S.Ct. at 2554; International
Association of Machinists and Aerospace Workers, ALF-CIO,
Lodge No. 2504 v. Intercontinental Manufacturing Company,
Inc., 812 F.2d 219, 222 (5th Cir.1987) Once this burden has
been established, the burden shifts to the nonmoving
party to demonstrate a genuine issue of material fact.
Matsushita Electric Industrial Company v. Zenith Radio
App. 36
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 signifi-
cantly 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 with “significant
probative evidence demonstrating the existence of a tri-
able 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
mirror 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 (Sth 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 affi-
davits, depositions, 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 in controverti-
bly 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 wit-
nesses subject to cross-examination would not
aid the determination if there are neither issues
of credibility 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 (Sth
Cir.1978).
App. 37
The court is satisfied that James Company fulfilled its
intitial 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 gov-
erning substantive law the corporate form should not be
disregarded. Joslyn’s rebutting facts and arguments, even
considered in their totality, simply do not constitute signifi-
cant probative evidence demonstrating a triable issue of fact.
This is especially true in this nonjury case where substantial
discovery has been conducted. This court was particularly
liberal in affording the parties ample opportunity to brief the
legal issues and provide supporting documentation. Joslyn
has not made the court aware of any uncompleted discovery
which would be relevant toward the issue of derivative
liability. Stated differently, 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-f 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. Id.
Based on the foregoing, the court concludes that
summary 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 the analysis uti-
lized by the cases cited in footnote 4, supra, it is noteworthy
(Continued on following page)
iii
App. 38
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. 1st
Cir.1985), writ denied, 470 So.2d 121 (La.1985); Kingsman
Enterprises, Inc. v. Bakersfield Electric Company, Inc., 339
So.2d 1280, 1282 (La.App. 1st Cir. 1976); Menard v. Associ-
ated Royal Crown Bottling Company, 249 So.2d 363, 364-65
(La.App. 4th Cir.1971). Accordingly, summary judgment
must be GRANTED in favor of T.L. James & Company
with respect to claims against it under LEQA.
(Continued from previous page)
that this court would have likely reached the same result under
applicable corporate law at least in Conservation Chemical, Mot-
tolo and Shore Realty. These cases involved factual situations
where the personal participation in the illegal disposal of haz-
ardous waste by the corporate officers was significant. As one
commentator has noted, these “courts have avoided the com-
mon law rule of limited liability by either explicitly or implic-
itly applying a generally recognized exception; a corporate
officer is liable for the wrongful acts of a corporation 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 hazardous
waste, then, arguably, liability would attach. See, generally,
Shingleton v. Armor Velvet Corp., 621 F.2d 180 (Sth Cir.1980);
L.C.L. Theatres, Inc. v. Columbia Pictures Industries, Inc., 619 F.2d
455 (5th Cir.1980); Tillman v. Wheaton-Haven recreation Associa-
tions, Inc., 517 F.2d 1141 (5th Cir.1975).
|
App. 39
An order consistent with the terms of this memoran-
dum ruling shall issue herewith.
App. 40
§ 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 défenses 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, agree-
ment, or otherwise arranged for disposal or
treatment, or arranged with a transporter for
transport for disposal or treatment, of hazard-
ous substances owned or possessed by such per-
son, by any other party or entity, at any facility
or incineration vessel owned or operated by
another party or entity and containing such haz-
ardous substances, and
(4) any person who accepts or accepted
any hazardous substances for transport to dis-
posal or treatment facilities, incineration vessels
or site selected by such person, from which
there is a release, or a threatened release which
causes the incurrence of response costs, of a
hazardous substance, shall be liable for -
(A) all costs of removal or vemedial
action incurred by the United States Gov-
ernment or a State or an Indian tribe not
inconsistent with the national contingency
plan;
App. 41
(B) any other necessary costs of
response incurred by any other person con-
sistent with the national contingency plan;
(C) damages for injury to, destruction
of, or loss of natural resources, including
the reasonable 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
expenditure concerned. The rate of interest on the out-
standing 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 established 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 com-
mences.
42 § 9601
(20)(A) The term “owner or operator” means (i) in
the case of a vessel, any person owning, operating, or
chartering by demise, such vessel, (ii) in the case of an
onshore facility or an offshore facility, any person owning
or operating such facility, and (iii) in the case of any
facility, title or control of which was conveyed due to
App. 42
bankruptcy, foreclosure, tax delinquency, abandonment,
or similar means to a unit of State or local government,
any person who owned, operated or otherwise controlled
activities at such facility immediately beforehand. Such
term does not include a person, who, without participat-
ing in the management of a vessel or facility, holds indi-
cia of ownership primarily to protect his security interest
in the vessel or facility.
(B) In the case of a hazardous substance which has
been accepted for transportation by a common or contract
carrier and except as provided in section 9607(a)(3) or (4)
of this title, (i) the term “owner or operator” shall mean
such common carrier or other bona fide for hire carrier
acting as an independent contractor during such trans-
portation, (ii) the shipper of such hazardous substance
Shall not be considered to have caused or contributed to
any release during such transportation which resulted
solely from circumstances or conditions beyond his con-
trol.
(C) In the case of a hazardous substance which has
been delivered by a common or contract carrier to a
disposal or treatment facility and except as provided in
section 9607(a)(3) or (4) of this title (i) the term “owner or
operator” shall not include such common or contract
carrier, and (ii) such common or contract carrier shall not
be considered to have caused or contributed to any
release at such disposal or treatment facility resulting
from circumstances or conditions beyond its control.
(D) The term “owner or operator” does not include
a unit of State or local government which acquired own-
ership or control involuntarily through bankruptcy, tax
App. 43
delinquency, abandonment, or other circumstances in
which the government involuntarily acquires title by vir-
tue of its function as sovereign.
The exclusion provided under this paragraph shall not
apply to any State or local government which has caused
or contributed to the release or threatened release of a
hazardous substance from the facility, and such a State or
local government shall be subject to the provisions of this
chapter in the same manner and to the same extent, both
procedurally and substantively, as any nongovernmental
entity, including liability under 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.