ELR Citation: ELR 20457
No(s). s. G89-10503 CA, -961 CA (W.D. Mich. Aug 27, 1991)

The court holds that the corporate owner (Cordova/Michigan) of a Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) national priorities list site, the corporation's direct (Cordova/California) and indirect parent (Aerojet) corporations, and the parent corporation (CPC) of the previous corporate owner of the site are liable under CERCLA §107 for U.S. response costs incurred at the site. CPC's subsidiary manufactured chemicals at the site, dumping wastewater and other chemical waste into onsite unlined lagoons. Drums containing hazardous waste were buried at the site and hundreds of gallons of chemicals were spilled from train cars. Additionally, waste overflowed from onsite basins and was dumped into local woods. Chemicals entering the ground from disposal in the lagoons or through spills seeped into the ground and migrated from the site into two waterways. CPC sold its subsidiary to a company that later went bankrupt. The Michigan Department of Natural Resources (MDNR) initiated cleanup efforts at the site and negotiated for the purchase of the site by Cordova/California, which transferred the site to Cordova/Michigan.

The court first holds that CPC is directly liable under CERCLA §107(a)(2) as an operator of the site, because it actively participated in and exerted significant control over the business and decisionmaking of the subsidiary that owned the site. CPC's history of involvement in the subsidiary's board of directors, management, the business of another subsidiary involved in the operations at the site, and specific policy matters including hazardous waste disposal demonstrate the high level of participation required for direct liability under §107(a)(2). The court next holds that the MDNR is not liable as an arranger under CERCLA §107(a)(3), because no arrangement was made between the MDNR and Cordova/California with respect to the groundwater contamination. Further, a nexus of control or possession is lacking, because the MDNR's involvement in cleanup activities at the site was only regulatory. The court notes that even if a prima facie §107(a)(3) case against the MDNR had been made, the MDNR would not be liable, because its actions at the site were taken in response to an environmental emergency and thus qualified for the exemption in §107(d)(2). Also, the state's response was devoid of the misconduct or gross negligence that would strip it of immunity under §107(d)(2). The court holds that the MDNR is not liable as an operator under §107(a)(2), because the MDNR's actions were regulatory and the agency did not assume possession or control over the site or its problems. The MDNR is also immunized by §107(d)(2).

The court next holds that Cordova/Michigan is directly liable under CERCLA §107(a)(1), because it has held legal title to the site since 1978. The court holds that Aerojet is liable under §107(a)(1), because piercing the corporate veil is appropriate. Aerojet totally dominated Cordova/Michigan, creating a complete identity of interests between the parent and its wholly owned subsidiary. Further, permitting Aerojet to escape CERCLA liability as the present owner and operator of the site would create an injustice to the parties entitled to recover their cleanup costs from the present owner and operator of a contaminated site. The court holds that Cordova/California is liable as an operator under §107(a)(2), because it owned the site from October 1977 to November 1978, during which time hazardous waste disposal occurred. The court holds that Aerojet is directly liable as an operator under §107(a)(2), because it operated the site through active participation and pervasive control over the businesses of both Cordova/California and Cordova/Michigan.

The court holds that Aerojet and Cordova/California are not liable under §107(a)(3) for arranging for the disposal of hazardous waste at the site. No agreement existed between the MDNR and Aerojet or Cordova/California with respect to a remedy for the groundwater contamination that existed at the site. Finally, the court holds that the innocent landowner defense in CERCLA §107(b)(3) is inapplicable to the liability of Aerojet, Cordova/California, and Cordova/Michigan. By acquiring the site from the bankruptcy trustee of the site's previous owner, Cordova/California had an indirect contractual relationship with a party responsible for contaminating the site. Aerojet and Cordova/California clearly knew about contamination at the site, and Aerojet and its subsidiaries failed to prove that the contamination was caused solely by others and that they exercised due care at the site.

[Other decisions in this litigation are published at 20 ELR 20712, and 22 ELR 20022 and 20029.]

Counsel are listed at 22 ELR 20022.

Counsel for Plaintiff
Patrick J. Conlon
Lowenstein, Sandler, Kohl, Fisher & Boylan
65 Livingston Ave., Roseland NJ 07068
(201) 992-8700

J. Michael Smith, Gordon J. Quist
Miller, Johnson, Shell & Cummiskey
800 Calder Plaza Bldg., Grand Rapids MI 49503
(616) 459-8311

Counsel for Defendants
John D. Tully
Warner, Norcross & Judd
111 Lyon St. NW, Ste. 900, Grand Rapids MI 49503
(616) 459-6121