ELR Citation: ELR 20976
No(s). 93-1227 (7th Cir. May 20, 1994)

The court reverses a district court's dismissal of a complaint alleging that two corporate officers are liable for response costs under §107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) as owners or operators of a scrap metal facility contaminated by polychlorinated biphenyls (PCBs). The PCBs allegedly spilled from a used electrical transformer. The scrap metal dealer brought suit under CERCLA against the seller of the transformer, seeking to recover response costs the dealer incurred with regard to the PCB contamination. The seller counterclaimed, asserting claims for response costs against the dealer as the site owner or operator, and filed a third-party complaint against the dealer's president and vice president, alleging they are liable as facility owners or operators within the meaning of CERCLA §§101(20)(A) and 107(a)(1). The district court dismissed the third-party complaint for failure to state a claim upon which relief can be granted, because the officers did not personally own the facility and the complaint failed to allege facts under Illinois law sufficient to "pierce the corporate veil."

The court holds that the district court erred in holding that Illinois law governing corporate derivative liability shields corporate officers from CERCLA liability. Although corporate officers and directors are normally shielded from responsibility for corporate violations, they may be held liable as operators within the meaning of CERCLA §§101(20)(A) and 107(a). CERCLA's goals, language, and legislative history indicate that direct, personal liability under the Act is distinct from derivative liability that results from "piercing the corporate veil." The court holds that the third-party complaint does, at least, state a claim for CERCLA operator liability, because it adequately alleges the kind of direct responsibility CERCLA requires for operator liability. The complaint alleges that the officers exercised management control over the dealer's operations and that the officers knowingly exerted direct and personal control over handling of the PCBs. The court notes that pleadings seeking CERCLA relief against corporate officers, directors, or shareholders must comply with appropriate standards of pleading. A complaint does not automatically state a claim for CERCLA operator liability merely by being directed against persons holding management or similar positions. Moreover, although limited liability doctrines do not preclude CERCLA liability, these corporate law principles may furnish a potential defense. To survive a motion to dismiss, a plaintiff must allege that corporate officials directly and personally engaged in conduct that led to the specific environmental damage at issue, and must allege the officers' active participation in, or exercise of specific control of, the activities in question.

Counsel for Plaintiff
Jane Lazaroff
Coburn & Croft
One Mercantile Ctr., St. Louis MO 63101
(314) 621-8575

Counsel for Defendant
Thomas J. Wilcox
Spencer, Fane, Britt & Browne
1400 Commerce Bank Bldg., 1000 Walnut St., Kansas City MO 64106
(816) 292-8175

Before BAUER, CUDAHY, and ROVNER, Circuit Judges.