ELR Citation: ELR 20574
No(s). C91-2065 (N.D. Iowa Sep 19, 1994)

The court holds that a corporation's sole shareholder and its two parent corporation's which had authority to control the subsidiary's operations are each directly liable as an "arranger" under §107(a)(3) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for the subsidiary's hazardous waste disposal at a dump near Charles City, Iowa. The court first finds that although the lease between the subsidiary and another company for the dump's use states that the lessor maintained all control over the property, other evidence suggests that the subsidiary did exert some control over the dump. Thus, whether defendants exerted enough control over the property to make them liable as owners or operators is a material dispute precluding summary judgment on this issue.

The court holds that the shareholder is directly liable as an "arranger," because he had the authority as the subsidiary's sole stockholder, chairman, and president, to assert control over the subsidiary's waste disposal arrangements. The court holds that the "authority to control" test used in holding corporate officers liable as "operators" under CERCLA §107(a)(2) is appropriate to determine a corporate officer's liability as an "arranger" under §107(a)(3), because otherwise corporate officers could escape liability merely by shipping hazardous waste offsite. The court finds that the shareholder exercised actual control over the subsidiary because he was not a mere figurehead or passive stockholder, he regularly communicated with the subsidiary's other officers and directors, and he made significant decisions affecting the subsidiary and its operations.

The court holds that each parent corporation is directly liable as an arranger for the subsidiary's improper disposal of hazardous waste at the dump, because extensive evidence demonstrated that they exerted actual control over the subsidiary's affairs. The court finds it appropriate to use case law discussing parent corporation liability as an operator to determine liability as an arranger, because treating a corporation producing hazardous waste and disposing of it off corporate property differently than a corporation disposing of its hazardous waste on its owner property would open a wide hole in CERCLA law. The court further holds that CERCLA policy dictates a finding of liability when the parent has gone beyond an investment relationship with the subsidiary, and has exerted actual control over the subsidiary's activities.

Counsel for Plaintiff
Sean Carman, Michael McNulty
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Defendants
Kimberly J. Walker
Faegre & Benson
400 Capital Sq.
400 Locust St., Des Moines IA 50309
(515) 248 -9000