SW Legal Educational Publishing

Superfund Liability for Parent Firm Based on Degree of Control of Subsidiary
Description Derivative liability for parent firm under CERCLA occurs when the corporate veil may be pierced, such as when the parent actively controls the operations of the subsidiary that caused the pollution.
Topic Environmental Law
Key Words CERCLA, Derivative Liability, Parent Corporation
C A S E   S U M M A R Y
Facts The U.S. sued CPC, the parent company of a defunct subsidiary, Ott, for the costs of cleaning up industrial waste generated by Ott. The issue appealed to the Supreme Court had to do with when CPC could be held liable.
Decision When, but only when, the corporate veil may be pierced, a parent corporation may be charged with derivative CERCLA liability for its subsidiary's actions. Otherwise, the parent is not liable for the acts of its subsidiaries. A corporate parent that actively participated in, and exercised control over, the operations of the subsidiary's facility may be liable as an operator of the facility. Liability is not based simply on ownership of the subsidiary, but the parent may become a liable "operator" under CERCLA due to joint officers or directors controlling the affairs of the facility on behalf of the parent.
Citation U.S. v. BestFoods, 118 S.Ct. 1876 (1998)

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