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AT & T Global Info. Solutions Co. v. Union Tank Car Co.

Citation: 29 ELR 20576
No. C2-94-876, 29 F. Supp. 857/48 ERC 1038/(S.D. Ohio, 11/02/1998)

The court holds that a grandparent corporation is derivatively liable under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for its subsidiary's actions in arranging for the disposal of toxic waste at a solvent reclamation site in Granville, Ohio. Several potentially responsible parties (PRPs) entered into a consent order with the U.S. Environmental Protection Agency, which required the PRPs to clean up the site. The PRPs that entered the consent order sought to recover costs from the PRPs that did not join the consent order. The court first holds that the subsidiary arranged for the disposal of various toxins at the site and that the subsidiary was an arranger pursuant to CERCLA § 107(a)(3). The evidence shows that the subsidiary created the waste and arranged for the disposal of the waste at the site. Furthermore, the waste that the subsidiary deposited at the site was of the same chemical makeup of the waste that the CERCLA cleanup action is now addressing. The court next holds that if a subsidiary who arranges for the disposal of its waste is so pervasively controlled by its parent to warrant veil piercing, the parent may be held derivatively liable for its subsidiary's CERCLA violations. The court further holds that under the present circumstances, the corporate veil of a grandparent corporation should be pierced in the same manner as that of the parent. In this instance, the subsidiary's immediate parent corporation was merely a legal fiction that had no more than a paper existence, and, thus, it is unnecessary to go through the steps of piercing the veil of the subsidiary's immediate parent. Moreover, it would be violative of congressional intent to have to pierce the veil of each and every fictional corporation between a subsidiary and its ultimate controlling parent.

The court then holds that Ohio law will be applied in analyzing the PRPs' attempt to pierce the corporate veil of the grandparent corporation and attach CERCLA liability. Although the grandparent corporation was incorporated in Delaware, the subsidiary was incorporated in Ohio for more than 20 years and had employed Ohio citizens. Thus, Ohio and its citizens have a substantial interest in having their laws applied. Additionally, although the locus of an action in and of itself is certainly not dispositive, it is another factor courts consider when determining which state's choice of law to apply. The court next holds that there is sufficient evidence to conclude that the grandparent corporation's control over the subsidiary was so complete that the subsidiary had no separate mind, will, or existence of its own. The court also holds that the control over the subsidiary by the grandparent was exercised in such a manner that inequitable or unfair consequences would result. The evidence makes clear that the grandparent corporation knew of the subsidiary's disposal requirements and potential liabilities before liquidating the subsidiary's assets. Last, the court holds that there is sufficient evidence to determine that the costs of the subsidiary's actions should rightly be born by the grandparent who controlled it. But for its dissolution, the subsidiary would be liable to the PRP that entered the consent order through a CERCLA contribution action. It would be unjust to allow the grandparent corporation to escape liability, especially after receiving notice of potential environmental liability, simply because it dissolved its patently culpable subsidiary.

Counsel for Plaintiffs
John T. Sunderland
Thompson, Hine & Flory
10 W. Broad St., Columbus OH 43215
(614) 469-3200

Counsel for Defendants
Craig H. Zimmerman
McDermott, Will & Emery
227 W. Monroe St., Chicago IL 60606
(312) 372-2000