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United States v. Cordova Chem. Co. of Mich.

ELR Citation: 27 ELR 20949
Nos. 92-2288, -2326, 113 F.3d 572/(6th Cir., 05/13/1997) Aff'd in part, rev'd in part, & remanded

The court holds that a parent corporation may only be held liable as an operator under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) for its subsidiary's actions when the requirements necessary to pierce the corporate veil are met. The court applies Michigan law, which requires such a unity of interest and ownership that the separate personalities of the corporation and its owner cease to exist. And the circumstances must be such that adherence to the fiction of separate corporate existence would sanction a fraud or promote injustice. The court next holds that the state environmental agency that signed a limited nonliability agreement with a purchaser of the contaminated site should escape liability as an arranger because its actions were taken in response to CERCLA's environmental emergency provision. The court then holds that the parent corporation of the site's present owner should not be held liable, because the facts do not establish that the subsidiary was a mere instrumentality of the parent in the sense that the separate corporate personalities of the two ceased to exist. Although the parent took an active interest in its subsidiaries, there is no support for the conclusion that the subsidiary was not a viable corporate entity. The court also holds that CERCLA's third-party defense precludes a person from escaping liability by contracting for a third party to do that person's dirty work, but the defense may be available to defendants that had other contractual relationships with the parties responsible for contaminating the site. The court remands the case to the district court to revisit its treatment of the third-party defense.

[Related cases are published at 21 ELR 20802 and 20805.]

Counsel for Plaintiff
Anne L. Alonzo, Robert P. Reichel
Environment and Natural Resources Division
U.S. Department of Justice, Washington, DC 20530
(202) 514-2000

Counsel for Defendants
John V. Byl
Warner, Norcross & Judd
900 Old Kent Bldg.
111 Lyon St. NW, Grand Rapids MI 49503
(616) 752-2000