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Donahey v. Bogle

ELR Citation: 28 ELR 20247
Nos. 92-1128, -1151, 129 F.3d 838/(6th Cir., 11/17/1997) Aff'g district court

The court holds that the owner of all the stock of the former lessee of a contaminated site is not liable as an operator under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) §107(a)(2). The court first holds that the owners' of the contaminated site may not be awarded attorney fees. The court rejects the owners' argument that the fees generated by their attorneys in attempting to identify the insurers of the former lessee qualify under the investigative exception to the general rule prohibiting the recovery of attorney fees. The court finds that this exception is limited to steps taken to finger previously unidentified parties that might bear some legal responsibility under CERCLA for pollution of the site. In this case, the former lessee had already been identified. The lessee's insurers, although perhaps contractually liable for some of the costs related to the cleanup, are not potentially responsible parties under CERCLA §107(a) and, thus, any attorney fees related to their identification fall outside the exception and are not recoverable.

Next, the court holds the owner of all the lessee's stock is not liable as an operator under CERCLA §107(a)(2). Michigan courts recognize that stockholders, like parent corporations, are shielded from liability unless the requirements necessary to pierce the corporate veil are satisfied. Given the similar treatment accorded parent corporations and stockholders with respect to vicarious liability, it is clear that the standard articulated in case precedent, holding that parent corporations should be held liable under CERCLA as an operator only where the requirements necessary to pierce the corporate veil are satisfied, should be extended to stockholders of a corporation. Therefore, a stockholder is not liable as an operator under CERCLA §107(a)(2) unless circumstances justify piercing the corporate veil. And because there are no facts that justify such veil piercing, the stockholder is not liable as an operator for the cleanup of the contaminated property.

A dissenting judge would hold that a person who owns all the shares in a corporation and plays a management role should be considered an operator under CERCLA §107(a)(2).

[A prior decision in this litigation is published at 23 ELR 20527.]

Counsel for Plaintiffs
H.G. Sparrow III
Dickinson, Wright, Moon, Van Dusen & Freeman
500 Woodward Ave., Ste. 4000, Detroit MI 48226
(313) 223-3500

Counsel for Defendants
Henry N. Carnaby
Bodman, Longley & Dahling
755 W. Big Beaver Rd., Troy MI 48084
(248) 362-2110

Before Martin, Merritt, Kennedy, Milburn, Nelson, Ryan, Boggs, Siler, Batchelder, Daughtrey, and Moore, JJ.