United States v. Carolawn Co.

No. 83-2162-0 (D.S.C. June 15, 1984)

The court rules that § 107(a) of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) imposes personal liability on corporate officers who are responsible for the operations of a hazardous waste disposal business. The court rejects the argument that defendants, two individuals who allegedly were officers of a corporation owning a hazardous waste disposal site and who for a time allegedly owned the site as individuals, are entitled to judgment on the pleadings. There is a material factual dispute with regard to the claim against one defendant, and CERCLA unquestionably imposes liability on disposal site owners. The court rules that defendants also might be found liable as operators of the site. Corporate officials responsible for day-to-day management of hazardous waste disposal activities may be held personally liable under CERCLA. In addition, defendants failed to demonstrate that plaintiff cannot pierce the corporate veil to reach them personally.

Counsel are listed at 14 ELR 20696.

[14 ELR 20699]

Anderson, J.:

Order

Introduction

This action was brought by plaintiff, United States of America, on behalf of the Administrator of the United States Environmental Protection Agency (hereafter "EPA"). Plaintiff seeks recovery of all costs associated with the United States' cleanup of unsafe environmental conditions at a hazardous waste site located near Fort Lown, South Carolina (hereafter the "Fort Lawn site" or the "site"), pursuant to Sections 104 and 107 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (hereafter "CERCLA"), 42 U.S.C. §§ 9604 and 9607. Two pro se defendants, Henry M. Tischler (hereafter "Tischler") and James Q. A. McClure (hereafter "McClure"), have filed individual motions to dismiss the complaint for failure to state a claim against them. Plaintiff maintains that the individuals are subject to liability under CERCLA as owners and operators of the Fort Lawn site.

The court is of the opinion that under Rule 12(c) of the Federal Rules of Civil Procedure both of these motions to dismiss should be treated as Motions for Judgment on the Pleadings.¹ After reviewing the pleadings and listening to oral argument held on May 29, 1984, and, under the appropriate standard of review, the court finds that it must deny the motions of both of these individual defendants.

Standard of Review

The standard for ruling on a motion for judgment on the pleadings is well-settled. The motion will not be granted unless the moving party clearly establishes that there are no material issues of fact in dispute and that the party is entitled to judgment as a matter of law. Greenberg v. General Mills Fun Group, Inc., __ F.2d 254 (5th Cir. 1973); Roberts v. Northern Trust Co., 550 F. Supp. 729 (N.D. Ill. 1982); Lambert v. Inryco, 569 F. Supp. 908 (D. Okla. 1980); King v. Gemini Food Services, Inc., 438 F. Supp. 964 (E.D. Va. 1976), aff'd. 562 F.2d 297 (4th Cir. 1977), cert. den. 434 U.S. 1065 (1978). Under this standard, all well-pleaded allegations of the complaint are taken as true and admitted. Roberts v. Northern Trust Co., 550 F. Supp. 729 (N.D. Ill. 1982); Felder v. Great American Insurance Co., 260 F. Supp. 575 (D.S.C. 1966).

The Facts

The following facts, gleaned from the allegations of the complaint, are, for purposes of these motions, taken as well-pleaded, admitted, and relevant. Southeastern Pollution Control Company (hereafter "SEPCO") is a defunct South Carolina corporation that filed for bankruptcy in February of 1973. Until 1976, the company owned an eighty-two acre parcel of land near Fort Lawn, South Carolina, part of which is often referred to as the "Fort Lawn" site, which was used by SEPCO as a hazardous waste treatment and disposal facility. SEPCO also owned another site near Clover, South Carolina, known as the "Clover site," at which numberous drums of hazardous wastes were stored.

In November of 1974, defendant Columbia Organic Chemical Company, Inc. (hereafter "COCC") entered into an agreement with the trustee-in-bankruptcy for SEPCO and the bank holding a mortgage on the Clover property, pursuant to which COCC cleaned up the Clover site by removing the hazardous waste materials stored there.Some of these wastes were taken by COCC to the Fort Lawn site.

On June 2, 1976, the trustee-in-bankruptcy sold the SEPCO Fort Lawn property to COCC. On the same day, COCC transferred title to the property to Tischler, McClure, and Max G. Gergel (hereafter "Gergel"), all of whom were then officers or representatives of COCC. These three individuals incorporated a new company on June 21, 1976, known as South Carolina Recycling and Disposal, Inc. (hereafter "SCRDI"). The three individuals owned, operated, and served as officers of the new company. While the individuals owned the Fort Lawn property, hazardous substances continued to be disposed and released at the site. Tischler and McClure were personally involved in the operation of the site as a facility at which hazardous substances were stored and disposed of and from which hazardous substances were released. In December of 1977, Tischler, McClure, and Gergel sold the property to the defendant Carolawn Company, Inc.

[14 ELR 20700]

In response to the releases and threatened releases of hazardous substances at the site, the government, through its contractors, executed remedial and removal operations to clean up the danger at the site. The resulting costs to the government are now in excess of $304,000.00.

Defendants' Liability Under CERCLA

In his answer, Tischler does not take issue with the facts alleged in the complaint. Consequently, the only issue with respect to his motion is whether he is entitled to judgment as a matter of law. McClure's answer, however, appears to dispute the alleged fact that the Fort Lawn site was used as a facility for the storage or disposal of hazardous substances during the time that he, SCRDI, or COCC operated or owned the site.² That being so, it appears to the Court that a material fact is in dispute between McClure and plaintiff. This is, in and of itself, sufficient to defeat McClure's motion for judgment on the pleadings.

Apart from the issue of fact with respect to McClure's liability, the individual defendants have failed to establish that they are entitled to judgment as a matter of law. The explicit language of CERCLA Section 107(a) makes it clear that owners of a site which is the subject of a CERCLA response action are liable to the government for response expenses.United States v. South Carolina Recycling and Disposal, Inc., et al., Civil Action No. 80-1274-6, Order [14 ELR 20272] (D.S.C. February 23, 1984), United States v. North Eastern Pharmaceutical & Chemical Co., Inc., No. 80-5066-CV-SW, Memorandum Opinion [14 ELR 20212] (W.D. Mo. January 31, 1984); United States v. Wade, et al., Civil Action No. 79-1426, Memorandum Opinion [14 ELR 20096] (E.D. Pa. Dec. 20, 1983). Unless, therefore, these defendants can raise one of the narrow affirmative defenses available to them under CERCLA Section 107(b), they may be liable in this case for the government's costs of cleanup.³

Apart from being subject to liability as owners of the Fort Lawn facility, McClure and Tischler may be liable as operators of the site. Plaintiff offers two theories for holding defendants liable as site operators; first, that corporate officials who participate in hazardous waste disposal activities are subject to individual liability under CERCLA, and second, that the circumstances of this case warrant piercing the corporate veil of SERDI and COCC to reach the individual principals of the companies.

This court agrees that CERCLA contemplates personal liability of corporate officials, such as McClure and Tischler, who are responsible for the day-to-day operations of a hazardous waste disposal business. In the first instance, the Act broadly defines "persons" subject to liability to include individuals. Additionally, language from the definition of "owner or operator" indicates that individuals are included. Subsection (iii) of Section 101(20) provides that "owner or operator" is "any person who owned, operated, or otherwise controlled activities at [a] facility . . . ." The definition then excludes "a person, who, without participating in the management of [a] facility, holds indicia of ownership primarily to protect his security interest in the . . . the facility." 42 U.S.C. § 9601(20)(A) (emphasis added). The use of the relative pronoun "who" instead of "which," of the possessive pronoun "his" rather than "its", and of the language "participating in the management," all connote individual, personal involvement.

The recent decision in United States v. North Eastern Pharmaceutical & Chemical Co., Inc. ("NEPACCO"), No. 80-5066-CV-SW, Memorandum Opinion [14 ELR 20212] (W.D. Mo. January 31, 1984) is persuasive in this regard. There, the court held that "a person who owns interest in a facility and is actively participating in its management . . .," in that case a vice president and supervisor of a generating facility, was liable as an "owner and operator" of the facility under CERCLA Section 107. Id. at 36. In United States v. Wade, No. 79-1426, Memorandum Opinion [14 ELR 20096] (E.D. Pa. Dec. 20, 1983) the court similarly concluded that under Section 107(a) of CERCLA "[a] corporate officer may be held liable if he personally participates in the wrongful, injury-producing act." Id. at 28. Thus, to the extent that an individual has control or authority over the activities of a facility from which hazardous substances are released or perticipates in the management of such a facility, he may be held liable for reponse costs incurred at the facility notwithstanding the corporate character of the business. Notably, this constructing of CERCLA is entirely consistent with the Fourth Circuit's construction of other federal statutes. See Tillman v. Wheaton-Haven Recreation Association, Inc., 517 F.2d 1141 (4th Cir. 1975). Accord, Escude Cruz v. Ortho Pharmaceutical Corp., 619 F.2d 902 (1st Cir. 1980); L.C.L. Theaters, Inc. v. Columbia Pictures Industries, Inc., 619 F.2d 455 (5th Cir. 1980).

Furthermore, it would appear that neither defendant has been able to substantiate that the government cannot pierce the corporate veil of SCRDI or COCC to reach them personally. Under the well-established principles set forth in the leading Fourth Circuit decision, Dewitt Truck Brothers v. Fleming Fruit Co., 540 F.2d 681 (4th Cir. 1976), the corporate form does not necessarily preclude a court from holding corporate officers and shareholders involved in tortious conduct or mischief personally liable. DeWitt set forth numerous factors that must be considered before a determination whether to pierce the corporate veil can be made. These matters are well outside the pleadings and are not properly considered here. Therefore, this court cannot conclude that plaintiff cannot prevail on this issue as a matter of law, and defendants' motions must fail.⁴

Conclusion

Because neither Tischler nor McClure can establishthat he is entitled to judgment as a matter of law, their respective motions must fail. Further, because McClure has raised in his answer an issue of material fact, his motion is denied on this ground as well.

WHEREFORE, in sum, the court holds the motions for judgment on the pleadings of both defendants are, hereby, in all respects,

DENIED.

1. Since Tischler and McClure filed their answers on September 21, and 22, 1983, respectively, and their motions on March 21 and May 11, 1984, respectively, the court finds that these motions are properly characterized as motions for judgment on the pleadings. Aldabe v. Aldabe, 616 F.2d 1089 (9th Cir. 1980); Kenemer v. Arkansas Fuel Oil Co., 151 F.2d 567 (5th Cir. 1945). Although both defendants have each submitted affidavits with their respective motions, these do not set forth material, undisputed facts germane to these defendants' liabilities. Therefore, it would be inappropriate to treat the pleadings as motions for summary judgment. See Anfac Mortgage Corp. v. Arizona Mall of Tempe, Inc., 583 F.2d 426 (9th Cir. 1978); Weisman v. LeLandais, 532 F.2d 308 (2nd Cir. 1976); Duane v. Altenberg, 297 F.2d 515 (7th Cir. 1962).

2. Paragraph 12 of McClure's answer states:

12. General statement

Neither SCRDI nor COCC ever operated any business or performed any operations on the Fort Lawn site except for the removal and proper disposition of materials left there and at the Clover site by the bankrupt SEPCO. This work included digging up over 100 drums which we discovered SEPCO had buried at Fort Lawn. No waste was taken onto the Fort Lawn site by either SCRDI or COCC except for some drums from the Clover site, since we had been originally led by South Carolina Department of Health and Environmental Control to expect to bury material at Fort Lawn. This letter never materialized.

3. Affirmative defenses may not be considered on motion for judgment on the pleadings and therefore need no further discussion here. Brinach v. Reading Co., 9 F.R.D. 420 (E.D. Pa. 1949); City Bank Farmer Trust Co. v. Liggett Spring and Axle Co., 4 F.R.D. 254 (N.D. Pa. 1945).

4. The court notes that Tischler attempts to raise a defense of res judicata in paragraph 4 of his answer based on his dismissal from a state court action involving the same site but to which the United States was not a party. As noted at footnote 3, infra, affirmative defenses are not appropriately considered in motions for judgment on the pleadings. It should be noted, however, that this same res judicata defense was raised by defendant Columbia Organic Chemical Company ("COCC") and was rejected by this court in denying COCC's motion for summary judgment this same date. COCC Order at 4. n.1.