Recent Developments

Charlie Denton
Matt Eugster
Varnum, Riddering Schmidt & Howlett LLP
Grand Rapids, Michigan

Indiana Department of Environmental Management v. RLG, Inc.,
755 N.E.2d 556
(Indiana Sup. Ct., Sept. 24, 2001)

The Indiana Department of Environmental Management (IDEM) filed a Complaint seeking to impose personal liability on sole officer and shareholder of landfill's corporate owner for civil penalties imposed for landfill's violations of the Indiana Environmental Management Act (IEMA). The Indiana Supreme Court held that: (1) officer and shareholder was the responsible corporate officer; (2) uncontradicted evidence of active involvement of officer and shareholder in violations of environmental management laws, including his direct supervision of at least some of the landfill's daily unlawful waste disposal activities, was sufficient to impose personal liability; and (3) officer's liability did not depend on piercing the corporate veil, where that liability was based on his individual participation in violations, their character as violations of laws affecting public health, and specific statutory liability.

Albany Bank & Trust Corp. v. Exxon Mobil Corp.
2001 WL 1491522
(N.D. Ill., Nov. 23, 2001)

Plaintiff's Complaint, pursuant to the citizen suit provision of the Federal Resource Conservation and Recovery Act (RCRA), asserted that ExxonMobil violated U.S. EPA regulations by failing to investigate and remediate contamination on plaintiff's property. Plaintiff relies on RCRA regulations regarding duties of owners and operators of underground storage tanks (USTs) to investigate, report, and remediate all free-product releases. Plaintiff refused to allow ExxonMobil access to its property, unless defendant first agreed to remediate any contamination and reimburse plaintiff for any expenses it incurred to remove the contamination.

The issues on which the ruling on the motion turns are whether under RCRA ExxonMobil had a duty to: (a) investigate potential petroleum releases on plaintiff's property, (b) remediate any damage caused by such releases, and (c) reimburse plaintiff for its investigation and cleanup costs. The U.S. District Court held that ExxonMobil did not violate its duties under RCRA and that any cause of action plaintiff may have against ExxonMobil for remediation is premature until defendant has been given an opportunity to investigate any possible contamination on plaintiff?s property.

Bob's Beverage, Inc. v. Acme, Inc.
264 F3d 692
(6th Circuit (Ohio), Sept. 6, 2001)

Former warehouse owner brought cost-recovery action against his predecessors, alleging violations of the Federal Comprehensive Environmental Response, Compensation and Liability Act (CERCLA), after purchaser discovered the water supply was contaminated and former owner entered into Consent Order with Ohio Environmental Protection Agency (OEPA) to provide alternate water supply and complete remedial investigation. The Sixth Circuit Court of Appeals held that predecessors were not liable for response costs because: (1) they did not cause a release affecting plaintiff?s response costs; and (2) predecessors who replaced septic system, or who owned or operated site during passive migration of contaminants, did not cause "disposal" of hazardous waste for purposes of CERCLA §107(a)(2) liability.

Russell v. Lechnar
2001 WL 1011863
(Mich. App., Sept. 4, 2001)

Plaintiffs' Complaint was filed for recovery of response costs incurred pursuant to the Michigan Environmental Remediation and Leaking Underground Storage Tanks statutes. On Aug. 24, 1990, plaintiffs purchased the former gasoline station property from defendant's deceased husband by land contract. On Feb. 8, 1994, plaintiffs removed the underground storage tanks on the property because they had decided to stop selling gasoline. When these tanks were removed, it was discovered that the soil was contaminated due to releases from the tanks. Plaintiffs filed suit against defendant widow and the prior owners and operators of the gasoline station on the property for reimbursement of response activity costs.

Although defendant and her husband retained title of the property after they sold it in 1990, they no longer participated in the management of the property or had the authority to determine how the property was used; they merely received plaintiffs' payments on the land contract and retained title as a security interest in the property. Furthermore, defendant-wife's dower rights in the property did not make her an owner. Therefore, defendant was not an owner of the site after the property was sold in 1990, and the Michigan Court of Appeals reversed the trial court's money judgment for plaintiffs.

Bestfoods F/K/A CPC International v. AeroJet-General Corp., et als.
173 F. Supp. 2d 729, 53 ERC 1810
(W.D. Mich. 2001)

The U.S. District Court, on remand of United States v. Bestfoods, 524 U.S. 51, 46 ERC 1673 (1998), ruled that Bestfoods is not responsible for the site clean-up costs pursuant to the Federal Comprehensive Environmental Response, Compensation & Liability Act (CERCLA), because Michigan and the U.S. Environmental Protection Agency failed to prove that the company - and not its subsidiary, Ott Chemical Company - actually operated the plant.

Ott Chemical Company owned and operated the Site from 1957 until 1965, when Bestfoods (then known as CPC International) purchased Ott, which continued to run the chemical plant as a wholly-owned subsidiary. The lengthy decision provides extensive details of corporate ownership, board activity and key personnel involvement from 1957 to 1972. In 1972, the site was sold to Story Chemical Company, which operated the plant until it filed for bankruptcy in 1977. A subsequent purchaser, Cordova Chemical/AeroJet General, had entered into a prospective purchaser agreement with the State in 1977; Cordova/AeroJet settled with U.S. EPA and Michigan after the U.S. Supreme Court decision in Bestfoods.

The Governments failed, according to the U.S. District Court, to present sufficient evidence that any CPC officer or dual officer/director may have engaged in activities sufficiently "eccentric" as to impose CERCLA operator liability on the parent corporation. The Court held there was insufficient evidence from which to conclude that CPC had the necessary control to be considered to have "operated" the subsidiary's facility under the standard set forth in Bestfoods. Bestfoods/CPC therefore was not directly or indirectly an "operator" of the facility under CERCLA. As part of the ruling, the District Court also held "the governments have failed to prove a basis under Michigan law for finding the parent corporation CPC [Bestfoods] a successor to Ott."