United States v. Bestfoods

PETITIONER:United States
RESPONDENT:Bestfoods
LOCATION:National Endowment for the Arts

DOCKET NO.: 97-454
DECIDED BY: Rehnquist Court (1986-2005)
LOWER COURT: United States Court of Appeals for the Sixth Circuit

CITATION: 524 US 51 (1998)
ARGUED: Mar 24, 1998
DECIDED: Jun 08, 1998

ADVOCATES:
Kenneth Steven Geller – Argued the cause for the respondents
Lois J. Schiffer – Argued the cause for the petitioner

Facts of the case

The site of a chemical manufacturing plant was polluted over many years. During much of the time, the companies running the plant were wholly owned subsidiaries of, first, CPC International Inc. (CPC), and later Aerojet- General Corp (Aerojet). By 1981, the federal Environmental Protection Agency had undertaken to have the site cleaned up. To recover some of the money spent, the U.S. filed an action under Section 107 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. Section 9607(a)(2). Section 107 allows the U.S. to seek reimbursement for cleanup costs from, among others, “any person who at the time of disposal of any hazardous substance owned or operated any facility.” The first phase of the trial concerned only liability, and focused on whether CPC and Aerojet had “owned or operated” the facility.

Question

May a parent corporation that actively participated in, and exercised control over, the operations of a subsidiary, without more, be held liable under CERCLA Section 107(a)(2) as an operator of a polluting facility owned or operated by the subsidiary?

William H. Rehnquist:

We’ll hear argument first this morning in Number 97-454, the United States v. Bestfoods, et al.–

Ms. Schiffer.

Lois J. Schiffer:

Mr. Chief Justice, and may it please the Court:

At issue in this case is under what circumstances is a parent corporation directly liable through its own acts as an operator of a facility under CERCLA?

This is a case of statutory construction.

Congress, to carry out its intent to have those responsible for causing pollution at a facility responsible to remediate it created a system that holds, among others,

“any person who owned or operated. “

a facility liable for cleanup of that facility.

It is a direct liability standard.

Owner or operator is a defined term in the statute.

A pertinent part of the definition, any person who operates the facility, is circular, and so according to the teachings of this Court must be given its common and ordinary meaning.

The dictionary definition of operate is in the context of an industrial facility any person who exercises managerial control over that industrial plant, and we think that this is the appropriate test to apply here.

Under CERCLA, the term any person is given a broad definition and includes any corporation, whether a parent or a subsidiary.

Thus–

Sandra Day O’Connor:

Well, Ms. Schiffer, surely you would agree that under the statute not every parent is liable under this statute for the operation of a facility by a subsidiary.

Lois J. Schiffer:

–We would absolutely agree with that.

Sandra Day O’Connor:

And there mere fact that there are interlocking directorships, or perhaps managers who serve both corporations, wouldn’t determine that, would it?

Lois J. Schiffer:

That is exactly correct, Justice O’Connor.

It would not determine it.

The fact that there are interlocking directorships may be an evidentiary factor in determining whether the parent corporation is operating the facility.

Sandra Day O’Connor:

Well, I’m not sure it should even do that, I mean, if our ordinary understanding of the corporate structure and reasonable investment-backed expectations is that we recognize the corporate separate entities, and we recognize that a parent can have a subsidiary and that a parent isn’t liable for what the subsidiary does in normal circumstances.

Lois J. Schiffer:

Justice O’Connor, what we’re talking about here, and which is consistent with the common law, is what the action of the parents are as a company toward the facility, not what the actions of the parent are toward the subsidiary, and while there may be useful evidence in how the parent acts toward the subsidiary, the real question is, how did the parent company directly affect or actively participate in the management of the facility.

David H. Souter:

I think that’s helpful, and I don’t think the district court did that.

It seemed to me that the district court focused on the relation of the parent to the subsidiary, and a corporate veil-piercing type of analysis, and certainly the Sixth Circuit did.

Lois J. Schiffer:

Well, let me start first with the district court, Justice Kennedy.

What the district court did is make very detailed and extensive factual findings that included information about the activities of the parent toward the subsidiary, but was in no way limited to that.

For example, there were specific factual findings made about Mr. Williams, who was a… an employee of the parent company, and the actions he had toward pollution-related activities at the facility that was operated by the subsidiary.

The… it’s easy to confuse here, because, in fact, for much of the time at issue the subsidiary companies operated only a single facility.

Ott II operated the facility at Muskegon, Michigan.

For 3 years it was its only activity.

Lois J. Schiffer:

For the remaining 4 years that Ott II was active here it owned one other facility in North Carolina, but all of the evidence the district court looked at went to the facility in Michigan.

Similarly, as to the–

Ruth Bader Ginsburg:

Ms. Schiffer, is that so?

I mean, he did discuss financial control and he discussed many things that gave me the impression the distinction between the parent controlling the subsidiary and the parent controlling the facility of the subsidiary is a distinction much easier said than applied in fact, because much of what the district judge said, it seemed to me, could be fit under the category, this parent is controlling the subsidiary.

Lois J. Schiffer:

–Your Honor, it may be instructive to look at some of the specific findings that the district court made, keeping in mind, again, that for much of the time, or for a substantial part of the time the subsidiary owned only this one facility, so that when we’re talking about… when the district court was talking about activities of the subsidiary it was really talking about activities at this particular facility.

But for example, at petitioner’s appendix 75a, where there are facts about the activities of Mr. Williams, it talked about Mr. Williams instructed Ott II officials to limit cooperation with State and Federal regulators regarding waste disposal, plainly implicitly at this facility, and to consult with CPC before responding to regulatory questionnaires or other inquiries.

There are also a list of the pertinent… some of the findings that the district–

Antonin Scalia:

He was an Ott board member though, wasn’t he?

Lois J. Schiffer:

–Mr. Williams was not an Ott board member, Your Honor.

Mr. Williams was simply an employee of CPC.

John Paul Stevens:

Okay.

I’m… I–

–May I ask if the case would be different if Mr. Williams, in addition to his responsibilities for the parent, had also been on the board of directors of the subsidiary and on the payroll of the subsidiary and an officer of the subsidiary?

Lois J. Schiffer:

We do not think the case… it would be a different set of facts, Your Honor, but we do not think the outcome would be particularly different, because we think what is probative and what the standard is is, did the parent company participate in management of the facility, and the activities of Mr. Williams were such that–

John Paul Stevens:

But you suggested at the outset that there’s a distinction between controlling the subsidiary and directly controlling the facility, and if everything that they did to control the facility was done by directing an officer to do what he thought was appropriate, then the officer went ahead and ran the facility, would that meet your test or not?

Lois J. Schiffer:

–It’s a very fact-specific test, Your Honor, but it is likely that it would meet it.

We can get some helpful guidance from the lender liability provisions of this statute, which were added in 1996 by Congress and which defined participation in management, and what they look at is the particular act… it is Congress giving content to the concept participation and management in the context of banks or lenders, but they provide helpful guidance for any corporation that is actively participating in management.

David H. Souter:

Were there any other individuals in Williams’ position who had no position, nominal or otherwise, either on the board or in the management of the subsidiary, but who were nonetheless directing the subsidiary’s own offices and employees?

Lois J. Schiffer:

I have two responses to that, Justice Souter.

The district court made specific findings about something called the CPC Development Company, which was a division of CPC, and while some of the people involved at the CPC Development Company were related to the Ott II facility, the Court indicates that not all of them were.

In addition–

David H. Souter:

But were the ones who were not so related independently and directingly… directly giving orders to the subsidiary?

Lois J. Schiffer:

–The district court’s findings go to the CPC Development Company as an entity, not… one I believe can’t discern from the facts–

David H. Souter:

So that’s not quite on the same plane with Williams.

Anyone else like Williams?

Lois J. Schiffer:

–There was no one else singled out particularly, but I would suggest to the court that the district court’s findings, which talk about CPC, not… in a number of instances, not CPC’s officers, not CPC’s managers, CPC itself, don’t… doesn’t… the Court doesn’t directly say that its finding that those officers and managers were acting when they were involved with the Ott facility as in their CPC capacity, but it certainly is the sensible reading and the implicit reading we–

Antonin Scalia:

Well–

–What does not that mean?

What does that mean, to be acting in your CPC capacity, when you are both an officer of CPC and an officer of the subsidiary of CPC?

Is there any difference between the two?

Antonin Scalia:

The interest of CPC and the interests of the subsidiary are identical.

Lois J. Schiffer:

–If the legal… the legal standard we’re espousing is that it is CPC that is actively managing the facility.

If the question is whether the district court’s findings that talk about CPC really mean that it is Ott that’s taking the actions, in fact the court specifically talks about CPC itself, and we think that, and particularly the facts that are listed at pages 11 and 12 of our opening brief, underscore that it is the parent company that is operating the facility within the meaning of operate.

David H. Souter:

No, but unless we get a situation like Williams, how do we avoid the problem that Justice Ginsburg said that she had in reading the findings?

How do we draw some metaphysical line between CPC as the operator and CPC simply getting the benefit of the influence which it undoubtedly has as a parent through the ownership of stock and through the frequently overlapping composition of the officers and directors?

How do we draw that line when we don’t have kind of an easy Williams example?

Lois J. Schiffer:

Your Honor, the legal standard is, was the parent company acting at the facility, and the district court findings which talk about CPC managing and controlling and operating at the facility don’t give the Court an easy line but they certainly give the Court a base, a basis, with these extensive findings of fact, for determining that it was the parent company that was undertaking the operation.

David H. Souter:

Well, if I may interrupt you, I don’t see that it gives me a basis.

It seems to me that what it gives me is a conclusion.

To say that CPC is doing it, that CPC is operating, when all I can tell beyond that conclusion is that their… that CPC owns the stock, that there are some directors who sit on each of the two boards, that there may be some officers or some individuals who are officers of each of the two corporations, that leaves me saying, what is peculiar about CPC’s operation which differentiates it from the position of any parent of any operating subsidiary, and I don’t know the answer to that question here.

Lois J. Schiffer:

We think that this is not the same as any… as the typical parent of the typical corporation, because CPC here was undertaking much more active involvement.

Under the findings of fact of the district court it was making managerial decisions about waste handling, it was making managerial decisions about a number of other operative aspects of the facility, and that when the district court findings talk about CPC, not CPC’s officers, not CPC’s directors, though it does that, too, but CPC specifically, it was indicating that the CPC officers, managers, and directors who were active at the Ott facility were there with their CPC hat on, not with the Ott–

David H. Souter:

Well, now do we know they have their CPC hat on by virtue of some unusual resolution of the CPC board that they were executing?

For example, do we have any resolutions from the CPC board getting down into the minutiae of operating the subsidiary to a degree that a parent normally would not?

Lois J. Schiffer:

–Your Honor, what we have is very detailed findings of the district court about the day-to-day involvement and the overall managerial involvement of CPC at the Ott II facility.

David H. Souter:

Well, do we have any of the sort that I just asked you about?

Lois J. Schiffer:

Not that were in the district court findings, Your Honor.

Ruth Bader Ginsburg:

Ms Schiffer–

–May I–

–may I ask you, in view of… this question has been brewing for some time, and there are diverse statutes where Congress does provide for reaching a parent… sometimes 80 percent test… has there been in all this time any proposal, any direct confrontation by the legislature of this question of parent liability for the subsidiary’s conduct?

Lois J. Schiffer:

Not that I’m aware of, Your Honor.

When Congress enacted CERCLA in 1980 it enacted a broad statute that defined any person in a broad way certainly to include a parent company if the parent company was actively managing the facility.

There has been over the past 5 years a lot of activity in Congress looking at Superfund reauthorization and to my knowledge this issue has not come up.

Antonin Scalia:

What is magic about the word manage?

I mean, if you say that there’s some special participation test when the word manage is used, why wouldn’t you use the same test if it were a statute that used the word use?

Why couldn’t you say just as easily that the parent uses the facility or uses some… or any verb?

I don’t know what there is distinctive about the verb manage, so that we’re going to have a special test for this statute.

I worry that whatever test we apply to this statute ought to be applied to any statute.

Lois J. Schiffer:

Justice Scalia… and this is… we think that each statute needs to be looked at in its own terms for what it does.

Here, Congress used the term operate and operator.

Lois J. Schiffer:

The dictionary definitions of those have, for industrial plants have a concept of managerial control.

Congress also was helpful in the lender context in using the words, participate in management, which are helpful, but the courts that have looked at this issue have used slightly different verbal formulations.

They come down to the same idea, which is–

Antonin Scalia:

I’m sorry, I used the wrong word.

It’s operate, which you say is… includes management, but what’s magic about the word operate?

Lois J. Schiffer:

–Operate is the term that Congress used in this statute, and defined to mean operate so that–

Antonin Scalia:

But we normally think that when a subsidiary is operating something the parent is not operating it, unless, you know, there’s veil-piercing.

Now, you say that because the word… the word operate is used here, that there’s some special… we’re not supposed to treat it like an ordinary corporate situation.

I don’t see what that verb… why that verb has that special meaning.

Lois J. Schiffer:

–We do not think this is a situation where what is the key test is the relationship between the parent and the subsidiary, which is what veilpiercing gets to, but rather what is the relationship of the parent company or any company to the facility, to the activities that are causing the pollution that then is leading to the cleanup, or to the activity of managing the whole facility, even without regard to the pollution, but which leads to the causing of the pollution.

What Your Honor is describing is the corporate veil standard which, when it’s pierced, is pierced for all purposes, which goes to the relationship between the parent and the subsidiary.

What we are looking at is the relationship of the parent company to the site, to the site where the pollution is being caused.

John Paul Stevens:

May I interrupt with a… but in doing that you look at specifically what Mr. Arnold Ott did and James Eiszner and some of these others, and you have to sort of say what hat were they wearing at the time they did it.

Does the record tell us who paid their salaries when they were doing these things?

Lois J. Schiffer:

It… there are not specific factual findings as to that, Your Honor.

John Paul Stevens:

Do you know if there’s evidence in the record on that point?

Lois J. Schiffer:

The district court findings talk about each of those people and… who served at the same time–

John Paul Stevens:

Right.

Lois J. Schiffer:

–as both on the parent and on the subsidiary.

John Paul Stevens:

But the district court doesn’t tell us who paid their salaries.

Lois J. Schiffer:

I don’t have a recollection.

John Paul Stevens:

Do you think that would be relevant?

Lois J. Schiffer:

I think it would be a factor, Your Honor, but even if the salaries were being paid by the subsidiary, if what the people were doing is acting in their capacity as… for the parent, and were making managerial decisions at the facility, then it would really be the parent who–

John Paul Stevens:

Well, supposing… and with regard to Mr. Williams’ case I guess is your strongest case, supposing the record showed that whenever he went down… went over to Muskegon or wherever he went to look at the facility and participate, he was especially put on the payroll of the subsidiary for that period of time, and paid by the subsidiary for the work he did, would that make a difference?

Lois J. Schiffer:

–It would certainly be a factor, Your Honor.

In fact, the facts here–

John Paul Stevens:

But we don’t know whether that happened.

Lois J. Schiffer:

–What we know as to Mr. Williams is that he always worked for… he was an employee of CPC, and there’s no indication in the record that he was in the employ of Ott II, the subsidiary.

William H. Rehnquist:

Ms. Schiffer, is it the Government’s view that if its view of the law is accepted this Court could simply order the district court judgment affirmed?

Lois J. Schiffer:

It is our view, Your Honor, that there were extensive factual findings in the district court that under rule 52(a) they were left undisturbed by–

William H. Rehnquist:

That really doesn’t answer my question at all.

I asked you, is it the view of the Government that if we accept your view of the law, that we could order that the district court’s judgment be affirmed?

Lois J. Schiffer:

–Yes, it is, because our view of the law is essentially what the district court applied to its fact-findings.

David H. Souter:

Is it… suppose… I don’t… I’m having trouble with the… you’ve said two separate things.

One is, just look at the relation of the parent to the dump, and the other thing was that the parent would have to take some action not normal to the parent’s subsidiary relation.

I’m trying to sort those out.

Suppose that Mr. and Mrs. Smith and their son, John, run a toxic waste dump, and they have a company called the Smith Family Limited Liability Corporation.

They do everything themselves.

Nobody else does a thing.

They operate it.

They’re not personally liable, are they?

Lois J. Schiffer:

Under the standard that we propose, Your Honor, if Mr. or Mrs. Smith… if Mrs. Smith made active managerial decisions–

David H. Souter:

Look, I said Mr. and Mrs. Smith and their son, John, do everything.

They have a shovel.

They put the dirt in.

They do everything themselves.

They are doing it through… they are paid… the checks are made out to the Smith Family Limited Liability Corporation.

Now, I would think that that is the classic situation of where a group of people form a corporation to limit their liability.

That’s why we have corporations.

Is there any suggestion in what you say that the Smith family is personally liable?

Nothing special’s going on.

It’s ordinary.

Lois J. Schiffer:

–Any facility can have more than one operator, Your Honor, and it is our view that if Mr. and Mrs. Smith themselves personally operated the facility, that is, actively participated in the management of the facility, that they would be liable.

Ruth Bader Ginsburg:

Isn’t the next case exactly that?

Wasn’t there already a case by this same… of a sole shareholder corporation?

Lois J. Schiffer:

There was, Your Honor.

Donahey v. Bogle was that case, and the sole shareholder also ran the place.

Stephen G. Breyer:

So your view is that if a group of people incorporate themselves and they personally operate the dump, they are personally liable, so in this statute alone… I’ve never seen another statute like that… there is no way for a group of operators to form a corporation and thereby exempt themselves from personal liability.

I mean, is… that’s the view of the Government?

Because I would have thought that if that’s the view you would have expected Congress to say something about that rather unusual… I think it would be unusual.

Lois J. Schiffer:

Congress did say two things, Your Honor.

One is that it defined any person in a broad fashion to include a corporation or to include individuals.

It was not looking at the corporate form, but rather at the reality of what was happening, and secondly it began the section 107 liability provision by saying, notwithstanding any other provision of law and subject only to three specified defenses in the statute.

Stephen G. Breyer:

Is there any other statute, of which you are aware, where it imposes liability is imposed on some entity… call it person, individual, whatever… and without saying it explicitly, the liability flows to individual shareholders, it flows to directors, it flows to the corporate form makes no difference, doesn’t limit liability?

Lois J. Schiffer:

Your Honor, the… in the… I’m not particularly aware of any other case, but decisions of this Court under other statutes have looked beyond corporate form to what is actually going on here, and here Congress was particularly concerned that those who were making decisions that caused the pollution would bear the economic responsibility for cleaning it up.

Sandra Day O’Connor:

Well, Ms. Schiffer, your position on behalf of the Government does propose a very fuzzy sort of line here to do something that is quite contrary to normal investment-backed expectations, and which may not be clearly mandated by the language of the statute.

And maybe because of that the Sixth Circuit, whose judgment we’re reviewing, said, we give up.

We’re going to apply normal State veil-piercing doctrine, and unless the veil is pierced so the corporation is a sham, we’re going to protect the corporate entity.

I guess that’s what happened.

Lois J. Schiffer:

The Sixth Circuit really looked at the concept of derivative liability.

That is, when is the parent company responsible for actions of the sub.

What Congress did in the Superfund law is look at the direct liability of the parent, which is really consistent with–

Sandra Day O’Connor:

Well, I know that’s what you’re saying, but it gets us back to that same question of how you draw the line and whether the statute is, indeed, that clear.

Lois J. Schiffer:

–Your Honor, we think that operate is, indeed, defined in a circular way, and we looked at the dictionary, but we think the Court can get some good guidance from the lender liability provisions adopted in the lender context, but which spell out a set of standards for how much activity and operation is necessary to meet the standard.

David H. Souter:

And under that definition, and under what I think is your answer to Justice Breyer, and I want to be very clear about this, it would be very rare that a corporation would be solely liable and not have some of its principal managers, operators, officers, also liable, is that not right?

Lois J. Schiffer:

It would not be… it would be very rare, Your Honor, because the ordinary corporation which is acting in a supervisory capacity through a subsidiary and not with active management would not be liable–

David H. Souter:

No, forget parent and subsidiary.

It’s very unusual for a corporation to commit a tort by itself without some human actor.

Lois J. Schiffer:

–Yes, and–

David H. Souter:

And the human actor is a cotortfeasor, and I take it your answer to Justice Breyer was that by using the word, any person, in 9607(b), that the Congress would make all of the people in his hypothetical that were actively participating in the waste disposal personally liable.

Lois J. Schiffer:

–We believe that that is correct, Your Honor.

Stephen G. Breyer:

And even if they hire somebody?

I mean, let’s say the largest corporation in the world decided to operate toxic waste dumps, hires four people from the assembly line at a company and says, you go out and you pull the switches, and what they do is, they pay them 42 an hour or something, and they go out there and pull switches, and those people, those individuals, those workers they just hired, assuming that they, you know, turn the shovels and so forth, in your view, they’re liable, too?

Lois J. Schiffer:

We do not think they are liable, Your Honor.

Stephen G. Breyer:

Oh, well, why not?

Lois J. Schiffer:

Because the concept is participation in management, and–

David H. Souter:

No, no, but what they do is… yes, they–

Lois J. Schiffer:

–not in management.

William H. Rehnquist:

–It says owner or operator.

Certainly Justice Breyer’s people are operating the thing.

William H. Rehnquist:

I’m trying to assume facts that they are, you know.

I’m trying to assume facts such that these are the people… they’re fairly low-level supervisors, and so forth, but it’s a small dump, and what they do is, they turn shovels, they make all the decisions there, they decide what to bury, what not to bury, they dig… you understand what I’m driving at.

Lois J. Schiffer:

Right.

Stephen G. Breyer:

I’m saying, in the Government’s view, is that kind of person who’s, let’s say, a fourth tier employee of the big corporation, also personally liable?

Lois J. Schiffer:

If it was a small facility and they were the managers, they would be liable.

If they’re the fourth tier employees and not the managers, they would not be.

I’d like to reserve the remainder–

David H. Souter:

May I ask you one question, though, before you sit down?

I take it that you could maintain your position in this case simply by saying, I will… the Government assumes that Congress meant to respect corporate forms, that Congress did not mean to look behind every corporate structure whenever an employee of the corporation performs a duty, and still maintain your position.

For example, what I’m thinking of is, if CPC passed a resolution, or if its president said to Williams, consistently with the corporate resolution, Williams, go down there and make sure that they dump the waste in the sand immediately, you don’t have to say that Williams is liable under those circumstances in order to get CPC liability as well as the subsidiary liability, do you?

You could respect the corporate form and still, in effect, get your… the result that you think is proper in this case?

Lois J. Schiffer:

–That’s exactly correct, Your Honor, and we think that our theory is consistent with respecting the corporate form because it looks at what is the corporation doing for its own activities.

David H. Souter:

Right, but I thought in answer to Justice Breyer’s question you were getting to the point where… of saying that whenever the employee of a corporation does the act which forms a part of the operation, that the employee is an operator and therefore liable regardless of whether the employee is acting as a maverick in relation to his corporate organization or whether he is doing exactly what his corporate organization told him to do, and now I think you’re saying you’re maybe not going that far.

Lois J. Schiffer:

The test is participation in management.

If there is a maverick employee who midnightdumps in the back 40, we would look at the activities of that particular person, but if the people are working for the corporation, following the orders of management, then we… it is the management and not the individual employees who would be liable.

Ruth Bader Ginsburg:

So–

–So I think that you were saying that in any close corporation there would be shareholder liability.

Lois J. Schiffer:

In fact, what the cases that look at shareholder liability really are taking people who are shareholders and chief executive officers and really are the active managers.

Ruth Bader Ginsburg:

I’m referring to a family corporation, the kind Justice Breyer described, a one-person corporation, a closed corporation, very small group, where they’re all involved in running the business.

In all those cases your theory is, you would reach the people who are operating, the participants in those close corporations.

Lois J. Schiffer:

We think that is what Congress intended by its definition of the term, operator, to assure that those who are responsible for the pollution are responsible for cleaning it up, Your Honor.

William H. Rehnquist:

Thank you, Ms. Schiffer.

Mr. Geller, we’ll hear from you.

Kenneth Steven Geller:

Thank you, Mr. Chief Justice, and may it please the Court:

Under CERCLA, a past or present owner or operator of a hazardous waste facility is liable for cleanup costs paid by the Government.

The question in this case is whether a parent corporation becomes an operator under CERCLA simply by participating in and exerting some unspecified degree of control over the affairs of a subsidiary that operates such a facility.

The answer to that question, in our view, turns entirely on whether Congress meant to sweep away traditional common law principles of limited shareholder liability merely by using the word operator in CERCLA.

We believe that the Government’s theory of parent company liability is unsupportable for a number of reasons.

The most obvious reason is that is plainly inconsistent with the language of the statute itself.

CERCLA imposes liability on persons that operate a facility.

Kenneth Steven Geller:

That is, a place where hazardous substances are deposited.

It doesn’t impose liability, as the Government would have it, on persons that control separate entities that in turn operate that facility.

Ruth Bader Ginsburg:

But the Government told us very clearly that that is not the way it would have it.

It says the parent must operate the facility, not the sub.

Kenneth Steven Geller:

Yes.

Ruth Bader Ginsburg:

And then I asked, well, how do we–

Kenneth Steven Geller:

Justice Ginsburg, there’s a lot of historical revisionism going on here today.

The Government’s position from the moment this case was brought was that all it had to show was that CPC controlled the affairs of its subsidiary.

It never took the position that it had to prove that CPC actually operated the Muskegon facility based on–

Anthony M. Kennedy:

–Well, I think the district court’s findings have that same flaw.

Kenneth Steven Geller:

–They absolutely do, Justice Kennedy.

Anthony M. Kennedy:

However… however, in determining what the test is, it seems to me that if this corporation, whether it’s a parent, whether it’s a partner, where it’s just as a lease, is simply a co-tortfeasor in the management of the company.

It seems to me the facts of the record could support that–

Kenneth Steven Geller:

I don’t believe so.

Anthony M. Kennedy:

–Could support that test if we send it back.

I think we’d probably have to remand.

Kenneth Steven Geller:

I don’t believe it could, Justice Kennedy.

Corporations can only act through their employees, obviously.

In order to show that CPC operated this facility, you have to show that some employee of CPC did something that could be construed as operating this facility.

Anthony M. Kennedy:

Granted.

Kenneth Steven Geller:

Now–

Anthony M. Kennedy:

And if we can just stick with Justice Breyer’s hypothetical a minute, because that’s where we ended the argument–

Kenneth Steven Geller:

–Yes.

Anthony M. Kennedy:

–would you agree that if three people were all actively involved in managing a facility, that they would all be operators?

Kenneth Steven Geller:

Yes.

Anthony M. Kennedy:

All right.

Kenneth Steven Geller:

Yes, but the point in this case, Your Honor, is–

Antonin Scalia:

Excuse me.

The shareholders?

You would–

Kenneth Steven Geller:

–If the shareholders were actually operating the facility.

Antonin Scalia:

–As officers of their corporation?

Kenneth Steven Geller:

No.

No, if they were actually personally involved in operating, they may well be operators.

That’s not what we have here.

We simply have a shareholder here that did nothing that could be construed as operating the facility.

All of the employees of CPC–

John Paul Stevens:

Let me be sure I understand your position, Mr. Geller.

You take Justice Breyer’s hypothetical and say yes, Mr. and Mrs. Smith and their son would be liable, if I understand your–

Kenneth Steven Geller:

–If they were actually physically engaged in operating the facility, they would fall within the statute, I would think, but that’s not–

David H. Souter:

–So that any employee of a corporation with a facility can be liable?

Kenneth Steven Geller:

–If someone satisfies the definition of operator, they’re liable under the–

David H. Souter:

If I go to work for 40 a week and they tell me to dump the waste in the sand, I am liable under the statute?

Do you concede that?

Kenneth Steven Geller:

–Technically if you’re a person, if you’re operating the facility you would be liable.

David H. Souter:

So that the corporate–

Kenneth Steven Geller:

There may well be… you know, the–

Antonin Scalia:

–I’m not operating it on my own behalf.

I’m operating it as an agent of someone else.

Kenneth Steven Geller:

–And under–

Antonin Scalia:

Does it make any difference?

Kenneth Steven Geller:

–respondeat superior principles the corporation would be liable as well and this issue we’re debating now would not be relevant.

But I want to make… bring us back to this case–

Antonin Scalia:

Well, why wouldn’t it be relevant?

I mean, they can sue both of us.

They can sue my superior and… you know, the company and–

Kenneth Steven Geller:

–That’s… that’s… we’re not here to argue that the employee would be liable in that situation.

You’d have to know the facts of that case.

The facts of this case show that no CPC employee did anything that could be construed as operating this facility.

All of the–

David H. Souter:

–But what about Williams?

That seems to be the toughest case.

Kenneth Steven Geller:

–Williams is the only person that they have identified as an employee of CPC and nothing that Williams did can be construed as operating this facility.

He attended a single meeting.

He gave some advice which was not followed.

That was the extent of Williams’ involvement in this case.

When you look at the list of factors that the district court identified as to why it concluded that CPC was an operator here, Williams is far down the list.

What the district court principally referred to was the fact that CPC owned 100 percent of the stock here.

There were some dual officers and directors.

The fact is, there is no employee of CPC that did anything here that could be construed as operating the facility.

Antonin Scalia:

Well, what did Williams do in particular?

I’m concerned in particular.

Kenneth Steven Geller:

He–

Antonin Scalia:

Even if we eliminate all the rest, should we send it back to the district court–

Kenneth Steven Geller:

–No, I–

Antonin Scalia:

–and tell the district court, you know, is… was Williams, what Williams did enough?

Kenneth Steven Geller:

–If the… Justice Scalia, if the Sixth Circuit adopted the right legal standard, which we conclude it did, there’s no reason to send it back because the Sixth Circuit looked at all the evidence in this case, including Williams, and concluded that none of that amounted to operating a facility on the part of CPC.

But I’d like to return the Court, if it would, because there’s a lot… been a lot of–

Ruth Bader Ginsburg:

Mr. Geller, before we get off Mr. Williams, what you said is, well, he was just sort of a peripheral character, but at least one of these briefs told us that the sub didn’t even fill out a questionnaire without consulting him, because he was responsible for the environmental affairs of the corporate unit, that is, both parent and sub.

Kenneth Steven Geller:

–Justice Ginsburg, that is completely untrue.

Williams was a lawyer-lobbyist who worked for CPC who attended a single meeting, would occasionally give advice to Ott II, which was frequently ignored.

But as I say, all of this was before the Sixth Circuit, which concluded that none of this amounted to direct operation of the facility by CPC.

William H. Rehnquist:

Well, where did Williams live?

I’d like to get something concrete here.

Kenneth Steven Geller:

Williams lived–

William H. Rehnquist:

Did he live in Muskegon?

Kenneth Steven Geller:

–No.

No, he didn’t.

None of the… none of the C… none of the people whose activities here were attributable to CPC, none of the dual employees lived at the Muskegon site.

William H. Rehnquist:

Where did they live?

Kenneth Steven Geller:

They all lived in New Jersey, where CPC had its corporate headquarters.

None of them was–

John Paul Stevens:

Even Mr. Ott?

Was Mr Ott–

Kenneth Steven Geller:

–Mr. Ott… the two corporate officers who had dual… who wore the two hats, Ott and Eiszner, who had been employees of Ott I when it was taken over by CPC, shared their time between Muskegon and New Jersey, spent most of their time at CPC–

Antonin Scalia:

–It would be better for your case if the dual employees lived in Muskegon.

What’s better for your case is if the sole employee, such as Williams, lived in New Jersey.

That helps you.

But the fact that the dual employees were at CPC’s headquarters–

Kenneth Steven Geller:

–It doesn’t matter where they lived.

The question is, when these dual employees took actions on behalf of Ott II, is it appropriate to attribute those actions to the parent CPC, and the common law rule is clearly no.

John Paul Stevens:

–But do you agree the record doesn’t tell us who paid their salary when they were working?

Supposing they were paid entirely by the parent for everything they did, would that make a difference?

Kenneth Steven Geller:

If they were employee… if they were acting… if they were dual employees, it seems to me, Justice Stevens, it doesn’t matter who paid their salaries.

The question is, in what capacity were they acting, and if they were acting in their capacity as Ott II employees it is inappropriate… inappropriate–

John Paul Stevens:

Do you think he’d be acting in his capacity as an Ott II employee if all his money came from the parent?

Kenneth Steven Geller:

–Well, the record doesn’t reflect, of course, and it’s–

John Paul Stevens:

Strange.

Kenneth Steven Geller:

–silly to speculate.

The question is, who is responsible for the activities of these dual employees, and the common law answers that question quite clearly.

What the Government is asking for here is a new Federal common law rule to attribute all of that activity to the parent, and there’s absolutely no basis–

John Paul Stevens:

Well, no, they just say you’ve got to attribute some of it to the parent.

If you attribute some of it to the parent, it’s… you know, maybe half-time he’s an operator and half-time he’s the general–

Kenneth Steven Geller:

–The Government has never made that case.

What they suggest is simply because CPC controlled and participated in the activities of its–

John Paul Stevens:

–Well, the district court did emphasize that a lot, I agree with you, but I’m not sure they confined it to the corporate control.

Kenneth Steven Geller:

–Well, I would like if I could to turn the court’s attention to the district court’s fact-findings, because it seems to me they are fairly significant in this case, and quite contrary to what the Government suggests here.

Ruth Bader Ginsburg:

Mr. Geller, may I ask for a clarification before you do that, and that… you said the Sixth Circuit took care of Williams.

They made him a minor player and that’s that.

But I took it that the big difference between the district court and the Sixth Circuit was, what is the source of law that we look to, because if it’s State law veil-piercing, then it takes a sham, a fraud to go through, but if you… on the district judge’s view and on the Government’s view it’s not State law, it’s Federal common law.

Ruth Bader Ginsburg:

They called it, what, a middle ground or something, but not the traditional State veil-piercing.

Some uniform Federal notion that the Federal courts will develop of a parent liability.

Kenneth Steven Geller:

That’s correct, Justice Stevens.

The district court adopted this new middle ground of liability, which is something in between direct liability and State common law veil-piercing, and the question in this case, the question for this Court is, is there anything in CERCLA that could be read on the part of Congress to want to have a new rule for attributing the liability of the subsidiary to the parent where the Congress–

Anthony M. Kennedy:

Well, but the Government… the Government says that’s not its theory now, at least.

The Government says you have to define the term operate, owner and operate.

These people were actively engaged in management and participating.

Therefore, they’re operators.

Now, maybe that’s right, maybe that’s wrong, but it seems to me that the test the Government suggests is correct.

Kenneth Steven Geller:

–The test is whether the parent can be said to be operating.

The only way a corporation can be operating, Justice Kennedy, is through its employees, and therefore, in order to meet the Government’s test you have to show that some employee of CPC did anything that constitutes operating here.

Stephen G. Breyer:

The word she used there was not normal.

She said… Ms. Schiffer said, well, look at this, and if you see something happening here in respect to operation that is not normally present where you have a simple parent-subsidiary relationship… let’s say the parent is significantly more active in operating than a company that was the classic parent subsidiary relationship.

Where that occurs, then you could say, without getting into all the problems you’re talking about, that the parent has operated it, and then you look at the record here and they seem to have some things that would go beyond what would be normal.

That’s what I took partly, that… I heard her say the word normal, and I’ve extrapolated on that a little.

Kenneth Steven Geller:

Well, there was a… if I could just finish the answer to Justice Kennedy’s question, if I could, you have to find that some employe of CPC was doing something here that could be considered operating before you could conclude that CPC itself… there was no evidence here.

The only evidence that the district court relied on was the dual officers, that Ott and Eiszner worked both for CPC and for Ott II.

If you… now, the question is, how can you attribute what Ott and Eiszner did in their role as Ott II employees and officers to CPC in a way that makes CPC the operator?

The normal common law rule would not allow you to do that, and therefore the only question really is, did Congress, in enacting CERCLA, intend to have a different attribution rule?

Is there any evidence in the statute itself that Congress intended to eliminate or supplant the normal common law rule of limited shareholder liability and create some amorphous, undefined test that suggests that if the parent takes an active role in controlling its subsidiary, which all parents of wholly-owned subsidiaries do, then there’s going to be liability on the part of the parent, and our submission is–

Sandra Day O’Connor:

Well, do you say that dual officers, people who are officers in both parent and subsidiary corporation, is not a relevant fact at all to be considered?

Kenneth Steven Geller:

–Under the common law, it would be a typical situation and not a relevant fact to consider in veil-piercing.

You’d have to show something far more than simply that they were dual officers.

Several of the amicus briefs filed in this Court have cited numerous authorities to the Court, including this Court’s own cases, that suggest that it’s the typical situation, particularly in a case of a wholly-owned subsidiary, to have some dual officers, and in fact you had fewer here than you had in the normal case.

Remember, this was Ott–

William H. Rehnquist:

Well, do you say, Mr. Geller, that it’s only if you can pierce the veil that you can impose liability on the parent?

Kenneth Steven Geller:

–We agree that there are two ways, as the Sixth Circuit said, to show that the parent is liable under CERCLA.

First, if the parent itself, through its own officers, has done something that could constitute operating, the parent is liable.

If, for example, at this facility CPC had been using the facility as part of its foreign business, or had in some way directed the disposal of the hazardous waste, it would be liable as an operator.

Secondly, there’s vicarious liability.

Kenneth Steven Geller:

CPC as the parent could be liable if you could pierce the corporate veil.

The Government–

William H. Rehnquist:

Well, what if CPC sends a memo to the people at Ott and says, look, we know the pollution inspectors are coming around on Friday, so dump this stuff on Saturday, not Thursday, and nobody ever goes to Muskegon to do it themselves.

They simply send that memo to the subsidiary.

Kenneth Steven Geller:

–If… in that sort of situation, if you have direct parental involvement in something that might constitute operating the facility, there may well be liability.

There isn’t a stitch of evidence in this particular case that any sort of… any of that sort of thing happened.

Remember, Ott I was a functioning business here before CPC came into the picture.

When CPC bought Ott I and it became Ott II, basically the same officers were left in place, Ott and Eiszner.

Ott and Eiszner were then given additional responsibilities at the parent CPC, but this isn’t the case in which CPC suddenly took over and implanted its own officers throughout the subsidiary’s corporate structure.

Antonin Scalia:

But that wouldn’t matter in your view, anyway.

Kenneth Steven Geller:

It wouldn’t matter, Justice Scalia, except atmospherically.

This is hardly a case of an atypical parent-subsidiary relationship.

In fact, the evidence here suggests more of a hands-off relationship and while I’m not going to take the time now to read any of this, I would refer the Court to the findings of the district court at pages 67 and 69a of the appendix to the petition, where the district court makes thorough findings that this was a facility that was completely operated by Ott II’s officers and management.

There isn’t any suggestion that any employee of CPC had anything to do with the management of this facility.

It’s purely a vicarious liability theory that the Government from day one in this case has tried to… has argued for in order to impose liability on CPC.

And therefore the question is, did Congress mean to impose a completely different rule of vicarious liability here beyond that what the common law for 100 years has required in order to have a shareholder be liable for the operations of this corporation, and we suggest that there are lots of indications that Congress never had that intention in CERCLA.

To begin with, this Court has many times said that in order for Congress to supplant a common law rule, particularly a rule as ingrained as the–

John Paul Stevens:

May I ask a question, Mr. Geller, before I forget it?

There is the special provisions about lender liability.

Kenneth Steven Geller:

–Yes.

John Paul Stevens:

Where… which are a departure from normal rules.

If the parent’s participation fit into the fact pattern that would have made a lender liable, would the parent then be liable as an operator?

Kenneth Steven Geller:

I don’t think so, Your Honor, because it seems to me that participating in the management facility is not the same thing as operating the facility.

To begin with, this is–

John Paul Stevens:

So that what your… I just want to be sure I understand your position.

So it is… a lender has a greater exposure than a parent.

Kenneth Steven Geller:

–Because a lender is already… first of all, not every lender is liable.

John Paul Stevens:

No, I understand that, but–

Kenneth Steven Geller:

Only a lender that has indicia–

John Paul Stevens:

–But I want to be sure that I get in my… sort it out for myself.

Kenneth Steven Geller:

–Yes.

John Paul Stevens:

The facts that would make a lender liable, in your view, would not be sufficient to make a parent liable.

Kenneth Steven Geller:

They may or may not.

The lender… the lender may be participating in the management of a facility to such an extent that it has become an operator, but–

David H. Souter:

No, but I thought the object of the particular lender provision was directed at owning rather than operating.

Kenneth Steven Geller:

–Absolutely, Justice Souter.

That was the point I was going to make with Justice Stevens.

It’s an exception to owner liability.

It has nothing at all to do–

Anthony M. Kennedy:

Well, that’s not what the statute says.

The statute, which is at 2a of the Government’s brief in the middle of the page, says the term owner or operator does not include a person that is a lender that did not participate–

Kenneth Steven Geller:

–Yes, but–

Anthony M. Kennedy:

–in the management of a vessel.

Kenneth Steven Geller:

–Justice Kennedy, if you look… the only reason this is in here is because if you look at the bottom of that, holds indicia of ownership… in other words–

William H. Rehnquist:

Whereabouts on 2a are you reading?

Kenneth Steven Geller:

–I’m on… well, actually, I’m on la of the appendix to the Government’s brief, where the… 9601 is reprinted, and (20)(A), if you look at the last sentence in that paragraph, such term does not include, if you see that, such term does not include a person who holds indicia of ownership primarily to protect a security interest.

In other words, these are people who would have been considered owners because they had indicia of ownership primarily to protect their security interest.

Anthony M. Kennedy:

Yes, but the such term is owner or operator.

Kenneth Steven Geller:

Well, that may be.

I’m not sure it changes anything, Justice Kennedy.

In fact, if you look at the derivation of this, this came into a House bill, H.R. 85, that only defined owner, and this was an exception to owner liability.

When the bills were combined it was put in this way, but it’s clear that what Congress was talking about here are people who hold security interests in States that would make them owners.

Anthony M. Kennedy:

Well, but it seems to me, as Justice Stevens indicates, that if management participation, which is what the Congress is interested in, is management participation, who’s doing this, if that suffices to hold a lender liable, surely it should hold a corporate… an affiliated corporation liable.

Kenneth Steven Geller:

For several reasons not so, Justice Kennedy.

First of all, it’s not participation in the management of a subsidiary.

It’s participation in management of a facility.

Anthony M. Kennedy:

I agree.

Kenneth Steven Geller:

And I don’t… CPC would not satisfy that definition here, because it did not participate… no one played–

Anthony M. Kennedy:

Well, but we’re talking about the test.

Kenneth Steven Geller:

–I understand.

Anthony M. Kennedy:

If a parent participated in management, as defined in this section that is applicable to lenders, would that parent, by reason of that participation in management, be an operator?

Kenneth Steven Geller:

It would… no.

They would not be liable as operators, Justice Kennedy.

They would not satisfy the exemption from liability as owners.

That’s the point.

This is an exemption from… these are people who would otherwise be liable as owners, and Congress–

John Paul Stevens:

But Mr. Geller, on 2a, sub… (E)(i), it’s exclusions of lenders not participant in management, (i) indicia of ownership to protect security, the term owner or operator does not include a person that is a lender without… blah, blah, blah.

Kenneth Steven Geller:

–I understand that, Justice Stevens, but it’s only because of the indicia of ownership that this matters.

These are people who would be liable as owners.

John Paul Stevens:

Right.

Regardless… if… but in any event, do you think that if a lender, say the Chase Bank, or some large lending institution, did exactly what the parent did in this case, sent Williams out to tell them not to open that one facility and so forth and so on, do you think they would be liable as a lender or not?

Kenneth Steven Geller:

No.

Not so, Justice Stevens.

I don’t think they would satisfy the definition of who are participating in management of this facility.

John Paul Stevens:

But your submission is that even if they might, the parent would not?

Kenneth Steven Geller:

The parent would not be liable in that situation.

John Paul Stevens:

Even if the lender would be under the–

Kenneth Steven Geller:

Yes, because this is a… participating in the management is not the same… as EPA has conceded, participating in the management is not the same thing as operating.

This is an exemption that applies to owner liability.

It has no relevance here.

Antonin Scalia:

–It would be a meaningless exception to the exemption–

Kenneth Steven Geller:

That’s exactly right, Justice Scalia.

Antonin Scalia:

–if participating in management were the same as operating–

Kenneth Steven Geller:

Absolutely.

Antonin Scalia:

–because then you wouldn’t have to get them as an owner.

Kenneth Steven Geller:

Absolutely.

Antonin Scalia:

You could get them as an operator.

Kenneth Steven Geller:

Absolutely, Justice Scalia.

It wouldn’t make any sense to say that the only way you can satisfy the exemption from owner liability is to show that you’re not an operator, because if you are an operator you wouldn’t need the exemption from owner… you’re absolutely right.

William H. Rehnquist:

You wouldn’t need it.

William H. Rehnquist:

It wouldn’t do you any good.

Kenneth Steven Geller:

It wouldn’t do you any good.

You’d be liable in exactly the same way under CERCLA.

I want to just continue this point that there’s no evidence here that Congress mean to change the common law rule.

To begin with, this Court has said that Congress will not be taken to change common law rules, particularly ones as ingrained as limited liability for shareholders, without clear evidence that it intended to do so.

There is absolutely no clear evidence here.

In fact, in this statute there is another provision of this statute in which Congress did import a control test.

When you’re dealing with abandoned facilities, Congress provided that people are liable not only if they owned or operated the facility, but also if they otherwise controlled the facility, so Congress clearly knew how to import the concept of control when it wanted to do so, but it didn’t do so in this case.

Ruth Bader Ginsburg:

But Mr. Geller, the Government told us that that was meant to deal with facilities that had long ceased operating, that that was otherwise controlled.

You stopped any operations at the place but you have security guards or whatever you have.

That was the picture that I got.

Kenneth Steven Geller:

That’s what they say.

There’s certainly nothing in the legislative history or anywhere else to support that, but even if that were true, in their view operating includes the concept of control, and therefore there would still have been no reason for Congress to have put otherwise controlled in there.

Congress could have said, whoever was operating the facility immediately before it was abandoned, but Congress didn’t do that.

They said, owned, operated, or controlled the facility immediately before it was abandoned, so this clearly shows that operator requires something different than mere control.

In addition, as you said, pointed out, Justice Ginsburg, there are many other statutes, many other statutes, including important statutes like ERISA and the Fair Labor Standards Act, the Securities Exchange Act, where Congress has imposed liability on people who control violators.

In other words, corporations are liable, as are their parents, in those situations.

Congress specifically did not do that in this particular statute.

And it would be inappropriate, we think, for the Court to read that in there when Congress has not chosen to put it in.

Antonin Scalia:

Mr. Geller, could I call you back to Mr. Williams again and ask you to address the findings of the district court concerning Williams?

They’re set forth on 75a of the joint appendix, and the… the district court finds that he exerted control over a variety of Ott II environmental matters.

Kenneth Steven Geller:

Well–

William H. Rehnquist:

Where are you reading from?

75a in the middle of the page.

Kenneth Steven Geller:

–There is no… if I could say, Justice Scalia, there’s no evidence to support that finding.

The district court doesn’t cite any evidence.

Antonin Scalia:

Well, it goes on to give what I take are… its… what it believed constituted exerting control.

In a meeting with the Water Resources Commission, Williams participated in discussions which, as a result of his influence, did not include presentation by Ott II.

I guess influence wouldn’t be the same as directing, would it?

Kenneth Steven Geller:

Right.

Kenneth Steven Geller:

In fact, I think all these fact-findings are not supported by the record, but even if they were taken as true, and I would refer the Court to our reply brief and our supplemental brief for why they’re not true, I don’t think that would rise to the level–

Antonin Scalia:

What about the next one?

Kenneth Steven Geller:

–operating this facility, operating–

Antonin Scalia:

Operating… but the next one said, he instructed them regarding various responses to State and Federal–

Kenneth Steven Geller:

–There was a… they were negotiating–

Antonin Scalia:

–You say that’s not operating?

Kenneth Steven Geller:

–That’s not operating this facility.

There were negotiations going on at the time with the Michigan Water Resources Commission as to use of the water facility, the county water facility, and Williams attended one of a dozen of those meetings.

He made some recommendations, most of which were not accepted.

This is all, I think, in our reply brief.

None of this, even if true, I think would amount to operating the Muskegon facility, which is what’s relevant here.

Stephen G. Breyer:

If we have a 4,000-page record on this, is it perhaps… if they’ve made the findings not supported, we should send it back under a correct standard, and is that correct–

Kenneth Steven Geller:

I–

Stephen G. Breyer:

–standard, in your view, the standard that if a parent operates simply as a shareholder… a shareholder, which includes appointing directors and doing those things that 100-percent shareholders often do, that that is not sufficient for liability, but if it goes beyond what shareholders normally do in the direction of making operational decisions, then it is liable, so we would look to what is normal in a relationship between parent and sub, a 100-percent shareholder.

I mean, I’m looking for a way of stating the correct standard.

The Sixth Circuit itself thought that a parent could go beyond what is normal–

Kenneth Steven Geller:

–What the Sixth Circuit said was that the… that the parent–

Stephen G. Breyer:

–It said about joint venture, but I mean, that–

–No.

What was–

–doesn’t really capture it very well.

Kenneth Steven Geller:

–This is at 17 and 18 of the joint… of the appendix to the petition, Justice Breyer.

What the… it said a parent could be liable if it directly operated the facility.

It didn’t say… have anything to do with–

Stephen G. Breyer:

All right, then we use the word… is the word… is–

Kenneth Steven Geller:

–the influence that the parent had over the subsidiary, which is what you’re talking about now, I believe.

Stephen G. Breyer:

–I’m looking for the best way to state what I think you might agree and everyone might agree that it’s certainly possible for a parent to go out and begin to operate the facility irrespective of whether the subsidiary does as well.

Kenneth Steven Geller:

If employees–

Stephen G. Breyer:

All right.

So what’s the word… yes.

Kenneth Steven Geller:

–If employees of the parent are directly involved in operating the facility, in other words, engaged in the day-to-day running of the facility, involved in the dumping of the hazardous waste of the facility–

Stephen G. Breyer:

What about making managerial decisions that determine how those operations will take place?

Kenneth Steven Geller:

–If you could show that the parent, as opposed to dual officers, which is what we have in this case, if you could show that the parent was making all of the decisions for the subsidiary–

Stephen G. Breyer:

Why all?

Kenneth Steven Geller:

–Or decisions related to the facility–

Anthony M. Kennedy:

How about actually participated in the management or operational affairs of the facility?

Yes.

Kenneth Steven Geller:

–If you could show that the parent was actually doing that, but there’s no evidence the parent was doing that in this case.

All of the evidence that would support that sort of a conclusion in this case, Justice Kennedy, has to do with Ott and Eiszner, who were dual officers.

There was no… I say this again because it’s so significant.

There was no employee of CPC… of CPC, as opposed to these dual officers, whose actions cannot be attributed to CPC.

There was no employee of CPC that did anything in this case that could be construed as operating this facility.

That’s what the Sixth Circuit held.

We think the Sixth Circuit adopted the correct legal standard, and we think that it reviewed the record in this case and correctly came to the conclusion that there was no operator liability.

Now, I just want to conclude by saying that although the Government tries to sugar-coat its position, if the evidence here is sufficient to find the parent liable under a Federal veil-piercing theory, and it’s hard to imagine any parent of a wholly owned subsidiary that wouldn’t be liable for its subsidiary’s acts under CERCLA by virtue of the Government’s two-step theory, it would be… this would be an astounding extension of CERCLA liability.

Parents would never know when they have overstepped what the Government thinks is an appropriate investor relationship, as they say, and instead have left themselves open for millions of dollars of unexpected CERCLA liability.

It’s an amorphous and unworkable test, and it’s contrary to the common law test that’s been around for 100 years.

There’s no evidence that Congress intended to supplant that common law test with this new middle ground that the district court has adopted here.

John Paul Stevens:

Mr. Geller, let me just… I don’t mean to be beating a dead horse here, but I do want to be sure I understand completely your thought on this.

Supposing we went through this series of reasoning and said, we’ve got to decide what an operator is.

You might say an operator is a person who participates actively in management.

That might be a test.

And then you’d say, well, what does participate in management mean?

What would be wrong with saying, we look at the definition of participation in management that Congress provided us for determining when lenders become owners or operators?

What would be wrong with that approach?

Kenneth Steven Geller:

Well–

John Paul Stevens:

It just occurred to me, and I should have thought of it before, but–

Kenneth Steven Geller:

–It… I think it would be wrong because it equates participating in management with operation.

John Paul Stevens:

–And you don’t… you think participating in management is not–

Kenneth Steven Geller:

I think it’s a different–

John Paul Stevens:

–enough to be an operator?

Kenneth Steven Geller:

–I think it’s a different test, but I would also say that even if you did that, what CPC did in this case–

John Paul Stevens:

Would not… I’m not suggesting you’re giving that away.

Kenneth Steven Geller:

–Yes.

It’s a diff… Congress could have just said operates instead of participating in management–

William H. Rehnquist:

Thank you, Mr. Geller.

I think you’ve answered the question.

The case is submitted.