United States v. Bestfoods Case Brief

Why is the case important?

The United States, brings an action against two parent corporations for the polluting activities of its subsidiary company. The United States Supreme Court must determine whether the parent companies can be liable under section 107(a)(2) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA).

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

Whether a parent corporation could be liable for its subsidiary’s pollution under CERCLA?

Answer

No, unless the corporate veil can be pierced. However, a parent corporation may be directly liable if it actively participated in and exercised control over the operations of that facility. The Court of Appeals’ decision is vacated and remanded.

Conclusion

The Court held that under 107(a)(2), a parent corporation that actively participated in, and exercised control over, the operations of the facility itself may be held directly liable in its own right as operator of the facility, as Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) does not bar a parent from direct liability for its own actions in operating a facility owned by its subsidiary.

  • Case Brief: 1998
  • Petitioner: United States
  • Respondent: Bestfoods
  • Decided by: Rehnquist Court

Citation: 524 US 51 (1998)
Argued: Mar 24, 1998
Decided: Jun 8, 1998