A recent decision by the 9th Circuit Court of Appeals highlights the boundary between environmental law and corporate law. US v Sterling Centercorp Inc., 2020 WL 5885920 (10/5/20). The case arose out of a Superfund Site in California that was the subject of a number of corporate transactions. Defendant Sterling was the corporate parent of Keystone Copper Corporation, a corporation that owned the site from approximately 1945-1989. Under the Superfund Law (42 USC 9601 et. seq.), a person who owned or operated the facility at the time of disposal of hazardous substances is liable for cleanup costs. The issue before the Court was whether the corporate parent of a former owner of the facility can be held liable as a former operator of the facility.

The starting point for the Court’s analysis was the Supreme Court’s decision in US v Bestfoods, 524 US 551 (1998), which held that operator liability is dependent on what the defendant did, not on the corporate relationship between the defendant and another entity that may have owned or operated the site. Thus, to be liable, the Court needed to examine whether the corporate parent made decisions or conducted operations specifically related to pollution or waste handling. Letterhead turned out to be important to the Court’s finding that Sterling was liable as an operator. In analyzing the facts, the Court noted that in 1979, when the Regional Water Board required a response to a disposal event in 1979, the response was led by Jack Gilbert, who directed compliance “using Sterling letterhead.” The Court noted that he received correspondence from the Board addressed to him at Sterling and seldom referred to Keystone in discussions with the Board.

Thus, liability of a corporate parent for environmental liabilities of a subsidiary is not based on the parent/subsidiary relationship. It must be based on the activities of the corporate parent specifically with respect to waste handling. In this case, the corporate parent had liability as an operator of the subsidiary’s facility because it directly managed waste handling decisions at the subsidiary’s facility.

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