By John P. Vayda
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POSSIBLE "OPERATOR" LIABILITY UNDER OPA
By John P. Vayda |
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A recent decision of the U.S. Supreme Court articulates two bases on which to hold a parent corporation responsible as an "operator" for pollution caused at the plant of its subsidiary under The Comprehensive Environmental Response Compensation and Liability Act of 1980 ("CERCLA"). This case suggests possible situations in which there might be "operator" liability for pollution damage caused by vessels under the Oil Pollution Act of 1990 ("OPA").
United States v. Bestfoods, _____ U.S. _____ 118, S. Ct. 1876 (1998) arose out of suit by the government under CERCLA against a group of defendants, including CPC International, Inc., the parent of the now-defunct Otto Chemical Co. ("Otto"), for costs of cleaning up industrial waste generated at Otto's chemical plant. As the case arises under CERCLA, it is not strictly applicable to pollution caused by a vessel or to OPA. However, courts have regularly looked to CERCLA cases in interpreting OPA.
In its decision, the Court first reaffirmed that a parent can have indirect, derivative CERCLA liability for its subsidiary's actions only when the corporate veil could be pierced under existing principles of corporate law. The Court rejected the argument that the traditional tests of "piercing" were unnecessary stating "although this respect for corporate distinctions when the subsidiary is a polluter has been severely criticized in the literature, nothing in CERCLA purports to reject this bedrock principle, and against this venerable, common law backdrop, the Congressional silence is audible." 118 S. Ct. at 1885.
The Court then analyzed the situations in which one could be held indirectly responsible under CERCLA for "operation" of the polluting facility. In a sentence which, no doubt, will be extensively quoted in the future, the Court stated that one who operates a polluting facility will be liable for clean up "regardless of whether that person is the facility's owner, the owner's parent corporation or business partner, or even a saboteur who sneaks into the facility at night to discharge its poisons out of malice." 118 S. Ct. at 1886. The Court found that, since CERCLA did not have a precise definition of operator (just as OPA does not), "the question is not whether the parent operates the subsidiary, but whether it operates the facility, and that operation is evidenced by participation in the activities of the facility, not the subsidiary." 118 S. Ct. at 1887. The Court then went on to state that a parent will not be liable merely if dual officers and directors make policy decisions and supervise activities at the facility. Instead, for "operator" liability to attach, the officers and directors would have to act as officers and directors of the parent, and not of the subsidiary when they make policy decisions and supervise activities that lead to pollution.
In apparent recognition of the importance of these issues to the industry, the Supreme Court took the unusual step of stating three situations in which the parent could be directly liable for operation of the facility. These are:
The Supreme Court then endorsed one test of when a parent would not incur direct "operator" liability in its oversight of its subsidiary. "Activities that involve the facility but which are consistent with the parent's investor status, such as monitoring of the subsidiary's performance, supervision of the subsidiary's finance and capital budget decisions, and articulation of general policies and procedures, should not give rise to direct liability."
We strongly urge all those with interests in vessels to review carefully the above three instances of when one might be found responsible as an "operator", as well as the above test of when one will not, in order to minimize the risk of being held responsible as an "operator" of a vessel which might be liable for pollution under OPA.
