Reducing Environmental Risk

Sole Shareholder of Company that Owned Contaminated Site Found Liable as a “Current Operator” under CERLCA

In Litgo New Jersey, Inc. v. Martin, 2011 U.S. Dist. LEXIS 2033 (D.N.J. Jan. 7, 2011) (denying Motion for Rehearing), the sole shareholder of company (a single-purpose entity) that owned a contaminated property was found liable as a “current operator” under CERCLA § 107(a) because he had “actual control over the day-to-day operations on the [property], including oversight and control over remedial activities carried out by [environmental remediation companies].” 

The term “operator” has a specific meaning in the context of the federal Comprehensive Environmental, Response, Compensation, and Liability Act (“CERCLA”), also know as the “Superfund” Act. To be liable as the current or past operator of a facility, the party must be someone who manages, directs, or conducts those operations at a facility that have to do with the leakage or disposal of hazardous waste or decisions about compliance with environmental regulations. See United States v. Bestfoods, 524 U.S. 51, 66-67 (1998).

By statute, the definition of “owner or operator” excludes any person, who, without participating in the management of a facility, holds “indicia of ownership” which is primarily used to protect his or her security interest in the facility. CERCLA § 9601(20)(A)(iii).

To this, courts have added that operator liability under CERCLA requires that the party has had actual control of either day-to-day operating or policy-making decisions at the facility. Aluminum Co. of America v. Beazer East, Inc., 124 F.3d 551, 564 (3d Cir. 1997).

Thus, the courts have made it quite clear that they will not allow a person to hide behind the “veil” of a corporation to escape liability as an operator under CERCLA:

So, under CERCLA, an operator is simply someone who directs the workings of, manages, or conducts the affairs of a facility. To sharpen the definition for purposes of CERCLA’s concern with environmental contamination, an operator must manage, direct, or conduct operations specifically related to pollution, that is, operations having to do with the leakage or disposal of hazardous waste, or decisions about compliance with environmental regulations.

United States v. Bestfoods, 524 U.S. 66-67.

Similar to decisions in other courts where sole or owning shareholders were personally found liable as an “operator” under CERCLA because they participated in the management of the facility, the “indicia of ownership” exception to operator liability under CERCLA was narrowly applied in Litgo New Jersey. The District Court of New Jersey had no trouble finding that a sole owning stockholder who manages the corporation is liable under CERCLA as an “owner or operator.”

You Can Try to Run from Liability, But You Can’t Hide Behind the Veil:

The clear lesson here is that establishing a limited liability company (“LLC”) (or another corporate entity) and placing a contaminated property in the LLC’s ownership may not always protect you, personally, against “operator” liability under CERCLA, especially if you are the sole shareholder, and thus by definition you are the only human being to make the day-to-day operating or policy decisions of the company, including hiring and overseeing environmental consultants and remediation companies.



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