the work." Mardan, 804 F.2d at 1465 (Reinhardt, J.,
dissenting). Relying on government-initiated cleanups has two
major disadvantages. First, the government's ability to monitor
numerous sites and initiate cleanups on a nationwide basis is
constrained by limited resources. Id. Second, government action
is supposed to be a last resort, only after the failure of
voluntary efforts. Id.
Finally, considering the third factor, application of a
uniform federal rule would not disrupt existing relationships
predicated on state law. Parties could expect federal law to
govern their rights, in light of the well-established rule that
federal law governs federal releases. In addition, documents
governing CERCLA transactions must be prepared in light of
applicable federal law regarding other CERCLA provisions.
Thus, under Kimbell Foods, it is appropriate for the Court,
in light of the strong policy favoring uniformity on this
issue, to apply a federal common law rule to interpret the
Assumption Agreement between Allied and Mobay's corporate
C. Liability of Parent Corporation Under CERCLA
Counts One and Two of Mobay's complaint allege that AHP is
liable for response costs at the Haledon site as an "owner or
operator" of a facility at which hazardous substances were
disposed. Section 107(a)(2) of CERCLA provides that "any person
who at the time of disposal of any hazardous substance owned or
operated any facility at which such hazardous substances were
disposed of" is liable for the costs of removal or remedial
action. 42 U.S.C. § 9607(a)(2). Count Two of Mobay's complaint
and Count One of Allied's cross-claim allege a claim for
contribution pursuant to Section 113(f)(1) of CERCLA.*fn7
"Owner or operator" is defined in CERCLA as "any person
owning or operating [a] facility." 42 U.S.C. § 9601(20)(A)(ii).
AHP asserts that it, as a parent corporation, cannot be liable
as an "owner or operator" for the activities of its
wholly-owned subsidiary under § 107 or § 113 because Mobay and
Allied have not alleged any facts which would justify piercing
the corporate veil.
Two circuits recently considered this issue and reached
divergent conclusions. In Joslyn Manufacturing Co. v. T.L.
James & Co., 893 F.2d 80 (5th Cir.1990), the first federal
appellate court to address this issue determined that a parent
corporation could not be liable under CERCLA for the acts of
its subsidiary. Id. at 82. The court relied primarily on the
fact that the parent corporation could not automatically be
deemed an "owner" of an offending facility of its subsidiary.
Id. at 82-83. The court found nothing in the language of CERCLA
nor the legislative history revealing a Congressional intent to
alter common law principles of corporate liability. Id. at 82.
Thus, the Joslyn court held that a parent corporation is
subject to liability as an "owner" only if the facts justify
piercing the corporate veil, such that the subsidiary is the
mere alter ego of the parent corporation. Id. at 82-83.
However, the First Circuit asserted that a parent corporation
could be liable under CERCLA for the acts of its subsidiary as
an "operator" of an offending facility. In United States v.
Kayser-Roth Corp., 910 F.2d 24 (1st Cir.1990), the court
explained that Congress, by including a category in addition to
owners, implied that a person who is an operator of a facility
is not protected from liability by the legal structure of
ownership. Id. at 26. Thus, it found that "a fair reading of
CERCLA allows a parent corporation to be held liable as an
operator of a subsidiary." Id. at 27.
In examining the district court's determination in
Kayser-Roth that the company
was an "operator" within the statutory meaning, the court noted
that to be an operator a parent must have "active involvement
in the activities of the subsidiary." Id. It observed that in
the usual case, a parent would not be liable because operator
status "requires more than complete ownership and the
concomitant general authority to control that comes with
ownership." Id. The district court relied on several factors in
determining that the parent exercised pervasive control over
the subsidiary: (1) monetary control over accounts; (2)
restriction of subsidiary's financial budget; (3) mandate that
it conduct governmental contact for the subsidiary; (4)
approval of the subsidiary's lease arrangements; (5) approval
of capital transfers; and (6) placement of parent personnel in
many subsidiary director and officer positions. United States
v. Kayser-Roth Corp., 724 F. Supp. 15, 18 (D.R.I.1989), aff'd,
910 F.2d 24 (1st Cir.1990). The First Circuit found that this
level of control was "more than sufficient" to create operator
liability under CERCLA. Kayser-Roth, 910 F.2d at 28.
All of the other district courts who have considered this
issue have also found parent corporations to be liable under
CERCLA if the parent controlled or participated in the
subsidiary's activities. See United States v. Allied Chemical
Corp., Nos. 83-5896 and 83-5898, 1990 WL 263611 (N.D. Cal. June
27, 1990) (denying summary judgment because factual issues
existed with respect to parent's liability either under
traditional alter ego or significant control theories); City of
New York v. Exxon Corp., 31 Envtl.Rep.Cas. 1412, 112 B.R. 540
(S.D.N.Y.1990) ("actual participation in and authority or
control over the affairs of a subsidiary or corporation are key
factors in determining whether to hold a parent corporation or
individual shareholder liable as an owner or operator"); United
States v. McGraw-Edison Co., 718 F. Supp. 154 (W.D.N.Y.1989)
(summary judgment denied because factual issues existed with
regard to direct liability); United States v. Nicolet, Inc.,
712 F. Supp. 1193, 1202-03 (E.D. Pa.1989) (denying parent's
motion to dismiss because as a stockholder and direct
participant in management, it could be liable for subsidiary's
cleanup costs); Rockwell Int'l Corp. v. IU Int'l Corp.,
702 F. Supp. 1384 (N.D.Ill.1988) (summary judgment denied because
parent corporation may be liable under CERCLA if it actively
participated in the management and control of the subsidiary's
facility); Colorado v. Idarado Mining Co., 18 Envtl.L.Rep.
20578, No. 83-C-2385, slip op. at 3 (D.Colo. April 29, 1987)
(parent corporation extensively involved in affairs of
subsidiary could be characterized as "owner" or "operator");
Idaho v. Bunker Hill Co., 635 F. Supp. 665, 671-72 (D.Idaho
1986) (evidence of control over subsidiary sufficient to impose
liability on parent as "owner" or "operator"). One district
court even found a parent corporation liable for subsidiary
responsibilities as a matter of law, without any demonstration
of control. Vermont v. Staco, Inc., 684 F. Supp. 822, 831-32
Other cases, dealing with the liability of individual
shareholders with a controlling interest in a corporation, held
that shareholders who actively participate in the management of
a facility can be liable under CERCLA. See, e.g., New York v.
Shore Realty Corp., 759 F.2d 1032, 1052 (2d Cir.1985); United
States v. Conservation Chemical Co., 628 F. Supp. 391 (W.D.
Mo.1985); United States v. Northeastern Pharmaceutical &
Chemical Co. ("NEPACCO"), 579 F. Supp. 823, 848-49 (W.D.Mo.
1984), rev'd in relevant part on other grounds and aff'd in
part, 810 F.2d 726 (8th Cir.1986), cert. denied, 484 U.S. 848,
108 S.Ct. 146, 98 L.Ed.2d 102 (1987).
As the court in Idarado Mining Co. stated:
the term "operator" must be interpreted with
[CERCLA's] purpose in mind. As a practical matter,
if mere interposition of a separate corporate
entity could insulate against CERCLA liability, it
would be far too easy to evade the statute.
18 Envtl.L.Rep. at 20578.