Module V – Corporate Externalities
Chapter 13
Corporate Environmental Liability
• Corporation as polluter
Bar
exam
– Respondeat superior liability
– But pollution pays!
• CERCLA liability (beyond corporate polluter)
Corporate
practice
Law
profession
– Parent corporation liability
(1) owner: only under PCV (derivative liability)
(2) operator: manage polluting facilities (direct liability)
– Factors in direct liability: parent personnel ~ polluting facility
(1) dual officers/directors not enough
(2) beyond “norms” of parental oversight
• Corporate officers’ liability
Citizen of
world
Corporations:
A Contemporary Approach
•
•
Criminal (environmental statutes): no convictions!
Civil: beyond normal PCV
Chapter 13
Corporate Environmental Liability
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When is corporation
liable as polluter?
Civil liability
Criminal liability
Does pollution pay?
Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
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United States v. Bestfoods
(US 1998)
• Superfund?
• How funded?
• Who liable? Why BF?
• Rules on parent liability?
• Overlapping managers?
• Supervision of
environ compliance?
• CERCLA policy?
• “owner” liability?
• “operator” liability?
Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
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CERCLA § 107(a)(1)
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 shall
be liable for all costs of removal or
remedial action incurred by the
United States Government or a
State.
Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
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Nothing in CERCLA purports to
reject this bedrock principle of
corporate law: parent is not
liable for acts of subsidiary. …
Only when the corporate veil
may be pierced may parent face
derivative liability.
Under CERCLA “operator” [direct
liability] must manage, direct or
conduct operations specifically
related pollution…. Analysis of
relationship between CPC and
Muskegon facility. Common
D/Os acting in their capacities
as CPC D/Os – beyond “normal
relationship.”
Justice David Souter
Gov’t
regulator
Direct
liability
Parent
“operator”
PCV
Subsidiary
“owner/operator”
Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
Slide 6
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Unanswered questions:
• Derivative liability: Why does Supreme Court adopt
“state” PCV standards – isn’t CERCLA federal law?
– Which state: If federal “derivative liability” standards
depend on state law, which state?
• Direct liability: Compare to PCV - different? “Corporate
form misused” vs. “beyond norms of parental influence”?
– Reward laxity: Which parent corporation is better off –
one that oversees its sub’s polluting activities or not?
• Corporate awe: Why is the Supreme Court so in awe of
state-based corporate limited liability – “bedrock principle”?
Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
Slide 7
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Data on PCV
in environmental cases …
Thompson
(until 1985)
Wake I
(1986-1995)
Wake II
(1996-2005)
PCV
(K / tort cases)
1005 cases
PCV = 39.5%
118 cases
PCV = 32.2%
154 cases
PCV = 26.6%
PCV
(environ cases)
6 cases
PCV = 83.3%
5 cases
PCV = 60.0%
6 cases
PCV = 67.7%
Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
Slide 8
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Data on PCV
in environmental cases …
Thompson
(until 1985)
Wake I
(1986-1995)
Wake II
(1996-2005)
PCV
(K / tort cases)
1005 cases
PCV = 39.5%
118 cases
PCV = 32.2%
154 cases
PCV = 26.6%
PCV
(environ cases)
6 cases
PCV = 83.3%
5 cases
PCV = 60.0%
6 cases
PCV = 67.7%
Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
Slide 9
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More questions:
• Special PCV: Should there be different piercing
standards in environmental cases?
• Officer civil liability: why should “could have
prevented” be the standard? Too lax?
• Officer criminal liability: if statutes specifically
contemplate this, why no convictions?
Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
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Gov’t
regulator
Direct
liability
Parent
“operator”
PCV
Subsidiary
“owner/operator”
Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
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Unanswered questions:
• Derivative liability: Why does Supreme Court adopt
“state” PCV standards – isn’t CERCLA federal law?
– Which state: If federal “derivative liability” standards
depend on state law, which state?
• Direct liability: Compare to PCV - different? “Corporate
form misused” vs. “beyond norms of parental influence”?
– Reward laxity: Which parent corporation is better off –
one that oversees its sub’s polluting activities or not?
• Corporate awe: Why is the Supreme Court so in awe of
state-based corporate limited liability – “bedrock principle”?
Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
Slide 12
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Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
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BP plc
BP America Inc
BP Corp North Am
BP Co. North Am
BP Am Production
BP Exploration, Inc
Corporations:
A Contemporary Approach
BP Oil Spill Victim
Compensation Fund *
Chapter 13
Corporate Environmental Liability
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You are the general counsel of GlobalPetroleum.
There’s been a terrible accident. An oil rig leased to GP North America -a company in the GP group -- has gone down in flames with loss of
life, and the uncapped underwater well is spewing oil into the Gulf of
Mexico. It may become the biggest man-made oil spill in history.
It turns out the rig was actually operated not by GP, but its wholly-owned
US sub, GP Exploration – which held the lease to the offshore oil field.
And liability of GP Exploration (as “holder” of the offshore mineral
rights) is capped under the Oil Pollution Act of 1990 at removal costs
plus $75 million in environmental damages, unless there was “gross
negligence.” [See Act]
The GP board has met in emergency session. You have been asked to
address GP’s liability. What do you advise the board?
Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
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OIL POLLUTION ACT OF 1990
SEC. 1001. DEFINITIONS.
(27) ‘‘person’’ means an individual, corporation, …
(32) ‘‘responsible party’’ means the following: …
(C) OFFSHORE FACILITIES.—In the case of an offshore facility … the lessee or permittee of the
area in which the facility is located or the holder of a right of use and easement granted
under applicable State law or the Outer Continental Shelf Lands Act….
SEC. 1002. ELEMENTS OF LIABILITY.
(a)IN GENERAL.—Notwithstanding any other provision or rule of law, … each responsible party for
… a facility from which oil is discharged .. into or upon the navigable waters … is liable for the
removal costs and damages specified in subsection (b) that result from such incident. …
SEC. 1004. LIMITS ON LIABILITY.
(a)GENERAL RULE.—Except as otherwise provided in this section, the total of the liability of a
responsible party under section 1002 … with respect to each incident shall not exceed—
(b)… (3) for an offshore facility …, the total of all removal costs plus $75,000,000 …
(c) EXCEPTIONS.—
(1) … Subsection (a) does not apply if the incident was proximately caused by—
(A) gross negligence or willful misconduct of, or
(B) the violation of an applicable Federal safety, construction, or operating regulation by, the
responsible party, an agent or employee of the responsible party ….
Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
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The end
Corporations:
A Contemporary Approach
Chapter 13
Corporate Environmental Liability
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