United States v. Bestfoods

From 1957 to 1972, Ott Chemical Company (Ott) (defendant) operated a manufacturing plant in Muskegon, Michigan, which polluted the site with hazardous chemicals. In the 1960s, Ott became a wholly-owned subsidiary of CPC International, Inc. (CPC) (defendant), since renamed Bestfoods. Ott and CPC had some common directors and officers, and CPC exercised significant control over Ott’s general business operations. One CPC employee, G.R.D. Williams, played a large role in dealing with the environmental risks caused by the Muskegon plant; Williams was an employee of CPC only, and not of Ott. In the 1980s, the federal Environmental Protection Agency (plaintiff) began to remediate the property and sought contribution from owners and operators pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Ott had dissolved by this time, but CPC was one of several companies sued for contribution. The district court found that CPC was directly liable under CERCLA as an operator of a hazardous plant because of the degree of control it exercised over Ott’s operation. Among other factors, the court cited the many directors and officers common to the two companies. The appellate court reversed, holding that a parent could only be liable for a subsidiary’s operation of a plant if state law piercing requirements were met, or if the parent and subsidiary operated the plant as a joint venture. The United States appealed.