## Facts

- A chemical manufacturing facility near Muskegon, Michigan became heavily contaminated over decades of operations by successive corporate owners and operators.
- The United States incurred cleanup costs and sought cost recovery under CERCLA § 107(a)(2) against parties that “owned or operated” the facility at the time of hazardous substance disposal.
- Corporate parents were linked to polluting subsidiaries that owned and operated the plant at different times, including CPC International, Inc. (through Ott Chemical Co.) and entities related to Aerojet-General Corp. (through Cordova Chemical subsidiaries).
- The dispute centered on whether parent corporations could be held liable under CERCLA as “owners or operators” based on their relationship to, and involvement with, the subsidiaries operating the facility.

## Issues

1. When, if ever, may a parent corporation be held derivatively liable under CERCLA for its subsidiary’s operation of a polluting facility (including through veil piercing)?
2. Whether a parent corporation may be held directly liable as a CERCLA “operator” based on its own participation in, and control over, the facility’s operations, without satisfying veil-piercing requirements.
3. What standard governs “operator” status for CERCLA § 107(a)(2) when the alleged operator is a corporate parent.

## Decision

- The Supreme Court held that a parent corporation may be held derivatively liable for a subsidiary’s CERCLA violations only when the corporate veil may be pierced under applicable law.
- The Court also held that veil piercing is not required for direct liability: a parent may be directly liable as an “operator” if it actually operated the facility.
- The Court rejected a test that treated ordinary parental oversight of a subsidiary as sufficient for operator liability.
- The judgment was vacated and remanded for application of the correct direct-operator standard to the parent’s conduct.

## Legal Principles

- CERCLA does not displace the general rule of limited liability between parent and subsidiary; derivative parent liability requires traditional veil-piercing conditions.
- Direct CERCLA operator liability turns on the entity’s relationship to the facility, not merely its relationship to the subsidiary as shareholder.
- An “operator” is one who directs the workings of, manages, or conducts the affairs of the facility, with emphasis on managing, directing, or conducting operations related to pollution (waste disposal/leakage) or environmental compliance decisions.
- Ordinary incidents of parental ownership (e.g., monitoring performance, approving budgets, setting general policies) do not alone establish operator liability; the focus is on actual management of pollution-related facility operations.

## Conclusion

The Court clarified that CERCLA imposes derivative parent liability only through veil piercing, but allows direct liability when a parent itself manages or directs pollution-related operations at the facility; the case was remanded to determine whether the parent’s conduct met that direct-operator standard.


United States v. Bestfoods, 524 U.S. 51 (1998)