Modern state statutes define the birth, lifetime capabilities and the death of corporations. State capacity statutes limit the time during which a dissolving corporation has the capacity to sue or be sued. Missouri's capacity statute is unique because it allows a dissolved Missouri corporation to be sued indefinitely.2

Missouri corporate law practitioners should realize the liability risk a capacity statute of indefinite length poses to clients under traditional corporate law doctrine. What may not be as clear is the significant risk of environmental liability a parent corporation faces. Courts have mutated traditional corporate law principles as they seek to apply the Comprehensive Environmental Response Compensation and Liability Act (CERCLA)3 to corporations. The result of the doctrinal mutation is an environmentally focused corporate law.

In Missouri, the capacity statute and environmental corporate law combination results in numerous methods for CERCLA plaintiffs to attach liabilities to parent corporations. This article seeks to explore those methods.4

The issue of whether potential CERCLA liability of a corporation disappears after dissolution is a developing and unresolved area of the law. Not surprisingly, the circuit courts have failed to reach a consensus. Beyond the Missouri capacity statute, there remains uncertainty in the analysis of a parent's potential CERCLA liability because Missouri district courts have failed to determine whether veil piercing requires analysis under the federal common law or Missouri law.5 Instead, the Missouri district courts have required both analyses.6

There are several theories by which CERCLA liabilities of a subsidiary can attach to the parent corporation. There are four possible scenarios in which direct liability for the acts of a subsidiary will attach to a parent corporation under Section 107(a) of CERCLA:7 (1) when the parent corporation manages the facility as an owner or operator;8 (2) when the parent corporation actively participates in disposal practices of its subsidiary;9 (3) when the parent has actual authority, regardless of whether it is exercised, to control the disposal practices of the subsidiary;10 and (4) when the acquiring corporation acquires the facility after active disposal and does nothing to stop the continued passive disposal, i.e., leaching and seeping of hazardous wastes at the facility.11

Congress, in CERCLA § 107(a)(1),12 requires that any person who owns a site contaminated with hazardous waste be strictly liable for all costs of cleanup.13 Federal courts hold parent corporations liable for their contaminated land under CERCLA. It is irrelevant to courts' analyses whether a corporation owned the land at the time of hazardous waste disposal.14

No provision exempts subsidiary corporations from the owner and operator requirements of CERCLA § 107(a).15 Whether a plaintiff can hold an acquiring parent corporation liable for the CERCLA liabilities incurred by the subsidiary prior to the parent's acquisition depends upon whether the parent becomes the owner of the land by virtue of controlling the subsidiary. The factual determination may involve discovering whether the parent ever had an ownership interest in the contaminated land.16

Under CERCLA § 107(a)(2),17 land ownership is not a prerequisite for direct liability to attach. Direct liability standards are more liberal than traditional vil piercing doctrine. Site operators at the time of hazardous waste disposal can also be held strictly liable for cleanup costs.18 The First Circuit, in John S. Boyd Co., Inc. v. Boston Gas Co., held a parent company directly liable for operating a contaminated facility through its subsidiary's operation.19 Conversely, the court in Joslyn Mfg. Co. v. T.L. James & Co., Inc.20 held that CERCLA does not define parent corporations of wholly-owned subsidiaries as "persons" and that parent corporations are liable only if the traditional tests for piercing the corporate veil are met.21

For plaintiffs to establish direct liability of a parent corporation under CERCLA, it may be enough to show the corporation had the authority to control the handling and disposal of hazardous substances.22 Courts are split whether mere authority, if not exercised, is enough for CERCLA liability to attach. The court in City of New York v. Exxon Corp.23 held that some degree of active participation by the parent corporation is necessary to hold the parent directly liable for the CERCLA liabilities of the subsidiary. For a court to attach CERCLA liability to a parent corporation, the plaintiff must demonstrate the parent exerted control or influence over the subsidiary during the time of disposal.

The Passive Disposal Theory attaches liability to land owners who allow contaminants to continue leaking or seeping into the environment.24 The theory was used by the Virgin Islands district court in the In re Tutu Wells Contamination Litigation case. In Tutu, a parent corporation acquired a subsidiary, dissolved the subsidiary and took title to the land for a brief period of time before selling the land. The court used the Passive Disposal Theory to hold a parent corporation directly liable under CERCLA even though that corporation was not the current owner or operator, nor had authority over the disposal practices of its subsidiary.25 The court held that the term "covered persons" under CERCLA § 107(a)26 includes owners of contaminated land who purchased the land after all active disposal of hazardous waste had ceased.27 "[I]f during their ownership and/or control of the . . . site, hazardous substances °deposited' or °stored' or °located' at the site °leaked' or °escaped' or °leached' into the environment, then [the owners] are °covered persons' under the statute,"28 the Tutu court explained.

Another district court within the Third Circuit has already criticized Tutu.29 Also, the overwhelming majority of case law requires some element of active disposal to find a parent corporation directly liable under CERCLA for the acts of its subsidiary.

A court's determination of an acquiring parent's possible successor liability requires analysis of the transaction by which the parent acquired the subsidiary.30 Liability turns on whether the transaction results in a merger or is merely a cash for stock swap. Traditionally, when corporate ownership is transferred from one corporation to another through a merger or consolidation, the successor corporation assumes the liabilities of the predecessor corporation.31

In a merger, one corporation disappears after merging its assets and liabilities into the surviving corporation; in a consolidation, two corporations merge into a newly created corporation. The two original corporations disappear.32

In contrast, when a corporation is acquired through a cash purchase of all of its stock, the corporate entity of the acquired corporation remains intact and retains its liabilities, despite the change of ownership.33 In Smith Land & Improvement Corp. v. Celotex Corp., the court reasoned that "changes in ownership of a corporation's stock will not affect the rights and obligations of the company itself."34 As the court explained, corporate rights and obligations survive a stock purchase because the entity is distinct from the shareholders "even if all of the stock is purchased by another corporation."35 Under the reasoning of Smith Land, the corporation acquired through a stock purchase will continue to be liable for all debts, contracts and torts it had prior to acquisition "to the extent of the property and assets received."36

In GRM Indus., Inc. v. Wickes Mfg. Co.,37 a Michigan district court rejected traditional corporate concepts of limited liability and held the stock purchaser to be a potentially liable party.38 Wickes involved the potential liability of a shareholder for the CERCLA liabilities the corporation incurred prior to the time the shareholder purchased the stock.

In Wickes, the transaction giving rise to the issue was a 100% stock for cash purchase. Wickes involved an acquired corporation that still existed. That corporation had sold the contaminated land at issue 12 years prior. Significantly, the court reasoned that successor liability should be applied to CERCLA actions regardless of the stock buyer's lack of involvement in waste disposal.39 The court held that failure to hold successor corporations liable allows "corporations to avoid CERCLA liability by carefully crafting corporate reorganizations."40 The Wickes decision, however, appears to be an anomaly. The majority of courts still uphold the limited liability shareholders have traditionally enjoyed, unless the shareholder is directly involved in the waste disposal.

If a transaction fails to meet the definition of either a merger or consolidation, the subsidiary does not disappear after its acquisition. The subsidiary continues as a corporate entity with the same assets and liabilities before and after the acquiring parent purchases it.41 Therefore, under Smith Land, and the majority of case law on point, practitioners cannot assume that a parent corporation succeeds to a subsidiary's liabilities upon acquisition.42

There are four exceptions to the general rule that liabilities are not assumed at acquisition except through merger or consolidation.43

(a) Express or Implied Assumption

Successor liability will attach when the buyer expressly or impliedly assumes the seller's liabilities.44 Even if no express agreement exists, one must analyze the facts and circumstances to determine whether the acquiring parent impliedly assumed the subsidiary's liabilities by affirmative acts. For example, an acquiring parent may impliedly assume the liabilities of the subsidiary by undertaking payment of the subsidiary's obligations after acquisition.

(b) De Facto Merger

Courts hold that successor liability attaches when a de facto merger occurs. The court in In re Acushnet45 listed the factors to be considered in a de facto merger analysis as follows:

(1) There is a continuation of the enterprise of the seller corporation, so that there is continuity of management, personnel, physical location, assets, and general business operations. (2) There is continuity of shareholders which results from the purchasing corporation paying for the acquired assets with shares of its own stock, this stock ultimately coming to be held by the shareholders of the seller corporation so that they become a constituent part of the purchasing corporation. (3) The seller corporation ceases its ordinary business operations, liquidates, and dissolves as soon as legally and practically possible. (4) The purchasing corporation assumes those obligations of the seller ordinarily necessary for the uninterrupted continuation of normal business operations of the seller corporation.46

The second de facto merger factor, continuity of shareholders, has traditionally been a required factor in a de facto merger analysis.47 The lack of this factor in any case weighs against any de facto merger argument for successor liability.

The amount of weight a court would give to the third factor is likely to hinge on whether the court considers the actual time between acquisition to be "as soon as legally and practically possible." The fourth factor under the de facto merger analysis may be met if the acquiring parent assumed the ordinary and necessary daily obligations of the subsidiary.48

The Acushnet court determined that none of the above factors were either necessary or sufficient to establish de facto merger.49 One should base such a determination on the totality of the circumstances.50 Further, the court noted that de facto merger is unlike any other basis for establishing successor liability.51 Courts can apply de facto merger as a judge-made equitable device.52

(c) Mere Continuation

Successor liability will attach if the court believes the buyer is merely continuing the same business operation of the seller.53 Besides the mere continuation exception, the courts have developed the broader "substantial continuity" test,54 and the even broader "continuity" test.55 Successor liability attaches when asset sales result in the buyer acquiring all or nearly all of the seller's assets, and the buyer continues nearly the same business.56

(d) Transaction Used to Escape Liability

Courts will also attach successor liability when the buyer corporation used the transaction to escape liabilities.57 Obviously, it is impossible to show that an acquiring parent dissolved its acquired subsidiary to escape CERCLA liability if the subsidiary was dissolved prior to CERCLA's 1980 enactment. Nevertheless, a credible argument for such a seemingly fraudulent dissolution is possible if the acquiring parent dissolved the liable subsidiary after 1980.

Some courts rule that Federal Rule of Civil Procedure 17(b)58 prevents CERCLA actions against successor corporations, dissolved corporations and their distributees. Where state law does not authorize preemption, the majority of courts have found that CERCLA preempts state corporation statutes.59

In Levin Metals Corp. v. Parr-Rich-mond Terminal Co.,60 the Ninth Circuit found that CERCLA did not preempt a state capacity statute. In Levin, the plaintiff sued under CERCLA to recover cleanup costs of land the defendant sold the plaintiff. The defendant corporation had voluntarily dissolved 12 years prior to the plaintiff's suit. The court reasoned that Rule 17(b) requires the court to apply the law of the state of incorporation when the state law is a "capacity statute."61

Levin distinguished statutes determinative of a dissolved corporation's capacity to be sued from statutes that limit liability.62 The court reasoned that allowing CERCLA to preempt state capacity statutes would prevent courts from looking to state law when determining whether a dissolved corporation could be sued in any case involving a federal cause of action.63 The Levin court implicitly disapproved of federal courts preempting corporation law, traditionally a creature of state law.64 The Levin court's implicit reasoning is that such a result would be inconsistent with Erie R.R. v. Tompkins,65 discussed infra at Section III.

A court that finds CERCLA does not preempt state law under Rule 17(b) will rely on state corporation law. If the subsidiary is a Missouri corporation, Missouri statutes control. Unlike the capacity statute at issue in Levin,66 Missouri's capacity statute allows a dissolved corporation to sue and be sued.67 The statute provides in relevant part, "Dissolution of a corporation does not . . . prevent commencement of a proceeding by or against the corporation in its corporate name."68

Given Missouri's capacity statute, a parent corporation of a dissolved Missouri subsidiary cannot successfully seek to avoid CERCLA liability by claiming CERCLA does not preempt state corporation law. If Missouri's capacity statute limited claims against a dissolved corporation, a parent corporation could try to argue that it could not be sued as successor-in-interest to a Missouri subsidiary. Significantly, the result under CERCLA or Rule 17(b) could be the same because the Missouri statute does not limit an acquiring parent corporation's amenability to suit.

When the assets of a dissolved corporation have yet to be distributed, some courts have held the dissolved corporation liable under CERCLA. In United States v. Sharon Steel Corp.,69 the Utah district court implicitly addressed the issue of successor liability under CERCLA. In that case, the United States sued a corporation still in the dissolution process. The Sharon Steel court did not address the issue of whether a CERCLA plaintiff can reach the assets of a dissolved corporation in the hands of the distributees.70 Rather, the court distinguished its holding, saying, "Here, the funeral is still going on."71 The court reasoned that the dissolved corporation could be held liable under CERCLA because assets not yet distributed were still available to pay for response costs.72 Yet, in United States v. Distler73 the Kentucky district court refused to hold a dissolved corporation liable under CERCLA because that corporation distributed all of its assets to shareholders nine years prior. However, the court's reasoning in Distler is reconcilable with Sharon Steel.

Distinguishing the Sharon Steel holding that CERCLA liability attached to a dissolved corporation that had not completely distributed its assets, the Distler court reasoned there is a difference between a dissolved corporation that is still "winding up its affairs" and a corporation for which the "funeral is long over" and which is "dead and buried."74

Furthermore, the Distler court determined this is a federal question.75 Because Congress could not have intended two different results for companies in identical positions, the Distler court decided it must ascertain the national rule.76

Finally, Distler contrasted the ample authority that supports CERCLA's retroactive application with the lack of authority imposing CERCLA liability on a dissolved and distributed corporation. The Distler court reasoned that because there is a lack of authority imposing CERCLA liability on "dead and buried" corporations and their distributees, liability cannot attach under CERCLA.77

Importantly, in Distler the United States sued a dissolved corporation and a shareholder/distributee to recover response costs under CERCLA. A different analysis is required if a plaintiff does not sue the dissolved subsidiary directly, but instead sues the acquiring corporation as the successor-in-interest to the dissolved subsidiary. This distinction is significant. By suing an active corporation, the plaintiff can avoid capacity statutes that may prevent a CERCLA action against a dissolved corporation.

Not all courts addressing this issue agree that dissolution is determinative of a corporation's capacity to be sued. At least one district court has held that a corporation could always be sued under CERCLA, regardless of its corporate status. In Allied Corp. v. Acme Solvents Reclaiming, Inc.,78 the court held that dissolved corporations are not on a different "definitional plane" from dissolved corporations that have yet to distribute net assets.

The court determined CERCLA's broad remedial goals would be "entirely frustrated" if state statutes were used to allow dissolved corporations to escape liability.79 Further, the court noted that Congress did not place any limit on the definition of a "corporation" as a "person" under CERCLA § 107.80 Therefore, the court reasoned that Congress intended to provide a cause of action "against a °corporation' without regard to its current status."81

The Tenth Circuit added another factor in City and County of Denver v. Adolph Coors Co.82 The court stated that if an identifiable body of assets attributable to the dissolved corporation still exist, then the dissolved corporation is still a "person" under CERCLA and amenable to suit.83

The Coors court reasoned that whether a corporation is a "person" under CERCLA depends on whether it has assets.84 In dicta, the court stated that a dissolved corporation's assets should be used for clean-up if the assets are available.85 This rationale is based on the underlying remedial policy goals of CERCLA, which seek to impose clean-up costs on those responsible for disposal.86

The Coors court left open the possi-bility that a dissolved corporation may not be liable when the corporation's assets are widely dispersed.87 The court rationalized it would be nearly impossible to find a single pool of assets to attach in those circumstances.88

If a court follows the reasoning of Sharon Steel and Distler, it is unlikely the subsidiary's CERCLA liabilities will attach to the acquiring parent. The acquiring parent can claim it is merely the shareholder distributee of a "buried" corporation. Sharon Steel and Distler do not give a plaintiff adequate reasoning to rebut such an argument. However, if the court follows Coors, the plaintiff will likely prevail because of the strong policy arguments in Coors.

This analysis is somewhat uncertain because both Sharon Steel and Coors were decided in the Tenth Circuit. However, the argument can be made that the two cases are complementary. Sharon Steel governs situations where assets are widely dispersed amongst numerous shareholder-distributees, whereas Coors governs cases in which the net assets have a definite value and there are few shareholder-distributees.

Another theory that may be employed to hold a parent corporation responsible for the CERCLA liability incurred by its acquired subsidiary is veil piercing.

Some courts refuse to apply federal common law of veil piercing and refer instead to the common law of the state where the corporation is domiciled, based on the Erie doctrine.89 In United States v. Bliss,90 the Missouri district court declined to determine whether state or federal common law of veil piercing should be used. The court required veil piercing analysis under both the federal common law and Missouri law.91 The Bliss court found it unnecessary to determine which law is applicable because they are similar.92 Because a case involving a dissolved Missouri subsidiary corporation may be tried in Missouri, both federal and Missouri common law are relevant.

CERCLA does not explicitly state that acquiring corporations are liable for the acts of the acquired corporation. The Supreme Court in Clearfield Trust Co. v. United States93 held that courts should fashion appropriate federal rules if statutory language is not dispositive.94 In such a case, selection of the federal rule is a matter of federal interpretation and not state law.95

The leading case holding that a uniform federal rule is appropriate in CERCLA cases is United States v. Chem-Dyne Corp.96 Chem-Dyne was a case of first impression on the issue of the scope of liability under CERCLA. Chem-Dyne addressed the significance of the Erie doctrine when federal courts consider CERCLA cases involving corporations, traditionally creatures of state law. The Chem-Dyne court held that although Erie eliminated federal common law, "the power to fashion federal specialized common law remains untouched when it is °necessary to protect uniquely federal interests.'" The court reasoned that CERCLA is easily distinguishable as a uniquely federal interest.97

Generally, the federal courts use four factors to determine whether to piece the corporate veil: (1) gross undercapital-ization of the corporation at formation and throughout its life; (2) failure to observe corporate formalities, such as non-functioning officers or directors, absence of corporate records, and non-payment of dividends; (3) siphoning of the corporation's funds by the dominant shareholder or parent corporation; and (4) when recognizing the corporate entity would defeat public policy or statutory intent or shield someone from liability for a crime.98 The court's ruling rests on a "totality of the facts" test.99

Note, as to the fourth factor there is little doubt that failure to hold a successor corporation liable would defeat a significant public policy. As noted in Acushnet,100 the Smith Land decision is worth quoting. "Congressional intent supports the conclusion that, when choosing between the taxpayers or the successor corporation, the successor should bear the cost."101

The Fifth Circuit presented an even more exhaustive list of factors courts should consider when determining whether to pierce the corporate veil in United States v. Jon-T Chemicals, Inc.102 The Jon-T factors include the following:

(1) the parent and the subsidiary have common stock ownership; (2) the parent and the subsidiary have common directors or officers; (3) the parent and the subsidiary have common business departments; (4) the parent and the subsidiary file consolidated financial statements and tax returns; (5) the parent finances the subsidiary; (6) the parent caused the incorporation of the subsidiary; (7) the subsidiary operates with grossly inadequate capital; (8) the parent pays the salaries and other expenses of the subsidiary; (9) the subsidiary receives no business except that given to it by the parent; (10) the parent uses the subsidiary's property as its own; (11) the daily operations of the two corporations are not kept separate; and (12) the subsidiary does not observe the basic formalities, such as keeping separate books and records and holding shareholder and board meetings.103

The success of federal common law veil piercing arguments in any given case necessarily depends on the discoverable facts of the case. The critical facts that need to be developed center on the formality of the relationship between the acquiring parent and the subsidiary corporation after the acquisition.

A plaintiff's case will be strong if the totality of facts indicate the acquiring parent failed to adhere to inter-corporate formalities and/or that it acquired the subsidiary for a fraudulent purpose, such as to drain the subsidiary's assets. An acquiring parent can effectively rebut such claims if it can prove that all, or most, corporate formalities were followed.

Like the federal courts, the Missouri courts also consider certain factors when determining whether to pierce the corporate veil. However, unlike the federal courts, the Missouri courts only consider three factors, and all three factors must be met before the court will engage in veil piercing. The Missouri Court of Appeals held the corporate veil will be pierced where: (1) the corporation is completely dominated by a person or other corporation to the extent that the corporation has no separate mind, will or existence of its own; (2) the complete domination and control of the corporation is used to commit fraud, or inflicts injustice or inequitable consequences; and (3) the control andbreach of duty must proximately cause the injury or unjust loss.104

K.C. Roofing Center v. On Top Roofing, Inc. involved a creditor's action to recover on a defendant's corporate debt. The K.C. Roofing court reasoned that the defendant had been the alter ego of his corporation because he did not adhere to the corporate formalities.105 In addition, the defendant had exercised complete control of the corporation.106

The K.C. Roofing court also reasoned that by dominating and controlling the corporation, the defendant had used the corporate form to evade paying the debt owed the plaintiff.107 Finally, the court reasoned that allowing the defendant to hide behind the corporate veil would be unjust, unfair and inequitable.108

A court applying Missouri common law and the reasoning of K.C. Roofing to an acquiring parent corporation would not pierce the dissolved subsidiary's corporate veil unless all three factors are clearly met. Thus, if any one of the three requirements cannot be proven by a CERCLA plaintiff, the veil piercing claim will fail under Missouri common law.

Clearly, there is a split of authority on each issue related to a parent's potential CERCLA liability due to acts of its subsidiary. It is unlikely that a parent corporation will be held directly liable for the pre-acquisition CERCLA liability of its subsidiary corporation, unless the plaintiff succeeds in piercing the corporate veil. On the other hand, it is quite possible that such a parent corporation can be held secondarily liable as a successor. Thus, parent corporations of Missouri subsidiaries should heed this warning. The combination of the Missouri capacity statute and dual veil piercing analysis greatly increases the risk a court will attach a Missouri subsidiary's pre-acquisition CERCLA liability to its parent corporation.

1 The Holy Bible, I Corinthians 15:55, King James Version.

2 Section 351.476(2)(5), RSMo 1994.

3 42 U.S.C. § 9607(a) (1994).

4 This paper is limited to the hypothetical situation of a parent corporation which acquires a subsidiary corporation. It will be assumed that sometime after acquisition the parent dissolves the subsidiary. Most importantly, the acquired subsidiary is a Missouri corporation for purposes of this paper. The parent corporation's origin is unstipulated.

5 See United States v. Bliss, 667 F. Supp. 1298, 1308 (E.D. Mo. 1987); see also United States v. TIC Inv. Corp., 68 F.3d 1082, 1091-92 (8th Cir. 1995).

6 Because the acquiring parent corporation may or may not be the sole shareholder of the dissolved subsidiary, this paper will also consider whether the dissolved subsidiary's potential CERCLA liability can attach to shareholders and/or distributee of the dissolved Missouri corporation.

7 42 U.S.C. § 9607(a) (1994).

8 State of New York v. Shore Realty Corp., 759 F.2d 1032, 1044 (2d Cir. 1985).

9 John S. Boyd Co., Inc. v. Boston Gas Co., 992 F.2d 401, 408 (1st Cir. 1993).

10 United States v. Northeastern Pharmaceutical & Chemical Co., Inc., (NEPACCO II), 810 F.2d 726, 743 (8th Cir. 1986).

11 In re Tutu Wells Contamination Litigation v. Texaco, Inc., 846 F. Supp. 1243, 1281-82 (D.V.I. 1993).

12 42 U.S.C. § 9607(a) (1994).

13 Id.

14 Shore Realty, at 1044.

15 42 U.S.C. § 9607(a) (1994).

16 Such uncertainty arises when a subsidiary dissolves and title to the contaminated land passes to the parent, whereby the parent becomes liable as an owner.

17 42 U.S.C. § 9607(a)(2) (1994).

18 Shore Realty, 759 F.2d at 408.

19 992 F.2d at 408. See also, BancAmerica Commercial Corp. v. Trinity Industries, Inc., 900 F. Supp. 1427, 1454 (D. Kan. 1995) (holding successor corporation can escape liability as an operator under 42 U.S.C. § 9607(a)(2) if none of the disposal occurred during the time the parent owned the subsidiary); United States v. Kayser-Roth Corp., Inc., 910 F.2d 24 (1st Cir. 1990) (ruling operator liability forparent requires, at a minimum, active involvement in subsidiary's affairs); Fishbein Family Partnership v. PPG Indus., Inc., 871 F. Supp. 764 (D.N.J. 1994) (finding claim against shareholder fails absent allegations and proof of shareholder exerting control over decisions).

20 893 F.2d 80 (5th Cir. 1990).

21 Id.

22 Northeastern Pharmaceutical & Chemical Co., at 743.

23 112 Bankr. 540, 548 (S.D.N.Y. 1990).

24 In re Tutu Wells Contamination Litigation, 846 F. Supp. 1243, 1281-2 (D.V.I. 1993).

25 Id.

26 42 U.S.C. § 9607(a) (1994).

27 In re Tutu Wells Contamination Litigation at 1281-2. See also Nurad, Inc. v. William E. Hooper & Sons Co., 966 F.2d 837, 842 (4th Cir. 1992); Shore Realty, 759 F.2d at 1045.

29 See United States v. CDMG Realty Co., 875 F. Supp. 1077, 1084 (D.N.J. 1995) (rejecting Tutu and holding active human participation must occur before CERCLA liabilities will attach).

30 19 Fletcher Cyclopedia of the Law of Private Corporations § 3:138 (rev. perm. ed. 1994).

31 Id.

32 Id.

33 Smith Land & Improvement Corp. v. The Celotex Corp., 851 F.2d 86, 91 (3d Cir. 1988).

34 Id. at 91.

35 Id. at 91.

36 Id., (quoting 15 Fletcher Cyclopedia of the Law of Private Corporations § 7121 (perm. ed. supp. 1996)).

37 749 F. Supp. 810 (W.D. Mich. 1990).

38 Id. at 814-15.

39 Id.

40 Id.

41 19 Fletcher Cyclopedia of the Law of Private Corporations § 3:138 (rev. perm. ed. 1994).

42 Smith Land, at 91.

43 United States v. Mexico Feed and Seed Co., Inc., 980 F.2d 478, 487 (8th Cir. 1992); John S. Boyd Co., Inc. v. Boston Gas Co., 992 F.2d 401, 408 (1st Cir. 1993).

44 City Environmental, Inc. v. U.S. Chemical Co., 814 F. Supp. 624, 634 (E.D. Mich. 1993).

45 712 F. Supp. 1010, 1015 (D. Mass. 1989).

46 Id.

47 Id. at 1016 (disapproving this traditional analysis).

48 Id.

49 Id.

50 Id.

51 Id. at 1015.

52 Id.

53 Mexico Feed and Seed, at 487; John S. Boyd Co., at 408.

54 For a well-developed and in-depth discussion, see Mexico Feed and Seed, 980 F.2d at 488-89.

55 Turner v. Bituminous Casualty Co., 244 N.W.2d 873, 881 (Mich. 1976).

56 Id. at 881. But see United States v. Carolina Transformer Co., Inc., 739 F. Supp. 1030 (E.D.N.C. 1989); Charter Township of Oshtemo v. American Cyanamid Co., 876 F. Supp. 934 (W.D. Mich. 1994).

57 See United States v. Arrowhead Refining Co., U.S. Dist. LEXIS 21013 (D. Minn. 1993); West Texas Refining & Dev. Co. v. Commissioner of Internal Revenue, 68 F.2d 77 (10th Cir. 1933).

58 2 Bender's Federal Practice Forms Rule 17(b) (1994). Rule 17(b) states, "The capacity of a corporation to sue or be sued shall be determined by the law under which it was organized."

59 See United States v. Sharon Steel Corp., 681 F. Supp. 1492, 1498 (D. Utah 1987) (finding that CERCLA preempts capacity provision when dissolved corporation has not yet distributed assets); Allied Corp. v. Acme Solvents Reclaiming, Inc., 812 F. Supp. 124 (N.D. Ill. 1993) (holding a corporation subject to suit under CERCLA regardless of the corporation's status); City & County of Denver v. Adolph Coors Co., 813 F. Supp. 1471, 1475 (D. Colo. 1992) (ruling that "CERCLA must preempt state capacity law and supersede Fed.R.Civ.P. 17(b)").

60 817 F.2d 1448, 1451 (9th Cir. 1987).

61 Louisiana-Pacific Corp. v. Asarco, Inc., 5 F.3d 431, 432 (9th Cir. 1993) (Washington[] [state's] two-year corporate capacity statute is not preempted by CERCLA's three-year statute of limitations). See United States v. Northeast Pharmaceutical & Chem. Co., Inc., 579 F. Supp. 823, 827 n.1 (W.D. Mo. 1984) (stating that it is well settled in the federal courts and in Missouri common law that state capacity statutes control under Rule 17(b)).

62 817 F.2d at 1451.

63 Id.

64 Id.

65 304 U.S. 64 (1938).

66 817 F.2d at 1451.

67 Mo. Rev. Stat. § 351.476(2)(5) (1996).

68 Id.

69 681 F. Supp. 1492, 1498 (D. Utah 1987).

70 I. at 1492.

71 Id. at 1498.

72 Id.; cf. Allied Corp. v. Acme Solvents Reclaiming, Inc., 812 F. Supp. 124 (N.D. Ill. 1993) (holding a corporation subject to suit under CERCLA regardless of the corporation's status) but see, Traverse Bay Area Intermediate Sch. Dist. v. Hitco, Inc., 762 F. Supp. 1298, 1301-2 (W.D. Mich. 1991), (finding that a corporation no longer holding assets is no longer a "person" under CERCLA).

73 741 F. Supp. 643, 647 (W.D. Ky. 1990).

74 Id. at 646.

75 Id.

76 Id.

77 Id. at 647. See also Hillsborough County v. A & e Road Oiling Serv., Inc., 877 F. Supp. 618, 622 (M.D. Fla. 1995) (finding that CERCLA cannot resurrect dissolved corporations that distributed all assets and are dead and buried).

78 812 F. Supp. 124 (N.D. Ill. 1993).

79 Id. at 4.

80 Id. at 5.

81 Id. However, note the district court's holding in Traverse, 762 F. Supp. at 1301-2 (W.D. Mich. 1991), that non-existent corporation cannot be a "person" under CERCLA.

82 813 F. Supp. 1471, 1474-75 (D. Colo. 1992).

83 Id.

84 Id.

85 Id. (citing Columbia River Service Corp. v. Gilman, 751 F. Supp. 1448 (W.D. Wash. 1990)).

86 813 F. Supp. at 1474-75. However, note the court's holding in A & e Road Oiling, 877 F. Supp. 618, that once all assets are distributed, the corporation is buried and cannot be resurrected for CERCLA purposes.

87 Coors at 1475.

88 Id.

89 Erie R.R. v. Tompkins, 304 U.S. 64 (1938). Erie abolished the notion of federal common law and required that state law be applied in all matters except those "governed by the Federal Constitution or by Acts of Congress." Id. at 78. The Supreme Court affirmed and clarified Erie in Budinich v. Becton Dickinson & Co., 486 U.S. 196, 198 (1988), holding that "Although state law generally supplies the rules of decision in federal diversity cases, it does not control the resolution of issues governed by federal statute."

About one month after deciding Budinich, the Supreme Court adopted a slightly more complex analysis for the applicable law question in Stewart Organization, Inc. v. Ricoh Corp., 487 U.S. 22 (1988). The Court ruled that a two-step analysis is required to determine what the applicable law is when "the federal law sought to be applied is a congressional statute." Id. at 26-28. First, is the statute "sufficiently broad to control the issue before the court[?]" Id. at 99. If the answer to the first inquiry is "yes" the inquiry continues. Second, the Court asks if "the statute represents a valid exercise of Congress' authority under the Constitution[?]" Id. at 27. If the result of the two-step test is an affirmative answer to both inquiries, then the federal courts are bound to apply the law of Congress. Id.

In determining whether the statute is intended to control the issue before the court one must refer to statute. There is language in CERCLA § 101(21), 42 U.S.C. § 9601(21) (1994), that defines a liable "person" broadly enough to include a "corporation" without regard to the corporation's status. On one hand, this statute could be interpreted not to apply to dissolved corporations because the reference is merely to a "corporation." The argument could be raised that if Congress had intended the statute to apply to any corporation, regardless of its status, then Congress would have so stipulated in the statute. On the other hand, the introductory language in CERCLA § 107(a), 42 U.S.C. § 9607(a) (1994), says that the statute applies "notwithstanding any other provision or rule of law." On balance, courts have generally interpreted CERCLA broadly enough not to frustrate Congress' intention of holding individuals and corporations responsible for the cost of cleaning up the hazardous waste for which they are responsible. Idaho v. Bunker Hill Co., 635 F. Supp. 665, 671-72 (D. Idaho 1986). Therefore, an argument can be made that the first test of Stewart is met in CERCLA cases.

Under the second test of Stewart, there does not appar to be any reason to believe Congress violated the Enabling Act or constitutional restrictions when it enacted CERCLA.

90 667 F. Supp. 1298, 1308 (E.D. Mo. 1987).

91 Id.

92 Id.

93 318 U.S. 363, 367 (1943).

94 Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 641 (1981).

95 Textile Workers Union v. Lincoln Mills, 353 U.S. 448, 457 (1957).

96 572 F. Supp. 802, 808 (S.D. Ohio 1983).

97 Id.; accord United States v. A & F Materials Co., Inc., 578 F. Supp. 1249, 1255 (S.D. Ill. 1984); Colorado v. Asarco, Inc., 608 F. Supp. 1484, 1489-90 (D. Colo. 1985).

98 See American Bell Inc., v. Federation of Telephone Workers of PA, 736 F.2d 879, 886 (3d Cir. 1984).

99 United States v. Jon-T Chemicals, Inc., 768 F.2d 686, 691-92 (5th Cir. 1985); see also City of New York v. Exxon Corp., 112 Bankr. 540, 553 (S.D.N.Y. 1990) (citing factors to be considered and describing the inquiry as one leading to an "equitable decision . . . dependent on the facts peculiar to each case"); United States v. Arrowhead Refining Co., 1993 U.S. Dist. LEXIS 21013 (D. Minn. 1993) (holding that requiring parent involvement in order to pierce the corporate veil is too restrictive and that all circumstances should be considered). But see Interstate Power Co. v. Kansas City Power & Light, 909 F. Supp. 1241 (N.D. Iowa 1993) (holding that control and active participation are alternative factors to the traditional veil piercing tests).

100 712 F. Supp. at 1013.

101 Smith Land, at 92.

102 768 F.2d 686, 691-92.

103 Id.

104 K.C. Roofing Center v. On Top Roofing, Inc., 807 S.W.2d 545, 548-49 (Mo. App. W.D. 1991). See also Mitchell v. K. C. Stadium Concessions, Inc., 865 S.W.2d 779 (Mo. App. W.D. 1993).

105 Id. at 547.

106 Id. at 548.

107 Id. at 550. See also Radaszewski v. Telecom Corp., 981 F.2d 305 (8th Cir. 1992); Collett v. American Nat'l Stores, Inc., 708 S.W.2d 273 (Mo. App. E.D. 1986).

108 Walls By Walls v. Allen Cab Co., Inc., 903 S.W.2d 937 (Mo. App. E.D. 1995) (holding veil pierced when parent controls subsidiary in violation of a statutory duty, the violated statutory duty contravened the plaintiff's rights, and the actions caused loss to plaintiff); Jackson v. O'Dell, 851 S.W.2d 535, 537 (Mo. App. W.D. 1993) (citing examples of wrongs satisfying the second requirement include: actual torts, under-capitalization, or the stripping of assets from the subservient corporation).

© 1997, Jeanette M. Bowers