Individual Liability for Environmental Law Violations
| Publication year | 2021 |
| Pages | 214 |
64 CBJ 214. INDIVIDUAL LIABILITY FOR ENVIRONMENTAL LAW VIOLATIONS
There is a growing recognition that our environment is under attack and that the battle to save it must escalate if we are to have any hope of success. Government agencies, the legislature and the courts have responded to this challenge by expanding the number of parties that may be charged with responsibility for the violation of environmental laws. This expansion encompasses the area of liability of corporate officers, directors, shareholders and employees for civil and criminal penalties under various federal and state statutes, and common law theories of liability. The traditional protections afforded to such persons by the corporate form are gradually eroding as the courts impose individual responsibility for conduct performed in the course of corporate activities.
Environmental law is both statutory and common law in nature. Such laws as the Clean Air Act,(fn1) the Federal Water Pollution Control Act,(fn2)the Resource Conservation and Recovery Act (RCRA),(fn3) and the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)(fn4) impose civil liability on "persons" and "owners and operators" who violate their provisions. Similarly, Connecticut statutes impose liability on "persons" who pollute the waters of the State.(fn5) Courts also utilize existing common law doctrines in their efforts to protect the environment.
This article will examine the development and current status of individual liability under various common law and federal statutory theories. First, it will discuss civil liability of directors, officers and shareholders under common law theories. Second, it will address civil liability of these individuals under the federal statutory framework. Finally, it will discuss the development of
criminal liability for violation of environmental laws under applicable federal statutes.
Under Connecticut law, there are two theories by which an individual officer, director or shareholder may be held liable for wrongs that would normally be attributable to a corporation. The 11 corporate veil" may be "pierced" to reach a controlling shareholder, or an officer or director may be held directly liable for torts committed in the course of work performed for the corporation.(fn6)
A. Piercing the Corporate Veil
The doctrine of "piercing the corporate veil" is an equitable doctrine.(fn7) It provides that when "the corporation is so manipulated by an individual or another corporate entity so as to become a mere puppet or tool for the manipulator, justice may require the courts to disregard the corporate fiction and impose liability on the real actor."(fn8) When such manipulation is present, the usual protection afforded to a shareholder, officer or director by the corporate existence will be disregarded. The doctrine requires that there be "such domination of finances, policies and practices that the controlled corporation has, so to speak, no separate mind, will or existence of its own and is but a business conduit for its principal."(fn9) It is not necessary that an individual be an officer or a director of the pierced corporation in order to hold him liable. The key question is the degree of control or influence exercised by the individual over the corporation.(fn10)
In Connecticut, the corporate shield may be pierced using one or both of two rules. They are known as the "instrumentality rule" and the "identity rule." Either one may be used to find that
a corporation is the "alter ego" of an individual.(fn11) The instrumentality rule requires proof of three elements:
(1) Control, not mere majority or complete stock control, but complete domination, not only of finances but of policy and business practice in respect to the transaction attacked so that the corporate entity as to this transaction had at the time no separate mind, will or existence of its own; and
(2) that such control must have been used by the defendant to commit fraud or wrong, to perpetrate the violation of a statutory or other positive legal duty, or a dishonest or unjust act in contravention of plaintiff's legal rights; and
(3) that the aforesaid control and breach of duty must proximately cause the injury or unjust loss complained of.(fn12)
The identity rule is stated as follows:
"If plaintiff can show that there was such a unity of interest and ownership that the independence of the corporation had in effect ceased or had never begun, an adherence to the fiction of separate identity would serve only to def eat justice and equity by permitting the economic entity to escape liability i arising out of an operation conducted by one corporation for the benefit of the whole enterprise."(fn13)
The identity rule is generally used in the situation where one corporation controls another and the plaintiff desires to impose liability on the controlling corporation. There is, however, precedent in Connecticut that holds the identity rule may also be used against an individual.(fn14)
Although Connecticut courts have yet to apply this doctrine in the environmental context in any reported decisions, it would seem to be a fertile avenue of attack in light of the willingness of courts to broaden the number of potentially liable persons. Of additional use is the doctrine which allows for direct liability of corporate officers.
B. Direct Liability
It is settled that corporate officers will be held liable for their own torts even when committed in the course of their official
duties.(fn15) "All that is required is that [there] is some special duty running to the third party and delegated to the officer by the corporation." (fn16)The officer may, however, be liable for torts committed by other agents, officers or employees of the corporation if the officer "specifically directed the particular act to be done, or participated, or cooperated therein.(fn17) Thus, officers and directors are held liable for torts of a corporation not because of their official position, but because of their own acts that amounted to a breach of duty to another.(fn18)
This rule has been frequently applied in Connecticut.(fn19) In Scribner, the president of a building contractor was held personally liable for damage to a homeowner's driveway caused by the contractor's excavation of the property. The Court stated that where "an agent or officer commits or participates in the commission of a tort, whether or not he acts on behalf of his principal or corporation, he is liable to third persons injured thereby."(fn20) The officer in Scribner was present on a daily basis during the construction of plaintiff's home and supervised the entire job. He also signed the contract for the corporation. This degree of involvement was enough for the Court to impose individual liability on him.(fn21)
There is ample basis under Connecticut common law for the imposition of liability for environmental violations upon officers and directors. As discussed below, federal courts have already begun the process of expanding these concepts into the existing statutory framework. It has become increasingly clear that the existence of a corporate entity will not provide any significant protection to an officer, director or shareholder who is actively connected with violations of federal environmental laws. Federal courts have generally found it unnecessary to "pierce the
corporate veil" in order to reach officers, directors and shareholders. Penalties are imposed directly based on broad interpretations of the provisions of CERCLA,(fn22) RCRA,(fn23) TSCA (fn24) and other statutes. There is now a significant body of federal common law interpreting the definition of "person" and "owner or operator" under various statutes to include corporate officers.
In United States v. Wade, (fn25) a company owner who had transported hazardous substances to a disposal facility argued that he could not be held individually liable under CERCLA for acts he performed in his capacity as president of the corporation. The district court held that he could be held liable if he personally participated in the wrongful injury-producing act.(fn26) The court refused, however, to find him liable on the government's motion for summary judgment. Although there had been deposition testimony that the owner personally brought drums to the waste site, there was no indication how many drums he brought or what they contained. The court noted that waste can be disposed of without giving rise to CERCLA liability. The government's allegation in its complaint that the officer directed or participated in waste disposal at the subject site was inadequate to form the basis for a finding of personal liability.
The district court denied a defendant's motion for summary judgment in United States v. Mottolo. (fn27)There, the United States sued the owner of a hazardous waste site, a chemical company that generated waste, and the company's president, Mr. Sutera, under CERCLA for reimbursement of costs incurred in response to the release of hazardous substances into the environment. Sutera argued that he operated the company to limit his personal liability and that the United States could not properly hold him vicariously liable for the actions of the corporation. The United States argued that Sutera was liable under the provisions of 42 U.S.C. § 9607(a)(3) (1982) in that he was a "person who by contract, agreement or otherwise arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment of hazardous substances owned or
possessed by such...
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