Kayser-Roth, Joslyn, and the Problem of Parent Corporation Liability Under CERCLA

This article examines these issues by focusing on the responsibility of parent corporations as owners and as operators under section 107 of CERCLA. The scope of the analysis is limited to corporations that participate in the management of other corporations. Moreover, for the sake of simplicity, the reach of the analysis is limited to the situation in which a corporation owns one hundred percent of the stock of the subsidiary. Part I provides a general overview of the principle of limited shareholder liability as it applies to parent corporations and of its economic underpinnings. Part II reviews judicial applications of CERCLA to parent corporations. My discussion focuses on two recent decisions - United States v. Kayser-Roth Corp. and Joslyn Mfg. Co. v. T.L. James & Co. - which represent the polar judicial views on shareholder liability and contain probably the best discussions in the case law thus far on this important issue. The district and appellate courts in Kayser-Roth found a parent corporation liable directly and indirectly under CERCLA. The courts in Joslyn, however, took the opposite position and declined to hold that CERCLA imposes direct liability on shareholders. Instead, they concluded that liability can only be imputed indirectly through piercing the corporate veil, and then only if the shareholder used the corporate form to avoid CERCLA liability. Finally, Part III criticizes the Kayser-Roth decision, as well as other decisions finding parent corporations directly liable under CERCLA, on both legal and policy levels. I conclude that parent corporation liability cannot be sustained under CERCLA unless the parent has exploited the corporate form to such an extent that piercing the corporate veil is warranted