United States District Court, S.D. New York
March 29, 2004.
CONSOLIDATED EDISON CO. OF NEW YORK, INC., Plaintiff, -against- UGI UTILITIES, INC., Defendant
The opinion of the court was delivered by: DENNY CHIN, District Judge
In this case, brought pursuant to the Comprehensive Environmental
Response, Compensation and Liability Act ("CERCLA"),
42 U.S.C. § 9601-9675, plaintiff Consolidated Edison Company of New York,
Inc. ("Con Ed") seeks to hold defendant UGI Utilities, Inc. ("UGI") liable
for environmental response costs
related to soil and groundwater contamination from manufactured gas
plant ("MGP") activities undertaken from 1898 to 1904 at sites owned by a
subsidiary and a predecessor of UGI. Defendant moves for summary judgment
pursuant to Fed.R.Civ.P. 56. For the reasons set forth below,
defendant's motion is granted.
STATEMENT OF THE CASE
I. The Facts
For purposes of this motion, the facts are construed in the light most
favorable to Con Ed as the party opposing summary judgment.
A. The Origins of UGI, 1882-1887
United Gas Improvement Company ("UGIC") was formed in June 1882 by a
group of Philadelphia business men for the purpose of "manufacturing gas
and gas-making machinery" based on the patent for a "water gas" process
and apparatus, obtained in April 1882 from inventor Thaddeus S.C. Lowe.
(Def. Exh. 2 at 32, 34-39; Gary Aff., Exh. 4 at UGI 1353; Gary Aff., Exh.
3 at UGI 5332). Lowe water gas was an improvement over coal gas because
it produced more light at a lower cost. (Gary Aff., Exh. 4 at UGI 1353).
UGIC sought ways to exploit and use this new technology, including by
purchasing certain existing gas works, establishing or building new gas
works that it would use itself or sell to others, and entering into
agreements to operate certain gas plants in return for a share of the
profits. (Def. Exh. 2 at 32-33; Def. Exh. 4 at 89; Gary Aff., Exh. 5 at
Under Pennsylvania law, UGIC could not hold stocks in another
corporation. (Gary Aff., Exh. 5 at 96). Accordingly, in 1887, the owners
of UGIC formed a new company called the Union Company and used it to
acquire an old Pennsylvania corporate charter with broad powers that
included the right to own other corporations. (Def. Exh. 4 at 89; Gary
Aff., Exh. 5 at 96-97). The name of this new company was then changed to
The United Improvement Company ("TUGIC"). (Id.).
B. UGI Acquisitions in New York. 1888-1900
TUGIC, which would later become UGI, purchased all of the assets of
UGIC in 1888 and then used the charter to acquire gas and electric
properties across the United States. (Id.; Def. Exh. 3 at
UGI*fn1 acquired ownership interests in the White Plains Lighting
Company and Hudson River Gas & Electric Company of Tarrytown in 1898
and 1900, respectively. (Gary Aff., Exh. 29; Exh. 33 at ENV 93, 95; Def.
Exh. 9 at 276).
In a January 1900 Board Meeting, UGI President Thomas Dolan reported
that UGI had acquired interests in, inter alia, New Rochelle
Electric Company, Pelham Electric Light and Power Company, Port Chester
Electric Light Company, and the White Plains Electric Company. (Def. Exh.
6 at 114). Dolan also reported that UGI had organized a company known as
Gas and Coke Company, which had gas franchises in Mount Vernon and
New Rochelle. (Id.).
In March 1900, UGI acquired the New York Suburban Gas Company ("New
York Suburban") from the American Gas Company ("American Gas") (Def. Exh.
7), itself a consolidation of utility companies owned by American Gas
the Eastchester Gas Light Company, the Pelham Gas Light Company,
the Larchmont Gas Company, the Westchester Gas and Electric Company, and
the New Rochelle Gas and Fuel Company. (Def. Exh. 8). UGI
thereby acquired interests in MGP sites in Mount Vernon, New Rochelle,
Pelham, Port Chester, and Rye.
Each company in which UGI invested had a superintendent who oversaw the
day-to-day activities of the gas plant. (Macey Dep. at 292-94). UGI
developed an audit system pertaining to its various subsidiaries'
budgets, expenditures, and best practices. (Def. Exh. 4 at 98).
According to an April 9, 1894 account in the Daily Philadelphia
Stockholder describing UGI, each UGI subsidiary
"should have a separate and independent
organization, reporting, however, to the head
office in [Philadelphia]. . . . The local
superintendents are thus kept in close touch with
the home office, and they take no important step
which is not specifically authorized. While their
instructions are to purchase in the city where
each plant is located all needful supplies
obtainable there, and thus give to each city the
benefit of outlays in part incidental with the
carrying on of the business, supplies, such as
coal, oil, cast iron pipe, etc., are purchased
through the home office, in order that here in the
East the company may secure the benefit of minimum
prices. Attached to
the company is a corps of traveling auditors,
one of whom visits each local company every three
months and makes an examination of its operations
and reports thereon to the home office. . . . Not
a dollar is outlayed for its account at any
point or for any purpose which is not first
approved at the home office, and there is the
closest scrutiny into each item of
expense. . . . Annually there is a convention of
superintendents of the local companies, presided
over by the general superintendent, at which,
besides reports of each as to the operations of
the plant or plants under his control, papers are
read on practical subjects relating to the objects
of the company, etc.
(Gary Aff., Exh. 6 at 2).
C. Formation and Operation of WLC
In November 1900, UGI organized a new subsidiary to be called the
Westchester Lighting Company ("WLC"). (Def. Exh. 10 at CE/UGI 6375). WLC
was incorporated for the purpose of "manufacturing and supplying gas for
lighting the streets and public and private buildings or cities, villages
and towns in the State of New York, and for manufacturing and using
electricity for producing light, heat and power. . . ." (Def. Exh. 10
at 281). UGI owned more than 80% of WLC's total shares. (Def. Exh. 11 at
At their first board meeting on November 9, 1900, WLC's nine directors
appointed a special committee to "investigate and make inquiry" into the
desirability of acquiring the various Westchester gas and electric
entities owned by UGI. (Def. Exh. 11 at 295, 297). The committee, with
the help of a gas and
electric light business expert, approved the proposed acquisition
and merger. (Id.).
On November 30, 1900, the WLC board acquired and then merged the
companies in which it had obtained interests: the Pelham Electric Light
and Power Company, Port Chester Electric Lighting Company, Larchmont
Electric Light Company, Eastchester Electric Company, and the Westchester
Gas and Coke Company. (Def. Exh. 11 at 307-13). Accordingly, WLC became
the owner of MGP sites in Rye, Mount Vernon, Pelham, Port Chester, and
In February 1901, WLC purchased the Hudson River Gas and Electric
Company and the White Plains Lighting Company. (Id. at 459-61).
In November 1902, WLC merged the companies into WLC. (Id.).
WLC thus became the owner of MGP sites in Tarrytown and White Plains.
a. Board of Directors
Upon WLC's creation in 1900, none of the first nine men listed in the
WLC Certificate of Incorporation and selected to serve on WLC's board
were dual office-holders. (Def. Exh. 11 at 289; Def Exh. 12 at 724). At
no time during 1900 to 1904 did UGI directors, officers, or employees
constitute a majority of the directors or officers of WLC. (Def. Exh. 12
During the first months of the WLC board's existence, the directors
appointed an executive committee to help manage the company, elected its
president who would serve for the next four
years, and reviewed the strength of each constituency company
before effecting the large-scale merger. (Def. Exh. 11 at 296-301, 446).
In 1901, three of the nine WLC directors held UGI senior executive
positions. (Def. Exh. 12 at 724). Two of the other board members
A.M. Young and R.A.C. Smith had worked "in conjunction" with UGI
to acquire possession of the New Rochelle Electric Company, Pelham
Electric Light and Power Company, Port Chester Electric Light Company,
Larchmont Electric Light Company, Eastchester Electric Company, and White
Plains Electric Company. (Def. Exh. 6 at 114; Exh. 11 at 446-47).
In 1902 and 1903, four of the eleven WLC directors held UGI senior
executive positions. (Id.). In 1904, four, then five, of eleven
directors held UGI senior executive positions. (Id.).
From 1900 to 1904, UGI senior executives never held the positions of
WLC president, vice president, or secretary. (Id.). UGI
executives did hold positions as WLC treasurer, assistant secretary, and
managing director. (Id.). Specifically, UGI's treasurer Lewis
Lillie was elected to assistant secretary and treasurer of WLC. (Def.
Exh. 11 at CE/UGI 12469, 19079). UGI's general superintendent Walton
Clark was named WLC managing director. (Id. at CE/UGI 19078).
The managing director "shall have the general management of the
business and properties of the company, and shall perform such other
duties as may be imposed upon him by the
board of directors." (Def. Exh. 11 at CE/UGI 12387). According to
the WLC bylaws, the duties of WLC's president included "presid[ing] at
all meetings of the board of directors," "act [ing] as temporary chairman
at and call [ing] to order all meetings of the stockholders,"
"countersign[ing] all checks, and . . . sign[ing] drafts, notes,
certificates of stock, and all contracts and other instruments, unless
otherwise ordered by the board." (Def. Exh. 11 at CE/UGI 12385). The
president also "shall, under the control of the directors, have the
general management of the company's affairs, and shall perform all duties
incidental to his office." (Id.).
b. WLC Executive Committee
In January 1901, the WLC board of directors appointed an "executive
committee," which was "in the recess of the Board [to] have full power to
direct and manage the business affairs of the company in such manner as
such committee shall deem best for the interests of the company in all
cases in which specific directions have not been given by the Board."
(Def. Exh. 11 at 446). The committee consisted of four members of the WLC
board with the WLC president W. W. Scrugman serving in an ex-officio
capacity. (Id.). Lillie, both UGI's treasurer and WLC's
assistant secretary and treasurer, and Clark, UGI's general
superintendent and WLC's managing director, filled two of the five
executive committee positions. (Def. Exh. 11 at 447). The other positions
were filled by board members who were local businessmen but did not hold
management positions at WLC. (Id.).
According to the WLC Executive Committee minutes for 1900 to 1903 WLC
made decisions concerning setting salaries (Def. Exh. 17 at 757-58),
approving the sale of various used equipment and materials (Id.
at 788), approving contracts and expenditures for improvements and
repairs (Id. at 753), authorizing changes in gas and electric
rates and rate reductions (Id. at 742, 750-52, 839), setting
electric current rates (Id. at 758), approving the purchase of
electric franchises (Id. at 755), approving the execution of
leases (Id. at 809), and appointing an attorney for legal
services. (Id. at 887).
In January 1901, UGI was named purchasing agent and consulting engineer
for WLC. (Def. Exh. 11 at CE/UGI 19076).
c. Superintendents of WLC Facilities
Each of the WLC facilities was directed by its own superintendent.
(Def. Exh. 17 at 757). According to expert testimony, "the
superintendent . . . generally runs the facility." (Macey Dep. at 294).
d. UGI Managing Committee and Works Committee
From 1900 to 1903, UGI had a Managing Committee and a Committee on
Works ("Works Committee"), which worked together to monitor UGI's
investments and to ensure that extensions, property improvements, and
certain supply contracts were reviewed and that UGI's subsidiaries
received UGI's expert advice when needed. (Def. Exh. 4 at 97-98). In
1903, UGI president Thomas Dolan described UGI's management of the
subsidiaries, stating that "the Works Committee of [UGI] passes favorably
upon all property
improvements and extensions, and contracts for supplies, before
they are authorized. This Committee meets every day." (Gary Aff., Exh. 4
at UGI 1488). UGI's corporate history indicates that the Works Committee
consisted of top UGI executives President Dolan, Vice President
and General Manager Samuel Bodine, Vice President and General Counsel
Randal Morgan, General Superintendent Walton Clark, and Treasurer Louis
Lillie. (Def. Exh. 4 at UGI 1488-89). In 1904, both the managing and
works committees were abolished in favor of a single executive committee.
(Def. Exh. 18 at 1061).
e. UGI Advice to WLC
A May 4, 1903 letter to UGI shareholders from UGI president Dolan
stated that UGI provided "advice" to the companies in which UGI held
interests "in the purchase of supplies, in laying out, construction and
operation of plants, in solving legal and financial problems, in
canvassing for new business and in all the details which make for success
in the management of a manufacturing company selling its wares to an
entire community." (Def. Exh. 4 at UGI 1489). UGI offered its "advice,"
in part, through the annual meeting of "the Superintendents and the
Commercial Agents of all the companies . . . in [Philadelphia, UGI's
headquarters,] . . . to read and discuss carefully prepared papers
upon the various technical and commercial problems of the business in
which they are engaged." (Id.).
f. Macey Expert Report
Con Ed's corporate governance expert Jonathan Macey concludes that "UGI
controlled every material aspect of the operations of [WLC]" and
"controlled all of the important facets of its policies and operations,
down to the smallest details." (Def. Exh. 1 at 2). Macey further states
that UGI "controlled every aspect of the corporate existence of [WLC]
from its birth to its corporate death." (Id. at 6). Macey
points, as illustration, to the UGI executive committee's approval
throughout 1904 of WLC actions, including employment decisions, contracts
for coal, sales of property, and purchases of equipment for the MGPs.
(Id. at 6-9).
3. Con Ed's Purchase of WLC
On July 1, 1904, Con Ed entered into an agreement with UGI to purchase
its ownership interest in WLC. (Def. Exh. 20). The WLC board of directors
authorized the transaction on July 8, 1904. (Def. Exh. 11 at 533-624).
The agreement was consummated on October 20, 1904 when WLC's stockholders
and board of directors granted authorization for WLC to transfer all of
its rights and property to a new Con Ed subsidiary known as the New York
and Westchester Lighting Company. (Def. Exh. 11). That same day, New York
and Westchester Lighting Company merged into WLC (Id. at
682-83), and Con Ed controlled WLC, with whom it eventually merged in
1951. (Def. Exh. 21).
E. American Gas's Operations. 1890-1900
Prior to UGI's purchase of New York Suburban from American Gas in March
1900, American Gas owned the MGP sites in Mount Vernon, New Rochelle,
Pelham, Port Chester, and Rye. Con Ed alleges that American Gas
incurred CERCLA liability through its control over its Westchester County
subsidiaries from 1890 to 1900 and that UGI succeeded to this liability
when American Gas merged into UGI in 1925. (Pl. Surr. 1).
1. Dual Officers/Directors
American Gas installed its own corporate officers and directors as
officers and directors of its Westchester County subsidiaries. (Gary
Aff., Exh. 22 at UGI 5-6; Exh. 17 at ENV 22, 24, 25; Exh. 23 at CE/UGI
27296; Exh. 24 at CE/UGI 12361; Def. Exh. 8). In the December 16, 1891
American Gas Board minutes, American Gas's Solicitor Thomas Learning
described the annual meeting of Eastchester Gas Company ("Eastchester
Gas"), which owned the Mount Vernon MGP:
[T]he General Manager, Treasurer and myself went
to New York, held the annual meeting of the
company, adopted a simple form of bylaws, elected
directors, and afterward held a board meeting and
elected officers. Messrs. Carpender, Penford, and
Crawley were made the New York directors with
Messrs. [Ramsdale] and Stroud. Mr. Carpender was
elected President, Mr. [Ramsdale] General Manager,
and Mr. Stroud Treasurer and Sec'y.
(Gary Aff., dated Nov. 24, 2003, Exh. 1 at UGI 7073)). Carpender
was American Gas's president. Penford and Crawley were Carpender's law
firm partners and served on American Gas's board
of directors. Ramsdale was American Gas's general manager. Stroud
was American Gas's treasurer. (Pl. Surr. 2).
2. Observance of Corporate Separateness
Plaintiff alleges that American Gas failed to observe "corporate
separateness." (Pl. Surr. 3). According to the October 26, 1893 minutes,
American Gas's general manager Ramsdale, as general manager of the New
Rochelle subsidiary, had entered into a construction contract listing
himself as general manager of American Gas, "the contract showing of
course, a profit to the latter company, and he is thus acting in a double
capacity." (Gary Aff., dated Nov. 23, 2003, Exh. 1 at UGI 7207). The
contract was subsequently approved by the subsidiary's board of directors
and signed on behalf of the company by its president. (Id.).
3. American Gas's Subsidiary Operations
American Gas's board of directors approved decisions pertaining to the
subsidiaries' management, including equipment purchases for the MGPs,
formation of contracts, and property extensions. (Id., Exh. 25
at UGI 756).
American Gas's general manager Ramsdale served as the general manager
for all of the Westchester subsidiaries. (Gary Aff., Exh. 23 at CE/UGI
27296; Exh. 25). The superintendent of each MGP reported to Ramsdale and
obtained his approval before taking any action. (Id., Exh. 23
at CE/UGI 27286-87; Exh. 24 at CE/UGI 12360). Ramsdale regularly visited
each MGP to monitor its operations. (Id., Exh. 25 at UGI
According to the June 17, 1891 American Gas board minutes, the company
approved the purchase and erection of a purifier plant at Eastchester Gas
Company's Mount Vernon MGP. (Gary Aff., dated Nov. 24, 2003, Exh. 1 at
UGI 7044). According to the April 20, 1892 and May 18, 1892 minutes,
American Gas approved the purchase and installation of a new water gas
plant from UGI for the Mount Vernon MGP. (Id. Exh. 1 at UGI
7104-06). In the April 5, 1892 minutes, American Gas's management
referred to the Mount Vernon MPG as "works operated by [American Gas]."
(Id., Exh. 1, at UGI 7090).
According to the November 15, 1893 minutes, American Gas decided to
reduce the amount of insurance held on the New Rochelle Gas Company's MGP
in New Rochelle. (Id., Exh. 1 at UGI 7211). The February 21,
1894 minutes state that American Gas approved the replacement of the gas
manufacturing apparatus at the New Rochelle MGP with parts from another
American Gas MGP plant. (Id. Exh. 1 at UGI 7226-27). According
to the May 18, 1892 minutes, American Gas "assumed control of the
operations of the plant [at New Rochelle], . . . and made very
considerable change." (Id., Exh. 1 at UGI 7106). Specifically,
American Gas made changes to the plant's oil purchasing agreement.
4. American Gas's Merger into UGI in 1925
American Gas merged into UGI in 1925, leaving UGI as the surviving
company. (Gary Aff., Exh. 21). The "Agreement of Consolidation and
Merger" stated that UGI and American Gas became "one corporation under
the name [UGI] . . . possessing all of the
rights, privileges and franchises theretofore vested in each of
them" and "all debts not of record, duties and liabilities of each of
said constituent corporations shall thenceforth attach to the
consolidated corporation, and may be enforced against it."
(Id., Exh. 21 at UGI 6976).
F. Environmental Contamination
According to Con Ed's environmental expert, Robert M. Karls, the
contamination at the Rye, Mount Vernon, Pelham, and Port Chester MGPs was
caused by the releases from "routine operations" at those facilities
occurring during the intervals from the installation of MGP equipment
through the end of gas production at those sites. (Gary Aff., Exh. 30 at
12, 14, 20, 24).
Con Ed has performed no environmental testing at the MGP sites in New
Rochelle, Rye, and Mount Vernon. (Wilcken Dep. at 67-68, 115, 128, 188).
The extent of contamination has not been determined at the White Plains
site. (Id. at 150-52). Con Ed has been or will be contributing
to cleanups being performed by successor owners at Port Chester and
Pelham and has conveyed the MGP site and agreed to pay a fixed sum for
environmental liabilities at Tarrytown. (Id. at 92-94, 159-60,
219). Pursuant to a Voluntary Cleanup Agreement with the New York State
Department of Environmental Conservation ("NYSDEC"), Con Ed is required
to investigate and remediate all of its former MGP sites, including those
at issue in this action. (Gary Aff., Exhs. 31, 32). In complying with the
Agreement, Con Ed has spent
more than $4 million to investigate and clean up the MGP sites at
issue. (Wilcken Aff. ¶ 3). Con Ed expects to expend in excess of $100
million to complete the investigation and remediation of all of the MGP
sites at issue. (Id. ¶ 4).
II. Prior Proceedings
Con Ed filed the original complaint in this action on September 20,
2001. Con Ed filed an amended complaint on March 4, 2002. After
discovery, UGI moved for summary judgment pursuant to Fed.R.Civ.P. 56.
The Court heard oral argument on the motion for summary judgment on
November 25, 2003. Ruling from the bench, the Court granted the motion in
part and reserved decision in part. The Court dismissed all derivative
liability claims, predicated on piercing the corporate veil, including
the state law claims, and all claims with respect to the Yonkers MGP
sites. (Tr. 47-48). The Court reserved decision as to the remaining
operator liability claims with respect to the other seven sites.
I. Applicable Law
A. Summary Judgment Standard
Summary judgment will be granted when "there is no genuine issue as to
any material fact and . . . the moving party is entitled to a judgment
as a matter of law." Fed.R.Civ.P. 56(c); see Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986).
Accordingly, the Court's
task is not to "weigh the evidence and determine the truth of the
matter but to determine whether there is a genuine issue for trial."
Anderson v. Liberty Lobby. Inc., 477 U.S. 242, 249 (1986).
Summary judgment is inappropriate if, resolving all ambiguities and
drawing all inferences against the moving party, there exists a dispute
about a material fact "such that a reasonable jury could return a verdict
for the nonmoving party." Id. 477 U.S. at 248; see Bay v. Times
Mirror Magazines, Inc., 936 F.2d 112, 116 (2d Cir. 1991). A factual
issue is genuine if it can reasonably be resolved in favor of either
party. Anderson, 477 U.S. at 250. A fact is material if it can
affect the outcome of the action based on the governing law.
Id. at 248.
The party seeking summary judgment must demonstrate the absence of
genuine issues of material fact, and then the nonmoving party must set
forth facts proving that there is a genuine issue for trial. Celotex
Corp. v. Catrett, 477 U.S. 317, 321-24 (1986). To defeat a motion
for summary judgment, the nonmoving party "must do more than simply show
that there is some metaphysical doubt as to the material facts."
Matsushita, 475 U.S. at 586. The nonmoving party "must present
concrete particulars and cannot succeed with purely conclusory
allegations." Fitch v. R.J. Reynolds Tobacco. Co., 675 F. Supp. 133,
136 (S.D.N.Y. 1987) (internal quotations omitted). There is no issue
for trial unless there exists sufficient evidence in the record favoring
the party opposing summary judgment to support a jury verdict in that
party's favor. Anderson, 477 U.S. at 249-50.
As the Court held in Anderson, "[i]f the evidence is
merely colorable, or is not significantly probative, summary judgment may
be granted." Id. (citations omitted). The plaintiff must
provide the Court with some basis to believe that her "version of
relevant events is not fanciful." Christian Dior-New York. Inc. v.
Koret, Inc., 792 F.2d 34, 38 (2d Cir. 1986) (internal quotations
B. Operator Liability Pursuant to CERCLA
Liability under CERCLA attaches, inter alia, to "any person
who at the time of disposal of any hazardous substance owned or operated
any facility at which such hazardous substances were disposed of."
42 U.S.C. § 9607(a)(2). An "operator" is "any person . . . operating"
the relevant facility. 42 U.S.C. § 9601(20) (A) (ii).*fn2 " [U]nder
CERCLA, an operator is simply someone who directs the working of,
manages, or conducts the affairs of a facility." United States v.
Bestfoods, 524 U.S. 51, 66-67 (1998).
CERCLA operator liability, however, requires that the operator's
control over the facility relate to pollution control
or waste disposal. "To sharpen the definition for purposes of
CERCLA's concern with environmental contamination, an operator must
manage, direct, or conduct operations specifically related to pollution,
that is, operations having to do with the leakage or disposal of
hazardous waste, or decisions about compliance with environmental
regulations." Bestfoods, 524 U.S. at 66-67; see also
Commander Oil Corp. v. Barlo Equip. Corp., 215 F.3d 321, 332 n.3 (2d
Cir. 2000) (in holding that operator liability did not apply, noting
that, under facts, defendant could not be said to have "manage[d],
direct[ed], or conduct[ed] operations specifically related to pollution,
that is, operations having to do with the leakage or disposal of
hazardous waste, or decisions about compliance with environmental
regulations") (quoting Bestfoods, 524 U.S. at 66-67)); United States
v. Green, 33 F. Supp.2d 203, 217 (W.D.N.Y. 1998) (holding that
defendant could not be found liable as an operator because of absence of
evidence that he directly participated in the management of facility's
pollution control operations, including decisions pertaining to the
disposal of hazardous substances and compliance with environmental
Derivative liability cases, which are based on piercing the corporate
veil, are distinct from operator liability cases, in which the parent's
liability is direct. "[D]erivative liability cases are to be
distinguished from those in which `the alleged wrong can seemingly be
traced to the parent through the conduit of its own personnel and
management' and `the parent is
directly a participant in the wrong complained of.' . . . In
such instances, the parent is directly liable for its own actions."
Bestfoods, 524 U.S. at 64-66 (quoting Douglas & Shanks,
Insulation from Liability Through Subsidiary Corporations, 39 Yale L.J.
193, 207, 208 (1929)). "CERCLA's `operator' provision is concerned
primarily with direct liability for one's own actions." Id. at
65. "If any such act of operating a corporate subsidiary's facility is
done on behalf of a parent corporation, the existence of the
parent-subsidiary relationship under state corporate law is simply
irrelevant to the issue of direct liability." Id.
Prior to Bestfoods, some circuits applied the "actual
control" test to determine operator liability, looking to "whether the
parent `actually operated the business of its subsidiary.'" Id.
at 68 ((citing United States v. Kayser-Roth Corp.,
910 F.2d 24, 27 (1st Cir. 1990) (operator liability "requires active
involvement in the affairs of the subsidiary"); Jacksonville Elec.
Auth. v. Bernuth Corp., 996 F.2d 1107, 1110 (11th Cir. 1993) (parent
is liable if it "actually exercised control over, or was otherwise
intimately involved in the operations of, the [subsidiary] corporation
immediately responsible for the operation of the facility")); see
also City of New York v. Exxon Corp., 112 B.R. 540, 548 n.9
(S.D.N.Y. 1990) ("We believe that some degree of active participation in
and actual control over the affairs of the subsidiary is necessary");
cf. State of Idaho v. Bunker Hill Co., 635 F. Supp. 665, 672
Idaho 1986) (determining whether owner or operator liability
applied based on whether defendant had "capacity" to prevent and abate
environmental damage). Morever, some courts have referred to "owner or
operator liability" as one form of liability, implying the
interchangeability of these two distinct bases. See, e.g., Joslyn
Mfg. Co. v. T.L. James & Co., 893 F.2d 80 (5th Cir. 1990);
Bunker Hill, 635 F. Supp. at 672.
The Court in Bestfoods held, however, that the "actual
control" test wrongly combines direct and indirect liability.
Id. at 67. "`The question is not whether the parent operates
the subsidiary, but rather whether it operates the facility, and that
operation is evidenced by participation in the activities of the
facility, not the subsidiary. Control of the subsidiary, if extensive
enough, gives rise to indirect liability under piercing doctrine, not
direct liability under the statutory language.'" Id. at 68 (citing Lynda
J. Oswald, Bifurcation of the Owner and Operator Analysis under CERCLA,
72 Wash. U. L.Q. 223, 269 (1994)) and Schiavone v. Pearce,
79 F.3d 248, 254 (2d Cir. 1996) ("Any liabilities [the parent] may have as
an operator, then, stem directly from its control over the plant")).
The Supreme Court in Bestfoods contemplated three scenarios
in which operator liability might arise, based on a parent company's
direct pollution-related action vis-a-vis a facility. 524 U.S. at 71.
First, a parent might be held directly liable when "the parent operates
the facility in the
stead of its subsidiary or alongside the subsidiary in some sort of
joint venture." Id.
Second, direct liability might arise when "a dual officer or
director . . . depart[s] so far from the norms of parental influence
exercised through dual officeholding as to serve the parent, even when
ostensibly acting on behalf of the subsidiary in operating the facility."
Id. Evidence of common directors or officers between a parent
and its subsidiary, however, is insufficient on its own to expose the
parent to direct liability under CERCLA. American Protein Corp. v.
AV Volvo, 844 F.2d 56, 57 (2d Cir.), cert. denied,
488 U.S. 852 (1988); see also Kingston Dry Dock Co. v. Lake Champlain
Transp. Co., 31 F.2d 265, 267 (2d Cir. 1929); Bestfoods,
524 U.S. at 69. Courts generally presume that directors "are wearing
their `subsidiary hats' and not their `parent hats' when acting for the
subsidiary." Bestfoods, 524 U.S. at 69 (citing P. Blumberg, Law
of Corporate Groups: Procedural Problems in the Law of Parent and
Subsidiary Corporations § 1.02.1, p. 12 (1983)); United States
v. Jon-T Chemicals, Inc., 768 F.2d 686, 691 (5th Cir. 1985),
cert. denied, 475 U.S. 1014 (1986)). To establish liability, a
plaintiff seeking to establish a parent's liability based on common
directors or officers must demonstrate that, despite the general
presumption to the contrary, the officers and directors "were acting in
their capacities as [the parent's] officers and directors, not as [the
subsidiary's] officers and directors, when they [made policy decisions
and supervised activities at the
facility]." Id. at 70; see also Raytheon
Constructors. Inc. v. Asarco, Inc., No. 00-1500, 00-1530, 2003 WL
984623, at *4 (10th Cir. Mar. 11, 2003) (holding that fact that
shareholder's president acted as president and board member of subsidiary
company was insufficient for operator liability in absence of evidence
that action was taken in capacity other than as president and board
member of subsidiary).*fn3
Third, the Court contemplated direct liability when "an agent of the
parent with no hat to wear but the parent's hat . . . manage[s] or
direct [s] activities at the facility." Id. at 71. " [T]he acts
of direct operation that give rise to parental liability must necessarily
be distinguished from the interference that stems from the normal
relationship between parent and subsidiary. Again, norms of corporate
behavior (undisturbed by any CERCLA provision) are crucial reference
points." Id. at 71-72. "The critical question is whether, in
degree and detail, actions directed to the facility by an agent of the
parent alone are eccentric under accepted norms of parental oversight of
parental oversight of a subsidiary's facility." Id. at 72.
"Norms of corporate behavior" are relevant to distinguishing "a
parental officer's oversight of a subsidiary from such an officer's
control over the operation of the subsidiary's facility." Id.
`[A]ctivities that involve the facility but which
are consistent with the parent's investor status,
such as monitoring of the subsidiary's
performance, supervision of the subsidiary's
finance and capital budget decisions, and
articulation of general policies and procedures,
should not give rise to direct liability.'
Id. at 72 (quoting Oswald, supra, at 282).
C. Successor Liability Under CERCLA
Under common law, a corporation acquiring the assets of another
corporation only takes on its CERCLA liabilities if any of the following
apply: (1) "the successor expressly or impliedly agrees to assume them";
(2) "the transaction may be viewed as a de facto merger or
consolidation"; (3) "the successor is the `mere continuation' of the
predecessor"; or (4) "the transaction is fraudulent." State of New
York v. Nat'l Servs. Indus., Inc., 352 F.3d 682, 685 (2d Cir. 2003)
(quoting B.F. Goodrich v. Betkoski, 99 F.3d 505, 519 (2d Cir.
1996)); see also Pfohl Bros. Landfill Site Steering Committee v.
Allied Waste Sys., Inc., 255 F. Supp.2d 134, 162 (W.D.N.Y. 2003).
The remaining claims in this action are the CERCLA and declaratory
judgment claims pertaining to the seven non-Yonkers MGPs located in Rye,
Mount Vernon, Pelham, Port Chester, New
Rochelle, White Plains, and Tarrytown. Con Ed seeks relief
contribution for response costs for operator liability, pursuant to
Section 113(f) of CERCLA, 42 U.S.C. § 9613 (f)(1). In addition, Con
Ed seeks a declaratory judgment, pursuant to Section 113(g)(2) of
CERCLA, 42 U.S.C. § 9613(g)(2) and 28 U.S.C. § 2201, as to UGI's
liability pursuant to Section 113(f)(1) of CERCLA, 42 U.S.C. § 9613
Con Ed asserts three theories of liability. First, it alleges that,
when American Gas merged into UGI in 1925, UGI succeeded to American
Gas's CERCLA liabilities incurred through the latter's ownership and
operation of five of the seven MGP sites at Rye, Mount Vernon, Pelham,
Port Chester, and New Rochelle prior to the sale of the property to UGI
in March 1900. (Pl. Mem. 32-33). Second, it alleges that operator
liability attaches based on UGI's "direct control" over the management of
its subsidiaries and the operations of all seven MGPs from 1900 to 1904.
(Pl. Mem. 28). Third, although styled as owner liability, plaintiff
appears to assert operator liability based on UGI's alleged domination
and control over the management and operations of the White Plains and
Tarrytown MGPs from 1898 and 1900, respectively, until 1902, when White
Plains Lighting and Hudson River Gas merged into WLC. (Pl. Mem. 36-37).
A. UGI's Successor Liability For Rye, Mount Vernon,
Pelham, Port Chester, and New Rochelle Based on American Gas Ownership
from 1890 to 1900
Con Ed alleges that when American Gas merged into UGI in 1925, UGI
succeeded to the CERCLA liability American Gas
incurred when it owned and operated the MGP sites at Rye, Mount
Vernon, Pelham, Port Chester, and New Rochelle from 1890 to 1900. (Pl.
Mem. 32-33; Pl. Surr. 1).
Con Ed's argument assumes that American Gas incurred CERCLA liability
based on its ownership of the MGP sites prior to 1900. Con Ed relies
primarily on American Gas board minutes from 1890 to 1900 to establish
that American Gas's control over the Mount Vernon and New Rochelle MGPs
and their operations gave rise to operator liability based on the
existence of dual officers and directors, the absence of corporate
separateness, and American Gas's control over the MGP operations. Because
I have already dismissed all claims predicated on derivative liability, I
examine whether any factual issues exist pertaining to American Gas's
direct liability as an operator.
Con Ed offers the following as evidence of American Gas's liability.
Corporate decisions for the Westchester subsidiaries were made by
American Gas from its offices in Philadelphia. (Gary Aff., Exh. 25).
American Gas's board of directors approved decisions pertaining to the
subsidiaries' management, including requests for approval of equipment
purchases for the MGPs, formation of contracts, and property extensions.
(Id., Exh. 25 at UGI 756).
American Gas's general manager served as the general manager for all of
American Gas's Westchester subsidiaries. (Gary Aff., Exh. 23 at CE/UGI
27296). The superintendent of each MGP reported to American Gas's general
manager and obtained his
approval before taking any action. (Id., at Exh. 23 at
CE/UGI 27286-87; Exh. 24 at CE/UGI 12360).
American Gas installed its own corporate officers and directors as
officers and directors of its Westchester County subsidiaries. (Gary
Aff., Exh. 22 at UGI 5-6; Exh. 17 at ENV 22, 24, 25; Exh. 23 at CE/UGI
27296; Exh. 24 at CE/UGI 12361; Def. Exh. 8).
In addition, American Gas approved the purchase and erection of a
purifier plant at the Mount Vernon MGP and the purchase and installation
of a new water gas plant for the Mount Vernon MGP. (Id. at UGI
7044, 7104-06). In the April 5, 1892 minutes, American Gas's management
referred to the Mount Vernon MGP as "works operated by [American Gas]."
(Id. at UGI 7090).
American Gas approved the reduction of insurance on the New Rochelle
MGP and the replacement of the gas manufacturing apparatus at the New
Rochelle MGP with parts from another American Gas MGP plant.
(Id. at 7211, 7226-27). Moreover, the minutes establish that
American Gas's general manager Ramsdale, who was also the New Rochelle
subsidiary's general manager, entered into a construction contract, later
authorized by the subsidiary's board of directors and signed by its
president, showing a profit to American Gas. (Id. at UGI 7207).
According to the minutes, American Gas assumed "control over the
operations" of the New Rochelle MGP, which included changes American Gas
made to the MGP's oil purchasing agreement. (Id. at UGI 7106).
Based on the evidence submitted, a reasonable jury could only conclude
that American Gas is not directly liable as an operator of the MGPs owned
by its subsidiaries. First and most importantly, the record is devoid of
any evidence of American Gas's control over "operations having to do with
the leakage or disposal of hazardous waste, or decisions about compliance
with environmental regulations." Bestfoods, 524 U.S. at 66-67;
Commander Oil, 215 F.3d at 332 n.3; Green,
33 F. Supp.2d at 217-18. Second, much of the evidence submitted pertains to
the relationship between American Gas and its subsidiaries, which is
largely irrelevant to the inquiry into whether American Gas is directly
liable as an operator of the MGPs. Bestfoods, 524 U.S. at 65.
Third, evidence of overlapping corporate management is insufficient, on
its own, to establish direct liability. American Protein Corp.,
844 F.2d at 57; Kingston Dry Dock Co., 31 F.2d at 267;
Bestfoods, 524 U.S. at 69; Raytheon, 2003 WL 984623,
at *4. Con Ed has failed to provide evidence to overcome the presumption
that the shared officers and directors acted on behalf of the
subsidiaries. Bestfoods, 524 U.S. at 70. Evidence of the
construction contract favorable to American Gas, entered into by
Ramsdale, fails to overcome the presumption that he acted on the
subsidiary's behalf because the contract was subsequently approved by the
subsidiary's board of directors and signed on behalf of the company by
its president. (Gary Aff., dated Nov. 23, 2003, Exh. 1 at UGI 7207).
In the absence of American Gas's operator liability, no reasonable jury
could conclude that UGI was liable as a successor when American Gas
merged into UGI in 1925. Accordingly, UGI's motion for summary judgment
is granted as to Con Ed's successor liability claim.
B. UGI's Operator Liability Based On Control Over
WLC and MGP Operations at Mount Vernon New Rochelle, Pelham, Port
Chester, Rye, Tarrytown, and White Plains from 1900 to 1904
Plaintiff alleges that UGI exerted direct control over WLC and the
operation of the seven MGPs owned by WLC, giving rise to operator
liability based on conduct from 1900 to 1904. These MGPs are located in
Mount Vernon, New Rochelle, Pelham, Port Chester, Rye, Tarrytown, and
Con Ed's allegations in support of its WLC-based operator liability
claim fall into two general categories. First, Con Ed alleges that
several UGI officers and directors also served in management and
directorship roles vis-a-vis WLC. For example, Con Ed asserts that UGI
officers Louis Lillie and Walton Clark served as WLC's treasurer,
assistant secretary, and managing director. (Pl. Mem. 37-28). Pursuant to
WLC's bylaws, Clark, as WLC's managing director, was responsible for and
directed the "general management of the business properties" of WLC,
including the management of the gas operations. (Id.). Lillie
and Clark also comprised half of WLC's executive
committee. (Id.). In addition, Lillie, Clark, and UGI
employees Randal Morgan and George Philler served on WLC's board of
In support of its claim that UGI controlled the management and
operations of WLC, Con Ed also asserts that WLC did not act or make any
expenditures without UGI's approval and that UGI was appointed both the
purchasing agent and consulting engineer for WLC. (Id.; Def.
Exh. 1 at 6). Con Ed also alleges that Robert Searle, "a known UGI
employee," was involved in gas operations for WLC and that UGI paid the
salaries of certain alleged WLC employees. (Id.; Gary Aff.,
Exh. 18 at ENV 43).
Con Ed's allegations of dual officership and directorship are
insufficient as a matter of law to establish operator liability. Lillie's
and Walton's dual roles as UGI officers and WLC directors, officers, and
executive committee members do not, without more, overcome the
presumption that they were acting on behalf of WLC. Bestfoods,
524 U.S. at 69; American Protein Corp., 844 F.2d at 57;
Kingston Dry Dock Co., 31 F.2d at 267; Raytheon, 2003
WL 984623, at *4. The mere fact of Walton's dual role as a UGI officer
and WLC's managing director does not mean, as a matter of law, that
Walton acted on UGI's behalf. Con Ed fails to offer any evidence that
either Lillie or Walton departed so far from "the norms of parental
influence . . . as to serve the parent." Bestfoods, 524 U.S.
at 71. In fact, Con Ed fails to provide any evidence at all to illustrate
the nature of Lillie's and Walton's conduct.
Con Ed's evidence of UGI's control over the management and
operations of MGPs is also insufficient as a matter of law. First, UGI's
approval of WLC expenditures falls within the parameters of the
parent-subsidiary relationship. See Bestfoods, 524 U.S. at 72
(stating that supervision of subsidiary's finance and capital budget
decisions does not qualify as parent's control of facility's operation);
Schiavone v. Pearce, 77 F. Supp.2d 284, 290 (D. Conn. 1999)
(holding that evidence of interlocking board of directors examining and
approving capital expenditures, including those for pollution control
equipment, was consistent with typical relationship between parent and
subsidiary); cf. Datron. Inc. v. CRA Holdings, Inc.,
42 F. Supp.2d 736, 747 (W.D. Mich. 1999) (holding that requirement for
subsidiary to obtain parent's approval for credit arrangements beyond
normal commercial credit accounts fell within norms of parental
Second, evidence that UGI was appointed both the purchasing agent and
consulting engineer for WLC is also insufficient as a matter of law to
establish UGI's control as an operator. Con Ed conclusorily alleges that,
in these capacities, UGI "determined the vendors, products, and processes
which would be used at the MGPs." (Pl. Opp. 38). The record lacks
evidence, however, supporting this general description of the consulting
engineer function. Morever, any evidence that might support Con Ed's
assertion would still be insufficient as a matter of law to establish
liability. Corporate decision-making of the type
attributed to the consulting engineer function would fall within
the contours of parental oversight. See Bestfoods, 524 U.S. at
72 (stating that parent's determination of policies and procedures was
consistent with parent's investor status); Schiavone,
77 F. Supp.2d at 292 (holding that parent's control over subsidiary's contract
review, approval, and negotiation and capital expenditures comported with
normal parental oversight); Datron, 42 F. Supp.2d at 748
(holding that parent's establishment of corporate policies applicable to
subsidiary was consistent with parent's investor status). UGI's role as
WLC's purchasing agent is similarly consistent with UGI's investor
status. See id.
Con Ed's allegation that Robert Searle, "a known UGI employee," was
involved in gas operations for WLC is equally insufficient as a matter of
law to establish liability. UGI, in fact, disputes Con Ed's assertion
that Searle was a UGI employee, contending that Searle was never employed
by UGI and was instead an employee of New York Suburban, the company UGI
acquired from American Gas in March 1900. (Def. Reply 4 (citing Gary
Aff., Exh. 18 at ENV 43)). Even assuming that Searle was a UGI employee,
his alleged "involve[ment] in gas operations for WLC" does not amount to
direct control over the MGP facilities, let alone control over the
pollution and waste disposal-related activities at the sites. At best,
Con Ed's allegation speaks to UGI's relationship with WLC, which is an
inadequate basis for operator liability.
Lastly, Con Ed contends that UGI's payment of the salaries of certain
alleged WLC employees supports its operator liability claim. According to
the WLC executive committee minutes from September 18, 1902, the
committee approved the salary for engineer J.A. Perry to be paid by WLC
and UGI. (Def. Exh. 17 at UGI 25643-44). UGI's payment to Perry does not,
however, establish that UGI controlled the operations of the MGPs. At
best, it illustrates the relationship between UGI and Con Ed.
The evidence offered by Con Ed to support its WLC-based claim fails to
raise an issue of fact as to whether UGI directly controlled the
operations at the MGPs owned by WLC from 1900 to 1904. Moreover, the
record is devoid of evidence establishing that UGI engaged in pollution
or waste disposal activity at the MGPs. The mere suggestion that
pollution or waste disposal operations may have been implicated in UGI's
relationship with WLC does not create an issue of fact as to UGI's
operator liability. Based on the evidence submitted, no reasonable jury
could conclude that UGI is subject to operator liability for activity
from 1900 to 1904 at the MGPs located in Mount Vernon, New Rochelle,
Pelham, Port Chester, Rye, Tarrytown, and White Plains. UGI's motion for
summary judgment is granted as to this claim.
C. UGI's Operator Liability for Tarrytown and White
Plains MGPs from 1898 to 1902
Con Ed contends that UGI is liable as an operator of the White Plains
and Tarrytown MGPs based on UGI's control over the subsidiaries that
owned these sites from 1898 until the subsidiaries merged into WLC in
1902. (Pl. Mem. 36). UGI acquired ownership interests in the White
Plains Lighting Company in 1898 and the Hudson River Gas and Electric
Company of Tarrytown in 1900. (Gary Aff., Exh. 29; Exh. 33 at ENV 93,
95). Con Ed bases its operator liability claim on allegations that UGI
and these two subsidiaries shared officers and directors and that UGI
controlled these subsidiary's operations. (Pl. Mem. 36-38).
The record, however, is devoid of evidence showing that UGI directly
operated the White Plains and Tarrytown MGPs from 1898 to 1902. Con Ed
merely makes the conclusory statement that "UGI dominated and controlled
the management and operations of the White Plains Lighting and Hudson
River Gas companies prior to their merger into WLC." (Pl. Mem. 36).
Moreover, Con Ed fails to submit evidence establishing UGI's control over
the MGPs' pollution control or waste disposal activities. Lastly, to the
extent that UGI and its White Plains and Tarrytown subsidiaries shared
officers and directors, Con Ed fails to offer evidence to overcome the
presumption that the officers and directors acted on the subsidiaries'
behalf. See Bestfoods, 524 U.S. at 69-70; American Protein
Corp., 844 F.2d at 57; Kingston Dry Dock Co., 31 F.2d at
267; Raytheon, 2003 WL 984623, at *4.
A reasonable jury could only conclude, based on the evidence presented,
that UGI was not directly liable for activities at the Tarrytown and
White Plains sites from 1898 to 1902. Accordingly, UGI's motion is
granted as to this claim.
For the reasons set forth above, the motion is granted in its entirety
and the complaint is dismissed with prejudice and with costs. The Clerk
of the Court shall enter judgment accordingly.