COM'R, IND. DEPT. OF ENVIR. MANAGEMENT v. RLG, INC.

Decision Date24 September 2001
Docket NumberNo. 27S02-0102-CV-101.,27S02-0102-CV-101.
Citation755 N.E.2d 556
PartiesCOMMISSIONER, Indiana DEPARTMENT OF ENVIRONMENTAL MANAGEMENT, Appellant (Plaintiff Below), v. RLG, INC. and Lawrence Roseman d/b/a Spring Landfill and Lawrence Roseman, et al., Appellee (Defendant Below).
CourtIndiana Supreme Court

Karen M. Freeman-Wilson, Attorney General of Indiana, Anita Wylie, Deputy Attorney General, Indianapolis, IN, Attorneys For Appellant.

Albert C. Harker, Marion, IN, Attorney For Appellee.

ON PETITION TO TRANSFER

BOEHM, Justice.

We hold that under some circumstances, including those here, an individual associated with a corporation may be personally liable under the responsible corporate officer doctrine for that corporation's violations of the Indiana Environmental Management Act, whether or not the traditional doctrine of piercing the corporate veil would produce personal liability.

Factual and Procedural Background

On August 26, 1993, the Indiana Department of Environmental Management (IDEM) initiated action against RLG, Inc. and Lawrence Roseman for violations of the Indiana Environmental Management Act at RLG's Spring Valley Landfill in Wabash, Indiana.1 IDEM sought preliminary and permanent injunctive relief as well as civil penalties. In response, RLG negotiated agreements to remedy the violations and to close the landfill and provide a post closure plan, all by specified dates.2 In return, IDEM agreed to drop its claim for other relief, including civil penalties. In March 1994, an environmental scientist inspected the landfill and found that the initial violations had not been remedied, and also that the subsequent agreements had been breached. In May 1994, the trial court found that RLG had failed to comply with the agreements in several respects and granted IDEM's motion for prejudgment possession and a temporary restraining order. RLG was found in contempt and ordered to pay $5,000 per day as a civil penalty until it complied with the agreements. In July 1994, IDEM filed a second amended complaint with an additional count seeking to impose personal liability on Roseman based upon his status as the sole corporate officer of RLG. Roseman filed answers to IDEM's interrogatories that disclosed that RLG was insolvent.

After RLG failed to answer the second amended complaint, a default judgment was entered against it and civil penalties were assessed at $5,000 per day from the date of the temporary restraining order for a total of $3,175,000. IDEM was also granted access to the landfill to undertake remediation. In June 1999, after a bench trial on the issue of Roseman's personal liability for civil penalties, judgment was entered in favor of Roseman. At Roseman's request the trial court entered findings of fact and conclusions of law. These included: "There is no evidence the defendant Larry Roseman ever acted in an individual capacity personally with respect to the activities which surrounded the management and operation of RLG, Inc." or "in activities surround[ing] the environmental regulations." Further, "[a]s a matter of law, ... defendant Larry Roseman [is not] personally liable [for] acts done as a corporate officer for defendant RLG, Inc." and is not "personally liable for the corporate debts of defendant." The Court of Appeals agreed with the trial court, holding that the importance of the corporate structure and a lack of evidence of Roseman's individual involvement in the environmental violations precluded personal liability for the acts of RLG. Comm'r, Indiana Dep't of Envtl. Mgmt. v. RLG, Inc., 735 N.E.2d 290, 299 (Ind.Ct.App. 2000).

Standard of Review

On appeal from a negative judgment, this Court does not reverse the judgment of the trial court unless it is contrary to law. Pepinsky v. Monroe County Council, 461 N.E.2d 128, 135 (Ind. 1984); accord Marquez v. Mayer, 727 N.E.2d 768, 773-74 (Ind.Ct.App.2000), trans. denied. This Court considers the evidence in the light most favorable to the appellee and will reverse the judgment only if the evidence leads to but one conclusion and the trial court reached an opposite conclusion. Id.

I. Theories of Individual Liability

In general, a corporate officer or employee is not individually liable for the corporation's actions, and an office or corporate status, even a very senior one, does not in itself expose an individual to personal liability. However, three distinct doctrines bear on potential individual liability under Indiana environmental management laws. In overview, an individual, though acting in a corporate capacity as an officer, director, or employee, may be individually liable either as a responsible corporate officer, as a direct participant under general legal principles, or under specific statutes or provisions. These doctrines can apply to both criminal and civil liability, though their application in either context varies with the circumstances. Of course, if the corporation is financially responsible, and the terms of its indemnification of officers and employees are met, individual liability for civil penalties may be largely academic. But the law has developed these bases of individual responsibility to heighten attention to compliance and also to remove the ability of fly-by-night operators to escape reimbursing the public cost of irresponsible operations.

A. The Responsible Corporate Officer Doctrine

The responsible corporate officer doctrine stems from a 1943 United States Supreme Court case in which the Court interpreted the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. §§ 301-92 (1938), to permit criminal liability to be imposed on any person within a corporation "responsible" for introducing an adulterated or misbranded drug into interstate commerce. United States v. Dotterweich, 320 U.S. 277, 64 S.Ct. 134, 88 L.Ed. 48 (1943). "[An] offense is committed ... by all who do have such a responsible share in the furtherance of the transaction which the statute outlaws...." Id. at 284, 64 S.Ct. 134. The Court reasoned, "[T]he only way in which a corporation can act is through the individuals who act on its behalf." Id. at 281, 64 S.Ct. 134. This liability was justified on the basis that the Food, Drug, and Cosmetic Act "touch[es] phases of the lives and health of people which, in the circumstances of modern industrialism, are largely beyond self-protection." Id. at 280, 64 S.Ct. 134.

In United States v. Park, 421 U.S. 658, 673-74, 95 S.Ct. 1903, 44 L.Ed.2d 489 (1975), the Supreme Court, drawing on Dotterweich, concluded that the government establishes a prima facie violation of the Food, Drug, and Cosmetic Act as a responsible corporate officer when:

it introduces evidence sufficient to warrant a finding by the trier of the facts that the defendant had, by reason of his position in the corporation, responsibility and authority either to prevent in the first instance, or promptly to correct, the violation complained of, and that he failed to do so.

The responsible corporate officer doctrine has been applied to public welfare offenses if "a statute is intended to improve the common good and the legislature eliminates the normal requirement for culpable intent, resulting in strict liability for all those who have a responsible share in the offense." Matter of Dougherty, 482 N.W.2d 485, 489 (Minn.Ct.App.1992).

Although it originated as a criminal law doctrine, the responsible corporate officer doctrine has been applied to civil liability under a number of federal statutes. See United States v. Northeastern Pharm. & Chem. Co., 810 F.2d 726, 743-44 (8th Cir. 1986) (addressing personal liability under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA)); United States v. Hodges X-Ray, Inc., 759 F.2d 557, 560-61 (6th Cir.1985) (assessing a violation of the Radiation Control for Health and Safety Act (RCHSA): "The fact that a corporate officer could be subjected to criminal punishment upon a showing of a responsible relationship to the acts of a corporation that violate health and safety statutes renders civil liability appropriate as well."); United States v. Conservation Chem. Co., 660 F.Supp. 1236, 1245-46 (N.D.Ind.1987) (president and principal stockholder of corporation operating hazardous waste facility in Gary, Indiana may be personally liable for violation of Resource Conservation and Recovery Act (RCRA)).

Similarly, several states have adopted the responsible corporate officer doctrine as appropriate under state legislation addressing public safety, in particular, disposal of hazardous waste. Matter of Dougherty, 482 N.W.2d at 488-90 (Minnesota's hazardous waste laws are public welfare statutes and subject to the responsible corporate officer doctrine); State ex rel. Webster v. Mo. Resource Recovery, Inc., 825 S.W.2d 916, 924-26 (Mo.Ct.App.1992) (applying doctrine to Missouri's Hazardous Waste Management Law); State, Dep't of Ecology v. Lundgren, 94 Wash.App. 236, 971 P.2d 948, 951-53 (1999) (sole shareholder of corporation that operated sewage treatment plant is personally liable for violation of Washington's Water Pollution Control Act); State v. Rollfink, 162 Wis.2d 121, 475 N.W.2d 575, 576 (1991) (corporate officer may be held personally liable for violations of Wisconsin's solid and hazardous waste laws if the "officer is responsible for the overall operation of the corporation's facility which violated the law").

B. Individual Liability as a Participant

As a matter of general criminal law, an individual who participates in a criminal violation is criminally responsible even if acting in a corporate capacity. See Doyle v. State, 468 N.E.2d 528, 542 (Ind. Ct.App.1984), trans. denied. The same is true of civil tort liability. See Civil Rights Comm'n v. County Line Park, Inc., 738 N.E.2d 1044, 1050 (Ind.2000) ("[A corporate] officer is personally liable for the torts in which she has participated or which she has authorized or directed.").

C. Statutory Liability under Environmental...

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