Sidney S. Arst Co. v. Pipefitters Welfare Educ. Fund, 93-1227

• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)
• Citation: 25 F.3d 417
• Docket Number: No. 93-1227,93-1227
• Parties: , 62 USLW 2745, 24 Envtl. L. Rep. 20,976 SIDNEY S. ARST CO., Plaintiff-Appellee, v. PIPEFITTERS WELFARE EDUC. FUND, Defendant-Third/Party Plaintiff-Appellant, v. Michael Rand ARST and Donald Takacs, Third/Party Defendants-Appellees.
• Decision Date: 20 May 1994

Page 417

25 F.3d 417 38 ERC 1756, 62 USLW 2745, 24 Envtl.
L. Rep. 20,976 SIDNEY S. ARST CO., Plaintiff-Appellee,
v.
PIPEFITTERS WELFARE EDUC. FUND, Defendant-Third/Party
Plaintiff-Appellant,
v.
Michael Rand ARST and Donald Takacs, Third/Party Defendants-Appellees. No. 93-1227. United States Court of Appeals,
Seventh Circuit. Argued Sept. 23, 1993.
Decided May 20, 1994.

Page 418

Timothy E. Hayes, Gerald J. Zafft, Joseph G. Nassif, J. William Newbold, II, Dale R. Joerling, Linda W. Tape, Coburn & Croft, Jane Lazuroff (argued), St. Louis, MO, for plaintiff-appellee.

John H. Goffstein, Bartley & Goffstein, Clayton, MO, Thomas J. Wilcox (argued), James T. Price, Mark A. Thornhill, Spencer, Fane, Britt & Browne, Kansas City, MO, for Pipefitters' Welfare Educational Fund.

J. William Newbold, III, Timothy E. Hayes, Joseph G. Nassif, Dale R. Joerling, Linda W. Tape, Coburn & Croft, St. Louis, MO, for Michael R. Arst, Donald Takacs.

Before BAUER, CUDAHY and ROVNER, Circuit Judges.

CUDAHY, Circuit Judge.

This is an appeal of the dismissal of a complaint against corporate officers asserting liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. Secs. 9601-9657 (CERCLA). The complaint alleged responsibility for a waste spill on the corporate premises. The reason for dismissal of the complaint was failure to plead facts sufficient under Illinois law to "pierce the corporate veil." We reverse.

I.

This appeal arises from a dispute about CERCLA responsibilities for the spill of a hazardous substance. On January 29, 1989, Sidney S. Arst Company (Arst), an Illinois scrap metal dealer, filed a six-count lawsuit against Pipefitters Welfare Educational Fund (Pipefitters) seeking to recover certain costs. Arst had incurred the costs in responding to contamination caused by a February

Page 419

1988 spill of polychlorinated biphenyls (PCBs) from a used electrical transformer at Arst's premises. The transformer came to Arst as part of a load of scrap metal that Pipefitters sold Arst, and this was the alleged basis of Pipefitters' liability to Arst. Pipefitters counterclaimed, asserting claims against Arst as the site "owner or operator" to recover Pipefitters' response costs for the same PCB spill. Then, Pipefitters obtained leave to file a third-party complaint against Michael Arst, the president, majority shareholder and a director of Arst, and Donald Takacs, Arst vice president. The complaint asserted claims under CERCLA, an Illinois statute and the common law, alleging that the two men had exercised authority over Arst and its operations, such that they should be held liable for the spill at the company's facility. Specifically, Pipefitters alleged that Michael Arst and Takacs were waste facility "owners or operators" within the meaning of CERCLA and thus should be held liable for costs. 42 U.S.C. Secs. 9607(a)(1), 9601(20)(A). ¹

The third party complaint was quite specific. ² Pipefitters alleged that Arst's president and vice president participated in the company's management and exerted direct management control over the company's operations specifically related to the hazardous substance spill. In particular, Pipefitters alleged that the two officers had authority to decide whether Arst would purchase and accept or reject tendered scrap materials for processing at its facility. Further, Pipefitters alleged that the officers had knowingly exercised direct control over the hazardous substance handling at issue; the officers had accepted the load of scrap material that included the PCB-filled electrical transformer and had directed and controlled the employees who cut the transformer open and spilled its contents onto the ground, causing the contamination.

The district court dismissed the third party complaint for failure to state a claim upon which relief might be granted. The court reasoned that the two Arst officers could not, as a matter of law, be liable as CERCLA facility "owners or operators" because the complaint indicated that they did not personally own the facility and because a finding of operator liability could not be made absent allegations that would justify "piercing the corporate veil" under Illinois law.

II.

We review the grant of a motion to dismiss de novo. Villegas v. Princeton

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Farms, Inc., 893 F.2d 919, 924 (7th Cir.1990); Corcoran v. Chicago Park Dist., 875 F.2d 609, 611 (7th Cir.1989). In our review, we take the well-pleaded allegations of the complaint as true, Reichenberger v. Pritchard, 660 F.2d 280, 282 (7th Cir.1981); Janowsky v. United States, 913 F.2d 393, 395 (7th Cir.1990), and we consider the facts alleged in the light most favorable to the non-moving party. Henry C. Beck Co. v. Fort Wayne Structural Steel, 701 F.2d 1221, 1223 (7th Cir.1983). The motion to dismiss for failure to state a claim must receive careful scrutiny and is not often granted. See Rothner v. City of Chicago, 929 F.2d 297, 302 (7th Cir.1991) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957)); Kaiser Aluminum & Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (7th Cir.1982).

We believe that the district court, which cited the rule requiring well-pleaded allegations, see Reichenberger, 660 F.2d at 280, and like cases, was applying the proper standard with respect to this general matter. Still, the court erred in concluding that the scope of CERCLA liability under the facts of this case was strictly constrained by corporate limited liability principles. Of course, it is generally settled that the shareholders, directors and officers of a corporation are not liable for the obligations or delicts of the corporation. ³ But several courts have held that, despite the apparent clash between CERCLA "owner" and "operator" responsibility and the shield protecting corporate officers and directors from responsibility for corporate violations, corporate officers and directors may well be liable as "operators" within the meaning of CERCLA. 42 U.S.C. Secs. 9601(20)(A), 9607(a); see also, e.g., Riverside Mkt. Dev. Corp. v. International Bldg....