Supreme Court weighs scope of 'Superfund' cleanup law Parent companies may have to pay costs

December 13, 1997|By Lyle Denniston | Lyle Denniston,SUN NATIONAL STAFF

WASHINGTON -- The Supreme Court agreed yesterday to decide whether a parent company can be required to pay the federal government's costs of cleaning up a toxic-waste site created by a subsidiary company.

The federal "Superfund" law gives the government broad authority to clean up hazardous-waste dumps and to collect the costs of doing so from those responsible for the dumping.

Federal appeals courts have disagreed over whether a parent company's links to a waste site operator make it responsible for the cleanup costs, too.

Under general business theories, parents and subsidiaries usually are treated as separate corporations and are not responsible for each other's misconduct. However, the federal government contends that the Superfund law determines who is an operator.

The government argues that a parent company should be held responsible when it does more than merely hold stock in the subsidiary and actually manages the subsidiary at the site. Then, according to the government's theory, the parent company is as much an operator as is the subsidiary and is jointly responsible for cleanup costs.

That theory has been accepted by several federal appeals courts, but rejected by others. The courts that have rejected it have concluded that the parent is responsible only when the two companies' separate existences is a sham and they actually are the same company.

In the important test case the court agreed to hear, the Justice Department lost in the 6th U.S. Circuit Court of Appeals in Cincinnati, Ohio. The case involves what the Justice Department calls one of the nation's most severely contaminated areas, which can be cleaned up only at the cost of "tens of millions of dollars."

The site, near Muskegon, Mich., was used by a series of chemical companies for their manufacturing operations. The federal government says that seven companies operating on the site contaminated it with toxic waste. The dumping occurred from 1959 through 1986.

The Justice Department says that, of the seven, only two parent companies -- CPC International Inc. and Aerojet-General Corp. -- would be able to pay the cleanup costs, but that an appeals court saved them from responsibility.

The Supreme Court yesterday also took on a case with potentially sweeping impact on the nation's telephone industry.

The key issue is whether AT&T Corp. and other phone companies may be sued under state law when customers allege that the companies agreed to provide specially tailored services, but then do not live up to the promises.

Pub Date: 12/13/97

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