In Duke Energy Florida, LLC v. Firstenergy Corp., CV
No. 17-3024, April 10, 2018, the Sixth Circuit refused to pierce the corporate
veil to determine which corporate entity would be liable under the
Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA),
42 U.S.C. § 9601 et seq., for costs associated with cleaning up hazardous waste
released at two manufactured gas plants in the early 1900s. The processes used at the time to create gas
for home consumption inevitably released harmful byproducts, including coal
tar, into the local environment, causing groundwater contamination.
At the time the tar was released, two utility companies,
Florida Public Service Company (FPSC) and Sanford Gas Company (Sanford)
operated the plants. A New York holding company, Associated Gas & Electric
Company (AGECO), owned the controlling interest in both companies through its
subsidiaries. Duke Energy is the
corporate successor to FPSC and Sanford, and FirstEnergy was the stipulated
corporate successor to AGECO.
Beginning in 1998, Duke Energy and other previous owners of
the gas plant sites entered into a series of agreements with the Environmental
Protection Agency (EPA) to conduct remediation at the sites and reimburse the
EPA for response costs it had incurred. Duke Energy asserted that FirstEnergy,
as AGECO’s corporate successor, should be required to contribute to the cleanup
costs based on the theory of indirect liability.
A corporate parent may be held indirectly liable under
CERCLA only if the corporate veil separating parent and subsidiary may be
pierced under the corporate law of the relevant state. Florida courts are reluctant to pierce the
corporate veil and take such action only in severely limited circumstances. The
party seeking to pierce the veil in Florida must prove three elements: (1) the
shareholder dominated and controlled the corporation to such an extent that the
corporation’s independent existence was in fact non-existent and the
shareholders were in fact alter egos of the corporation; (2) the corporate form
must have been used fraudulently or for an improper purpose; and (3) the
fraudulent or improper use of the corporate form caused injury to the claimant.
The U.S. District Court declined to pierce the corporate
veils separating FPSC and Sanford from AGECO.
The Sixth Circuit affirmed the District Court’s finding that although
Duke Energy had successfully shown that AGECO dominated and controlled FPSC and
Sanford, it had not proven by clear and convincing evidence that AGECO had used
the two subsidiaries for an improper or fraudulent purpose. As a result, Florida law did not permit
piercing the veil on the facts of this case.
