Question

Based on Court Case United States v. Bestfoods 113F.3d 572 (1998)

Is direct liability for a parent company's operation of the facility distinct from derivative liability for the subsidiary's operation of the facility?

Answer 1

In the event when the Corporate veil is pierced, the Parent Company is liable for the subsidiary’s operation of the polluting facility. However, in general, the Parent Company’s operation of the facility is distinct from derivative liability for the subsidiary’s operation of the facility and hence the Parent corporation cannot be held directly liable for subsidiary’s acts. The only way hence there could be a direct liability for a Parent Company’s operation of the facility with that of derivative liability for the subsidiary’s operations, is when the Corporate veil is pierced at the time of fraudulent or other malpractices conducted by the Parent-Subsidiary Company, thereby holding the shareholders liable for the acts too.

Otherwise, there is no direct liability for a parent company's operation of the facility distinct from derivative liability for the subsidiary's operation of the facility