Opinion
No. CV 03-0825384
May 24, 2005
MEMORANDUM OF DECISION ON MOTION TO STRIKE (#111)
Whether counts thirteen and fourteen of the plaintiff's amended complaint dated October 21, 2003 should be stricken on the ground that the responsible corporate officer doctrine does not apply to violations of the Transfer Act.
The plaintiff, Arthur J. Rocque, Jr., Commissioner of Environmental Protection, filed an amended sixteen-count complaint dated October 21, 2003 against defendants Michael Schiavone, Vice President of Joseph A. Schiavone Corp., Joseph A. Schiavone Corp. (JASC) and Metal Management Connecticut, Inc. The action relates to the operation and transfer of ownership of a scrap metal reclamation facility that allegedly generated, discharged and spilled hazardous waste. The facility was located at 250 Universal Drive in North Haven, Connecticut (site) and the transfer occurred on or about July 1, 1998. Allegations relevant to the present motion include the plaintiff's claims that given the discharges and spillage that occurred on the site, JASC was required to file a Form III, pursuant to General Statutes § 22a-134(12), and a complete environmental condition assessment form (ECAF), pursuant to General Statutes § 22a-134a(d) and (e). Instead, JASC filed a Form I, upon which defendant Michael Schiavone certified under oath that there had not been any discharge, spillage, etc. at 234 Universal Drive, North Haven, Connecticut. Presuming that the defendants JASC and Michael Schiavone were referring to the site, notwithstanding the difference in address, the plaintiff claims that such defendants violated § 22a-134a for failing to file a Form III and are subject to penalties for filing false information pursuant to § 22a-134d.
Metal Management Connecticut, Inc. is a wholly-owned subsidiary of Metal Management, Inc. Metal Management, Inc. filed for bankruptcy relief pursuant to Chapter 11 of the Bankruptcy Code and received a discharge from its debts and liabilities arising prior to June 18, 2001.
"`Form I' means a written certification by the transferor of an establishment on a form prescribed and provided by the commissioner that: (A) No discharge, spillage, uncontrolled loss, seepage or filtration of hazardous waste or a hazardous substance has occurred at the establishment which certification is based on an investigation of the parcel in accordance with prevailing standards and guidelines, or (B) no discharge spillage, uncontrolled loss, seepage or filtration of hazardous waste has occurred at the establishment based upon an investigation of the parcel in accordance with the prevailing standards and guidelines and the commissioner has determined, in writing, or a licensed environmental professional has verified that any discharge, spillage, uncontrolled loss, seepage or filtration of a hazardous substance has been remediated in accordance with the remediation standards[."] General Statutes § 22a-134(10). "`Form III' means a written certification signed by a certifying party on a form prescribed and provided by the commissioner, which certification states that (A) a discharge, spillage, uncontrolled loss, seepage or filtration of hazardous waste or a hazardous substance has occurred at the establishment or the environmental conditions at the establishment are unknown, and (B) that the person signing the certification agrees to investigate the parcel in accordance with prevailing standards and guidelines and to remediate pollution caused by any release of a hazardous waste or hazardous substance from the establishment in accordance with the remediation standards." General Statutes § 22a-134(12).
Relevant to the motion before this court, the plaintiff in count thirteen, essentially alleges that defendant Michael Schiavone was, as vice president of JASC, responsible for JASC's failure to file Form III accompanied by an ECAF and that he did not himself make such filings and therefore is personally liable under § 22a-134d as a responsible corporate officer. Count fourteen contains, inter alia, allegations that Michael Schiavone signed Form I as the certifying party, caused it to be submitted to commissioner and knew that his certified statement was false in violation of §§ 22a-134 through 22a-134e. It is further alleged that, "Michael Schiavone knowingly gave or caused to be given false information on a document required by the Transfer Act." (Amended Complaint dated 10/21/03, ¶ 18, p. 14.) The plaintiff also incorporates, by reference, those portions of count thirteen alleging that Michael Schiavone was the responsible corporate officer. Accordingly, the plaintiff contends that Michael Schiavone is personally subject to the penalty set forth in § 22a-134d and, in the corresponding prayer for relief asks the court to order Michael Schiavone to pay a penalty not to exceed one hundred thousand dollars. (Amended Complaint dated 10/21/03, Prayer for Relief ¶ 11, p. 24.)
Defendant Michael Schiavone and JASC moved to strike counts thirteen and fourteen of the amended complaint dated October 21, 2003 on the grounds that the responsible corporate officer doctrine (doctrine) does not apply to violations of the Transfer Act. The plaintiffs oppose the motion by taking essentially the opposite position on applicability of the doctrine to the present case.
"The motion to strike . . . replaced the demurrer in our practice. Its function, like that which the demurrer served, is to test the legal sufficiency of a pleading." (Internal quotation marks omitted.) RK Constructors, Inc. v. Fusco Corp., 231 Conn. 381, 384, 650 A.2d 153 (1994). "The purpose of a motion to strike is to contest . . . the legal sufficiency of the allegations of any [complaint] . . . to state a claim upon which relief can be granted." (Internal quotation marks omitted.) Peter-Michael, Inc. v. Sea Shell Associates, 244 Conn. 269, 270, 709 A.2d 558 (1998).
"The Connecticut Transfer Act (Transfer Act), which is codified at General Statutes §§ 22a-134 et seq . . . subjects transferors of `establishments' to reporting, investigation and remediation requirements that depend on the environmental condition of the property being transferred. See General Statutes §§ 22a-134a. The transferor makes the report on one of several forms, which are defined terms under the statute as Forms I, II, III and IV. See General Statutes §§ 22a-134(10) through (13) (defining form contents). (Internal quotation marks omitted.) Northeast Connecticut Economic Alliance, Inc. v. ATC Partnership, 272 Conn. 14, 39-40, 861 A.2d 473 (2004). Here, it is alleged that the defendant corporation transferred property but did not file Form III, but instead completed, and Vice President of the defendant corporation signed, Form I.
Direct liability for corporate officers differs from the derivative liability that occurs in the context of corporate veil piercing. See BEC Corporation v. Department of Environmental Protection, 256 Conn. 602, 618, 775 A.2d 928 (2001). Corporate officers have long been held to be directly liable for the commission of torts in Connecticut. See Kilduff v. Adams, Inc., 219 Conn. 314, 331-32, 593 A.2d 478 (1991); Scribner v. O'Brien, Inc., 169 Conn. 389, 403-04, 363 A.2d 160 (1975). Personal liability for corporate officers in Connecticut jurisprudence expanded into the realm of environmental law in BEC Corporation v. Department of Environmental Protection, supra, 256 Conn. 602 (finding that responsible corporate officers can be held personally liable for violations of the Water Pollution Control Act [WPCA], General Statutes § 22a-416 et seq.). There, the court set forth what is essentially a two-part analysis: (1) whether corporate officers were intended to be liable under the act; (2) "when, or under what circumstances, a corporate officer is liable under [the WPCA]." Id., 616-17.
While liability based on an environmental statute was also imposed on individuals in Connecticut Building Wrecking Company, Inc. v. Carothers, 218 Conn. 580, 595 n. 13, 590 A.2d 447 (1991), the issue of whether corporate officers could be liable in their individual capacities was not before the court as these persons did not contest such findings.
In the first part of the analysis, the Supreme Court cites that portion of § 22a-423 wherein a "person" is defined as "any officer . . . of any . . . corporation." (Emphasis omitted.) Id., 617. Accordingly, the court determined that "the language of § 22a-423 strongly suggests that the legislature intended that corporate officers may be held liable under § 22a-432 under appropriate circumstances . . . [T]herefore, . . . under § 22a-432, the mere fact that a `person' who is polluting is a corporate officer does not automatically shield that officer from liability for his own actions or omissions." Id.
The court then analyzed "when, or under what circumstances, a corporate officer is liable under § 22a-432." Id., 617. The analysis primarily consisted of the discussion and adoption of a responsible corporate officer doctrine; id., 617-19; the court then held that a corporate officer is personally liable for a violation of the Water Pollution Control Act, General Statutes § CT Page 9137 22a-432, when "(1) the officer is in a position of responsibility that allows that officer to influence corporate policies and activities; (2) there is a nexus between the officer's actions or inactions in that position and the violation of § 22a-432 such that the corporate officer influenced the corporate actions that constituted the violation; and (3) the corporate officer's actions or inactions resulted in the violation." Id., 618. This holding was considerably narrowed by the court's statement that, "[w]e emphasize that we are by no means establishing the responsibility of corporate officers in general with respect to corporate activity; we restrict the application of the responsible corporate officer doctrine solely to violations of the act. Furthermore, we point out that a corporate officer's liability under the act is not tantamount to vicarious liability where the corporate officer may be held liable simply because the officer occupies the position of officer or director; rather, we hold that a corporate officer's conduct must have a responsible relationship to a violation of the act." (Emphasis added.) Id., 618-19.
Likewise, this court's analysis must begin with the relevant statutes. "No person shall transfer an establishment except in accordance with the provisions of Sections 22a-134 to 22a-134e, inclusive . . ." General Statutes § 22a-134a(a). "`Person' means person, as defined in Section 22a-2." General Statutes § 22a-134(14). "`[P]erson' means any individual, firm, partnership, association, syndicate, company, trust, corporation, limited liability company, municipality, agency or political or administrative subdivision of the state, or other legal entity of any kind." General Statutes § 22a-2. While an "individual" is a person under the act, the language defining "person" does not explicitly include corporate officers. General Statutes § 22a-2.
See 15 H.R. Proc., Pt. 15, 1973 Sess., p. 7792 (". . . the Act applies to everyone . . . persons, firms, municipalities, groups . . . and that's quite natural. Of course it does, because it takes everyone to make up a good environment or to pollute the environment, as we've been doing for the past hundred years").
The more inclusive definition of "person" as it exists in the Water Pollution Control Act, General Statutes § 22a-423, pre-dates the definition of person adopted in the Transfer Act, General Statutes § 22a-134(14). "It is . . . a tenet of statutory construction that the legislature is presumed to be aware of existing statutes. Leo Fedus Sons Construction Company v. Zoning Board of Appeals, 225 Conn. 432, 441-42, 623 A.2d 1007 (1993). Also, the legislative history of § 22a-134 suggests that the legislature intended to draft and adopt a relatively lenient statute: "[t]he State of New Jersey has passed a piece of legislation far, far stricter, far more harsh than that which Connecticut has or is in the process of passing here." 28 S. Proc., Pt. 6, 1985 Sess., p. 1803. The legislature could have adopted a definition of "person" in the Transfer Act that included the words "corporate officer" but did not. The results of the foregoing analysis may merely be interpreted as inconclusive regarding the issue of whether corporate officers are included in the definition of "person" adopted by § 22a-134(14); however, the results do not support a finding that the strong suggestion of corporate officer liability upon which the court relied in BEC Corporation v. Department of Environmental Protection exists in the present case.
Public Acts 1967, No. 57, § 2 was codified as General Statutes § 22a-423. Public Acts 1985, No. 85-568 § 2 was codified as General Statutes § 22a-134.
The second part of the analysis requires the court to consider "when, or under what circumstances, a corporate officer is liable under § 22a-432. BEC Corporation v. Department of Environmental Protection, supra, 256 Conn. 616-17. In BEC Corporation v. Department of Environmental Protection, the plaintiff corporate officers appealed from a commission finding that they had individually created or maintained a facility that could pollute state waters and that they were jointly and severally liable for compliance with an order to prevent, investigate, remediate and monitor pollution at the site. Id., 604. The Supreme Court, in affirming dismissal of the appeal, found that corporate officers could be held personally liable under the Water Pollution Control Act. The court cited to Starr v. Commissioner of Environmental Protection, 226 Conn. 358, 378, 627 A.2d 1296 (1993), in support of its holding stating that the broad remedial purpose of the Water Pollution Control Act "is to protect the waters of the state from pollution . . . [and] to remedy an inadequate statutory scheme as it pertained to the . . . commission's authority to order the abatement of existing sources of pollution." (Internal quotation marks omitted.) BEC Corporation v. Department of Environmental Protection, supra, 256 Conn. 621-22.
Here, the conduct complained of is the defendant corporate officer's failure to file a Form III, pursuant to General Statutes § 22a-134(12), and a complete environmental condition assessment form (ECAF), pursuant to General Statutes § 22a-134a(d) and (e). While the facts underlying the alleged violation of statute relate to the generation, discharge and spillage of hazardous substances, the remedy sought here is a civil penalty pursuant to General Statutes § 22a-134d. This is distinguishable from the order appealed from in BEC Corporation v. Department of Environmental Protection in that here, the plaintiff is not asking the court to order Michael Schiavone to remediate pollution. This is also distinguishable from the other cases cited by the court in holding that "a corporate officer's conduct must have a responsible relationship to a violation of the [Water Pollution Control Act]." BEC Corporation v. Department of Environmental Protection, supra, 256 Conn. 619, citing, e.g., United States v. Northeastern Pharmaceutical Chemical Co., 810 F.2d 726, 744 (8th Cir. 1986), cert. denied, 484 U.S. 848, 108 S.Ct. 146, 98 L.Ed.2d 102 (1987) (corporate officer individually liable under Comprehensive Environmental Response, Compensation, and Liability Act of 1980 [CERCLA] "because he personally arranged for the transportation and disposal of hazardous substances on behalf of [company] and thus actually participated in [company's] CERCLA violations"); United States v. Park, 421 U.S. 658, 674, 95 S.Ct. 1903, 44 L.Ed.2d 489 (1975) (for corporate officer to be criminally liable for violation of § 301(k) of the Federal Food, Drug, and Cosmetic Act, he had to have a responsible relation to unsanitary conditions that existed).
Based on the absence of statutory language suggesting that responsible corporate officers are liable for violations of the Transfer Act, the limitation on imposition of the responsible corporate officer doctrine set forth in BEC Corporation v. Department of Environmental Protection, supra, and the nature of the remedy sought, the defendant's motion to strike counts thirteen and fourteen of the amended complaint dated October 21, 2003 is granted.
Hennessey, J.