The Supreme Court recently made it more difficult for the federal government to collect Superfund cleanup costs for sites owned by corporate subsidiaries.

In an important decision in the era of Brownfields, when businesses are evaluating the possible liabilities for hazardous waste cleanup, the justices ruled unanimously inUnited States v. Bestfoods, et al. The court ruled that the parent corporation was not subject to derivative liability for Superfund cleanup costs as to the subsidiary’s operation unless the corporate veil is pierced.

Under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA), the government may bring suit to recover the costs of cleaning up hazardous waste at a facility against a party that at the time of disposal of waste, owned or operated the facility.

In this case, the government, attempting to recover costs of cleaning up a former chemical manufacturing plant near Muskegon, Michigan, sued Bestfoods. Bestfoods had a subsidiary that owned the site from 1965 through 1972, when the plant was sold to a company that later went bankrupt.

A federal judge originally ordered Bestfoods to pay the clean up costs. The federal appeals court reversed and the Supreme Court affirmed that reversal.

It is now clear that a parent company that controlled a subsidiary’ operations, generally, cannot be forced to clean up that site.

This decision provides guidance on structuring the parties in a Brownfields project so that there is no liability for the corporate owner of the subsidiary that will actually be handling hazardous waste.