New York State Electric & Gas Corp. v. FirstEnergy Corp.
766 F.3d 212
| 2d Cir. | 2014Background
- NYSEG sued FirstEnergy under CERCLA §107(a) for cleanup costs at 16 upstate New York MGP sites, seeking veil-piercing liability against AGECO (FirstEnergy’s predecessor).
- FirstEnergy filed CERCLA §113(f) contribution claims against NYSEG and I.D. Booth, Inc. (owner of one site).
- District court held NYSEG can pierce AGECO veil to hold FirstEnergy liable for period 1922–1940, and found I.D. Booth liable at Cortland-Homer site; other sites’ costs were time-barred or not barred by statute.
- AGECO filed for bankruptcy in 1940; NYSEG’s board executed a covenant not to sue during that process, conditionally to indorsement by AGECO Trustees, which did not occur, so covenant not to sue did not bar NYSEG’s claims.
- Issues included whether AGECO directly operated the sites, whether veil-piercing extends to pre-merger liabilities, and how to allocate costs including insurance offsets and statutory limitations.
- The court ultimately affirmed in part, vacated in part, and remanded for further proceedings on several veil-piercing and limitations issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Covenant not to sue bars NYSEG claim? | NYSEG | FirstEnergy | Covenant not to sue does not bar NYSEG's claims |
| AGECO as direct CERCLA operator | NYSEG | FirstEnergy | AGECO not a direct operator for the listed sites |
| Veil piercing for contamination by AGECO and pre-merger subsidiaries | NYSEG | FirstEnergy | Liability for contamination by AGECO-controlled entities pre-merger affirmed for NYSEG's path; liability for pre-merger non-NYSEG subsidiaries pierced rejected |
| Timeliness of Plattsburgh, Norwich, and Owego | NYSEG | FirstEnergy | Plattsburgh timely; Norwich and Owego time-barred |
| Allocation and offset issues (gas production, insurance, delays) | NYSEG | FirstEnergy | District court’s rulings on gas production estimates, insurance offset, and delay considerations sustained |
Key Cases Cited
- United States v. Bestfoods, 524 U.S. 51 (1998) (defines operator liability under CERCLA)
- Passalacqua Builders, Inc. v. Resnick Developers S., Inc., 933 F.2d 131 (2d Cir.1991) ( Passalacqua factors for veil piercing)
- Next Millenium Realty, LLC v. New York, 732 F.3d 117 (2d Cir.2013) (CERCLA removal vs remedial action; timing considerations)
- Rochester Gas & Elec. Corp. v. GPU, Inc., 355 F.App’x 547 (2d Cir.2009) (discusses corporate veil and AGECO history)
- Lashins Arcade Co. v. NYS, 91 F.3d 353 (2d Cir.1996) (due care under third-party defenses in CERCLA)
- Next Millenium Realty, LLC v. New York (Alternate citation for context), 732 F.3d 117 (2d Cir.2013) (as above)
- Wm. Passalacqua Builders, Inc. v. Resnick Developers S., Inc., 933 F.2d 131 (2d Cir.1991) (Passalacqua factors governing piercing the corporate veil)