Browning-Ferris and several other companies have brought a suit for contribution under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA — the Superfund statute). The suit is against Richard Ter Maat and two corporations of which he is (or was — one of the corporations has been sold) the president and principal shareholder; they are M.I.G. Investments, Inc. and AAA Disposal Systems, Inc.
Back in 1971 the owners of a landfill had leased it to a predecessor of Browning-Ferris, which operated it until the fall of 1975. Between then and 1988 it was operated by M.I.G. and AAA. In June of that year, after AAA was sold and Ter Maat moved to Florida, M.I.G. abandoned the landfill without covering it properly. For tax reasons, M.I.G. had been operated with very little capital, and it lacked funds for a proper cover. Two years after the abandonment, the EPA placed the site on the National Priorities List, the list of the *955 toxic waste sites that the Superfund statute requires be cleaned up, see 42 U.S.C. §§ 9605(8)(B), 9616(d), (e), and shortly afterward Browning-Ferris and the other plaintiffs, which shared responsibility for some of the pollution at the site, agreed to clean it up.
Section 113(f)(1) of the Superfund law authorizes any person who incurs costs in cleaning up a toxic-waste site to “seek contribution from any other person who is liable or potentially liable under section 9607(a) of this title.... In resolving contribution claims, the court may allocate response costs among liable parties using such equitable factors as the court determines are appropriate.” 42 U.S.C. § 9613(f)(1). Section 107(a)(1), 42 U.S.C. § 9607(a)(1), a part of the statutory provision to which section 113(f)(1) refers, includes in the set of potentially liable persons anyone who owned or operated a landfill when a hazardous substance was deposited in it, and this set is conceded to include both M.I.G. and AAA. The district judge held, however, that Ter Maat was not himself a potentially liable person, because he had done nothing that would subject him to liability on a “piercing the corporate veil” theory for the actions of the two corporations. So far as corporate liability for clean-up costs was concerned, the judge ruled that of the 55 percent of those costs that he deemed allocable to transporters and operators (the other 45 percent he allocated to the owners of the landfill and the generators of the toxic wastes dumped in it), 40 percent was the responsibility of Browning-Ferris and the other 60 percent the responsibility of M.I.G. and AAA. As between those two, the judge allocated responsibility equally, holding that, although the two corporations had operated the landfill jointly, the statute required him to allocate liability severally rather than jointly.
Browning-Ferris and the other companies that have incurred clean-up costs at the site of the former landfill have appealed. All of them join in making the following three arguments: the corporate veil should be pierced two ways, one to make Richard Ter Maat liable for the conduct of both “his” corporations, AAA and M.I.G., and the other to make AAA liable for M.I.G.’s conduct as an affiliate; in any event Ter Maat is directly as distinct from derivatively liable for contribution, as he was personally an operator of the landfill; the Superfund statute does permit joint liability in a contribution suit and it would be equitable to make AAA pay for the whole amount allocated to the two corporations, since they were jointly liable and M.I.G. is assetless (or may be — it has some insurance). Finally, Browning-Ferris argues that the district court allocated too much of the liability for the pollution at the site to it relative to M.I.G. and AAA.
Two issues are relatively simple and we address them first. One is whether an individual can shield himself from liability for operating a hazardous-waste facility merely by being an officer or shareholder of a corporation that also operates the facility. The answer is no. The principle of limited liability shields a shareholder from liability for the debts (including debts arising from tortious conduct) of the corporation in which he owns shares (with the exception discussed later for “veil piercing” situations), but not for his personal debts, including debts arising from torts that he commits himself. In other words, the status of being a shareholder does not immunize a person for liability for his, as distinct from the corporation’s, acts. E.g.,
Sidney S. Arst Co. v. Pipefitters Welfare Education Fund,
So if Ter Maat operated the landfill personally, rather than merely directing the business of the corporations of which he was the president and which either formally, or jointly with him (as well as with each other), operated it, he is personally liable. E.g.,
United States v. Best-foods,
It is also clear we think that CERCLA does not preclude the imposition of joint as distinct from several liability in a suit for contribution. This is, or at least should be considered, a case of first impression at the appellate level.
Carter-Jones Lumber Co. v. Dixie Distributing Co., supra,
An earlier Sixth Circuit case had tossed off a casual dictum that contribution liability under CERCLA is several, not joint,
Centerior Service Co. v. Acme Scrap Iron & Metal Corp.,
In traditional common law, when two or more persons inflict an indivisible injury each is fully liable for the injury. That is, the plaintiff can if he wants sue one of the tortfeasors for the entire damages and let the other go, and the one who is sued has no remedy against the one who got off scot-free. CERCLA modifies the traditional common law rule (as many other statutes do and as many state courts have done by decisions modifying the common law) by allowing one liable party to sue another for contribution. It does not follow that if, as in this case, contribution is sought from more than one party, the defendants cannot be held jointly liable. It is up to the district judge, guided only by equitable considerations — a broad and loose standard, see
Kerr-McGee Chemical Corp. v. Lefton Iron & Metal Co.,
Suppose, to alter the facts for simplicity’s sake, that Browning-Ferris had been made to clean up the entire site even though it had made only a small (say, 1 percent) contribution to its toxicity. Suppose M.I.G. and AAA were the bad actors jointly responsible for the other 99 percent. Suppose that for tax or other reasons M.I.G. had no assets. Under the view of the district court, even though M.I.G. and AAA had combined to inflict an indivisible injury (the contamination for which they were jointly responsible as joint operators), AAA would have to pay only 50 percent of the contamination for which it and M.I.G. were jointly liable, or 49.5 percent of the total clean-up cost (remember that we’re assuming that the two corporations are jointly responsible for 99 percent of the total contamination), while Browning-Ferris would have to pay 50.5 percent of the total clean-up cost even though it was responsible for only 1 percent of that cost. Cf.
Carter-Jones Lumber Co. v. Dixie Distributing Co., supra.
These are not our facts, but they show that a rule against ever holding contribution defendants jointly liable would be inconsistent with the statutory direction that the district court allocate liability equitably among the liable parties. Cf.
Centerior Service Co. v. Acme Scrap Iron & Metal Corp., supra,
The next issue is whether the district judge allocated too large a share (40 percent) of responsibility for the cost of the clean up to Browning-Ferris relative to the defendants, who had operated the landfill for a lot longer time and had dumped a much larger quantity of wastes in it. The judge allocated as large a share as he did to Browning-Ferris because he found that it had operated the landfill poorly and had dumped particularly toxic *958 wastes from a nearby Chrysler plant in violation of its operating permit, and the liquid character of the wastes had hastened their absorption into groundwater. Browning-Ferris argues both that these findings are erroneous and that, in any event, there, is no evidence that the wastes from the Chrysler plant increased the cost of cleaning up the site and anyway the amount dumped in the landfill was not as great as the district judge found. From evidence that a considerable portion of the Chrysler wastes were dumped elsewhere, Browning-Ferris argues that defendants’ expert had exaggerated the amount deposited in the landfill. Browning-Ferris may be correct on all these factual points, but we cannot say that the district court committed any dear errors in finding as it did, and that of course is our criterion.
The trickier question, which returns us to the issue of the district court’s equitable discretion in allocating liability among polluters, is whether the court must find a causal relation between a party’s pollution and the actual cost of cleaning up the site. To answer this question we have to distinguish between a necessary condition (or “but-for cause”) and a sufficient condition. If event A is a necessary condition of event B, this means that, without A, B will not occur. If A is a sufficient condition of B, this means that, if A occurs, B will occur. If A is that the murder weapon was loaded and B is the murder, then A is a necessary condition. If A is shooting a person through the heart and B is the death of the shooting victim, then A is a sufficient condition of B but not a necessary condition, because a wound to another part of the victim’s body might have been fatal as well.
This distinction may sometimes be important in the pollution context. It is easy to imagine a case in which, had X not polluted a site, no clean-up costs would have been incurred; X’s pollution would be a necessary condition of those costs and it would be natural to think that he should pay at least a part of them. But suppose that even if X had not polluted the site, it would have to be cleaned up — and at the same cost — because of the amount of pollution by Y. (That would be a case, perhaps rare, in which the clean-up costs were sensitive neither to the amount of pollution nor to any synergistic interaction between the different pollutants.) Then X’s pollution would not be a necessary condition of the clean up, or of any of the costs incurred in the clean up. But that should not necessarily let X off the hook. For suppose that though if X had not polluted the site at all there still would have been enough pollution from Y to require a clean up, if Y had not polluted the site X’s pollution would have been sufficient to require the clean up. In that case, the conduct of X and the conduct of Y would each be a sufficient but not a necessary condition of the clean up, and it would be entirely arbitrary to let either (or, even worse, both) off the hook on this basis. So far as appears, this is such a case; Browning-Ferris’s pollution was serious enough (if indeed it dumped a large quantity of Chrysler’s particularly toxic wastes) to require that the site be cleaned up, but the other pollution at the site was also enough. If Browning-Ferris’s conduct was thus a sufficient though not a necessary condition of the clean up, it is not inequitable to make it contribute substantially to the cost.
We do not suggest that this is one of the presumably rare cases in which the total costs of clean up are unaffected by the number of polluters or the specific amounts or types of pollution contributed by each. Browning-Ferris’s pollution was not, so far as appears, so serious all by itself as to have required the incurring of all the clean-up costs that were incurred. Even so, no principle of law, logic, or common sense required the court to allocate those total costs among the polluters on the basis of the volume of wastes alone. Not only do wastes differ in their toxicity, harm to the environment, and costs of cleaning up, and so relative volume is not a *959 reliable guide to the marginal costs imposed by each polluter; but polluters differ in the blameworthiness of the decisions or omissions that led to the pollution, and blameworthiness is relevant to an equitable allocation of joint costs. (Presumably it would not entitle the judge to make one polluter pay for separable costs wholly imposed by other polluters.) The district judge did not abuse his discretion in deciding that all these factors warranted making Browning-Ferris bear more than its proportional volumetric share of the pollution.
It remains to consider two issues of derivative liability. If Ter Maat is deemed on remand to be personally hable as an operator of the landfill, and especially if the judge allocates 100 percent of the joint liability of M.I.G. and AAA to AAA, the solvent one of the pair (there is no suggestion that the change of ownership gets AAA off the liability hook), then Browning-Ferris and the other plaintiffs will be able to collect the amount of contribution to which they are entitled from the defendants. But these are big “ifs” (how big is for the district judge to decide, in the first instance, on remand). The judge may find that Ter Maat was not an operator and that AAA should not bear the entirety of its joint liability with M.I.G. In that event, it will become important whether Ter Maat and AAA are derivatively liable for the conduct of M.I.G., and as the issue is fully briefed we shall resolve it now and hope to head off a further appeal.
The argument is that the corporate veil should be pierced, and Ter Maat, as shareholder of M.I.G. and AAA, and AAA as^an affiliate of M.I.G. (both dominated by Ter Maat, and AAA in addition a 30 percent shareholder of M.I.G.), should be held liable for MJ.G.’s debt to the plaintiffs. Although there is a split of authority on whether federal or state law governs the piercing of the corporate veil in CERCLA cases (the Supreme Court expressly left the question open in
United States v. Bestfoods, supra,
The general rule, of course, in Illinois as elsewhere, is that a shareholder, qua shareholder, and a parent, subsidiary, or other affiliate, qua affiliate, is not liable for a corporation’s debts. E.g.,
In re Rehabilitation of Centaur Ins. Co.,
In the case of a voluntary creditor, for example someone who had lent money to the corporation, the strongest case for piercing the veil is presented when the corporation had led potential creditors to believe that it was more solvent than it really was.
Holland v. Joy Candy Mfg. Corp.,
Analysis is more difficult in the ease of an involuntary creditor, such as the plaintiffs here, who wish to be compensated for having in effect “lent” the money to clean up the site of the former landfill but lent under compulsion, having been forced to clean it up by the Superfund law rather than pursuant to a contract with the “debtors,” such as M.I.G. See generally
Secon Service System, Inc. v. St. Joseph Bank & Trust Co.,
Second, it could be argued that enterprises engaged in potentially hazardous activities should be prevented from externalizing the costs of those activities, by being required to maintain or at least endeavor to maintain a sufficient capital cushion to be answerable in a tort suit should its activities cause harm give rise to liability, on pain of its shareholders’ and affiliates’ losing their limited liability should the corporation fail to do this. This argument has not carried the day in any jurisdiction that we are aware of, presumably because of the risks that it would impose on shareholders and because the potential victims of the corporation’s hazardous activities can be protected without making inroads into limited liability by requiring enterprises engaged in such activities to post a bond large enough to assure that any judgment against the corporation will be collectible. Courts do, it is true, frequently mention “undercapitalization” as a separate ground from neglect of corporate formalities for piercing the corporate veil.
Hystro Products, Inc. v. MNP Corp., supra,
There is no evidence that either M.I.G. or AAA failed to comply with the legal requirements for operating in the corporate form, except with regard to keeping minutes of their corporate meetings — not a failure significant enough to warrant forfeiture of limited liability, given that penalties should be proportioned to the gravity
*961
of the misconduct being penalized. The plaintiffs further argue, however, that M.I.G. was undercapitalized. The clearest case — here merging, though, with neglect of corporate formalities — for forfeiture of limited liability on this ground is where the corporation has failed to maintain the minimum capitalization required by law. But such eases are few (the only Illinois case we can find is
Gallagher v. Reconco Builders, Inc.,
There is of course a difference between assets available to pay a judgment and taxable income; the former might be ample while the latter was slight. But our point is only that the fact that M.I.G. might have been “undercapitalized” for tax reasons is not a reason for piercing the corporate veil. The cases in which under-capitalization has figured in the decision to pierce the corporate veil are ones in which the corporation had so little money that it could not and did not actually operate its nominal business on its own. An example is the corporation in the Fentress case, which had no capital at all that the court could find, and no bank account. Even there the court did not pierce the veil on the basis of undercapitalization alone, but cited also a persistent neglect of corporate formalities. Undercapitalization is rarely if ever the sole factor in a decision to pierce the corporate veil, William P. Hackney & Tracey G. Benson, “Shareholder Liability for Inadequate Capital,” 43 U. Pitt. L. Rev. 837, 885-87 (1982), and we think is best regarded simply as a factor helpful in identifying a corporation as a pure shell, which M.I.G. was not.
So on remand, to summarize, there will be no issues of veil piercing to consider but the court will have to decide Ter Maat’s personal liability and whether AAA should pay more than 50 percent of the two corporations’ liability to the plaintiffs.
Affirmed in PaRt, Reversed in Paut, and Remanded.