United States: When an Individual can be Responsible for the Corporation´s Environmental Responsibilities

The Indiana Supreme Court recently held that, under some circumstances, an individual associated with a corporation may be held personally liable for payment of civil penalties and the requirement to take corrective action to comply with the corporation’s legal obligations. Commissioner, Indiana Department of Environmental Management v. Lawrence Roseman d/b/a Spring Landfill and Lawrence Roseman, 755 N.E.2d 556 (Ind. 2001).

The Indiana Supreme Court used the "responsible corporate officer" doctrine to find that an individual could be personally responsible for a corporation’s violations of the Indiana Environmental Management Act. This is not too surprising, since Indiana Code 13-30-6-4 provides that a responsible corporate officer can be held liable under the criminal penalty provisions of the Environmental Management Act. However, the Supreme Court has held that a responsible corporate officer can also be held responsible for payment of civil penalties and taking actions necessary to comply with the environmental laws. The Court plainly believed individual liability was just in this particular case. As an indication of how the Supreme Court viewed the individual involved in this case, the decision actually discusses the development of the law to remove the ability of "fly-by-night" operators to escape reimbursing the public costs of "irresponsible operators." The corporation consisted of a sole owner and officer. Its sole owner and stockholder was in almost total non-compliance with the rules that apply during closure and post-closure of a municipal solid waste land-fill. The corporation was underfunded as it had become insolvent.

The procedural facts were no less egregious: The corporation had received a notice of violation from IDEM. It had negotiated an agreement to correct the violations and was given a complete waiver from the payment of any civil penalty. The corporation did not comply with that agreement. As a result the trial court held that corporation in contempt and ordered payment of $5,000 per day until the company complied with the agreement. The corporation, however, failed to answer a second amendment to the com-plaint which added a count to impose personal liability. Eventually a default judgment was entered against the corporation.

These extreme facts served as the foundation for the Indiana Supreme Court to consider for the first time whether, under the environmental laws, an individual could be held responsible for a corporation’s legal environmental obligations.

The circumstances and standards the Supreme Court used to find individual liability for a corporation’s responsibilities were: (1) the individual must be in a position of responsibility which allows the person to influence the corporation’s policy or activities; (2) there must be a nexus between the individual’s position and the violation in questions such that the individual could have influence on the corporation’s actions that caused the violation; and (3) the individual’s actions or inactions must have facilitated the violation. Based on the facts of this case, the individual, Larry Roseman, dominated the corporation and therefore was in a position allowing him to influence policies of the corporation. His acts were found to have facilitated the violations. There were no subordinates or intermediate officers principally responsible for compliance and he was directly involved in the corporation’s activity of disposing of waste outside the permit boundary. The court also used the Indiana Good Character Law’s definition of responsible party to say that Larry Roseman was in a position of "responsibility."

The facts of this case are so extreme that the holding may not be applicable to many other corporate violation situations. The court found that Larry Roseman was at the site at least five days a month and that he had ordered the landfill manager to deposit landfill waste outside the permitted contours. The court stressed that there was evidence of this individual’s direct participation in the environmental violation.

The Court found that it was not necessary to "pierce the corporate veil" in order to establish an individual’s liability for a corporation’s responsibility because: (1) the individual participated in the violation; (2) the type of violation affects public health; and (3) there was statutory liability under the Environmental Management Act for corporate officers. The Court has found that the responsible corporate officer doctrine is a separate basis for imposing liability on individuals in a corporation under Indiana’s Environmental Management Act.