An Ohio appellate court has upheld the trial court’s finding of personal liability for the environmental violations of a number of closely held corporate entities and reiterated the standards in Ohio for “piercing the veil” for environmental liabilities. In State of Ohio v. Pure Tech Systems, Inc., the Eighth District Court of Appeals upheld the trial court’s grant of summary judgment to the State of Ohio related to the failure to remediate property used for industrial purposes since the 1880’s.
The defendant, Robert Kattula, created and controlled corporations, which owned and operated portions of the affected property. Certain of these companies entered into agreements with Ohio EPA to remediate the property but failed to comply. The court, after finding that violations of hazardous substance remediation requirements had occurred, evaluated the extent of Mr. Kattula’s personal involvement in the operations of these entities and his direct authority to make decisions regarding the remediation of the properties. The court of appeals agreed that the factual record was sufficient to demonstrate that the corporations existed at the will of Mr. Kattula, and that in exercising control over them, Kattula was personally involved in the violations of law. Further, the record demonstrated that Kattula exercised control over the appellant corporations in such a manner that it would be fraudulent not to hold him personally accountable for the violations at issue. Mr. Kattula also diverted or comingled the companies’ corporate assets and used the corporations for personal gain.
The court also evaluated the trial court’s assessment of a $6.1 million civil penalty against the corporations. The Court of Appeals upheld the assessment of civil penalties finding that the trial court both properly considered the civil penalty worksheet prepared by Ohio EPA and addressed the relevant factors for determining the amount of the civil penalty in an environmental case in Ohio. These factors include the significance of the harm presented to the environment, the level of recalcitrance, defiance or indifference, the economic benefit gained and the extraordinary costs incurred in enforcement.
The Pure Tech decision confirms the legal standards that Ohio courts will consider when evaluating claims to pierce the corporate veil in in connection with alleged environmental violations. It further highlights the importance of carefully evaluating corporate responses to environmental requirements to protect corporate officer and shareholder interests.