In connection with the demolition of a defunct Ohio steel mill, Arthur David Sugar, Sr., the sole shareholder of a company called Honey Creek Consulting Company, Inc., was found personally liable for the actions of both Honey Creek and asbestos remediation contractors hired by Honey Creek resulting Mr. Sugar being jointly and severally liable for a civil penalty of $850,000 for violation of Ohio’s asbestos abatement requirements.
On March 3, 2016, the Jefferson County Court of Appeals upheld both the amount of the penalty and trial court’s determination of Mr. Sugar’s personal liability. The Opinion reiterates the standards under Ohio law under which corporate officers can be personally liable based on their direct involvement in and authority over actions taken by the company.
As might be expected, the facts of the case were egregious. Sugar’s company, Honey Creek, purchased a defunct steel mill in Steubenville, Ohio with full knowledge that the mill contained substantial quantities of friable asbestos which would have to be removed prior to demolition of the mill and sale of the scrap materials. From March 2005 through 2010, the site was the subject of more than 50 notices of violation and was declared an asbestos public health emergency by the Steubenville Health Department. Friable asbestos was scattered throughout the site and the health department documented “white, greyish powdery substance” floating above the mill.
The evidence showed that Sugar was directly involved in the hiring of several asbestos remediation contractors, including one contractor that was clearly incapable of properly competing the abatement work. Honey Creek employees also testified that Sugar directed them to prevent regulatory agency representatives from inspecting the facility on certain occasions.
In May of 2012, a bench trial was conducted and the court found Sugar and his companies jointly and severally liable for the $850,000 civil penalty. Sugar appealed the trial court’s finding that he was personally liable. He argued that Honey Creek was the owner of the mill and that the asbestos remediation companies were the asbestos abatement “operators.” The appeals court was not impressed noting that the record supported the fact that Sugar oversaw the operations, organized the projects, sent workers from his companies, served as the contact person with administrative agencies and gave all orders regarding the project. He also allegedly ordered his workers to prevent inspectors from entering the site. Further, he continued to employ asbestos abatement contractors which were clearly incapable of properly completing the work.
Finally, the record demonstrated that Sugar failed to correct the known violations despite the fact that he was the sole person with the authority to do so. Accordingly, the trial court properly found that Sugar was personally liable as an individual based on his personal participation in the alleged violations. Note that the decision was not based on piercing the corporate veil but rather Sugar’s personal involvement.
Ultimately, the court also upheld the trial court’s assessment of $850,000 penalty. It examined the risk it posed to the environment, the defendants’ recalcitrance, indifference or defiance of the law and the economic benefit gained by the violation along with the extraordinary enforcement cost incurred by the state and determined that the civil penalty was well within the statutory guidelines.
The decision highlights the importance of retaining well-qualified asbestos abatement contractors, assuring proper oversight of the contractors and the considering the potential for personal liability where the corporate officer is personally involved in making decisions on behalf of the corporation which result in environmental violations.