C&D Disposal Technologies, LLC (“C&D Disposal”) operated a construction and demolition debris landfill in southeastern Ohio. The landfill had a difficult operating history, allegedly accepting illegal solid waste and used tires, being filled beyond its permitted capacity, and a host of other alleged violations. After a trial on the merits, the trial court found C&D Disposal and the majority shareholder, Joseph Scugoza, in violation of Ohio EPA’s environmental regulations and assessed a penalty of $4,000,000 for overfilling the landfill and $700,000 for violating water pollution control laws. The court found the C&D Disposal and Mr. Scugoza jointly and severally liable.

Mr. Scugoza appealed the court’s determination of the amount of the penalty and the trial court’s finding that he was personally liable for the penalty. After evaluating the trial court’s penalty calculation, the court of appeals found it well within the trial court’s discretion. The court of appeals then turned to Mr. Scugoza’s determination of his personal liability. Mr. Scugoza argued that the State had failed to prove facts meeting the three-part test for piercing the corporate veil established under Belvedere Condominium Unit Owners Association v. R.E. Roark Cos., Inc. (1993), 67 Ohio St.3d 274, because he did neither exert nor had the authority to assert sufficient control over C&D Disposal’s corporate decision making. The court of appeals noted the trial court had not determined his liability on the basis of his corporate capacity, but rather had determined that Mr. Scugoza was directly liable because of his personal involvement and actions in controlling the day-to-day operations of the facility. As stated by the trial court, “it is not that he had authority but rather that he actually exercised it in directing the conduct that caused the violations.”

The court of appeals discussed the similarities with another recent decision (DeWine v. Sugar, 2016-Ohio-884) that upheld personal liability in connection with an asbestos abatement and demolition project where the defendant was found personally liable and fined $50,000 after taking a plea agreement in federal court, followed by an additional $850,000 after a state bench trial.

The court of appeals upheld Mr. Scugoza’s joint and several liability for the $4.7 million penalty on the basis of his actual control of operations at the site rather than his control of the corporation. This is the second decision in the last year to uphold personal liability under similar circumstances. It is a trend worth watching in Ohio.