Scott v. NG US1, Inc.

(Massachusetts Supreme Judicial Court)

• Opposing Expansion of the Doctrine of Piercing the Corporate Veil

In its March 7 decision in this case the Massachusetts Supreme Judicial Court agreed with NELF and the Associated Industries of Massachusetts (“AIM”) that a parent corporation, having first acquired an ownership interest in a subsidiary decades after the subsidiary had allegedly caused pollution and sold the contaminated site, cannot be held derivatively liable under the state Superfund law, G. L. c. 21E.  Superior Court Judge Allan van Gestel had granted summary judgment in favor of the defendant companies, but the Massachusetts Appeals Court vacated the judgment for NG US 1, concluding that there existed a genuine issue of material fact as to whether the corporate veil of New England Electric System (NG US 1’s corporate predecessor) could be pierced to impose liability.  NELF supported the defendants’ petition for further appellate review and, after the SJC granted that application, joined with AIM in filing an amicus brief.  In its unanimous opinion, authored by Chief Justice Marshall, the SJC first agreed with NELF’s and AIM’s assertion that federal and state Superfund statutes do not disturb the common law with respect to the criteria for piercing the corporate veil.  The Court then provided a virtual primer on the common law doctrine and concluded that “the corporate form may not be pierced to impose liability for actions taken (or not taken) by another entity long before the formation of a corporate relationship.”  The Court rejected the Appeals Court’s interpretation of Attorney Gen. v. M.C.K., Inc., 432 Mass. 546 (2000), as authorizing the disregard of corporate form based purely on general statutory goals.  To the contrary the SJC confirmed, as amici had argued, that there can be no basis for piercing the parent’s veil unless an agency or similar relationship existed between the two corporate entities at the time of the events giving rise to liability.   The case is a welcome reaffirmation of the principles articulated by the SJC forty years ago in My Bread Baking Co. v. Cumberland Farms, Inc., 353 Mass. 614 (1968).