Weather Underground, Incorporated v. Navigation Catalyst Systems, Incorporated et al

Filing 186

APPENDIX re: 178 MOTION for Summary Judgment filed by Epic Media Group, Incorporated. by Epic Media Group, Incorporated (Attachments: # 1 Exhibit 1, # 2 Exhibit 2, # 3 Exhibit 3, # 4 Exhibit 4, # 5 Exhibit 5, # 6 Exhibit 6, # 7 Exhibit 7, # 8 Exhibit 8, # 9 Exhibit 9, # 10 Exhibit 10, # 11 Exhibit 11, # 12 Exhibit 12, # 13 Exhibit 13) (Delgado, William)

Exhibit 6

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Not Reported in F.Supp.2d, 2009 WL 2242904 (W.D.Mich.), 70 ERC 1418
(Cite as: 2009 WL 2242904 (W.D.Mich.))

United States District Court,
W.D. Michigan,
Southern Division.
ITT CORPORATION, an Indiana corporation,
Plaintiff,
v.
BORGWARNER INC., a Delaware corporation, et
al., Defendants.
No. 1:05-CV-674.
July 22, 2009.
West KeySummaryCorporations and Business
Organizations 101
2724(4)
101 Corporations and Business Organizations
101X Mergers, Acquisitions, and Reorganizations
101X(C) Sale, Lease, or Exchange of Substantially All Corporate Assets
101k2721 Assumption of or Succession to
Transferor's Debts and Liabilities
101k2724 Particular Debts and Liabilities
101k2724(4) k. Liabilities based on
statutory provisions. Most Cited Cases
(Formerly 101k445.1)
A subsidiary corporation was not liable as a
successor under the Comprehensive Environmental
Response, Compensation, and Liability Act
(CERCLA). Since there was no evidence that a de
facto merger between the liable corporation and its
subsidiary had occurred, the subsidiary was not liable by reason of its purchase of certain assets relating to the contaminated site. 42 U.S.C. § 960.
Scott D. Broekstra, Mika Meyers Beckett & Jones
PLC, Grand Rapids, MI, for Plaintiff.
Jeffrey K. Haynes, Beier Howlett PC, Bloomfield
Hills, MI, John D. Dunn, Matthew T. Nelson,
Gaetan Edward Alain Gerville-Reache, Warner
Norcross & Judd LLP, Ryan D. Cobb, U.S. Attor-

ney, Grand Rapids, MI, John J Bursch, Sarah C.
Lindsey, Steven C. Kohl, Warner Norcross & Judd
LLP, Southfield, MI, Stephanie Sue Couhig, Stephen Q. Giblin, Jones Day, Cleveland, OH, for Defendants.
OPINION
ROBERT HOLMES BELL, District Judge.
*1 This environmental clean-up case comes before the Court on the Bronson Defendants'
(BorgWarner
Inc.,
Kuhlman
Corporation
(“Kuhlman Delaware”), and Bronson Specialities
Inc. (“New BSI”)) and Plaintiff ITT Corporation's
cross-motions
for
summary
judgment.
(Dkt.Nos.245, 251.) For the reasons that follow, the
Bronson Defendants' motion will be granted and
Plaintiffs motion will be denied.
I.
This is an action under the Comprehensive Environmental Response, Compensation, and Liability
Act (CERCLA), 42 U.S.C. § 960 et seq., and Part
201 of the Michigan Natural Resources and Environmental Protection Act (NREPA), Mich. Comp.
Laws § § 324.20101-324.20142, seeking recovery
of claimed response costs at two operable units
within the EPA-regulated North Bronson Area Superfund site in Bronson, Michigan. The two operable units at issue in this case are Operable Unit
One (“OU1”) of the North Bronson Former Facilities Site (“NBFF OU1 Site”) and OU1 of the North
Bronson Industrial Area Site (“NBIA Site”).
The NBFF OU1 Site was developed by the
Bronson Reel Company in 1929 for the manufacture of fishing reels. Higbie Manufacturing Company owned the Bronson Reel Company and the
NBFF OU1 property until 1963, when it sold the
Bronson Reel Company Division and the NBFF
OU1 property to Bronson Specialities, Inc. (“Old
BSI”). Plaintiff ITT is the successor corporation to
Higbie Manufacturing Company.

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New BSI had a manufacturing operation at the
NBFF Site from 1979 to 1984. New BSI discontinued all manufacturing operations in 1990, but it is
still the owner of the NBFF OU1 Site. New BSI is a
wholly-owned subsidiary of Kuhlman Delaware,
and Kuhlman Delaware is a wholly-owned subsidiary of BorgWarner.
Plaintiff has alleged that Defendant New BSI is
the current owner and operator of the NBFF OU1
Site, and that it is the successor-in-interest to Old
BSI and Bronson Products Company, former owners/operators of the NBFF OU1 Site from 1963
through 1979. (Dkt. No. 88, Am.Compl.¶ 6.)
Plaintiff has alleged that Defendant Kuhlman is a
former operator of the Site, and that it owns and
controls New BSI. (Id. at ¶ 7.) Plaintiff has alleged
that Defendant BorgWarner is the successorin-interest to and owner of Kuhlman, that it owns
and controls BSI, and that it is a current operator of
the Site. (Id. at ¶ 9.)
Currently before the Court are the Bronson Defendants' motion for partial summary judgment on
Plaintiffs claim that New BSI succeeded to Old
BSI's CERCLA and Part 201 liabilities relative to
the NBFF OU1 and NBIA Sites, and the Bronson
Defendants and Plaintiff ITT's cross-motions for
summary judgment on whether Kuhlman and
BorgWarner are liable under CERCLA and Part
201 at both the NBFF OU1 Site and the NBIA Site
FN1
under theories of direct or derivative liability.
Defendant Scott Fetzer joins in ITT's opposition to
the Bronson Defendants' motion for summary judgment. (Dkt. No. 263.)
FN1. Plaintiff has acknowledged that the
corporate issues addressed in the Bronson
Defendants' motion for summary judgment
on all claims against BorgWarner and
Kuhlman “apply equally to the Part 201
claims and CERCLA claims, as well as the
NBIA Site and NBFF Site.” (Dkt. No. 260,
Pl.'s Opp'n 4 n. 1.)
II.

The Bronson Defendants have moved for partial summary judgment that New BSI has not succeeded to any claimed CERLCA or Part 201 liabilities of Old BSI,
*2 Plaintiff has conceded that it cannot show
that there was a de facto merger of Old BSI with
Kuhlman and/or its subsidiary New BSI, and that
there is no evidentiary basis for finding successor
liability on the part of New BSI at the NBFF OU1
Site. (Dkt. No. 260, ITT's Opp'n 16.) See Craig ex
rel. Craig v. Oakwood Hosp., 471 Mich. 67, 684
N.W.2d 296, 314 (Mich.2004) (describing the
scope of successor liability and the elements of a de
facto merger).
Accordingly, the Court will grant partial summary judgment to New BSI, that it has not succeeded to any claimed CERLCA or Part 201 liabilities by reason of its purchase of certain assets relating to the NBFF OU1 Site on January 26, 1979.
This ruling does not affect New BSI's potential liability for Old BSI's orphan's share, i.e., the equitable share of the amount of response costs that are
attributable to bankrupt or financially insolvent potentially responsible parties (“PRPs”). See Charter
Twp. of Oshtemo v. Am. Cyanamid Co., 898
F.Supp. 506, 508 (W.D.Mich.1995) (Enslen, C.J.)
(defining “orphan's share”).
III.
The Bronson Defendants also seek summary
judgment on Plaintiffs contention that Kuhlman
Corporation is directly liable to Plaintiff for New
BSI's CERCLA and Part 201 liabilities at the NBFF
OU1 Site based on Kuhlman's assumption of the
environmental liabilities of New BSI in 1999 when
New BSI became a wholly-owned subsidiary of Defendant Kuhlman Delaware.
Some background on the history of New BSI's
ownership is essential to the Court's analysis. In
1979, Kuhl, Inc., a wholly owned subsidiary of
Kuhlman, Inc. (“Kuhlman Michigan”), purchased
the assets of Old BSI. Kuhl, Inc. subsequently
changed its name to Bronson Specialties, Inc.

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(“New BSI”). (Dkt. No. 245, Exs.A, C, D.) In 1985,
New BSI sold substantially all of its operational assets associated with the NBFF OU1 property, but
not the NBFF OU1 property itself, to P.C. Industries, which changed its name to Bronson Precision
Products, Inc. (a/k/a Defendant Royal Oak Industries). New BSI continued other manufacturing operations at other locations until June 1990, when it
sold substantially all of its remaining assets. (Dkt.
No. 265, Bronson Def.'s Opp'n, Ex. 1.) Although
New BSI retained certai n assets, including the
NBFF OU1 property, New BSI had no ongoing operations after the 1990 sale of its assets.
In 1993 Kuhlman Michigan merged into Kuhlman Electric Corporation (“KEC”), a Delaware corporation. (Dkt. No. 245, Ex. I). As a result of this
transaction, New BSI became a subsidiary of KEC,
and KEC became a wholly-owned subsidiary of
newly created Kuhlman Delaware. Kuhlman
Delaware was engaged in the manufacture of industrial products and electrical products. On March 1,
1999, BorgWarner acquired Kuhlman Delaware as
a wholly-owned subsidiary, but announced its intention to sell Kuhlman Delaware's electrical
products businesses. (Dkt. No. 265, Ex. 3,
BorgWarner 3/19/1999 10-K.) In August 1999
BorgWarner sold KEC to a third-party. (Dkt. No.
245, Ex. J.) However, certain of KEC's assets, including New BSI, were excluded from the sale, and
KEC assigned its right, title and interest in those
excluded assets to Kuhlman Delaware. (Id.) As a
result of this transaction, in 1999 New BSI became
a wholly owned subsidiary of Kuhlman Delaware,
which was a wholly owned subsidiary of
BorgWarner.

that it was party to or a third-party beneficiary of
the August 30, 1999 Assignment and Assumption
Agreement between Kuhlman Delaware and KEC
that purportedly contained a contractual promise to
assume liabilities. (Dkt. No. 251, Ex. 5, 10/5/1999
Assignment and Assumption Agrm't.)
Michigan's third-party beneficiary statute
“draws a distinction between intended third-party
beneficiaries who may sue for a breach of a contractual promise in their favor, and incidental thirdparty beneficiaries who may not.” Brunsell v. City
of Zeeland, 467 Mich. 293, 651 N.W.2d 388, 390
(Mich.2002) (citing Mich. Comp. Laws § 600.1405
). “A person is a third-party beneficiary of a contract only when that contract establishes that a
promisor has undertaken a promise directly to or
for that person.” Schmalfeldt v. North Pointe Ins.
Co., 469 Mich. 422, 670 N.W.2d 651, 654
(Mich.2003) (citing Mich. Comp. Laws § 600.1405;
Koenig v. South Haven, 460 Mich. 667, 677, 597
N.W.2d 99 (1999)). “[A] court should look no further than the form and meaning of the contract itself to determine whether a party is an intended
third-party beneficiary within the meaning of
1405.” Id .
Plaintiff has not shown that it was referred to in
the Agreement or that it was an intended beneficiary of the Agreement. Accordingly, ITT has no
basis to assert any rights or claims for assumption
of New BSI's liabilities arising out of that agreement.

*3 Plaintiff contends that Kuhlman Delaware
should be held liable for New BSI's environmental
liabilities based on its assumption of New BSI's environmental liabilities. This assumption is based on
two false premises.

Second, even if Plaintiff had standing to enforce the Assignment and Assumption Agreement,
Plaintiff is not correct in its assertion that Kuhlman
Delaware assumed New BSI's liabilities in that
agreement. ITT relies on the following language
from the agreement as the basis for its assertion that
Kuhlman Delaware is liable for New BSI's obligations:

First, Plaintiff erroneously assumes that it is in
a position to enforce the contract between Kuhlman
Delaware and KEC. Plaintiff has not demonstrated

Assignee [Kuhlman Corporation] hereby assumes, and agrees to pay, perform and discharge
when due, all obligations and liabilities of As-

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signor [Kuhlman Electric Corporation] to be performed under the Retained Liabilities, in each
case from and after the Effective Date.

having to do with the leakage or disposal of hazardous waste, or decisions about compliance with
environmental regulations.

(Dkt. No. 251, Ex. 5.) There is no mention in
the Agreement of any assumption of New BSI's liabilities. Plaintiff relies on the fact that Kuhlman
assumed liabilities of KEC under the “Retained Liabilities,” which includes certain liabilities associated with subsidiaries. However, Kuhlman
Delaware only assumed those liabilities of the subsidiaries to the extent that KEC itself had liability
for the subsidiaries. In order to read an assumption
of New BSI's liabilities into the Agreement, the
Court would have to ignore the separate corporate
existence of New BSI. As discussed in Part V below, the Court finds no basis for doing so. For these
reasons, the Court declines to find that Kuhlman
Delaware is directly liable to Plaintiff based on its
alleged assumption of New BSI's liabilities.

United States v. Bestfoods, 524 U.S. 51, 66-67,
118 S.Ct. 1876, 141 L.Ed.2d 43 (1998).

IV.
*4 The Bronson Defendants also seek summary
judgment on Plaintiff's contention that BorgWarner
is directly liable as an operator of the NBFF OU1
Site. Plaintiff contends that the evidence demonstrates that Borg Warner has exerted control over
the NBFF OU1 Site to a level sufficient to hold it
directly liable as an operator under CERCLA §
107(a)(1) and the corresponding provisions of Part
201.
CERCLA defines the term “operator” as “any
person ... operating” the facility. 42 U.S.C. §
9601(20)(A)(ii). Because of the “uselessness” of
this definition, the term is given its ordinary and
natural meaning, which, in the CERCLA context is
as follows:
[U]nder CERCLA, an operator is simply
someone who directs the workings of, manages,
or conducts the affairs of a facility. To sharpen
the definition for purposes of CERCLA's concern
with environmental contamination, an operator
must manage, direct, or conduct operations specifically related to pollution, that is, operations

For operator liability to attach under CERCLA,
it is not enough that a corporate defendant actively
participated in and exercised control over the general affairs of its subsidiary. Id. at 67-68. To be directly liable as an operator, a defendant must
“manage, direct, or conduct operations specifically
related to pollution.” Id. at 66-67. Operator liability
may attach “where a party's operational decisions,
in conjunction with surrounding circumstances,
contribute to a release.” United States v. Meyer,
120 F.Supp.2d 635, 639 (W.D.Mich.1999) (Enslen,
C.J.). For operator liability to attach, the
“surrounding circumstances” must link the defendant as an operator to the disposal of waste. AeroMotive Co. v. Becker, No. 1:99-CV-384, 2001 WL
1699194, at *5 (W.D.Mich. Dec.6, 2001) (Quist, J.)
Plaintiff has presented evidence that after purchasing Kuhlman in 1999, BorgWarner did nothing
with the NBFF OU1 property for three years.
BorgWarner, the grandparent corporation of New
BSI, cannot be held liable as an operator for failing
to act with respect to New BSI's property. “Before
one can be considered an ‘operator’ for CERCLA
purposes, one must perform affirmative acts. The
failure to act, even when coupled with the ability or
authority to do so, cannot make an entity into an
operator.” United States v. Twp. of Brighton, 153
F.3d 307, 314 (6th Cir.1998).
Plaintiff has also presented evidence that since
2002, BorgWarner has put up a fence around the
property, arranged for Bronson Precision Products
to remove its property, has provided ITT entry to
the property to perform its work, has been the point
person for ITT's and the EPA's contact, and has
used its legal department to review access agreements.

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BorgWarner's role in facilitating access to the
NBFF OU1 site for remediation activities by ITT
and other third parties does not qualify as managing, directing or conducting operations specifically related to pollution. See Datron, Inc. v. CRA
Holdings, Inc., 42 F.Supp.2d 736, 747
(W.D.Mich.1999) (Bell, J.) (granting summary
judgment to a parent corporation on similar evidence). The Court concludes that BorgWarner cannot be held liable as an “operator” of the NBFF
OU1 under CERCLA.
V.
*5 Plaintiff also contends that BorgWarner and
Kuhlman Delaware have derivative liability for
New BSI's environmental liabilities because the
veil between BorgWarner and Kuhlman Delaware
and New BSI must be pierced.
“It is a general principle of corporate law
deeply ingrained in our economic and legal systems
that a parent corporation (so-called because of control through ownership of another corporation's
stock) is not liable for the acts of its subsidiaries.”
Bestfoods, 524 U.S. at 61 (quotations omitted).
“[N]othing in CERCLA purports to reject this bedrock principle ....“ Id. at 62. “[W]hen (but only
when) the corporate veil may be pierced, may a
parent corporation be charged with derivative CERCLA liability for its subsidiary's actions.” Id. at
63-64 (footnote omitted).
A question left unresolved by Bestfoods is what
law should be applied to the issue of piercing the
FN2
corporate veil.
Plaintiff contends that the Court
should apply federal common law to this issue. See
United States v. Gen. Battery Corp., 423 F.3d 294,
303-04 (3d Cir.2005) (holding that successor and
veil-piercing liability issues are governed by federal
common law). Subsequent to the Bestfoods decision, the Sixth Circuit reaffirmed its position that
it applies state law rather than federal common law
in resolving liability issues relating to corporations
and officers. Carter-Jones Lumber Co. v. Dixie
Distrib. Co., 166 F.3d 840, 847 (6th Cir.1999); see
also Mickowski v. Visi-Trak Worldwide, LLC, 415

F.3d 501, 515 (6th Cir.2005) (observing that “[t]his
Circuit similarly has declined to create federal common law and held that state common law provides
the relevant standards for successor liability in a
CERCLA action”).
FN2. “There is significant disagreement
among courts and commentators over
whether, in enforcing CERCLA's indirect
liability, courts should borrow state law, or
instead apply a federal common law of veil
piercing.... [However,] the question is not
presented in this case, and we do not address it further.” Bestfoods, 524 U.S. at
63-64 n. 9.
Plaintiff contends that if state law is to be applied, the Court should apply the law of Delaware
because that is the state where Kuhlman and
BorgWarner are incorporated. The Bronson Defendants contend the Court should apply Michigan
law because that is where New BSI is incorporated,
and it is the New BS1 corporate veil that ITT is attempting to pierce.
Courts in this circuit have generally applied the
law of the forum state in their veil-piercing analysis. See Donahey v. Bogle, 129 F.3d 838, 843 (6th
Cir.1997) (applying Michigan doctrine of veil piercing because case arose in Michigan), vacated on
other grounds, 524 U.S. 924, 118 S.Ct. 2317, 141
L.Ed.2d 692 (1998); United States v. Cordova
Chem. Co., 113 F.3d 572, 580 (6th Cir.1997)
(applying Michigan law to issue of whether to
pierce the corporate veil), vacated on other grounds
sub nom United States v. Bestfoods, 524 U.S. 924
(1998); Chrysler Corp. v. Ford Motor Co., 972
F.Supp. 1097, 1101-05 (E.D.Mich.1997) (holding
that Michigan, the state with the greatest interest in
the lawsuit, rather than the state of the parent corporation's incorporation, should govern). This case
arose in Michigan and Michigan has the greatest interest in, and connection to, the events in question.
New BSI is Michigan corporation, and the polluted
property is in Michigan. The Court concludes that
Michigan Jaw governs the issue of piercing the cor-

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porate veil.
*6 “Michigan law presumes that, absent some
abuse of corporate form, parent and subsidiary corporations are separate and distinct entities.” Seasword v. Hilti, Inc., 449 Mich. 542, 537 N.W.2d
221, 224 (Mich.1995). “ ‘The law treats a corporation as an entirely separate entity from its shareholders, even where one individual owns all the
corporation's stock.’ “ RDM Holdings, LTD v.
Cont'l Plastics Co., 281 Mich.App. 678, 762
N.W.2d 529, 550 (Mich.Ct.App.2008) (quoting
Rymal v. Baergen, 262 Mich.App. 274, 293, 686
N.W.2d 241 (2004)). The presumption that the parent and subsidiary corporations are separate and
distinct entities “may be pierced only where an otherwise separate corporate existence has been used
to ‘subvert justice or cause a result that [is] contrary
to some other clearly overriding public policy.’ ”
Seasword, 537 N.W.2d at 224 (quoting Wells v.
Firestone, 421 Mich. 641, 650, 364 N.W.2d 670
(1984)).
“ ‘The traditional basis for piercing the corporate veil has been to protect a corporation's creditors
where there is a unity of interest of the stockholders
and the corporation and where the stockholders
have used the corporate structure in an attempt to
avoid legal obligations.’ “ RDM Holdings, 762
N.W.2d at 550 (quoting Rymal, 262 Mich.App. at
293, 686 N.W.2d 241). Under Michigan law, for
the corporate veil to be pierced: (1) “ ‘the corporate
entity must be a mere instrumentality of another individual or entity;’ “ (2) “ ‘the corporate entity
must have been used to commit a wrong or fraud;’ “
and (3) “ ‘there must have been an unjust injury or
loss to the plaintiff.’ “ Id. (quoting Rymal, 262
Mich.App. at 293-94, 686 N.W.2d 241). See also
Cordova, 113 F.3d at 580 (“Michigan appears to
follow the general rule that requires demonstration
of patent abuse of the corporate form in order to
pierce the corporate veil. There must be such a
unity of interest and ownership that the separate
personalities of the corporation and its owner cease
to exist, and the circumstances must be such that

adherence to the fiction of separate corporate existence would sanction a fraud or promote injustice.”).
FN3
Plaintiff, as the party seeking to impose liability on the parent corporation, bears the burden of
demonstrating grounds for piercing the corporate
veil. See Stryker Corp. v. XL Ins. Am., Inc., No.
4:01-CV-157, 2006 WL 1997142, at *19
(W.D.Mich. July 14, 2006).
FN3. DeIaware law similarly requires a
plaintiff to prove an abuse of the corporate
form amounting to fraud or an injustice
akin to fraud. See Pauley Petroleum Inc. v.
Cont'l Oil Co., 239 A.2d 629, 633
(Del.1968) (holding that separate entities
of parent and subsidiary corporations may
disregarded “only in the interest of justice,
when such matters as fraud, contravention
of law or contract, public wrong, or where
equitable consideration among members of
the corporation require it, are involved.”)
Accordingly, even if the Court were to apply Delaware law, the analysis would be
essentially the same.
Plaintiff contends that the corporate veil
between Borg Warner and New BSI must be
pierced because (a) Kuhlman is merely a holding
company for New BSI and has no known employees, business operations, or assets; (b) New BSI is
undercapitalized; (c) New BSI did not observe corporate formalities; (d) New BSI was and is controlled and financed by its parent corporations; and
(e) New BSI's existence is a fraud because its parent corporations were aware of its environmental liabilities and have made no arrangements to address
suc h liabilities. (Dkt. No. 251, Pl.'s Br. 18-19.)
For purposes of the Bronson Defendants' motion for summary judgment, the Court construes the
evidence and draws all reasonable inferences in favor of Plaintiff, the non-moving party. See Minges
Creek, L.L.C. v. Royal Ins. Co. of Am., 442 F.3d
953, 955-56 (6th Cir.2006) (citing Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,
587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). Nev-

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ertheless, even assuming the truth of Plaintiff's
evidence, the evidence presented is not sufficient to
create an issue of fact as to whether Kuhiman
Delaware and BorgWarner have engaged in any
kind of fraud or abuse of the corporate form such
that they should be held derivatively liable for New
BSI.
*7 Plaintiff contends that in light of the three
corporations' overlapping directors and the subsidiaries' lack of assets, employees, operations, and attention to corporate formalities, New BSI and
Kuhlman Delaware are sham corporations operated
to shield BorgWarner from liability.
“Organization of a corporation for the avowed
purpose of avoiding personal responsibility does
not in itself constitute fraud or reprehensible conduct justifying a disregard of the corporate form.”
Cordova, 113 F.3d at 580 (citing Gledhill v. Fisher
& Co., 272 Mich. 353, 262 N.W. 371, 373
(Mich.1935)). “Virtually all corporations are
formed for the purpose of limiting liability. Only
where an attempt to limit liability is of a type that
typically involves a specific attempt to thwart
[legal] obligations is the application of relaxed alter
ego principles justified.” NLRB v. Fullerton Transfer & Storage Ltd., 910 F.2d 331, 341 (6th
Cir.1990). There is nothing inherently suspect in a
parent and subsidiary having overlapping officers
and directors. Bestfoods, 524 U.S. at 69-70 (“[I]t is
entirely appropriate for directors of a parent corporation to serve as directors of its subsidiary, and that
fact alone may not serve to expose the parent corporation to liability for its subsidiary's acts.”)
Moreover, disregard of corporate formalities, in and
of itself, is not sufficient to justify piercing the corporate veil. Soloman v. Western Hills Dev. Co., 110
Mich.App. 257, 312 N.W.2d 428, 432
(Mich.Ct.App.1981). Fraud, illegality, or injustice
must also be shown. Id.
The evidence of record, viewed in the light
most favorable to Plaintiff, reveals that BorgWarner
and Kuhlman Delaware have simply maintained
New BSI in the status in which it has existed since

1990. Plaintiff has not identified any legal authority
for holding BorgWarner and Kuhlman Delaware liable for New BSI's environmental liabilities merely
because they continued the corporate existence of
New BSI with outstanding potential liabilities. A
parent corporation's mere control and ownership of
a subsidiary corporation that lacks sufficient funds
to meet its environmental obligations is not a sufficient basis for piercing the corporate veil. See IBC
Mfg. Co. v. Velsicol Chem. Corp., No. 97-5340,
1999 WL 486615, at *4 (6th Cir. July 1, 1999)
(applying Tennessee law, and holding that in the
absence of evidence that the parent corporation's
control and ownership of the subsidiary was intended to defraud creditors, there was no basis for
piercing the corporate veil even though the subsidiary could not pay its environmental liabilities).
Plaintiff has not identified any legal basis for requiring a parent corporation to infuse money into a
subsidiary corporation that cannot otherwise meet
its financial obligations.
In a final effort to show fraud, Plaintiff asserts
that the corporate veil should be pierced because it
is undisputed that Kuhlman and KEC removed all
assets from New BSI and kept it as an insolvent
shell after 1990, with no funds to address known
environmental liabilities. (Dkt. No. 278, Pl.'s Am.
Reply Br. 1.) Evidence that a parent corporation
drained a subsidiary of its assets so that the subsidiary could not meet its known environmental liabilities might well provide a basis for piercing the corporate veil. However, Plaintiff would have to show
both knowledge of environmental liabilities and a
removal of assets to avoid those liabilities. Plaintiff
cannot meet either prong. The evidence simply does
not support Plaintiffs assertion that Defendants removed assets from New BSI at a time when they
knew that New BSI had outstanding environmental
obligations.
*8 Plaintiff acknowledges that New BSI had no
bank account as of 1990, after it had addressed the
environment al contamination at the NBFF OU1
Site, and ceased operations. Plaintiff has presented

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no evidence of what assets New BSI had when it
ceased operations. Plaintiff has not presented any
evidence that Kuhlman Michigan, KEC, Kuhlman
Delaware or BorgWarner removed any assets from
New BSI, much less what assets they removed,
when they removed the assets, or the purpose for
which they removed the assets. Absent evidence on
these issues, there is no basis for inferring that New
BSI's lack of sufficient assets to meet its environmental obligations is attributable to its corporate
parents. Nor is there any basis for inferring that
New BSI's corporate parents removed assets from
New BSI for the purpose of avoiding liabilities of
their own or for some other wrongful purpose.
In addition, Plaintiff's fraud argument fails because Plaintiff has not shown that Defendants were
aware that there were any cognizable claims for environmental liability. The directors and officers of
the Bronson Defendants have testified that they had
no knowledge from 1991 forward of any outstanding claims or unresolved liabilities related to New
BSI. No one asserted a claim against the Bronson
Defendants for environmental liabilities until ITT
initiated this suit in 2005.
Plaintiff relies primarily on two pieces of correspondence to show that Defendants had knowledge of New BSI's environmental liabilities. The
first is correspondence from the EPA in 1986 addressed to New BSI and Kuhlman Michigan, asserting that both entities may be PRPs for environmental contamination at the NBIA site. (Dkt. No. 265,
Ex. 4.) The letter specifically referenced the two
waste disposal lagoons and connecting sewer systems. Through their attorneys New BSI and Kuhlman Michigan denied contributing to the claimed
industrial contamination. (Dkt. No. 265, Ex. 5.) The
EPA did not pursue New BSI, Kuhlman Michigan,
or Kuhlman Delaware before entering into a consent decree regarding the NBIA site in March 1999.
Neither did any of the parties to the consent decree
pursue the Bronson Defendants prior to the initiation of this suit in 2005.
The second piece of correspondence relates to

the NBFF OU1 Site. In 1988 New BSI received notice from the Michigan Department of Natural Resources (“MDNR”) of potential contamination at
the NBFF OU1 site. New BSI was no longer the operator at the site but it was still the owner of the
site. In response to the MDNR's notice, from 1988
to 1990 New BSI undertook extensive excavation
and removal actions, including the removal of seventy percent of the exposed soils down to the water
table in most areas (10,000 tons of soil). (Dkt. No.
265, Ex. 6, Site Status Report.) The correspondence
Plaintiff relies on is a November 7, 1990, letter
from Leonard Lipinski, a project manager for the
MDNR, to counsel for New BSI and Kuhlman
Michigan, advising what additional work was required to complete the investigation and remediation at the NBFF site and to bring the matter to
closure. (Dkt. No. 251, Ex. 10, Lipinski Dep. 62,
Dep. Ex. 11.) The letter concluded that additional
work was needed to complete the investigation and
to attain site closure, including a risk assessment
with respect to the contaminants that remained on
site, additional soil sampling around the excavations, and additional monitoring wells. (Lipinski
Dep. 62-64, 66.) New BSI did conduct some additional background soil samples, but it did not conduct all of the work described. (Lipinski Dep. 69;
Dkt. No. 265, Ex. 9, 2/19/1991 letter to Lipinski.)
There is no evidence that the MDNR sent any further correspondence to New BSI regarding the
NBFF OU1 Site, or that it had any intention of pursuing, through any administrative process or suit,
any claim against New BSI or Kuhlman Michigan,
for conditions at NBFF OU1. In fact, in July 2001
when the EPA sent out the Special Notice of Liability letter regarding the separate NBFF operable
units, it did not list New BSI as a PRP; the letter
was only sent to ITT, L.A. Darling, and Scott Fetzer. (Dkt. No. 265, Ex. 11, 7/5/2001 Special Notice
of Liability Ltr. from EPA re NBFF OU1.)
*9 Neither of the letters Plaintiff relies on mandated any particular environmental response, nor
did they contain any findings of liability on the part
of New BSI. The fact that there were some discus-

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Page 9
Not Reported in F.Supp.2d, 2009 WL 2242904 (W.D.Mich.), 70 ERC 1418
(Cite as: 2009 WL 2242904 (W.D.Mich.))

sions about potential environmental liability on the
part of New BSI does not suggest that New BSI's
denial of further liability was made in bad faith.
The Court concludes that the evidence does not
suggest that the Bronson Defendants were aware of
any environmental liabilities. Moreover, even if
there is a question of fact as to knowledge of environmental liabilities, the lack of evidence that New
BSI's corporate parents removed any assets from
New BSI in an effort to avoid those liabilities prevents this Court from finding the kind of wrongful
conduct that would support piercing the corporate
veil.
Plaintiff contends that other courts have
pierced the veil in CERCLA cases where the parent
corporation's acts were similar to those at issue in
this case. These cases are distinguishable because
they contained evidence that the corporate parent
was involved in depleting assets from the subsidiary when it knew the assets would be required to
address known environmental liabilities. See Pharmacia Corp. v. Motor Carrier Servs. Corp., 309 F.
App'x 666, 672 (3d Cir.2009) (piercing the corporate veil where the nature of the subsidiary's business changed significantly after its purchase by the
parent corporation and it ceased receiving revenue
even though it had acknowledged responsibility for
environmental contamination at the site); AT & T
Global Information Solutions Co. v. Union Tank
Car Co., 29 F.Supp.2d 857, 868 (S.D.Ohio 1998)
(piercing the corporate veil where there was evidence that the parent corporation knew of the subsidiary's potential liabilities before liquidating the
subsidiary's assets); United States v. Kayser-Roth
Corp., 724 F.Supp. 15, 23-24 (D.R.I.1989) (giving
less respect than required by Bestfoods to the corporate form, and piercing the corporate veil where
the parent corporation “exhibited overwhelming
pervasive control” over the subsidiary, including
control over its environmental matters).

man Delaware ever used New BSI to shield themselves from any liabilities that they owed, or that
they ever held New BSI out as something that it
was not for the purpose of committing a wrongful
or fraudulent act.
For the reasons stated herein, the Bronson Defendants' motion for partial summary judgment on
claims against Bronson Specialties Inc. for liabilities incurred by the previous owner of the site and
for summary judgment on all claims against
BorgWarner Inc. and Kuhlman Corporation will be
granted, and Plaintiff's motion for partial summary
judgment will be denied.
An order and partial judgment consistent with
this opinion will be entered.
W.D.Mich.,2009.
ITT Corp. v. Borgwarner Inc.
Not Reported in F.Supp.2d, 2009 WL 2242904
(W.D.Mich.), 70 ERC 1418
END OF DOCUMENT

The evidence in this case does not support piercing the corporate veil. Plaintiff has not presented
any evidence to suggest that BorgWamer or Kuhl-

© 2011 Thomson Reuters. No Claim to Orig. US Gov. Works.