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 9

881 N.E.2d 1125
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129
(Cite as: 450 Mass. 760, 881 N.E.2d 1125)

Supreme Judicial Court of Massachusetts,
Suffolk.
FN1
Wayne SCOTT, trustee,

Page 1

Affirmed in part, vacated in part, and remanded.
West Headnotes

FN1. Of 12 Woodbury Court Trust.

[1] Appeal and Error 30

v.
FN2
FN3
NG U.S. 1, INC.,
& others.

30 Appeal and Error
30XVI Review
30XVI(G) Presumptions
30k934 Judgment
30k934(1) k. In general. Most Cited
Cases
On appeal from summary judgment for defendants, Supreme Judicial Court considers the facts underlying the motions, and all reasonable inferences
drawn therefrom, in their light most favorable to
the plaintiff, the nonmoving party.

FN2. Also known as National Grid USA.
FN3. Boston Gas Company, doing business as KeySpan Energy Delivery New
England; and KeySpan New England,
LLC, also known as KeySpan Corp.
Argued Nov. 6, 2007.
Decided March 7, 2008.
Background: Landowner brought action against
gas utility and power company under the Massachusetts Oil & Hazardous Material Release Prevention Act to recover for spread of hazardous materials to property based on their respective relationships with prior owner of adjacent parcel of
land which contained gas manufacturing plant. The
Superior Court, Suffolk County, Allan van Gestel,
J., 2003 WL 25466605, granted defendants' motions for summary judgment. Landowner appealed.
The Appeals Court, Cypher, J., 67 Mass.App.Ct.
474, 854 N.E.2d 981, affirmed in part, reversed in
part, and remanded. Defendants' applications for
further review were granted.
Holdings: The Supreme Judicial Court, Marshall,
C.J. held that:
(1) power company which acquired its interest in
prior owner decades after environmental contamination by subsidiary and owner's sale of the site was
not indirectly liable for that release under corporate
veil piercing concepts, and
(2) Superior Court applied incorrect standard in
denying litigation costs and attorney fees.

[2] Appeal and Error 30

934(1)

893(1)

30 Appeal and Error
30XVI Review
30XVI(F) Trial De Novo
30k892 Trial De Novo
30k893 Cases Triable in Appellate
Court
30k893(1) k. In general. Most Cited
Cases
Supreme Judicial Court reviews the superior
court judge's legal conclusions de novo.
[3] Corporations and Business Organizations
101
1063
101 Corporations and Business Organizations
101II Disregarding Corporate Entity; Piercing
Corporate Veil
101k1057 Particular Occasions for Determining Corporate Entity
101k1063 k. Environmental liabilities and
violations. Most Cited Cases
(Formerly 101k1.6(3))
Corporation which acquired its interest in

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881 N.E.2d 1125
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129
(Cite as: 450 Mass. 760, 881 N.E.2d 1125)

former subsidiary decades after environmental contamination by subsidiary and decades after subsidiary's sale of the site was not indirectly liable for
that release under corporate veil piercing concepts;
former subsidiary's activity concluded decades before any alleged pervasive control with fraudulent
or injurious consequence or confused intermingling
with substantial disregard of the separate nature of
the corporate entities, and, thus, the veil could not
be pierced. M.G.L.A. c. 21E, § 5(a)(2, 5).
[4] Environmental Law 149E

445(1)

149E Environmental Law
149EIX Hazardous Waste or Materials
149Ek436 Response and Cleanup; Liability
149Ek445 Persons Responsible
149Ek445(1) k. In general. Most Cited
Cases
A past owner or operator of a site contaminated
by oil can be held liable if that person caused a release or threat of a release of oil from the site or is
otherwise legally responsible for it. M.G.L.A. c.
21E, § 5(a)(5).
[5] Environmental Law 149E

Page 2

101k1079 Actions to Pierce Corporate Veil
101k1080 k. In general. Most Cited Cases
(Formerly 101k1.7(1))
Corporations and Business Organizations 101
3190
101 Corporations and Business Organizations
101XIII Foreign Corporations
101XIII(A) In General
101k3186 Subjection to Requirements as
Imposed by State of Incorporation; What Law Governs
101k3190 k. Piercing corporate veil.
Most Cited Cases
(Formerly 101k640)
Massachusetts law governed claim seeking to
pierce corporate veil to hold Delaware corporation's
predecessor liable for environmental contamination
by former subsidiary; all other entities were organized under Massachusetts law, and parties did not
argue for application of other states' law.
[7] Corporations and Business Organizations
101
1063

445(1)

149E Environmental Law
149EIX Hazardous Waste or Materials
149Ek436 Response and Cleanup; Liability
149Ek445 Persons Responsible
149Ek445(1) k. In general. Most Cited
Cases
Neither legal responsibility nor causation is
synonymous with ownership under statute imposing
liability on any person who otherwise “caused” or
is “legally responsible” for a release or threat of release of oil or hazardous material from a vessel or
site. M.G.L.A. c. 21E, § 5(a)(5).
[6] Corporations and Business Organizations
101
1080
101 Corporations and Business Organizations
101II Disregarding Corporate Entity; Piercing
Corporate Veil

101 Corporations and Business Organizations
101II Disregarding Corporate Entity; Piercing
Corporate Veil
101k1057 Particular Occasions for Determining Corporate Entity
101k1063 k. Environmental liabilities and
violations. Most Cited Cases
(Formerly 101k1.6(3))
In the environmental context, as in other contexts, corporate veils are pierced only in rare particular situations and only when an agency or similar
relationship exists between the entities.
[8] Corporations and Business Organizations
101
1053
101 Corporations and Business Organizations
101II Disregarding Corporate Entity; Piercing
Corporate Veil
101k1050 Separate Corporations; Disregard-

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

881 N.E.2d 1125
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129
(Cite as: 450 Mass. 760, 881 N.E.2d 1125)

ing Separate Entities
101k1053 k. Parent and subsidiary corporations in general. Most Cited Cases
(Formerly 101k1.5(3))
A veil may be pierced where the parent exercises some form of pervasive control of the activities of the subsidiary and there is some fraudulent or
injurious consequence of the intercorporate relationship.
[9] Corporations and Business Organizations
101
1055
101 Corporations and Business Organizations
101II Disregarding Corporate Entity; Piercing
Corporate Veil
101k1050 Separate Corporations; Disregarding Separate Entities
101k1055 k. Common enterprise. Most
Cited Cases
(Formerly 101k1.5(1))
Corporate formalities may be disregarded when
there is a confused intermingling of activity of two
or more corporations engaged in a common enterprise with substantial disregard of the separate
nature of the corporate entities, or serious ambiguity about the manner and capacity in which the various corporations and their respective representatives are acting.
[10] Corporations and Business Organizations
101
1044
101 Corporations and Business Organizations
101II Disregarding Corporate Entity; Piercing
Corporate Veil
101k1042 Factors Considered
101k1044 k. Domination or control by
shareholder. Most Cited Cases
(Formerly 101k1.4(1))
Control, even pervasive control, without more,
is not a sufficient basis for a court to ignore corporate formalities.
[11] Corporations and Business Organizations
101
1053

Page 3

101 Corporations and Business Organizations
101II Disregarding Corporate Entity; Piercing
Corporate Veil
101k1050 Separate Corporations; Disregarding Separate Entities
101k1053 k. Parent and subsidiary corporations in general. Most Cited Cases
(Formerly 101k1.5(3))
Ultimately, the decision to disregard settled expectations accompanying corporate form requires a
determination that the parent corporation directed
and controlled the subsidiary and used it for an improper purpose based on evaluative consideration
of twelve factors: (1) common ownership; (2) pervasive control; (3) confused intermingling of business assets; (4) thin capitalization; (5) nonobservance of corporate formalities; (6) absence of corporate records; (7) no payment of dividends; (8) insolvency at the time of the litigated transaction; (9)
siphoning away of corporation's funds by dominant
shareholder; (10) nonfunctioning of officers and
directors; (11) use of the corporation for transactions of the dominant shareholders; and (12) use of
the corporation in promoting fraud.
[12] Corporations and Business Organizations
101
1051
101 Corporations and Business Organizations
101II Disregarding Corporate Entity; Piercing
Corporate Veil
101k1050 Separate Corporations; Disregarding Separate Entities
101k1051 k. In general. Most Cited Cases
(Formerly 101k1.5(1))
Absent evidence that an agency or similar relationship exists between the entities, violation by
one corporation of its obligations presents no occasion to disregard the corporate form of another corporation.
[13] Corporations and Business Organizations
101
1053
101 Corporations and Business Organizations
101II Disregarding Corporate Entity; Piercing

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881 N.E.2d 1125
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129
(Cite as: 450 Mass. 760, 881 N.E.2d 1125)

Corporate Veil
101k1050 Separate Corporations; Disregarding Separate Entities
101k1053 k. Parent and subsidiary corporations in general. Most Cited Cases
(Formerly 101k1.5(3))
In the absence of some very special facts, a
parent corporation should not be held responsible
by veil piercing for the acts of a subsidiary that occurred decades before the parent acquired the subsidiary.
[14] Costs 102

2

102 Costs
102I Nature, Grounds, and Extent of Right in
General
102k1 Nature and Grounds of Right
102k2 k. In general. Most Cited Cases
Costs 102

194.44

102 Costs
102VIII Attorney Fees
102k194.44 k. Bad faith or meritless litigation. Most Cited Cases
Standard for award under statute entitling defendant to litigation costs and reasonable attorney
fees if plaintiff had no reasonable basis for asserting that the defendant was liable is not whether it is
beyond doubt that the plaintiff can prove no set of
facts in support of claim which would entitle him to
relief viewing the complaint; the standard is whether the plaintiff had no reasonable basis for asserting
that the defendant was liable, i.e., whether, when
the complaint was filed, application of the facts to
existing law made it reasonably clear that the defendants were not liable. M.G.L.A. c. 21E, § 4A(f).
**1127 Joseph S.U. Bodoff, Boston, for the
plaintiff.
Robert C. Kirsch (Tina Y. Wu, Boston, with him)
for NG U.S. 1, Inc.
Martin C. Pentz, Boston (Karen L. Crocker with
him) for Boston Gas Company & another.

Page 4

Martin J. Newhouse, Ben Robbins, Christopher P.
Davis, & Christophe G. Courchesne, Boston, for
New England Legal Foundation & another, amici
curiae, submitted a brief.
Present: MARSHALL, C.J., GREANEY, IRELAND, SPINA, COWIN, CORDY, & BOTSFORD,
JJ.
MARSHALL, C.J.
*761 Predominant among the issues raised in
this appeal is whether a parent corporation first acquiring an ownership interest in a subsidiary corporation decades after the subsidiary both released
environmentally hazardous material and sold the
contaminated site, without more, may be liable under G.L. c. 21E for later incurred response costs at
the site. We conclude that the parent corporation is
FN4
not directly liable as an operator of the site.
We
also conclude**1128 that, in the circumstances of
this case, the parent corporation is not indirectly liable as an operator of the site where there are no
grounds for piercing the corporate veil of the parent. We affirm the grant of summary judgment for
all defendants, vacate the order denying the defendants' motions for litigation costs and attorney's fees,
and remand for further proceedings on that issue.
FN5
FN4. General Laws c. 21E, § 5 (a ),
provides, in part:
“(1) the owner or operator of a vessel or
a site from or at which there is or has
been a release or threat of release of oil
or hazardous material; (2) any person
who at the time of storage or disposal of
any hazardous material owned or operated any site at or upon which such hazardous material was stored or disposed
of and from which there is or has been a
release or threat of release of hazardous
material; ... and (5) any person who otherwise caused or is legally responsible

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

881 N.E.2d 1125
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129
(Cite as: 450 Mass. 760, 881 N.E.2d 1125)

for a release or threat of release of oil or
hazardous material from a vessel or site,
shall be liable, without regard to fault.”
On appeal, the plaintiff does not argue
that the defendant parent corporation has
G.L. c. 21E liability as an owner
(directly or indirectly) of the site.
FN5. We acknowledge the amicus brief
filed by the New England Legal Foundation and the Associated Industries of Massachusetts, Inc.
1. Procedural background. On cross motions
for summary judgment and associated motions for
attorney's fees and costs, a judge in the Superior
Court granted the defendant corporations' motions
for summary judgment and denied the plaintiff
property owner's cross motion, concluding that the
defendants were not *762 liable to the plaintiff for
response costs or damages, pursuant to G.L. c. 21E.
FN6
The judge also ruled that the defendants were
not entitled to their attorney's fees and costs, pursuant to G.L. c. 21E, § 4A (f ). The Appeals Court affirmed the judgment except on one point: it concluded that a genuine issue of material factconcerning whether the corporate veil of New England Electric System (NEES), the defendant NG
U.S. 1, Inc.'s, corporate predecessor, could be
pierced to impose derivative liability-precluded
entry of summary judgment, and accordingly vacated the entry of summary judgment for NG U.S.
FN7
1, Inc., on that issue.
Scott v. NG U.S. 1, Inc.,
67 Mass.App.Ct. 474, 485, 854 N.E.2d 981 (2006).
FN6. The Superior Court judge also denied
two peripheral motions: the plaintiff's motion to file his motion for summary judgment under seal; and the plaintiff's emergency motion to strike the defendants'
summary judgment motions. Neither ruling
is at issue on appeal.
FN7. Although NG U.S. 1, Inc., as New
England Electric System's (NEES) corpor-

Page 5

ate successor, is the named defendant, we
refer to it throughout as NEES. The entity
was known as NEES during much of the
relevant period, and both the Superior
Court and the Appeals Court used that acronym.
We granted the defendants' applications for further appellate review without limitation, and have
considered all of the issues briefed and argued before the Appeals Court. See, e.g., Brusard v.
O'Toole, 429 Mass. 597, 606 n. 11, 710 N.E.2d 588
(1999). For essentially the reasons stated by the
motion judge, and those expressed by the Appeals
Court in part 1 of its opinion, Scott v. NG U.S. 1,
Inc., supra at 477-479, 854 N.E.2d 981, as well as
those articulated in United States v. Bestfoods, 524
U.S. 51, 64-67, 118 S.Ct. 1876, 141 L.Ed.2d 43
(1998) (circumstances supporting direct liability of
corporate parent as operator of facility), the order
of the Superior Court judge concluding that NEES
is not directly liable as an operator of the contaminated site pursuant to G.L. c. 21E, § 5 (a ) (1), was
FN8
correct.
Likewise, for **1129 essentially the
reasons stated by the motion judge, and those expressed by the Appeals Court in part 3 of its opinion, Scott v. NG U.S. 1, Inc., supra at 485-488, 854
N.E.2d 981, the order of the Superior *763 Court
judge allowing the defendant Boston Gas Company's motion for summary judgment was correct.
We proceed, focusing our discussion solely on two
remaining issues: first, whether the judge correctly
ruled that the undisputed facts present no occasion
to disregard NEES's corporate form to impose operator liability indirectly; and second, whether the
judge properly denied the defendants' motions for
attorney's fees and costs.
FN8. General Laws c. 21E, § 2, defines
“[o]wner” or “[o]perator” as “any person
owning or operating such site,” which
“indicates that only present owners or operators are strictly liable [under G.L. c.
21E, § 5 (a ) (1),] where there has been a
release of oil or hazardous material on

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881 N.E.2d 1125
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129
(Cite as: 450 Mass. 760, 881 N.E.2d 1125)

their property, regardless of when the release itself occurred.” Griffith v. New England Tel. & Tel. Co., 414 Mass. 824, 827,
610 N.E.2d 944 (1993), S.C., 420 Mass.
365, 649 N.E.2d 766 (1995).
[1][2] 2. Corporate background. Apart from
the attorney's fees and cost issue, the case is before
us on appeal from the entry of summary judgment
for the defendants. We consider the facts underlying those motions, and all reasonable inferences
drawn therefrom, in their light most favorable to
FN9
the plaintiff, the nonmoving party.
See Blare v.
Husky Injection Molding Sys. Boston, Inc., 419
Mass. 437, 438, 646 N.E.2d 111 (1995); Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716,
575 N.E.2d 734 (1991). We review the Superior
Court judge's legal conclusions de novo. Maffei v.
Roman Catholic Archbishop of Boston, 449 Mass.
235, 243, 867 N.E.2d 300 (2007).
FN9. For purposes of these proceedings,
the parties stipulated to the facts concerning the corporate transactions.
In January, 2002, the plaintiff, Wayne Scott,
trustee of 12 Woodbury Court Trust, purchased
property in Salem, intending to develop and sell
townhouses on it. During construction, he discovered “highly volatile” coal tar, or a similar contaminant, on the property that, for purposes of summary judgment, was assumed to have migrated
from abutting land on Northey Street (Northey
Street property). From 1850 to 1890, the Northey
Street property had been owned and operated by
Salem Gas Light Company (Salem Gas) as a “gas
works.” The gas works facility ceased gas production in 1890, Salem Gas conveyed the property to a
FN10
third party,
and the facility was dismantled by
1906, at the latest. Salem Gas, incorporated in Massachusetts in 1847, existed as an independent gas
utility company until at least 1927. It continued to
manufacture gas at another site in Salem until 1953.
FN10. The third party is not named and is
not a party to this action.

Page 6

In 1926, some thirty-six years after Salem Gas
sold the Northey Street property, North Boston
Lighting Properties (North Boston) began acquiring
Salem Gas stock; by the following year, New England Power Association (NEPA), a corporate predecessor of *764 defendant NEES, had acquired almost six per cent of the voting power of outstanding shares of North Boston stock. By 1942-more
than fifty years after the Northey Street property
had been sold-North Boston owned almost ninetyfive per cent of Salem Gas and, by 1945, NEPA
(through a holding company, Massachusetts Power
and Light Associates [MPLA] ) owned a substantial
majority interest in North Boston. NEPA was reorganized in 1947, NEES was formed, and North Boston's assets (including its stock in Salem Gas) and
obligations were transferred to NEES. Through
these corporate transactions, Salem Gas became a
subsidiary of NEES in 1947, and North Boston and
MPLA were liquidated.
In 1951, NEES formed an unincorporated “gas
division” and, in 1953, arranged for **1130 consolidation of the gas operations of Salem Gas and two
other companies-Gloucester Gas Light Company
and Beverly Gas and Electric Company-into a new
company, North Shore Gas Company. In March,
1964, however, the Securities and Exchange Commission ordered NEES to divest itself of its gas operations. After its appeals were exhausted, on October 27, 1972, conditioned on regulatory approval,
NEES sold all of its stock in North Shore Gas Company (of which the former Salem Gas was part) and
two other companies (Lynn Gas Company and
Mystic Valley Gas Company) to Eastern Gas &
Fuel Associates. The stock purchase agreement
provided that the companies would be acquired by
or combined with Eastern Gas & Fuel Associates's
subsidiary, Boston Gas Company (Boston Gas), one
of the defendants in this action.
On January 23, 1973, Boston Gas, North Shore
Gas Company, Lynn Gas Company, and Mystic
Valley Gas Company executed an “Agreement for
Purchase and Sale of Assets and Assumption of Li-

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881 N.E.2d 1125
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129
(Cite as: 450 Mass. 760, 881 N.E.2d 1125)

abilities.” Under that agreement, Boston Gas agreed
to purchase all assets of North Shore Gas, Lynn
Gas, and Mystic Valley Gas “as then constituted,”
and to assume all liabilities of those three companies “as then existing.” The defendant, NG U.S. 1,
Inc., also known as National Grid USA (National
Grid), subsequently became the corporate successor
to NEES.
[3] 3. Indirect liability as an operator: piercing
the corporate veil. As we have said, NEES is not a
present owner or operator of the Northey Street
site, and is not directly liable to the plaintiff*765
under G.L. c. 21E, § 5 (a ) (1). Griffith v. New England Tel. & Tel. Co., 414 Mass. 824, 827, 610
N.E.2d 944 (1993), S.C., 420 Mass. 365, 649
N.E.2d 766 (1995) (former lessee of site not liable
as present operator). See Scott v. NG U.S. 1, Inc.,
supra at 478, 854 N.E.2d 981 (rejecting proposition
that entity remains “present operator” of site until
hazardous wastes removed). The question we now
consider is whether NEES, which acquired a controlling interest in Salem Gas many years after the
environmental release, may be derivatively liable
for Salem Gas's actions as a past operator under
FN11
G.L. c. 21, § 5 (a ) (2) or (5).
See note 4,
supra.
FN11. In his complaint, the plaintiff alleged that the defendants are “persons liable pursuant to [G.L.] c. 21E, §§ 5 (a ) (1)
and 5 (a ) (5) [,] as the owner/operator
and/or as a person who otherwise caused
and continues to cause an oil and/or hazardous materials release on to the Property.” Although he made no specific claim
under § 5 (a ) (2), many of the cases on
which he relies involve that section.
[4][5] The conduct giving rise to liability under
G.L. c. 21E, § 5 (a ) (5), is “caus[ing]” or being
“legally responsible” for the release or threat of release of oil or hazardous material. Under § 5 (a )
(5), therefore, “a past owner or operator of a site
contaminated by oil can be held liable if that person
‘caused’ a release or threat of a release of oil from

Page 7

the site,” or is otherwise legally responsible for it.
FN12
Griffith v. New England Tel. & Tel. Co.,
supra at 830, 610 N.E.2d 944. See G.L. c. 21E, § 5
(a ) (2) (liability rests on ownership or **1131 operation of a site “at the time” of storage or disposal). Assuming, for purposes of summary judgment,
that Salem Gas-a past owner or operator-“caused or
is legally responsible for a release,” G.L. c. 21E, at
§ 5 (a ) (5), the question is whether NEES-which
acquired its interest in Salem Gas decades after
both the environmental contamination and sale of
the site-is indirectly liable for that release through
application of corporate veil piercing concepts. We
think not.
FN12. In this context, neither “legal responsibility” nor “causation” is synonymous with ownership. See Commonwealth v.
Boston Edison Co., 444 Mass. 324, 335,
828 N.E.2d 16 (2005) (no legal responsibility within meaning of G.L. c. 21E, § 5 [a
] [5], absent duty to act); Griffith v. New
England Tel. & Tel. Co., 420 Mass. 365,
369, 649 N.E.2d 766 (1995) ( “it is clear
from the statute's different treatment of
petroleum releases that there must be more
than a showing that the defendant previously owned the site, brought oil onto the
property, or stored oil on the property to
establish causation under § 5 [a ] [5]”). See
also Marenghi v. Mobil Oil Corp., 420
Mass. 371, 374, 649 N.E.2d 764 (1995).
[6] Neither Federal (CERCLA) nor State environmental laws *766 displace bedrock principles of
corporate common law. See, e.g., United States v.
Bestfoods, 524 U.S. 51, 61-62, 118 S.Ct. 1876, 141
L.Ed.2d 43 (1998). See generally Martignetti v.
Haigh-Farr, Inc., 425 Mass. 294, 680 N.E.2d 1131
(1997). One of the basic tenets of that body of law
is that corporations-notwithstanding relationships
between or among them-ordinarily are regarded as
separate and distinct entities. See, e.g., Attorney
Gen. v. M.C.K., Inc., 432 Mass. 546, 555, 736
N.E.2d 373 (2000); My Bread Baking Co. v. Cum-

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881 N.E.2d 1125
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129
(Cite as: 450 Mass. 760, 881 N.E.2d 1125)

berland Farms, Inc., 353 Mass. 614, 618, 233
N.E.2d 748 (1968). See also United States v. Bestfoods, supra.
“Thus it is hornbook law that ‘the exercise of
the “control” which stock ownership gives to the
stockholders ... will not create liability beyond
the assets of the subsidiary. That “control” includes the election of directors, the making of bylaws ... and the doing of all other acts incident to
the legal status of stockholders. Nor will a duplication of some or all of the directors or executive officers be fatal.’ ”
Id., quoting Douglas, Insulation from Liability
Through Subsidiary Corporations, 39 Yale L.J. 193,
196 (1929) (Douglas). Indeed, the concept 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,” is
“deeply ‘ingrained in our economic and legal systems,’ ” United States v. Bestfoods, supra at 61,
118 S.Ct. 1876, quoting Douglas, supra at 193, and
assures that “the exercise of the ‘control’ which
stock ownership gives to the stockholders ... will
not create liability beyond the assets of the subsidiary.” United States v. Bestfoods, supra at 61-62,
118 S.Ct. 1876. Also settled is the equilibratory
concept that the corporate veil between parent and
subsidiary corporations may be pierced when,
“inter alia, the corporate form would otherwise be
misused to accomplish certain wrongful purposes,
FN13
most notably fraud.”
Id. at 62, 118 S.Ct.
1876. Cf. 1 W.M. Fletcher, Cyclopedia of Corporations § 43, at 286-290 (rev. ed 2006) (“There is a
*767 presumption of separateness that a plaintiff
must overcome to establish liability by showing
that a parent is employing a subsidiary to perpetrate
a fraud or commit **1132 wrongdoing and that this
was the proximate cause of the plaintiff's injury”).
“Nothing in CERCLA purports to rewrite this wellsettled rule....” United States v. Bestfoods, supra at
63, 118 S.Ct. 1876.
FN13. In considering whether to disregard
the corporate form of the defendant NG

Page 8

U.S. 1, Inc.'s predecessor, New England
Electric System (NEES), we apply Massachusetts law. Apart from NG U.S. 1,
Inc., a Delaware corporation, which succeeded NEES after NEES sold its interest
in Salem Gas, it is undisputed that the entities involved in the corporate transactions
in this case were organized in Massachusetts, and the parties have not argued that
the law of any other State applies. Compare Evans v. Multicon Constr. Corp., 30
Mass.App.Ct. 728, 737 n. 7, 574 N.E.2d
395 (1991) (applying Massachusetts law of
veil piercing), with Lily Transp. Corp. v.
Royal Inst. Servs., Inc., 64 Mass.App.Ct.
179, 188 n. 15, 832 N.E.2d 666 (2005)
(whether corporation's veil could be
pierced to impose G.L. c. 93A liability on
shareholders governed by law of corporation's place of incorporation), and In re
Cambridge Biotech Corp., 186 F.3d 1356,
1376 n. 11 (Fed.Cir.1999) (when “court
considers disregarding the corporate entity
... [it] applies the law of the state of incorporation”).
[7][8][9][10][11] In Massachusetts, the equitable doctrine of corporate disregard differs in no
material respect from the description in United
States v. Bestfoods, supra at 62-63, 118 S.Ct. 1876,
and nothing in G.L. c. 21E displaces the doctrine's
established scope. In the environmental context, as
in other contexts, corporate veils are pierced only in
“rare particular situations,” and only when an
“agency or similar relationship exists between the
entities.” My Bread Baking Co. v. Cumberland
Farms, Inc., supra at 619, 620, 233 N.E.2d 748. A
veil may be pierced where the parent exercises
“some form of pervasive control” of the activities
of the subsidiary “ and there is some fraudulent or
injurious consequence of the intercorporate relationship.” Id. at 619, 233 N.E.2d 748. See Hanson
v. Bradley, 298 Mass. 371, 381, 10 N.E.2d 259
(1937) (“The right and the duty of courts to look
beyond the corporate forms are exercised only for

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881 N.E.2d 1125
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129
(Cite as: 450 Mass. 760, 881 N.E.2d 1125)

the defeat of fraud or wrong, or the remedying of
injustice”). See also 1 W.M. Fletcher, Cyclopedia
of Corporations, supra at § 43, at 292 (“the injured
party must show some connection between its injury and the parent's improper manner of doing
business-without that connection, even when the
parent exercises domination and control over the
subsidiary, corporate separateness will be recognized”). Corporate formalities also may be disregarded “when there is a confused intermingling of
activity of two or more corporations engaged in a
common enterprise with substantial disregard of
the separate nature of the corporate entities, or serious ambiguity about the manner and capacity in
which the various corporations and their respective
representatives are acting” (emphasis added). My
Bread Baking Co. v. Cumberland Farms, Inc.,
supra at 619, 233 N.E.2d 748. Stated more directly,
*768 control, even pervasive control, without more,
is not a sufficient basis for a court to ignore corporate formalities: “There is present in the cases which
have looked through the corporate form an element
of dubious manipulation and contrivance [and] finagling....” Evans v. Multicon Constr. Corp., 30
Mass.App.Ct. 728, 736, 574 N.E.2d 395 (1991).
See United States v. Bestfoods, supra at 62, 118
S.Ct. 1876 (veil piercing appropriate when, “inter
alia, the corporate form would otherwise be used to
accomplish certain wrongful purposes, most notably fraud, on the shareholder's behalf”); 1 W.M.
Fletcher, Cyclopedia of Corporations, supra at § 43
, at 296 (“although corporations are related, there
can be no piercing of the corporate veil without a
showing of improper conduct”). Ultimately, the decision to disregard settled expectations accompanying corporate form requires a determination that the
parent corporation directed and controlled the subsidiary, and used it for an improper purpose, based
on evaluative consideration of twelve factors:
“(1) common ownership; (2) pervasive control;
(3) confused intermingling of business assets; (4)
thin capitalization; (5) nonobservance of corporate formalities; (6) absence of corporate records;
(7) no payment of dividends; (8) insolvency at

Page 9

the time of the litigated transaction; (9) siphoning
away of corporation's funds by dominant shareholder; (10) nonfunctioning of officers and directors; (11) use of the corporation for transactions of the dominant shareholders; and (12) use
of the corporation in promoting fraud ”
(emphasis added).
Attorney Gen. v. M.C.K., Inc., supra at 555 n.
19, 736 N.E.2d 373, citing **1133Pepsi-Cola
Metro. Bottling Co. v. Checkers, Inc., 754 F.2d 10,
15-16 (1st Cir.1985) (categorizing My Bread Baking Co. factors).
In this case, the plaintiff makes no claim of
“fraudulent or injurious consequence” under the
first of the My Bread Baking Co. prongs, but relies
instead on the second prong: confused intermingling with “substantial disregard of the separate
nature of the corporate entitles.” Id. He contends
that during the period of 1931 to 1973, there is
evidence of operational integration of the operations of NEES and the entities to which business of
Salem Gas succeeded, including financial operations. Beginning in 1951, he alleges that Salem Gas
and its successors were *769 operated as an integrated part of NEES, without regard to corporate
formality, and when the business of Salem Gas was
sold, only NEES received the resulting funds.
[12] Assuming, for summary judgment purposes, that Salem Gas's conduct, ownership, or operation of the Northey Street site during the 1800's
meets the requirements of G.L. c. 21E, § 5 (a ) (2)
or (5), that activity concluded decades before any
alleged “pervasive control,” with “fraudulent or injurious consequence” or “confused intermingling ...
with substantial disregard of the separate nature of
the corporate entities.” My Bread Baking Co. v.
Cumberland Farms, Inc., supra at 619, 233 N.E.2d
FN14
748.
In this case, NEES's corporate form may
not be pierced to impose liability for actions taken
(or not taken) by another entity long before the
FN15,FN16
formation of a corporate relationship.
FN14. In his summary judgment materials,

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881 N.E.2d 1125
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129
(Cite as: 450 Mass. 760, 881 N.E.2d 1125)

the plaintiff alleges that between 1931 and
1951, Salem Gas operated as a “nominal
subsidiary” of NEES, although it was an
integrated part of NEES's business. He alleges that after 1951, the business of Salem
Gas was operated by NEES without regard
to corporate formality. Among other
things, he alleges that NEES and its various gas subsidiaries, including Salem Gas,
shared employees, management, marketing, supply, operations and merchandising,
that the president of Salem Gas and other
NEES gas subsidiaries was also the head
of the unincorporated gas division of
NEES; and that final authority on important matters rested with NEES management. The question before us is not whether the corporate veil could be pierced at
some point after 1931, but rather whether
it should be pierced during the time of the
release or threatened release of oil or hazardous material. While we need not decide
whether the corporate veil could be pierced
at any other point in time, we are dubious
that the summary judgment record in this
case, particularly lacking substantial evidence of impropriety or injurious consequences of the corporate relationship,
would support application of the doctrine.
See 1 W.M. Fletcher, Cyclopedia of Corporations § 43, at 296 (rev. ed 2006).
FN15. While the Appeals Court suggests
that “gas manufacturing companies in
Massachusetts were aware of certain health
and environmental dangers posed by their
coal to gas operations in the late 1800's,”
Scott v. NG U.S. 1, Inc., 67 Mass.App.Ct.
474, 484, 854 N.E.2d 981 (2006), it identified no source of a pre-1973 continuing
duty to investigate possible contamination
on properties sold by a related entity decades before there was any corporate relationship. The plaintiff likewise has not
suggested, prior to NEES's sale of its in-

Page 10

terest in Salem Gas in 1973, the source of
NEES's alleged duty to assess and remediate possible environmental contamination
on property owned (since the turn of the
century) by a third party or parties with
whom NEES apparently had no relationship at all. We accordingly focus on the
original hazardous material releases (in the
1800's), rather than on any continuing failure to remediate.
FN16. By construing Attorney Gen. v.
M.C.K., Inc., 432 Mass. 546, 736 N.E.2d
373 (2000), to authorize disregard of corporate form based on general statutory and
policy goals, rather than evaluation of the
factors in My Bread Baking Co. v. Cumberland Farms, Inc., 353 Mass. 614, 233
N.E.2d 748 (1968), the Appeals Court read
the M.C.K., Inc. case broadly. Scott v. NG
U.S. I, Inc., supra at 480, 854 N.E.2d 981.
In M.C.K., Inc., we recognized only that
frustration of a statutory scheme, when
coupled with pervasive control and confused intermingling of activity and assets,
supported corporate veil piercing. Absent
evidence that “an agency or similar relationship exists between the entities,” My
Bread Baking Co. v. Cumberland Farms,
Inc., supra at 619, 233 N.E.2d 748, violation by one corporation of its obligations
presents no occasion to disregard the corporate form of another corporation. Put another way, the statutory purpose of G.L. c.
21E, regulating “cleanup of sites contaminated with hazardous material,” Commonwealth v. Boston Edison Co., 444 Mass.
324, 328, 828 N.E.2d 16 (2005), is not advanced by doing violence to bedrock principles of corporate law. Cf. John Boyd Co.
v. Boston Gas Co., 775 F.Supp. 435, 442
(D.Mass.1991) (“Notwithstanding the
noble social purposes embodied in CERCLA, there is nothing peculiar to the problem of hazardous waste disposal that, in

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881 N.E.2d 1125
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129
(Cite as: 450 Mass. 760, 881 N.E.2d 1125)

the absence of Congressional direction,
would justify a policy that would ignore
the corporate form altogether in these
types of cases”).
**1134 [13] *770 In determining whether one
entity exercised “pervasive control” over another,
and whether “confused intermingling” exists sufficient to disregard the corporate formalities, we focus on the events giving rise to liability: in this
case, causing a release or threatened release, or
FN17
owning or operating the facility at that time.
See Attorney Gen. v. M.C.K., Inc., supra at 557 n.
20, 736 N.E.2d 373 (determining whether control
exercised at time of relevant acts); Evans v. Multicon Constr. Corp., 30 Mass.App.Ct. 728, 732 n. 6,
574 N.E.2d 395 (1991) (rejecting without discussion piercing claim against partners who withdrew
before relevant acts); Pepsi-Cola Metro. Bottling
Co. v. Checkers, Inc., supra at 16-17
(distinguishing case in which parent acquired subsidiary after “event at issue”); United States v. Wallace, 961 F.Supp. 969, 979 (N.D.Tex.1996). See
also My Bread Baking Co. v. Cumberland Farms,
Inc., supra at 620-621, 233 N.E.2d 748 (analyzing
whether, in refusing to return bread racks, subsidiary corporation acted as parent corporation's
agents). See generally 1 W.M. Fletcher, Cyclopedia
of Corporations, supra at § 41.10, at 143-144
(while various jurisdictions apply different veilpiercing factors, they commonly require *771 control with respect to transaction at issue, such that, at
that time, controlled corporation lacked “no separate mind, will or existence of its own”). Cf. Lily
Transp. Corp. v. Royal Inst. Servs., Inc., 64
Mass.App.Ct. 179, 188, 832 N.E.2d 666 (2005)
(“Stockholders who are not involved in the improper transaction or wrongdoing are not liable even
when the corporate veil is pierced”). We agree with
the Superior Court judge's conclusion that, “in the
absence of some very special facts, a parent corporation should not be held responsible by veil piercing for the acts of a subsidiary that occurred decades before the parent acquired the subsidiary.”

Page 11

FN17. Both My Bread Baking Co. v. Cumberland Farms, Inc., supra, and Attorney
Gen. v.M.C.K., Inc., supra, involved attempts to impose liability on a parent corporation for acts of a subsidiary during the
existence of a parent-subsidiary relationship. In this case, however, the environmental release occurred-and the Northey
Street site was sold-more than thirty years
before the parent's predecessor acquired
any interest in the subsidiary.
In the present case, the environmental releases
occurred-and the contaminated property was soldmore than thirty years before North Boston purchased its first share of stock in Salem Gas, and before NEES's predecessor, NEPA, purchased its first
share of stock in North Boston. The plaintiff does
not suggest that NEPA's acquisition of North Boston was related to the then-discontinued operations
at a site no longer owned by Salem Gas. Nor was
there evidence that NEES had any ability to direct
or control environmental measures on a site sold
decades before, let alone any duty to do so. Indeed,
G.L. c. 21E was enacted in 1983, ten years after
NEES sold its interest in Salem Gas, and the
plaintiff has identified no other source **1135 of
statutory or common-law obligation of NEES (or of
Salem Gas) during the period NEES had such an interest, to investigate, identify, or respond to possible environmental contamination from coal tar
caused decades before, on property not owned by
NEES or related entities. Cf. John S. Boyd Co. v.
Boston Gas Co., 992 F.2d 401, 408 (1st Cir.1993)
(parent corporations liable “for the oil gas waste
created while they were linked to the Lynn Gas
Co.”).
We do not doubt that an important objective of
G.L. c. 21E is prompt “assessment, containment
and removal,” G.L. c. 21E, § 4, of hazardous materials. Nor do we question that the party that caused
the environmental contamination should be responsible for its cleanup. Garweth Corp. v. Boston
Edison Co., 415 Mass. 303, 307, 613 N.E.2d 92

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881 N.E.2d 1125
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129
(Cite as: 450 Mass. 760, 881 N.E.2d 1125)

(1993). But it does no injustice to G.L. c. 21E to
conclude that where the parent corporation lacked
any interest in, and did not control, the subsidiary
or its facility at the time of the acts giving rise to
environmental liability, there is no occasion to *772
disregard its corporate form. Summary judgment
properly was granted to NEES.
4. Attorney's fees. General Laws c. 21E, § 4A (f
), requires a court to award litigation costs and reasonable attorney's fees to a defendant if it finds “(1)
the plaintiff did not participate in negotiations or
dispute resolution in good faith; (2) the plaintiff
had no reasonable basis for asserting that the defendant was liable, or (3) the plaintiff's position
with respect to the amount of the defendant's liability pursuant to the provisions of this chapter was
unreasonable.” The Superior Court judge, though
properly granting summary judgment to the defendants on liability, denied their § 4A (f ) litigation
costs and attorney's fees request. He rejected the
defendants' arguments that (1) the plaintiff had no
reasonable basis for asserting liability; and (2) the
plaintiff failed to negotiate in good faith by failing
to explain the legal basis for his claim, and by failing to provide detailed information on the contamination and remediation.
As to the first point, the judge reasoned that the
test whether the plaintiff “had no reasonable basis
for asserting that [the defendants were] liable,”
G.L. c. 21E, § 4A, is akin to the inquiry whether a
complaint would survive a motion to dismiss under
Mass. R. Civ. P. 12(b)(6), 365 Mass. 754 (1974):
that is, based on the facts known to the plaintiff at
the time the complaint was filed, whether it appeared “beyond doubt that the plaintiff can prove
no set of facts in support of his claim which would
entitle him to relief viewing the complaint.” Marram v. Kobrick Offshore Fund, Ltd., 442 Mass. 43,
45, 809 N.E.2d 1017 (2004), quoting Warner-Lambert Co. v. Execuquest Corp., 427 Mass. 46, 47,
691 N.E.2d 545 (1998). He concluded, quoting
Nader v. Citron, 372 Mass. 96, 98, 360 N.E.2d 870
(1977), that given that the corporate history leading

Page 12

from Salem Gas to the defendants was “far from
transparent,” and notwithstanding that John S. Boyd
Co. v. Boston Gas Co., supra at 404 (addressing
1973 transaction between defendants), and
Longview Fibre Co. vs Boston Gas Co., U.S. Dist.
Ct., No. 92-10284-WD (D.Mass. Sept. 10, 1993),
strongly signaled weakness in the plaintiff's claims
with respect to Boston Gas, it could not be said
“that when filed, ‘it appear[ed] beyond doubt that
the [Trust could] prove no set of facts in support of
[its] claim which would entitle [it] to relief.’ ”
While recognizing *773 that the claims against
NEES are “admittedly thinner,” given that NEES
did not acquire Salem Gas stock until well after the
contaminated site was no longer owned by Salem
Gas and the site was no longer operational, the
judge concluded that the plaintiff's position was
neither irrational nor unreasonable.
**1136 [14] In evaluating the plaintiff's claims,
the Superior Court judge applied the incorrect
standard. At issue under G.L. c. 21E, § 4A, is not
whether it is “beyond doubt that the plaintiff can
prove no set of facts in support of his claim which
would entitle him to relief viewing the complaint,”
Marram v. Kobrick Offshore Fund, Ltd., supra, but
rather whether “the plaintiff had no reasonable
basis for asserting that the defendant was liable.”
G.L. c. 21E, § 4A (f ). Cf. Commonwealth v. Cahill,
442 Mass. 127, 134, 810 N.E.2d 1196 (2004)
(Legislature could have, but did not, impose standard other than that provided in statute). Put another
way, the question is whether, when the complaint
was filed, application of the facts to existing law
made it reasonably clear that the defendants were
not liable under G.L. c. 21E. See Hill v. Metropolitan Dist. Comm'n, 439 Mass. 266, 278, 787 N.E.2d
526 (2003); Buddy's Inc. v. Saugus, 62
Mass.App.Ct. 256, 262-263, 816 N.E.2d 134 (2004)
. We do not presume to speculate about the conclusion the Superior Court judge might have reached if
the “reasonable basis” standard had been applied.
Accordingly, we remand this case to the Superior
Court to consider whether the plaintiff had “no
reasonable basis” to assert liability on the part of

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881 N.E.2d 1125
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129
(Cite as: 450 Mass. 760, 881 N.E.2d 1125)

Boston Gas or NEES.

Page 13

Scott v. NG U.S. 1, Inc.
450 Mass. 760, 881 N.E.2d 1125, 66 ERC 1129

In addition, G.L. c. 21E, § 4A (f ) (1), requires
an award of fees if the plaintiff “did not participate
in negotiations or dispute resolution in good faith.”
In evaluating the plaintiff's actions in this regard,
the Superior Court judge interpreted G.L. c. 21E, §
4A (a ), as permitting, but not requiring, the
plaintiff to give notice to the defendant prior to filing suit. Existing case law requires compliance with
§ 4A procedures prior to commencement of litigation. See, e.g., Martignetti v. Haigh-Farr, Inc., 425
Mass. 294, 322, 680 N.E.2d 1131 (1997) (“only
after such notice and procedures [under G.L. c.
21E, § 4A (a ) and (b ),] may a civil action be
brought”); Buddy's Inc. v. Saugus, supra at
261-262, 816 N.E.2d 134 (prelitigation notification
“required of plaintiffs as a condition of initiating a
lawsuit”); *774Rudnick v. Hospital Mtge. Group,
Inc., 951 F.Supp. 7, 9 (D.Mass.1996) (actual,
though not perfect, notice sufficient to confer jurisdiction under G.L. c. 21E). On remand, the Superior Court judge may consider whether the mandatory nature of the predispute notice requirement affects the analysis regarding the comportment of the
plaintiff's predispute activities with the requirements of good faith. See Hill v. Metropolitan Dist.
Comm'n, supra.

END OF DOCUMENT

5. Conclusion. On the facts contained in the
summary judgment record, this case does not
present a “rare situation,” Attorney Gen. v. M.C.K.,
Inc., supra at 555, 736 N.E.2d 373, warranting piercing the corporate veil of NEES to impose indirect
liability for the environmental wrongdoing by
Salem Gas more than one century ago. We affirm
the decision of the Superior Court judge granting
summary judgment to all defendants. We vacate the
order denying the defendants' motions for litigation
costs and attorney's fees, and we remand for further
proceedings on those motions, consistent with this
decision.
So ordered.
Mass.,2008.

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