United States v. Kayser-Roth Corp.

United States Court of Appeals
For the First Circuit

No. 00-2038

UNITED STATES OF AMERICA,

Plaintiff, Appellee,

v.

KAYSER-ROTH CORPORATION,

Defendant, Appellant.

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF RHODE ISLAND

[Hon. Ernest C. Torres, U.S. District Judge]

Before

Lipez, Circuit Judge,

Bownes, Senior Circuit Judge,

and Lisi,* District Court Judge.

J. Daniel Berry, with whom William Carter, William S. Eggling
and Ropes & Gray, were on brief, for appellant.
Joan M. Pepin, Attorney, Department of Justice, with whom
John C. Cruden, Deputy Assistant Attorney General, John T. Stahr, Donald
G. Frankel, Attorneys, Department of Justice, Lloyd Selbst, Senior
Enforcement Counsel, and Nina Rivera, Office of General Counsel,
Environmental Protection Agency, were on brief, for appellee.

December 3, 2001
*
Of the District of Rhode Island, sitting by designation.

LIPEZ, Circuit Judge. In this appeal, Kayser-Roth
Corporation (Kayser-Roth) seeks relief pursuant to Fed. R. Civ. P.
60(b)(5) from a 1990 declaratory judgment finding it liable under the
Comprehensive Environmental Response, Compensation, and Liability Act
(CERCLA), 42 U.S.C. § 9601 et seq., for future cleanup costs associated
with a release of trichloroethylene at a facility of its subsidiary,
Stamina Mills, Inc. United States v. Kayser-Roth Corp., 724 F. Supp.
15 (D.R.I. 1989) ( Kayser-Roth I ). Kayser-Roth asserts that the Supreme
Court's decision in United States v. Bestfoods, 524 U.S. 51 (1998),
renders the prospective application of the declaratory judgment "no
longer equitable" within the meaning of Rule 60(b)(5). Reviewing the
Kayser-Roth I judgment in light of Bestfoods, the district court
concluded that the principles of direct and derivative liability under
CERCLA articulated in Bestfoods would not have altered that original
judgment. United States v. Kayser-Roth Corp., 103 F. Supp. 2d 74
(D.R.I. 2000) ( Kayser-Roth II). Kayser-Roth appeals that determination,
and we affirm.
I.
A. Factual Background
We draw these background facts from Kayser-Roth I. During
the time relevant to this litigation, Stamina Mills was a wholly-owned
subsidiary of Kayser-Roth.1 Along with another Kayser-Roth subsidiary
and other corporations, Stamina Mills was also part of Kayser-Roth's
"Crown Division," a designation created for internal organization
purposes only.
Stamina Mills ran a textile manufacturing operation in the
village of Forestdale, in the City of North Smithfield, Rhode Island.2
The Forestdale mill building had been located on the north side of the
Branch River for decades. At one time, the textile production at the
Forestdale facility used a soap scouring system to remove oil and dirt

1
Stamina Mills no longer exists. For a more involved corporate
history, we refer to the district court's decision in Kayser-Roth I,
724 F. Supp. at 18-21.
2
The record is unclear whether, at the time the contamination
occurred at the Forestdale site, Stamina Mills had commenced
yarnspinning operations at another location in Woonsocket, Rhode
Island.

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from newly-woven fabric. As a result of complaints about discharge and
pollution into the Branch River, the soap scouring method was replaced
with a system using trichloroethylene (TCE) in March 1969. During one
delivery of TCE before November 1969, an indeterminate amount of TCE
spilled onto the Stamina Mills property. In addition to this accidental
release, there was evidence that Stamina Mills would deposit used
quantities of TCE bottoms in a landfill on its property. One witness
at trial testified that he saw a truck back up to the landfill to dump
a purplish fluid with oily texture. That witness also testified that
the odor of TCE emanated from Stamina Mills' building.
In 1979 the Rhode Island Department of Health determined that
residential wells near the Stamina Mills site in the Forestdale
community contained elevated levels of TCE. In September 1982, the
Environmental Protection Agency conducted a hydrogeological study and
identified the Stamina Mills site as the source of the TCE. The site
was subsequently added to the National Priorities List for cleanup
funding. The EPA's costs related to remedial measures at the
residential wells and the Stamina Mills site, as well as enforcement,
totaled $660,612.71. The Department of Justice incurred an additional
$185,879.62 in enforcement costs.
B. 1990 Declaratory Judgment
In 1988, the United States filed an action (the 1988 action)
against Kayser-Roth pursuant to 42 U.S.C. § 9607(a)(2) seeking
reimbursement of its response costs and a declaration that Kayser-Roth
would be liable for any additional response costs incurred in the future
relating to the Stamina Mills site.3 It asserted, among its six
liability theories, that Kayser-Roth was liable as an "operator" and an
"owner" under CERCLA. Judge Boyle found Kayser-Roth liable under both
theories. See Kayser-Roth I, 724 F. Supp. at 23-24.
1. Operator Liability
Judge Boyle interpreted the standard for operator liability
of a parent corporation as follows: "The parent corporation's control
over the subsidiary's management and operations is an essential element
of proving operator liability on the parent's part." Id. at 22.
Accordingly, Judge Boyle focused on "whether Kayser-Roth exercised
control over Stamina Mills management and operations sufficient to find
that Kayser-Roth was a de facto operator." Id.

3
Section 9607(a) states, in pertinent part: "[T]he owner and
operator of a vessel or a facility . . . shall be liable for . . . all
costs of removal or remedial action incurred by the United States
Government . . . ." Section 9601(20)(A)(ii) provides that "any person
owning or operating such facility" is an owner or an operator.

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 Based upon the evidence heard at a bench trial, Judge Boyle
determined that Kayser-Roth was liable as an "operator" under CERCLA.
Id. He specifically found the following:
Kayser-Roth exercised pervasive control over Stamina Mills
through, among other things: 1) its total monetary control
including collections of accounts payable; 2) its restrictions on
Stamina Mills' financial budget; 3) its directive that subsidiary-
governmental contact, including environmental matters, be funneled
directly through Kayser-Roth; 4) its requirement that Stamina
Mills' leasing, buying or selling of real estate first be approved
by Kayser-Roth; 5) its policy that Kayser-Roth approve any capital
transfer or expenditure greater than $5,000; and finally, 6) its
placement of Kayser-Roth personnel in almost all Stamina Mills'
director and officer positions, as a means of totally ensuring
that Kayser-Roth corporate policy was exactly implemented and
precisely carried out. These are only examples of Kayser-Roth's
practical total control over Stamina Mills' operations.

Id. As further evidence of control, Judge Boyle made findings specific
to Kayser-Roth's "actions with regard to environmental matters affecting
Stamina Mills":
Illustrative of Kayser-Roth's control are its actions with
regard to environmental matters affecting Stamina Mills.
Kayser-Roth had the power to control the release or threat of
release of TCE, had the power to direct the mechanisms
causing the release, and had the ultimate ability to prevent
and abate damage. Kayser-Roth knew that Stamina Mills
employed a scouring system that used TCE; indeed, Kayser-Roth
approved the installation of that system after mandating that
a cost-benefit study be made by Stamina Mills. Kayser-Roth
not only had the capacity to determine the use of TCE but
also was able to direct Stamina Mills on how the TCE should
have been handled. There are other examples of Kayser-Roth's
participation in Stamina Mills' environmental decision-
making. Evidence was introduced that Kayser-Roth issued a
directive to its subsidiaries, including Stamina Mills,
requiring that Kayser-Roth's Legal Department be notified of
any governmental agency or court contact regarding
environmental matters. Furthermore, when Stamina Mills was
sued in 1974 by the United States for an illegal waste water
discharge into the Branch River, the final decision on
settlement was made by Kayser-Roth's directors.

Id. at 22-23 (footnote omitted).
2. Owner Liability

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 In addition, Judge Boyle concluded Kayser-Roth was liable as
an "owner" under a veil piercing theory, based "upon analysis of the
factors relevant to piercing Stamina Mills' veil, and mindful of the
liberal construction CERCLA must be afforded so as not to frustrate
probable legislative intent." Id. at 23. Recognizing the preliminary
issue as to whether state or federal common law veil-piercing standards
should apply, Judge Boyle recited the veil-piercing factors required
under each regime. See id. at 20. However, he ultimately left the
choice-of-law issue unaddressed, on the basis that "the distinction
between state law and a federal rule of decision is of little practical
difference." Id. at 20. Judge Boyle then found that many of the
factors applicable to the operator liability inquiry were also relevant
to owner liability:
Kayser-Roth has exhibited overwhelming pervasive control over
Stamina Mills. Many of the same factors used in holding
Kayser-Roth liable as an operator are relevant. Kayser-Roth's
control over environmental matters; its policy of approving
all capital expenditures of greater than $5,000; its
stranglehold on income and expenses; its practice of placing
Kayser-Roth personnel in Stamina Mills' director positions,
thereby precluding other Stamina Mills executives from
significant daily decision-making; and its overwhelming
control over Stamina Mills' financial and operational
structure add flesh to the skeletal proposition that
Kayser-Roth's corporate existence should be disregarded.
Accordingly, Stamina Mills' veil should be pierced to hold
Kayser-Roth liable, not only because public convenience,
fairness, and equity dictate such a result, but also due to
the all encompassing control which Kayser-Roth had over
Stamina Mills as, in fact and deed, an owner. Any other
result would provide too much solace to deliberate polluters,
who would use this device as an escape.

Id. at 24 (footnote omitted).
As a result of his liability determination, Judge Boyle
entered judgment against Kayser-Roth in January 1990 for nearly $1
million in response costs previously incurred by the EPA and interest.
In addition, he issued a declaratory judgment (1990 declaratory
judgment) holding Kayser-Roth liable for "all further response costs
incurred by the United States related to the Stamina Mills Site."4

4
CERCLA authorizes entry of such a declaratory judgment. See 42
U.S.C. § 9613(g)(2)("In any such action described in this subsection,
the court shall enter a declaratory judgment on liability for response
costs or damages that will be binding on any subsequent action or

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 On appeal, we affirmed Judge Boyle's decision as to Kayser-
Roth's operator liability. United States v. Kayser-Roth Corp., 910 F.2d
24, 27-28 (1st Cir. 1990). We specifically held that "[t]o be an
operator . . . [a]t a minimum . . . requires active involvement in the
activities of the subsidiary," and that the degree of control described
in Judge Boyle's opinion was "more than sufficient" to impose operator
liability on Kayser-Roth. Id. As the operator liability issue was
dispositive, we did not address Kayser-Roth's liability as an owner
under veil-piercing principles. Id. at 28 n.11.

actions to recover further response costs or damages.").

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C. 1998 Cost Recovery Action
In March 1998, the United States filed before Judge Torres
a second cost recovery action (the 1998 action) against Kayser-Roth,
seeking $4.1 million in additional response costs incurred after the
period covered by the 1990 judgment and $2.3 million in interest. In
its complaint, the government relied on the 1990 declaratory judgment
finding Kayser-Roth liable for future response costs.
Shortly after the filing of this second cost recovery action,
the Supreme Court decided United States v. Bestfoods, 524 U.S. 51
(1998)(discussed infra). Consequently, Kayser-Roth filed a motion under
Fed. R. Civ. P. 60(b)(5)5 for relief from the liability determination in
the 1990 declaratory judgment.6 As grounds therefor, Kayser-Roth argued
that Bestfoods changed the CERCLA liability standards applied by Judge
Boyle and thus rendered prospective application of his 1990 declaratory
judgment unjust.
At oral argument before Judge Torres, Kayser-Roth explained
that the relief sought under Rule 60(b)(5) would give Kayser-Roth the
opportunity to have its liability determined anew under current law in
the action before Judge Torres. We share that understanding of the
effect of Rule 60(b)(5) relief in this setting. Relief, if granted,
would not exonerate Kayser-Roth from liability with any finality, but
rather would release Kayser-Roth from the prior declaratory judgment to
the extent that this judgment imposes liability for future response
costs. The issue of liability under CERCLA would be back on the table,
giving Kayser-Roth an opportunity to litigate its liability under
current law in the context of the 1998 cost recovery action.
In considering Kayser-Roth's request for relief, Judge Torres
found that the 1990 declaratory judgment, applied to Kayser-Roth for
future response costs, would have prospective effect and would inflict
undue hardship on Kayser-Roth, two requirements for relief under Rule

5Rule 60(b)(5) provides, in pertinent part: "On motion and upon
such terms as are just, the court may relieve a party . . . from a
final judgment, order, or proceeding [when] . . . the judgment has been
satisfied, released, or discharged, or a prior judgment upon which it
is based has been reversed or otherwise vacated, or it is no longer
equitable that the judgment should have prospective application." The
rule also requires that a motion under subsection five be brought
"within a reasonable time."
6
Seeking relief from the 1990 declaratory judgment, Kayser-Roth
originally filed its Rule 60(b)(5) motion in the 1988 action (C.A. No.
88-325) in which that declaratory judgment was entered. The district
court appears to have consolidated the 1998 action (C.A. No. 98-160T)
with the 1988 action.

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60(b)(5).7 See Kayser-Roth II, 103 F. Supp. 2d at 78-81. However,
Judge Torres denied relief from judgment under Rule 60(b)(5) because of
his conclusion that Kayser-Roth remained liable as both owner and
operator under Bestfoods. Id. at 82, 85. Addressing operator liability
first, Judge Torres reasoned:
Judge Boyle expressly found that Kayser-Roth directed Stamina
Mills's activities with respect to environmental matters, in
general, and operation of the facility utilizing TCE, in
particular. Judge Boyle also found that Kayser-Roth had
directed activities at the site. Consequently, Bestfoods
would not alter [Judge Boyle's] determination of "operator"
liability as affirmed by the First Circuit.

Id. at 82. As to owner liability, Judge Torres held that Bestfoods did
not undermine Judge Boyle's veil-piercing analysis and upheld the
determination that Kayser-Roth was liable as an owner. Id. at 85. The
denial of the motion for relief under Rule 60(b)(5) prompted the instant
appeal.
II.
Fed. R. Civ. P. 60(b) empowers federal courts, in certain
instances, to vacate judgments "'whenever such action is appropriate to
accomplish justice.'" Teamsters, Chauffeurs, Warehouseman and Helpers
Union, Local No. 59 v. Superline Transp. Co., 953 F.2d 17, 19 (1st Cir.
1992) (quoting Klapproot v. United States, 335 U.S. 601, 614-15 (1949)).
In the application of this rule, we must recognize, inter alia, "the
importance of finality as applied to court judgments." Id. We have
identified certain criteria to determine whether relief from judgment
is appropriate under Rule 60(b): "(1) timeliness, (2) the existence of
exceptional circumstances justifying extraordinary relief, and (3) the
absence of unfair prejudice to the opposing party." Id. at 20. In
addition, to obtain relief under Rule 60(b), "[a litigant] must give the
trial court reason to believe that vacating the judgment will not be an
empty exercise" in any new proceedings. Id. Although the movant need
not show "an ironclad claim or defense which will guarantee success at
trial," it must at least demonstrate that it possesses "a potentially
meritorious claim or defense which, if proven, will bring success in its

7
We agree with Judge Torres that, if Kayser-Roth were no longer
liable under Bestfoods, requiring Kayser-Roth to pay additional
response costs in excess of $4 million imposes a hardship of sufficient
magnitude to render the additional response costs award inequitable.
The issue of prospective effect may present a closer question.
However, the EPA did not present this argument to us on appeal after
presenting it to Judge Torres. Thus, for purposes of this case, we
treat the judgment as prospective in nature.

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wake." Id. at 21; Lepkowski v. United States Dep't of Treasury, 804
F.2d 1310, 1314 (D.C. Cir. 1986). Purely conclusory allegations are not
sufficient to establish the Rule 60(b) precondition. Teamsters, 953
F.2d at 21.
While the above principles govern Rule 60(b) relief
generally, the precise contours of the applicable standard will depend
on the particular subsection involved and the nature of the underlying
judgment from which relief is sought.8 Here, that subsection is Rule
60(b)(5), which provides for relief from judgment in situations where
"it is no longer equitable that the judgment should have prospective
application." Courts have granted Rule 60(b)(5) relief from a prior
judgment on the basis of a significant change in the decisional law upon
which that judgment relied. See, e.g., Agostini v. Felton, 521 U.S.
203, 215 (1997); Rufo v. Inmates of Suffolk County Jail, 502 U.S. 367,
384 (1992) (requiring moving party to show "a significant change either
in factual conditions or in law"). Kayser-Roth specifically seeks Rule
60(b)(5) relief from the prospective effects of the 1990 declaratory
judgment on account of a change in law under Bestfoods. Cf. 11 Charles
Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and
Procedure § 2863 at 337 n.13 (2d ed. 1995) ("Relief seems to be possible
under [Rule 60(b)(5)] from the prospective operation of a declaratory
judgment."). As we explain herein, the Teamsters criteria set forth
above provide an analytic framework well-suited to this circumstance.
Courts invoking the Teamsters criteria for Rule 60(b) motions
have typically done so in the context of default judgments, where the
merits were arguably never considered. See, e.g., Teamsters, 953 F.2d
at 18-19 (grant of unopposed motion for summary judgment); de la Torre
v. Continental Ins. Co., 15 F.3d 12, 14 (1st Cir. 1994)(same); Key Bank
of Maine v. Tablecloth Textile Co. Corp., 74 F.3d 349, 354 (1st Cir.
1996); Coon v. Grenier, 867 F.2d 73, 76 (1st Cir. 1989)(motion to remove
entry of default); Compton v. Alton S.S. Co., 608 F.2d 96, 102 (4th Cir.
1979). The 1990 declaratory judgment, the product of a well-litigated
bench trial, is far different than a default judgment. Nevertheless,
the inquiry here on the "meritorious defense" element of Rule 60(b)(5)
relief is similar in two respects. First, the merits of the 1990
declaratory judgment have not yet been considered under Bestfoods.
Second, as with vacating default judgments, the request to vacate the
1990 declaratory judgment contemplates a subsequent litigation to
determine liability under current law. See supra. Hence, we deem it
appropriate to employ the Teamsters criteria when relief is sought from

8See Teamsters, 953 F.2d at 20 n.3 ("Often, the scope and shape
of [the Teamsters criteria] depend, at least in part, on which clause
of Rule 60(b) governs a particular motion.").

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prospective operation of a declaratory judgment on account of a change
in law.
Kayser-Roth argues that the Teamsters criteria cited by Judge
Torres should not apply here because the motion for relief in Teamsters
was filed under Rule 60(b)(6), not Rule 60(b)(5). That argument is
unpersuasive. We contemplated that the Teamsters criteria would be
generally applicable to Rule 60(b) motions, not just those under Rule
60(b)(6). Teamsters, 953 F.2d at 19-20 (noting that relief from
"judgments under the aegis of Rule 60(b)" generally required that movant
demonstrate identified criteria). Further, as already noted, see supra,
the Teamsters criteria are well-suited to the motion at issue here,
namely, one for relief from the prospective effect of a declaratory
judgment on account of a change in law.
Kayser-Roth also argues that, even if the Teamsters criteria
are applicable, Judge Torres improperly displaced the Teamsters
"potentially meritorious claim or defense" formulation with a more
stringent standard requiring definitive proof of an "ironclad" defense.
Id. at 21. Kayser-Roth cites as evidence of this burden the following
statement in Judge Torres' opinion: "Kayser-Roth must
establish . . . that . . . it should be relieved from any further
liability [under current law]." Kayser-Roth II, 103 F. Supp. 2d at 81.
We note, however, that Judge Torres also concluded that " Bestfoods would
not alter [Judge Boyle's] determination of 'operator' liability as
affirmed by the First Circuit." Id. at 82. That conclusion is
tantamount to a determination by Judge Torres that Kayser-Roth cannot
establish a "potentially meritorious defense" to CERCLA liability under
current law. The district court's formulation of the Rule 60(b)(5)
standard was not a legal error.

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 III.
We now probe the heart of this appeal. Kayser-Roth asserts
that United States v. Bestfoods, 524 U.S. 51 (1998), altered the law of
parent liability under CERCLA and now potentially may afford Kayser-Roth
with a defense to liability, rendering prospective application of the
1990 judgment unjust. To evaluate the merits of this argument, we must
first examine the Bestfoods decision.
A. Bestfoods
Before delving into the Supreme Court's analysis in
Bestfoods, we must look for context to the lower court opinions in that
case. The United States brought suit in federal district court under
CERCLA against numerous entities, including two parent corporations --
CPC International (CPC) and Aerojet -- for costs related to cleanup of
industrial waste generated by each parent's respective wholly-owned
subsidiaries. The district court held that operator liability attaches
to a parent corporation
only when it has exerted power or influence over its
subsidiary by actively participating in and exercising
control over the subsidiary's business during a period of
disposal of hazardous waste. A parent's actual participation
in and control over a subsidiary's functions and decision-
making creates "operator liability" under CERCLA; a parent's
mere oversight of a subsidiary's business in a manner
appropriate and consistent with the investment relationship
between a parent and its wholly owned subsidiary does not.

CPC Int'l, Inc. v. Aerojet-General Corp., 777 F. Supp. 549, 573
(W.D.Mich. 1991). Applying these principles to the facts of the case,
the district court found CPC and Aerojet liable as operators. Id.
In a rehearing en banc, the Sixth Circuit, affirming in part
and reversing in part, held that
where a parent corporation is sought to be held liable as an
operator . . . based upon the extent of its control of its
subsidiary which owns the facility, the parent will be liable
only when the requirements necessary to pierce the corporate
veil [under state law] are met. In other words, under the
circumstances of this case, whether the parent will be liable
as an operator depends upon whether the degree to which it
controls its subsidiary and the extent and manner of its
involvement with the facility, amount to the abuse of the
corporate form that will warrant piercing the corporate veil
and disregarding the separate corporate entities of the
parent and subsidiary.
United States v. Cordova/Michigan, 113 F.3d 572, 580 (6th Cir. 1997).
Because the record failed to support veil piercing under Michigan law,

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the Court of Appeals reversed the district court's findings of operator
liability for CPC and Aerojet. Id. at 580, 583.
The Supreme Court granted certiorari in Bestfoods "to resolve
a conflict among the Circuits over the extent to which parent
corporations may be held liable under CERCLA for operating facilities
ostensibly under the control of their subsidiaries." 524 U.S. at 60.
The Court vacated the appellate decision and remanded the case to the
district court. Id. In doing so, the unanimous Court recognized that
"CERCLA liability may turn on operation as well as ownership, and
nothing in the statute's terms bars a parent corporation from direct
liability for its own actions in operating a facility owned by its
subsidiary." Id. at 64. To clarify the scope of direct operator
liability under CERCLA, the Court addressed separately derivative (or
indirect) liability for a parent corporation based on corporate veil
piercing and direct liability based on the parent corporation's active
operation of a facility.9
1. Derivative (Indirect) Liability
The Court began the analysis by affirming in a CERCLA context
the general rule that a parent corporation is not liable for acts of its
subsidiary. See id. at 61-62 ("[N]othing in CERCLA purports to reject
this bedrock principle, and against this venerable common-law backdrop,
the congressional silence is audible."). Thus, the Court rejected the
notion that owner liability could attach to a parent corporation simply
because its subsidiary owned a polluting facility. See id. at 62.
However, the Court also recognized "an equally fundamental
principle of corporate law" that the corporate veil may be pierced to
hold a parent corporation liable for acts of a subsidiary. Id. at 62.
Finding "[n]othing in CERCLA [that] purports to rewrite this well-
settled rule," the Court held that a parent may be charged with

9 The Court noted that the indirect veil-piercing approach,
generally linked to owner liability, may, in limited instances, bear
upon derivative operator liability:

Some courts and commentators have suggested that this
indirect, veil-piercing approach can subject a parent
corporation to liability only as an owner, and not as an
operator. We think it is otherwise, however. If a
subsidiary that operates, but does not own, a facility is so
pervasively controlled by its parent for a sufficiently
improper purpose to warrant veil piercing, the parent may be
held derivatively liable for the subsidiary's acts as an
operator.

524 U.S. at 64 n.10 (citations omitted).

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derivative CERCLA liability for its subsidiary's acts only when the
corporate veil may be pierced.10 Id. at 63-64.
2. Direct Operator Liability
The Court then addressed the circumstances under which a
parent company would be directly liable for its own actions in operating
a facility owned by its subsidiary. Rejecting the Sixth Circuit view,
the Court held that corporate veil-piercing is not a prerequisite to
holding a parent directly liable as an operator:
Under the plain language of the statute, any
person who operates a polluting facility is
directly liable for the costs of cleaning up the
pollution. This is so regardless of whether
that person is the facility's owner, the owner's
parent corporation or business partner, or even
a saboteur who sneaks into the facility at night
to discharge its poisons out of malice. If any
such act of operating a corporate subsidiary's
facility is done on behalf of a parent
corporation, the existence of the parent-
subsidiary relationship under state corporate
law is simply irrelevant to the issue of direct
liability.
Id. at 65 (citation omitted).
At the outset of the discussion, the Court defined "operator"
under CERCLA as "someone who directs the workings of, manages, or
conducts the affairs of a facility." Id. at 66. It also, however, set
forth a definition more specific to pollution-related activities at the
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 having to do with the leakage
or disposal of hazardous waste, or decisions about compliance
with environmental regulations.

Id. at 66-67. Later in the opinion, the Court also recited the broader
definition of "operator", noting that Congress' use of the word "to
operate" means "something more than mere mechanical activation of pumps

10Acknowledging "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," the Court left this issue unaddressed. Bestfoods,
524 U.S. at 63 n.9.

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and valves, and must be read to contemplate 'operation' as including the
exercise of direction over the facility's activities." Id. at 71.
Applying these definitions, the Court identified two flaws
with the district court's treatment of direct operator liability.
First, the Court rejected the district court's erroneous "fusion of
direct and indirect liability." Id. at 67. Rather, to keep direct and
derivative liability distinct, the Court focused the direct "operator"
liability inquiry not on the parent's interaction with the subsidiary,
but rather on the parent's interaction with the facility: "The question
is not whether the parent operates the subsidiary, but rather whether
it operates the facility, and that operation is evidenced by
participation in the activities of the facility, not the subsidiary.
Control of the subsidiary, if extensive enough, gives rise to indirect
liability under piercing doctrine, not direct liability under the
statutory language." Id. at 67-68 (internal quotation marks
omitted)(quoting Lynda J. Oswald, Bifurcation of the Owner and Operator
Analysis under CERCLA, 72 Wash. U.L.Q. 223, 269 (1994)).
Second, the Bestfoods Court noted that, "[i]n addition to
(and perhaps as a reflection of) the erroneous focus on the [parent-
subsidiary] relationship," the district court assumed erroneously that
the actions of the joint officers and directors were necessarily
attributable to the parent CPC. Id. at 68. In doing so, the district
court failed to recognize that "it 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." Id. at 69 (internal quotation
marks omitted). The Court stated that,
[s]ince courts generally presume that the directors are
wearing their subsidiary hats and not their parent hats when
acting for the subsidiary, it cannot be enough to establish
liability here that dual officers and directors made policy
decisions and supervised activities at the facility. The
Government would have to show that, despite the general
presumption to the contrary, the officers and directors were
acting in their capacities as [parent] officers and
directors, and not as [subsidiary] officers and directors,
when they committed those acts.

Id. at 69-70 (internal quotation marks and citations omitted).
The Court described examples of activities that would be
sufficient to find a parent directly liable as an operator of a
polluting facility. The first example, identified by the Sixth Circuit,
occurs "when the parent operates the facility in the stead of its
subsidiary or alongside the subsidiary in some sort of joint venture."
Id. at 71 (citing Cordova/Michigan, 113 F.3d at 579). Another occurs
when

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 a dual officer or director might depart so far from the
norms of parental influence exercised through dual
officeholding as to serve the parent, even when ostensibly
acting on behalf of the subsidiary in operating the
facility.

Id. In a third scenario, "an agent of the parent with no hat to wear
but the parent's hat might manage or direct activities at the facility."
Id.
To distinguish a parental officer's oversight of a subsidiary
from control over the operation of the subsidiary's facility, "norms of
corporate behavior (undisturbed by any CERCLA provision) are crucial
reference points." Id. Elaborating on the general contours of these
norms, the Court noted that liability would not arise out of activities
involving the facility but "consistent with the parent's investor
status, such as monitoring of the subsidiary's performance, supervision
of the subsidiary's finance and capital budget decisions, and
articulation of general policies and procedures." Id. at 72 (citations
and internal quotation marks omitted).11 Thus, "[t]he critical question
is whether, in degree and detail, actions directed to the facility by
an agent of the parent alone are eccentric under accepted norms of
parental oversight of a subsidiary's facility." Id.
The Court found "some evidence that CPC engaged in just this
type and degree of activity" at the plant in question. Id.
Specifically, a CPC agent "played a conspicuous part in dealing with"
the toxic risks emanating from the operation of the plant. Id. The
district court found that this agent, G.R.D. Williams (Williams), served
in the capacity of CPC's governmental and environmental affairs director
and became heavily involved in environmental issues at CPC's subsidiary.
Drawing no ultimate conclusions, the Court nevertheless found these
findings sufficient "to raise an issue of CPC's operation of the
facility" and therefore remanded to the district court for a
"reevaluation" of CPC agents' role in operating the facility at issue.
Id. at 72-73.
B. Standard of Review
Before assessing Judge Torres' application of Bestfoods to
Kayser-Roth's request for Rule 60(b)(5) relief, we need to explain the

11The fact that an inquiry into corporate norms may involve
factors relevant to veil-piercing would not render such analysis
impermissible under Bestfoods. Cf. Carter-Jones Lumber Co. v. LTV
Steel Co., 237 F.3d 745, 750 (6th Cir. 2001) (holding that "the fact
that Ohio common law, in this case, allows veil-piercing under roughly
the same conditions that CERCLA imposes direct liability is a
coincidental fact about Ohio law" and does not violate Bestfoods).

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standards of review we apply to his decision. Rule 60(b)(5) rulings are
generally reviewed for abuse of discretion. See, e.g., Agostini, 521
U.S. at 238; King v. Greenblatt, 52 F.3d 1, 4 (1st Cir. 1995); Alexis
Lichine & Cie. v. Lichine Estate Selections, Ltd., 45 F.3d 582, 586-87
(1st Cir. 1995); Theriault v. Smith, 523 F.2d 601, 602 (1st Cir. 1975).
If, however, the district court's exercise of discretion is premised on
an erroneous legal principle, we review that legal error de novo. See
Koon v. United States, 518 U.S. 81, 100 (1996) (noting that "the
district court by definition abuses its discretion when it makes an
error of law"). See also Agostini, 521 U.S. at 238 ("[T]he exercise of
the discretion [in a Rule 60(b)(5) context] cannot be permitted to stand
if we find it rests upon a legal principle that can no longer be
sustained."); Alexis Lichine, 45 F.3d at 586 ("[I]n reviewing the
actions of the trial court, we may reverse only for error of law or
abuse of discretion.").
Here, there is an important interplay between the decisions
of Judge Boyle and Judge Torres. Judge Torres interpreted Bestfoods and
applied that interpretation to Judge Boyle's findings of fact to reach
the conclusion that Kayser-Roth lacks a meritorious defense to operator
liability under Bestfoods. That conclusion amounts to a legal
determination closely akin to a "substantial likelihood of success"
ruling in the context of a motion for preliminary injunctive relief –
a ruling which courts often treat as a legal conclusion subject to de
novo review.12 We do the same here, reviewing de novo Judge Torres'
conclusion that " Bestfoods would not alter [Judge Boyle's] determination
of 'operator' liability as affirmed by the First Circuit." Kayser-Roth
II, 103 F. Supp. 2d at 82. However, we review for abuse of discretion
Judge Torres' ultimate determination that the motion for Rule 60(b)(5)
relief should be denied because continued application of the 1990

12
See, e.g., Teva Pharm., USA, Inc. v. U.S. Food and Drug Admin.,
182 F.3d 1003, 1007 (D.C. Cir. 1999); Associated Gen. Contractors of
Am. v. Metropolitan Water Dist. of S. Cal., 159 F.3d 1178, 1180 (9th
Cir. 1998)(reviewing de novo district court's legal conclusion as to
likelihood of success on merits); Matter of Forty-Eight Insulations,
Inc., 115 F.3d 1294, 1301 (7th Cir. 1997)("[W]e review the legal
conclusion that a stay movant in bankruptcy proceedings has met the
required threshold showing of likelihood of success de novo."). See
also Hiller Cranberry Prods. v. Koplovsky, 165 F.3d 1 (1st Cir.
1999)(reviewing de novo district court's interpretation of veil-
piercing law upon which it relied in making likelihood-of-success
determination).

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declaratory judgment is not unjust,13 recognizing that his assessment of
the meritorious defense element of the 60(b)(5) calculus was of primary
importance in reaching his ultimate determination.14
C. Potentially Meritorious Defense
Kayser-Roth argues that it possesses a "potentially
meritorious defense" to CERCLA liability under these Bestfoods
principles sufficient to give a court "reason to believe that vacating
the judgment will not be an empty exercise." Teamsters, 953 F.2d at 20.
Focusing only on operator liability, as we did in our first decision in
this case,15 see 910 F.2d at 26-28 & n.11, we disagree.
In Kayser-Roth I, Judge Boyle held that "[t]he parent
corporation's control over the subsidiary's management and operations
is an essential element of proving operator liability on the parent's
part." 724 F. Supp. at 22. Under Bestfoods, this reading of CERCLA is
incorrect. Instead, the Supreme Court focused on the relationship
between the parent and the facility itself: "The question is not whether
the parent operates the subsidiary, but rather whether it operates the
facility, and that operation is evidenced by participation in the
activities of the facility, not the subsidiary." 524 U.S. at 68
(internal quotation marks omitted). The Court defined an operator as
someone who directs the workings of, manages, or conducts the
affairs of a facility. . . . [and] must manage, direct, or
conduct operations specifically related to pollution, that
is, operations having to do with the leakage or disposal of
hazardous waste, or decisions about compliance with
environmental regulations.

13 Similarly, the standard of review for the denial of a
preliminary injunction is abuse of discretion. See Lanier Professional
Services, Inc. v. Ricci, 192 F.3d 1, 3 (1st Cir. 1999); Hiller
Cranberry Products, Inc., 165 F.3d at 4.
14Drawing again upon our precedent in the preliminary injunction
context, we note that "[l]ikelihood of success is the touchstone of the
preliminary injunction inquiry." Philip Morris, Inc. v. Harshbarger,
159 F.3d 670, 674 (1st Cir. 1998). See Ross-Simmons of Warwick, Inc.
v. Baccarat, Inc., 102 F.3d 12, 16 (1st Cir. 1996)("Likelihood of
success is the main bearing wall of the four-factor framework.");
Weaver v. Henderson, 984 F.2d 11, 12 (1st Cir. 1993).
15We recognize that the district court decisions in Kayser-Roth
I and Kayser-Roth II addressed both operator and owner liability.
However, because we conclude that Kayser-Roth continues to be liable as
an operator under current law, we need not reach the issue of Kayser-
Roth's liability as an owner.

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Id. at 66-67.
In its formulation of operator liability, we face an arguable
ambiguity in the Bestfoods decision. The Court appears to link the
operational inquiry to the environmental matters noted above. At other
times, the Court articulates the relevant parent-facility relationship
more broadly, suggesting an inquiry beyond the parent's direct
involvement in pollution-related activities at the plant. See id. at
66-73 (noting the term "operation" to include "the exercise of direction
over the facility's activities").
Whatever the ambiguity created by these references, we think
it is clear that direct operator liability requires an ultimate finding
of the parent's involvement with "operations having to do with the
leakage or disposal of hazardous waste, or decisions about compliance
with environmental regulations." Id. at 66-67. Indeed, at the end of
Bestfoods the Court's attention to facts specific to the involvement of
CPC (and its agent Williams) in its subsidiary's environmental matters
indicates that the pollution-related focus is controlling. See id. at
72-73. This reading is consistent with that of other courts
interpreting CERCLA liability since Bestfoods. See, e.g., Carter-Jones
Lumber Co. v. Dixie Distrib. Co., 166 F.3d 840, 846-47 (6th Cir. 1999)
(reading Bestfoods in arranger liability context to require "active[]
involve[ment] in the arrangements for disposal"); United States v.
Green, 33 F. Supp. 2d 203, 217 (W.D.N.Y. 1998) (requiring participation
in management of "facility's pollution control operations" for operator
liability to attach).
Judge Boyle cited Kayser-Roth's "pervasive control" over
Stamina Mills's environmental affairs, specifically at the Forestdale
facility. His findings place Kayser-Roth squarely within the Supreme
Court's definition of direct operator liability. Specifically, Judge
Boyle found that
[i]llustrative of Kayser-Roth's control are its actions with
regard to environmental matters affecting Stamina
Mills. . . . Kayser-Roth knew that Stamina Mills employed a
scouring system that used TCE; indeed, Kayser-Roth approved
the installation of that system after mandating that a cost-
benefit study be made by Stamina Mills. . . . There are
other examples of Kayser-Roth's participation in Stamina
Mills' environmental decision-making. Evidence was
introduced that Kayser-Roth issued a directive to its
subsidiaries, including Stamina Mills, requiring that
Kayser-Roth's Legal Department be notified of any
governmental agency or court contact regarding environmental
matters. Furthermore, when Stamina Mills was sued in 1974
by the United States for an illegal waste water discharge

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 into the Branch River, the final decision on settlement was
made by Kayser-Roth's directors.

Kayser-Roth I, 724 F. Supp. at 22-23. Judge Boyle also found that
Kayser-Roth essentially was in charge in practically all of
Stamina's operational decisions, including those involving
environmental concerns. Kayser-Roth made the ultimate
decision to acquire the dry cleaning process using TCE.
Moreover, Kayser-Roth issued a directive requiring Stamina
Mills to notify the Kayser-Roth Legal Department of any
correspondence with courts or governmental agencies regarding
environmental matters. The only autonomy given the officers
of Stamina Mills was that absolutely necessary to operate the
facility on-site from day to day such as hiring and firing
hourly employees and ordering inventory. Stamina was in fact
and effect the serf of Kayser-Roth.

Id. at 19-20. Based on these findings, we conclude (as did Judge
Torres) that "Judge Boyle expressly found that Kayser-Roth directed
Stamina Mills's activities with respect to environmental matters, in
general, and operation of the facility utilizing TCE, in particular."
Kayser-Roth II, 103 F. Supp. 2d at 82.
Reliance on Judge Boyle's findings of Kayser-Roth's control
over pollution-related operations at Stamina Mills' Forestdale mill
might be questionable if Judge Boyle premised these findings upon
evidence of actions of joint directors or officers of Kayser-Roth and
Stamina Mills, thereby assuming that these actions were automatically
attributable to Kayser-Roth. That attribution would be in conflict with
Bestfoods. However, the record made before Judge Boyle reveals
"control" by Kayser-Roth in the manner required by Bestfoods.16

16We recognize that Judge Boyle did his fact-finding while using
an operator liability standard under CERCLA that is no longer
appropriate. That fact is not an impediment to our continued reliance
on his fact-finding. On direct appeal, we have the authority, upon
correcting an error in the district court's legal analysis, to apply
the correct rule of law to extant findings and facts in the record.
See Cohen v. Brown Univ., 991 F.2d 888, 904 (1st Cir. 1993)("Even when
a trial court has misconstrued the law, an appellate tribunal may avoid
remanding if the record is sufficiently developed and the facts
necessary to shape the proper legal matrix are sufficiently clear.");
Societe Des Produits Nestle, S.A. v. Casa Helvetia, Inc., 982 F.2d 633,
642 (1st Cir. 1992) (after district court misinterpreted law, appellate
court applied correct rule of law to district court's factual findings
and to uncontradicted facts in record); United States v. Mora, 821 F.2d

-19-
 There is evidence that an agent of Kayser-Roth -- Norman
Hinerfeld, executive vice-president of Kayser-Roth -- directly exerted
operational control over environmental matters at the Forestdale
facility. Hinerfeld was neither an officer nor a director of Stamina
Mills. With "no hat to wear but the parent's," Hinerfeld acted solely
on behalf of Kayser-Roth in his actions affecting Stamina Mills.
Bestfoods, 524 U.S. at 71.
As Judge Boyle found, there were complaints about wastewater
discharge from the Forestdale mill into the Branch River caused by the
Forestdale mill's soap scouring system which removed oil and dirt from
newly-woven fabric. Hinerfeld testified that he directed that cost
studies be conducted to evaluate various solutions to that problem. He
testified that he rejected the option of a lagoon system for treating
wastewater, based on cost and space factors, and approved instead the
selection of the dry cleaning system, installed in 1969, which he knew
used TCE (which ultimately led to the TCE contamination at the site)
based upon his assessment that it was "the least expensive solution [to
the plant's environmental problems] that would work." John Merrick,
Crown Division's controller, described Hinerfeld in his deposition
testimony as the "lead man" in making this decision about how to handle
this pollution problem.
Further, Hinerfeld played a critical leadership role in the
settlement of a separate EPA action (unrelated to the instant
litigation) filed in 1974 against Stamina Mills for an effluent
discharge into the Branch River. Hinerfeld testified that, regarding
the 1974 EPA suit, "[his] role was to see to it that prompt action was
taken to comply with what the government wanted us to accomplish and
then to see to it that the underlying causes of the government action
were permanently corrected." According to Hinerfeld, Stanley Sheerr,17
president of Kayser-Roth's Crown Division, recommended that, to rectify
the pollution problem, the wet processing operation (which was the
source of the effluent) be transferred from the Forestdale mill to

860, 869 (1st Cir. 1987) (same); see also Cameron v. Tomes, 990 F.2d
14, 20 (1st Cir. 1993) ("It is true that these findings were made in
the framework of a legal analysis that we do not adopt, but the
findings fit well enough into a due process framework and this court
may affirm on any grounds supported by evidence."). That rule surely
applies in this Rule 60(b) setting where the finality concerns are so
prominent. See Teamsters, 953 F.2d at 19 (noting that Rule 60(b) "must
be construed so as to recognize the importance of finality as applied
to court judgments.").
17
Like Hinerfeld, Sheerr was neither an officer nor a director of
Stamina Mills.

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another facility which was set up with a lagoon system that could handle
the wastewater discharge. Hinerfeld approved that recommendation and
made "the final decision" to move wet processing from the Forestdale
mill. Although this 1974 lawsuit did not involve the TCE contamination
at issue in this case, Judge Boyle nevertheless found it probative of
Kayser-Roth's overall control over the handling of Stamina Mills's
pollution problems. Judge Torres agreed with that assessment, and so
do we.
In the period when TCE from the Forestdale site contaminated
residential wells, Hinerfeld played a central role in decisions about
environmental compliance at the Forestdale mill and specifically the
decision to implement the cleaning process that used TCE. These
activities went far beyond the "norms of parental oversight," reflecting
instead direct control by the parent at the Forestdale facility over
"operations having to do with the leakage or disposal of hazardous
waste, or decisions about compliance with environmental regulations."
Bestfoods, 524 U.S. at 66-67. Therefore, we conclude that Kayser-Roth
cannot establish that Bestfoods gives it a potentially meritorious
defense to operator liability under CERCLA for the release of
contaminants at the Forestdale facility. We agree with Judge Torres'
conclusion that Bestfoods would not alter Judge Boyle's determination
of Kayser-Roth's operator liability.18
IV.
For the reasons stated above, we conclude that Judge Torres
did not abuse his discretion in denying Kayser-Roth Rule 60(b)(5) relief
from the 1990 declaratory judgment.
Affirmed.

18
In support of Kayser-Roth's operator liability, the government
points to evidence in the record of other instances outside the
environmental area in which Kayser-Roth exercised control over the
Forestdale facility rather than oversight. Because we need not
consider these instances in this case, we do not address whether such
an inquiry might be appropriate.

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