Commissioner, Indiana Department of Environmental Management v. RLG, Inc.

ATTORNEYS FOR APPELLANT

Karen M. Freeman-Wilson
Attorney General of Indiana

Anita Wylie
Deputy Attorney General
Indianapolis, Indiana

ATTORNEY FOR APPELLEE

Albert C. Harker
Marion, Indiana

__________________________________________________________________

IN THE

SUPREME COURT OF INDIANA

__________________________________________________________________

COMMISSIONER, INDIANA )
DEPARTMENT OF )
ENVIRONMENTAL MANAGEMENT, )
)
Appellant (Plaintiff Below), ) Indiana Supreme Court
) Cause No. 27S02-0102-CV-101
v. )
) Indiana Court of Appeals
RLG, INC. and LAWRENCE ) Cause No. 27A02-9909-CV-646
ROSEMAN d/b/a SPRING LANDFILL )
and LAWRENCE ROSEMAN, et al., )
)
Appellee (Defendant Below). )
__________________________________________________________________

APPEAL FROM THE GRANT CIRCUIT COURT
The Honorable Thomas R. Hunt, Judge
Cause No. 27C01-9602-CP-66
__________________________________________________________________

ON PETITION TO TRANSFER

__________________________________________________________________

September 24, 2001

BOEHM, Justice.
We hold that under some circumstances, including those here, an
individual associated with a corporation may be personally liable under the
responsible corporate officer doctrine for that corporation’s violations of
the Indiana Environmental Management Act, whether or not the traditional
doctrine of piercing the corporate veil would produce personal liability.

Factual and Procedural Background

On August 26, 1993, the Indiana Department of Environmental
Management (IDEM) initiated action against RLG, Inc. and Lawrence Roseman
for violations of the Indiana Environmental Management Act at RLG’s Spring
Valley Landfill in Wabash, Indiana.[1] IDEM sought preliminary and
permanent injunctive relief as well as civil penalties. In response, RLG
negotiated agreements to remedy the violations and to close the landfill
and provide a post closure plan, all by specified dates.[2] In return,
IDEM agreed to drop its claim for other relief, including civil penalties.
In March 1994, an environmental scientist inspected the landfill and found
that the initial violations had not been remedied, and also that the
subsequent agreements had been breached. In May 1994, the trial court
found that RLG had failed to comply with the agreements in several respects
and granted IDEM’s motion for prejudgment possession and a temporary
restraining order. RLG was found in contempt and ordered to pay $5,000 per
day as a civil penalty until it complied with the agreements. In July
1994, IDEM filed a second amended complaint with an additional count
seeking to impose personal liability on Roseman based upon his status as
the sole corporate officer of RLG. Roseman filed answers to IDEM’s
interrogatories that disclosed that RLG was insolvent.
After RLG failed to answer the second amended complaint, a default
judgment was entered against it and civil penalties were assessed at $5,000
per day from the date of the temporary restraining order for a total of
$3,175,000. IDEM was also granted access to the landfill to undertake
remediation. In June 1999, after a bench trial on the issue of Roseman’s
personal liability for civil penalties, judgment was entered in favor of
Roseman. At Roseman’s request the trial court entered findings of fact and
conclusions of law. These included: “There is no evidence the defendant
Larry Roseman ever acted in an individual capacity personally with respect
to the activities which surrounded the management and operation of RLG,
Inc.” or “in activities surround[ing] the environmental regulations.”
Further, “[a]s a matter of law, . . . defendant Larry Roseman [is not]
personally liable [for] acts done as a corporate officer for defendant RLG,
Inc.” and is not “personally liable for the corporate debts of defendant.”
The Court of Appeals agreed with the trial court, holding that the
importance of the corporate structure and a lack of evidence of Roseman’s
individual involvement in the environmental violations precluded personal
liability for the acts of RLG. Comm’r, Indiana Dep’t of Envtl. Mgmt. v.
RLG, Inc., 735 N.E.2d 290, 299 (Ind. Ct. App. 2000).

Standard of Review

On appeal from a negative judgment, this Court does not reverse the
judgment of the trial court unless it is contrary to law. Pepinsky v.
Monroe County Council, 461 N.E.2d 128, 135 (Ind. 1984); accord Marquez v.
Mayer, 727 N.E.2d 768, 773-74 (Ind. Ct. App. 2000), trans. denied. This
Court considers the evidence in the light most favorable to the appellee
and will reverse the judgment only if the evidence leads to but one
conclusion and the trial court reached an opposite conclusion. Id.

I. Theories of Individual Liability

In general, a corporate officer or employee is not individually liable
for the corporation’s actions, and an office or corporate status, even a
very senior one, does not in itself expose an individual to personal
liability. However, three distinct doctrines bear on potential individual
liability under Indiana environmental management laws. In overview, an
individual, though acting in a corporate capacity as an officer, director,
or employee, may be individually liable either as a responsible corporate
officer, as a direct participant under general legal principles, or under
specific statutes or provisions. These doctrines can apply to both
criminal and civil liability, though their application in either context
varies with the circumstances. Of course, if the corporation is
financially responsible, and the terms of its indemnification of officers
and employees are met, individual liability for civil penalties may be
largely academic. But the law has developed these bases of individual
responsibility to heighten attention to compliance and also to remove the
ability of fly-by-night operators to escape reimbursing the public cost of
irresponsible operations.

A. The Responsible Corporate Officer Doctrine

The responsible corporate officer doctrine stems from a 1943 United
States Supreme Court case in which the Court interpreted the Federal Food,
Drug, and Cosmetic Act, 21 U.S.C. §§ 301-92 (1938), to permit criminal
liability to be imposed on any person within a corporation “responsible”
for introducing an adulterated or misbranded drug into interstate commerce.
United States v. Dotterweich, 320 U.S. 277 (1943). “[An] offense is
committed . . . by all who do have such a responsible share in the
furtherance of the transaction which the statute outlaws . . . .” Id. at
284. The Court reasoned, “[T]he only way in which a corporation can act is
through the individuals who act on its behalf.” Id. at 281. This
liability was justified on the basis that the Food, Drug, and Cosmetic Act
“touch[es] phases of the lives and health of people which, in the
circumstances of modern industrialism, are largely beyond self-protection.”
Id. at 280.
In United States v. Park, 421 U.S. 658, 673-74 (1975), the Supreme
Court, drawing on Dotterweich, concluded that the government establishes a
prima facie violation of the Food, Drug, and Cosmetic Act as a responsible
corporate officer when:
it introduces evidence sufficient to warrant a finding by the trier of
the facts that the defendant had, by reason of his position in the
corporation, responsibility and authority either to prevent in the
first instance, or promptly to correct, the violation complained of,
and that he failed to do so.

The responsible corporate officer doctrine has been applied to public
welfare offenses if “a statute is intended to improve the common good and
the legislature eliminates the normal requirement for culpable intent,
resulting in strict liability for all those who have a responsible share in
the offense.” Matter of Dougherty, 482 N.W.2d 485, 489 (Minn. Ct. App.
1992).
Although it originated as a criminal law doctrine, the responsible
corporate officer doctrine has been applied to civil liability under a
number of federal statutes. See United States v. Northeastern Pharm. &
Chem. Co., 810 F.2d 726, 743-44 (8th Cir. 1986) (addressing personal
liability under Comprehensive Environmental Response, Compensation, and
Liability Act (CERCLA)); United States v. Hodges X-Ray, Inc., 759 F.2d 557,
560-61 (6th Cir. 1985) (assessing a violation of the Radiation Control for
Health and Safety Act (RCHSA): “The fact that a corporate officer could be
subjected to criminal punishment upon a showing of a responsible
relationship to the acts of a corporation that violate health and safety
statutes renders civil liability appropriate as well.”); United States v.
Conservation Chem. Co., 660 F. Supp. 1236, 1245-46 (N.D. Ind. 1987)
(president and principal stockholder of corporation operating hazardous
waste facility in Gary, Indiana may be personally liable for violation of
Resource Conservation and Recovery Act (RCRA)).
Similarly, several states have adopted the responsible corporate
officer doctrine as appropriate under state legislation addressing public
safety, in particular, disposal of hazardous waste. Matter of Dougherty,
482 N.W.2d at 488-90 (Minnesota’s hazardous waste laws are public welfare
statutes and subject to the responsible corporate officer doctrine); State
ex rel. Webster v. Mo. Res. Recovery, Inc., 825 S.W.2d 916, 924-26 (Mo. Ct.
App. 1992) (applying doctrine to Missouri’s Hazardous Waste Management
Law); State, Dep’t of Ecology v. Lundgren, 971 P.2d 948, 951-53 (Wash. Ct.
App. 1999) (sole shareholder of corporation that operated sewage treatment
plant is personally liable for violation of Washington’s Water Pollution
Control Act); State v. Rollfink, 475 N.W.2d 575, 576 (Wis. 1991) (corporate
officer may be held personally liable for violations of Wisconsin’s solid
and hazardous waste laws if the “officer is responsible for the overall
operation of the corporation’s facility which violated the law”).
B. Individual Liability as a Participant
As a matter of general criminal law, an individual who participates in
a criminal violation is criminally responsible even if acting in a
corporate capacity. See Doyle v. State, 468 N.E.2d 528, 542 (Ind. Ct. App.
1984), trans. denied. The same is true of civil tort liability. See Civil
Rights Comm’n v. County Line Park, Inc., 738 N.E.2d 1044, 1050 (Ind. 2000)
(“[A corporate] officer is personally liable for the torts in which she has
participated or which she has authorized or directed.”).
C. Statutory Liability under Environmental Management Laws
Under Indiana Code section 13-30-6-4, “A responsible corporate officer
may be prosecuted for a violation of section 1, 2, or 3 of this chapter in
accordance with IC 35-41-2-4.” The criminal code section to which this
refers is the general “aiding and abetting” statute, which provides that
one who aids a crime commits that crime. Under these provisions, aiding or
directing a crime, if done “intentionally or knowingly” is sufficient to
support criminal responsibility under Indiana Code sections 13-30-6-4 and
35-41-2-4. See Tobar v. State, 740 N.E.2d 109, 112 (Ind. 2000). The
landfill violations would have constituted a violation of Indiana Code
section 13-30-6-1. Statutory civil liability is more expansive than
criminal liability. Unlike the criminal liability provision in the
environmental management laws, the provision imposing civil liability has
no “mens rea” requirement of knowledge or willfulness. Indiana Code
section 13-30-4-1 imposes civil liability on “a person who violates”
environmental management laws. A “person,” for purposes of environmental
management laws, includes “an individual, a partnership, a copartnership, a
firm, a company, a corporation . . . .” Ind. Code § 13-11-2-158 (1998).
Both general legal principles and the language of the statute support the
conclusion that an individual acting for a corporation participating in a
violation of a statute listed in Indiana Code section 13-30-4-1 may be
individually liable for civil penalties under that section, and, if acting
with the requisite mens rea, may be criminally responsible for violations
of Indiana Code sections 13-30-6-1 through 3. As elaborated in Part II,
Roseman is individually liable under all three of the theories discussed in
this section.
II. Roseman’s Liability
A. Roseman as a Responsible Corporate Officer
The Court of Appeals determined that it was unnecessary either to
adopt or reject the responsible corporate officer doctrine because the
court found the evidence inadequate to establish Roseman as a responsible
party under Park, as formulated in Dougherty. RLG, 735 N.E.2d at 299. We
disagree. Roseman was the sole shareholder of RLG, Inc., which operated
the Spring Valley Landfill. As Indiana corporate law allows in a company
with only one shareholder, Roseman was the single director. From RLG’s
inception in 1988, Roseman served as its only corporate officer, holding
the offices of president, secretary, and treasurer. As is typical of a
single shareholder corporation, only Roseman appears in the corporate
minutes in any capacity.
These factors, individually or collectively, are not enough to
establish individual liability under the responsible corporate officer
doctrine. It is not Roseman’s status as officer, director, or sole
shareholder of RLG that is determinative under this theory. Each of these
in itself may be sufficiently removed from the relevant corporate
activities that the individual is not a “responsible corporate officer”
despite high corporate office. Rather it is Roseman’s direction of and
involvement in operating the landfill, his representation to IDEM that he
was the responsible party, and his actual role in the corporation’s
activities that are critical.
Matter of Dougherty, 482 N.W.2d 485, 490 (Minn. Ct. App. 1992),
formulated the standard of a responsible corporate officer as:
(1) the individual must be in a position of responsibility which
allows the person to influence corporate policies or activities; (2)
there must be a nexus between the individual’s position and the
violation in question such that the individual could have influenced
the corporate actions which constituted the violations; and (3) the
individual’s actions or inactions facilitated the violations.

This is a fair restatement of the responsible corporate officer doctrine as
articulated in United States v. Park, 421 U.S. 658, 673-74 (1975). Roseman
meets all these criteria. He plainly had a position that allowed him to
influence RLG’s policies and functions. Indeed, he dominated the
corporation. He also designated himself as the responsible party in the
solid waste permit application, establishing the necessary nexus between
his position and environmental compliance. Finally, his acts facilitated
the violation.
The facts of this case are analogous to Dougherty, where the Minnesota
Court of Appeals based responsible corporate officer liability on findings
that the defendant “was in a position of responsibility as president and
primary emergency coordinator,” that the violations were within his “sphere
of influence,” that he “was the primary contact with all regulatory bodies
concerning hazardous waste,” and that he “failed to prevent the violations
and take proper corrective action once the violations occurred.”
Dougherty, 482 N.W.2d at 490. Here there is no subordinate or intermediate
officer principally responsible for compliance, and Roseman was directly
involved in at least some corporate activities. Either may be sufficient,
and in concert they demonstrate that Roseman had both the responsibility
and authority to prevent the IEMA violations in the first instance and to
correct the violations once they were brought to his attention. Cf. Park,
421 U.S. at 673-74. In any event, Roseman’s voluntary assumption of the
role of responsible party is also sufficient. When Roseman signed IDEM’s
character disclosure statement, he did not cite the corporation’s
activities to demonstrate its capacity to operate a proposed landfill.
Rather he pointed to his own individual experience as “Director” of a
landfill for three years as fulfilling the requirement of experience of the
“applicant.” Thus, by his own admission, he was the party responsible for
the landfill’s operations, and held himself out as the responsible party in
obtaining the permit.
B. Roseman’s Individual Participation and Statutory Liability
Corporate status was not Roseman’s only involvement in the IEMA
violations. According to Jim Ritchie, who operated a bulldozer and backhoe
at the landfill from April 1990 until April 1991, Roseman was at the
landfill site approximately five days per month, and Roseman ordered the
landfill’s manager and Ritchie to “landfill garbage outside of the
permitted landfill contours.” This was evidence of Roseman’s direct
participation in the environmental violation.
Equally important, the environmental laws require that there be a
“Responsible Party” incident to the permitting of a landfill.[3] When RLG
filled out IDEM’s “Waste Facility Character Disclosure Statement” in 1991,
Roseman listed RLG in Section D as the “Responsible Party,” but signed his
own name as the “Applicant/Responsible Party.” Section D2 of that form
also requires the applicant or responsible party to list his, her, or its
experience in managing the type of waste for which the permit was sought.
Significantly, Roseman listed his individual three years of experience as
director of Spring Valley Landfill as supplying the “Responsible Party’s”
experience in waste management at the contemplated site. Finally, once the
violations became the subject of court order, Roseman, who had sole,
ultimate control over RLG, did not act to correct them.
The trial court’s findings did not address Ritchie’s affidavit
describing Roseman’s direct involvement in placing the garbage outside the
permitted area, or the fact that Roseman represented himself, not RLG, to
be the “Responsible Party” with three years experience as director of the
landfill. All of these are documented and essentially indisputable. The
Court of Appeals observed that “[t]he evidence discloses [only] that
Roseman conducted himself as a corporate officer.” RLG, 735 N.E.2d at 299.
But that circumstance addresses only the piercing of the corporate veil
and does not in itself eliminate liability under Indiana statute or the
responsible corporate officer doctrine. Finally, Ritchie’s uncontradicted
affidavit established that Roseman directly supervised at least some of the
landfill’s daily unlawful waste disposal activities. This undisputed
evidence of Roseman’s active involvement in the violations is also
sufficient to impose personal liability.
III. Personal Liability and Piercing the Corporate Veil
Roseman argues that an important cornerstone of Indiana law is respect
for the corporate form, and that he may not be held personally liable
unless RLG disregarded corporate structure and served as a mere
instrumentality for his own business sufficient to pierce the corporate
veil. We do not agree that Roseman’s liability depends on piercing the
corporate veil. In general, that doctrine holds individuals liable for
corporate actions based on the failure to observe corporate formalities.
Aronson v. Price, 644 N.E.2d 864, 867 (Ind. 1994). The corporate veil is
pierced only where it is clear that the corporation is merely a shell for
conducting the defendant’s own business and where the misuse of the
corporate form constitutes a fraud or promotes injustice. Id. Unlike the
responsible corporate office doctrine, or specific statutory liability,
veil piercing is not dependent on the nature of the liability. In
contrast, Roseman’s liability here is essentially based on his individual
participation in the violations, their character as violations of laws
affecting public health, and specific statutory liability. The responsible
corporate officer doctrine is distinct from piercing the corporate veil,
and explicitly expands liability beyond veil piercing. See United States
v. Dotterweich, 320 U.S. 277, 282 (1943) (“If the [FDCA] were construed [to
limit liability to the corporation], the penalties of the law could be
imposed only in the rare case where the corporation is merely an
individual’s alter ego.”). The same is plainly true of statutory
liabilities. We agree that the record in this case does not support
piercing the corporate veil. Roseman is entitled to the benefit of
corporate limited liability even if he owned all of the shares of RLG and
was its only officer and director. A corporate officer is not liable
simply because of his position within the corporation. United States v.
Park, 421 U.S. 658, 674 (1975). A corporate officer may, however, be held
personally liable if he was actively involved in the activity that violates
the statute. United States v. Conservation Chem. Co., 733 F. Supp. 1215,
1221 (N.D. Ind. 1989). For the reasons discussed in Part II, Roseman is
also liable under Indiana’s Environmental Management Act.
Conclusion
For all these reasons, we conclude that Roseman may be held personally
liable for civil penalties for the violations committed at the Spring
Valley Landfill and the resulting remediation costs. The judgment of the
trial court is reversed and remanded for entry of judgment in favor of IDEM
and against Roseman in the amount of the default judgment of $3,175,000.

SHEPARD, C.J., and DICKSON, SULLIVAN, and RUCKER, JJ., concur.
-----------------------
[1] An August 1993 affidavit signed by an inspector for IDEM lists RLG’s
violations as the following: (1) litter over the site, Ind. Admin. Code
tit. 329, r. 2-14-4 (repealed 1996); (2) failure to submit statistical
analysis concerning groundwater data, I.A.C. 2-16-5; (3) presence of
organics in the groundwater at the site, I.A.C. 2-16-2(a); (4), failure to
submit an adequate groundwater sampling and analysis plan, I.A.C. 2-16-
2(a); and (5) failure to submit a closure plan, I.A.C. 2-15.
[2] The agreements RLG entered into in February of 1994 included the
obligations to “locat[e] active leachate seepage points at the Site,”
“initiate winterizing patches . . . to address the active leachate seepage
points,” “initiate erosion controls . . . necessary to effectively
remediate or prevent off-site migration of cover soils at the Site,” and
“to initiate discussion with IDEM regarding hydrogeological issues.”
[3] “Responsible Party” for purposes of Indiana Code section 13-19-4
(formerly section 13-7-10.2), the section under which Roseman filed for a
solid waste permit, means:
(1) an officer, a corporation director, or a senior management
official of a corporation, partnership, limited liability company, or
business association that is an applicant; or
(2) an individual, a corporation, a limited liability company, a
partnership, or a business association that owns, directly or
indirectly, at least a twenty percent (20%) interest in the applicant.
Ind. Code § 13-11-2-191(a) (1998).