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When is a Corporate Executive Personally Liable for a Spill Act Claim?

Oil storage fire. The tank farm is burning, black smoke is combu

If you discover an underground storage tank (UST) on land owned by your real estate development or other company, you must act quickly, effectively, and appropriately to address the situation. If the UST has a leak, it is vital to undertake appropriate remediation as soon as possible and in accordance with state and federal regulations. If you fail to remediate a spill appropriately, you may find that more than just your business is at stake: Under certain circumstances, you may find yourself personally liable for claims brought under the New Jersey Spill Compensation and Control Act (the “Spill Act”). Hiring dedicated, professional, licensed UST remediation and removal professionals to handle a damaged or contaminated UST can keep you from harming both your professional and personal livelihood.

Piercing the corporate veil in Spill Act cases

When a court decides to look past a company’s legal limited liability structure and find the person behind the business personally liable for damages wrought by the company, the legal community refers to finding personal liability as “piercing the corporate veil.” The New Jersey Appellate Division has previously dealt with the question of whether and when the principal of a company may be held personally liable for actions brought under the Spill Act.

The matter of New Jersey Dep’t of Environmental Protection (NJDEP) v. Navillus Group involved two family-owned companies. The Navillus Group, a general partnership composed of the children of James Sullivan, Jr., purchased tax sale certificates to buy a piece of property in Franklin Township that was under foreclosure. The purchase allegedly occurred using a check written from an account in the name of Jim Sullivan, Inc., another corporation in which the same Sullivan siblings were shareholders. The property ended up suffering a UST spill, and the State had to clean it up. NJDEP sued for recovery of costs expended in the cleanup.

On summary judgment, the trial court found that Navillus, Jim Sullivan, Inc., and the Sullivan siblings, as general partners of Navillus, were all liable under the Spill Act for the costs of remediation and unjust enrichment. The court also pierced the veil for Jim Sullivan, Inc. to find James Sullivan personally liable, based on an alleged commingling of assets. The commingling of assets finding was predicated on the assumption that funds from Jim Sullivan, Inc. were used to purchase the tax certificates. The defendants appealed.

On appeal, the New Jersey Appellate Division upheld liability against all defendants except Jim Sullivan, Jr. The appeals court emphasized that under New Jersey Supreme Court precedent, piercing the corporate veil is intended to prevent individuals from using the corporate structure to “perpetrate fraud, to accomplish a crime, or otherwise to evade the law.” The court may also pierce the veil when “an individual . . . was using the corporation as his alter ego and abusing the corporate form in order to advance his personal interests.”

Here, there was not sufficient undisputed evidence on the record to find that the check used to purchase the tax certificates came from Jim Sullivan, Inc.; the finding was based on an assumption of one of the parties who testified. Moreover, “[w]riting a check for another entity on one occasion, during the more than twenty-year existence of Jim Sullivan, Inc., hardly demonstrates a pattern of commingling assets that might serve as a foundation for piercing the veil.” Nor was there sufficient evidence that the transfer of property was meant to avoid liability. Summary judgment was therefore inappropriate on the issue of individual liability piercing the corporate veil.

Call in the Professionals at Lutz to Handle Your Underground Storage Tank Issues

If you find a UST at your construction worksite or are dealing with a UST spill on your property, get help from trusted advisors with years of underground storage tank experience. For experienced, qualified, and dedicated assistance, call Herbert Lutz & Company, in Florida at 954-971-5222, or in New Jersey at 908-862-8888.

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