January 9, 2019 Sweetnam and Schwartz

Directors and officers are being held liable at an increasing rate for violations of environmental laws and regulations by their corporations. A recent case, in which our Atlanta environmental law firm was involved, from a federal court in Georgia demonstrates the ever-widening scope of personal liability of corporate officers.

In Draper v. Roberts, a case of first impression, the U.S. District Court for the Northern District of Georgia ruled that individual officers could be held personally liable for the violations of the corporation under the Clean Water Act (CWA). In imposing such liability the Court determined liability principally on the basis that the corporate individuals had the capacity to prevent the violations at issue. Thus, an owner or operator of a company in Georgia can be personally liable if that officer has the authority to direct the activities causing or constituting the violations facility has the power to direct the activities of persons who control the mechanisms causing the violation.

Other jurisdictions that had addressed the imposition of personal liability upon corporate officers in the context of the CWA held that the CWA does not impose personal civil liability for prohibited acts simply by virtue of an individual’s corporate position. These courts have generally found corporate officers to be personal liable under the CWA only when they have extensively participated in or were directly responsible for the statutorily proscribed violative conduct.

In the Draper case, the Plaintiffs alleged that the corporate defendant, a small development company, caused sedimentation into their lakes in violation of the CWA. They further alleged that the two individuals that owned and operated the company were liable personally for the violations. The defense contested personal liability on the basis that the individuals lacked actual control over the activities that caused the alleged violations. As it only engaged contractors (i.e. grader and home builder) to perform the land disturbance and other construction work alleged to have caused the sedimentation on the Plaintiffs’ properties, the individual defendants did not direct or control any activities that caused any alleged violation of the CWA.

While agreeing that personal liability cannot be based on corporate status alone, the Court found that both individual had sufficient responsibility for and control over the construction and erosion control at the property subdivision to be held individually liable for the violations of the CWA. Specifically, the Court noted that one defendant was the managing partner who made all decisions for the company that was the primary permittee under the CWA, monitored activities of the contractors and subcontractors, observed erosion and sedimentation control practices and recorded rainfall data. The other defendant was the person that signed the Notice of Intent, thereby holding himself out as an officer of the company, and designating himself as facility contact, and that certified the Erosion, Sedimentation, and Pollution Control Plan, indicating that it would be implemented in compliance with the CWA. Both officers corresponded regularly with regulatory entities regarding violation notices regarding activities at the property. The Court determined that these largely misiterial tasks constituted significant responsibilities related to compliance with erosion and sedimentation control measures and best management practices, violation of which caused damages to the Plaintiffs.

Moreover, the Court held the individuals responsible for their failure to correct violations stating the violations that are the subject of the lawsuit were “at least partly a consequence of their actions or, more importantly, their omissions”. According to the Court, the individuals did not perform the work, but were “ultimately responsible for the performance of the work”. Therefore, under the precedent set by this case, an officer of a company that fails to ensure compliance with the CWA, is just as liable as if the individual had directed the violation of the CWA.

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