Massachusetts Court Upholds Collective Knowledge And Veil Piercing In Criminal Prosecution For Environmental Violations

In a case of first impression, the Appeals Court of Massachusetts recently affirmed criminal convictions against four different corporate defendants for failure to report one release of oil to the Massachusetts Department of Environmental Protection ("MADEP"). Commonwealth v. Springfield Terminal Railway Company, 80 Mass. App. Ct. 22 (2011)("Springfield Terminal"). The Appeals Court upheld the Commonwealth's combined use of collective knowledge and piercing the corporate veil theories to expand the number of defendants and multiply the maximum criminal penalties. The Appeals Court's adoption of the collective knowledge theory and its extension to multiple criminal defendants at once is without precedent. Despite that fact, the opinion has garnered surprisingly little attention.

Springfield Terminal concerned a substantial release of diesel fuel from a freight locomotive parked in a railyard. Testimony and evidence at trial established that hundreds of gallons of fuel spilled out of the locomotive "like . . . a waterfall." Workers who observed the spill reported it to their supervisors and immediately took measures to contain the spill. A train dispatcher, train master, and corporate vice president all were made aware of it. The Appeals Court saw no need to specify in its opinion which workers and supervisors were employed by which corporate defendant. The train dispatcher testified that there were contingency plans in place for reporting diesel spills; however, none of the defendants' employees or officers reported the spill to MADEP. Within 17 hours, workers began excavating contaminated soil and ballast, placing it in drums, and replacing it with clean fill. At that point, an "anonymous informant" called MADEP to report the spill.

It was uncontested that: (i) a spill of diesel equal to or greater than 10 gallons must be reported to MADEP; (ii) more than that "Reportable Quantity" had been spilled in a period of 24 consecutive hours or less; and, therefore, (iii) the spill should have been reported to MADEP "as soon as possible but not more than two hours after obtaining knowledge" that the release met those criteria (emphasis added). 310 C.M.R. 40.0311(3). None of the parties contested the trial court's instruction that both knowledge that the release had occurred and knowledge that it was 10 or more gallons were required to trigger the reporting requirement. The Appeals Court highlighted but made no ruling with respect to that issue.

The Commonwealth brought criminal charges under M.G.L. c. 21E, § 11, for failure to notify MADEP "as soon as [one] has knowledge of a release or threat of release of oil or hazardous material," as required by M.G.L. c. 21E, § 7. Section 11 states that the maximum criminal fine for each such violation is $100,000, and that "[e]ach day such violation occurs or continues shall be considered a separate violation." In an...