In 1994 an underground storage tank owned and operated by The Customer Company leaked over 3,000 gallons of gasoline into the ground in the City of Galt [part of California's Central Valley south of Sacramento]. The Customer Company was a family company in which the Roscoes were officers, directors, and shareholders. Employee Johnson hired Parker Environmental Services (PES) to oversee the remediation. Unfortunately, the remediation was not carried out in a timely manner. The Sacramento County Environmental Management Department (EMD) sent numerous notices about the various deficiencies; the letters were opened by John Roscoe, who treated them as “form letters”. John passed them to employee Johnson who passed them to PES. No attempt was made by anyone at The Customer Company (TCC) to ascertain what had to be done, and to make sure that such activities were undertaken in a timely manner. The Sacramento DA filed a civil suit against TCC and the Roscoes; following a trial, the Court imposed a $2.5 million civil penalty. The trial court found that TCC was the owner and operator of the UST, and that the Roscoes were liable under the responsible corporate officer doctrine. [The doctrine derives from the jurisprudence of the U.S. Supreme Court. See, for example, United States v. Dotterweich (1943) 320 U.S. 277 and United States v. Park (1975) 421 U.S. 658. The doctrine does not require piercing the corporate veil or the direct participation of an officer in the wrongdoing.] The trial court found that "overall authority for company affairs was retained by John and Ned Roscoe", and that they could have prevented or remedied promptly the noticed violations of the regulations, but they did not "exercise their responsibilities and power to use all objectively possible means to discover, prevent, and remedy any and all violations." The trial court concluded that had a timely cleanup operation occurred, the cost likely would have been approximately $400,000 instead of the $1.5 million paid by the State of California Underground Storage Cleanup Fund. The Roscoes appealed, citing the excessive penalty and the application of the responsible corporate officer doctrine as grounds for reversal.
In People v. Roscoe et al, Docket No. C055801 (Calif. Court of Appeal: 12/26/08), the Court considered the issues. “The plain language of the statutes does not readily answer whether a corporate officer is immune from liability under the responsible corporate officer doctrine if the corporation has been found to be the operator. On one hand, Section 25299, subdivision (a)(6) [of the Health & Safety Code] does not limit liability to a single operator; rather it imposes liability on ‘[a]ny operator.’ Similarly, section 25281, subdivision (j) does not define operator as ‘the person’ in control of or having daily responsibility for the tank; rather it defines operator as ‘any person.’ This broad language could be read as supporting imposition of liability on both the corporate officer and the corporation when appropriate. On the other hand, section 25281, subdivision (l) does not specifically include a corporate officer in the definition of person. This could be read as a limitation on a corporate officer's liability.” Thus, the Court looks to extrinsic sources for ascertaining legislative intent.
The Court noted that over the years the Legislature had steadily expanded those entities liable for violations of the UST laws, and that the laws were of the type that were the foundation for the responsible corporate officer doctrine as developed by the U.S. Supreme Court. Further the Roscoes only provide the Court with a clerk’s transcript of the trial, which the Court noted greatly simplified its task. No reversible error appears in this limited record. Thus, the findings of the trial court prevail, namely that the Roscoes retained "overall authority for company affairs", they could have prevented or remedied promptly the noticed violations of the regulations, and they did not "exercise their responsibilities and power to use all objectively possible means to discover, prevent, and remedy any and all violations." “Based on these factual findings, the trial court did not err in holding the Roscoes personally liable for violations of the tank laws.”
In terms of challenging the penalty imposed, the Court once again noted that the limited record which defendants have provided the Court constrained the type of arguments that could effectively be made. The Court noted that the statement of decision correctly recounted the intent of the tank laws and correctly recounted the applicable law. The trial court also was held to have properly found the Roscoes bore individual culpability in this case, and that imposing penalties on them served the purposes of the tank laws; defendants attempt to raise the issue of proportionality as to the penalty was rejected as untimely since it was not even mentioned in the opening brief. Because of the lack of a record beyond the clerk’s transcript, the Court of Appeal looked at the statement of decision and found that it reflected that the penalties were proportional and not excessive.
Thus, the appeal was rejected en toto.
Thus, the appeal was rejected en toto.
Clearly, the defendants were penny wise and pound foolish by not producing a reporter’s transcript of the trial. The lack of such a record undercut their ability to make most of their arguments in any meaningful manner.