Find Legal Information

FIRST DIVISION
February 2, 2004

The State appeals the dismissal of its second amendedcomplaint in which it charged Cyrus Tang, individually and aschairman and chief executive officer of Pielet Brothers Scrap Ironand Metal L.P. (P Brothers LP), with violations of the IllinoisEnvironmental Protection Act (415 ILCS 5/1 et seq. (West 2000))(the Act). We affirm dismissal of the complaint.

The State filed its original complaint against Tang on June19, 2001. It charged him, under the Act, with open dumping,improper waste disposal, developing a waste disposal site withouta permit, operation of a waste disposal site without an operatingpermit, water pollution, water pollution hazard, and failure topost a landfill bond. It also charged common law public nuisance. The complaint alleged that Tang was chairman and chief executiveofficer of and had a controlling ownership in P Brothers LP. Anonparty was the chief operating officer. The complaint allegedthat "Defendant Tang conducted an automobile shredding operation atthe site through the business entities." It accused him of causingand allowing auto shredder residue and auto fluff to be piledoutside for more than one year, both from on-site operations andother off-site automobile shredding operations. It further allegedthat the decision to spend money to clean up the wastes could nothave been made without Tang's approval. It claimed that"[d]efendant Tang had taken no action, nor had caused any action tobe taken, to institute measure(s) to prevent this materialincluding auto fluff waste from entering the environment viadifferent pathways, including but not limited to, storm water run-off from the site." The complaint sought declaratory and mandatoryinjunctive relief and assessment of fines.

Tang moved to dismiss the complaint under section 2-619.1 ofthe Code of Civil Procedure (735 ILCS 5/2-619.1 (West 2000)),claiming that the State failed to "allege any personal involvementin any wrongful act by Mr. Tang, and thus fail[ed] to state a claimunder Illinois law." Tang further claimed that the court could notgrant the requested mandatory injunctive relief because Tang didnot own or have control over the site. Although the order is notincluded in the record on appeal, the parties inform us that theState's original complaint was dismissed on December 7, 2001,without prejudice.

The State subsequently filed its first amended complaint. Thecomplaint was nearly identical to the original complaint, exceptthat it added counts for failure to file an initial report onlocation and disposal practices, violation of the annual reportingrequirement, violation of the groundwater reporting requirement,violation of the record-keeping requirements, and accumulation ofwaste on site for over one year. It also contained an allegationthat Tang "caused or allowed" the violations

"as a part of his performance of, and as a direct resultof, his duties as Chairman and Chief Executive Officer ofP Brothers LP, and because of his controlling ownershipinterest in both a limited partner and the generalpartner of P Brothers LP. These duties included, and hiscontrolling ownership interest meant, that Defendant Tangwas a person, if not the only one, who could decide tomake the expenditure in such an amount to be sufficientto dispose of the auto shredder residue and/or auto fluffwaste at the site."

It further alleged:

"Defendant Tang failed to make the decision to properlydispose of, or direct or authorize sufficient fundingreasonably necessary for the disposal of, the autoshredder residue and/or auto fluff waste at the site. Inthis fashion, Defendant Tang caused or allowed theconsolidation of the auto shredder residue and/or autofluff waste at the site."

Tang moved to dismiss the first amended complaint undersection 2-619.1 of the Code of Civil Procedure (735 ILCS 5/2-619.1(West 2000)). The court granted the motion and dismissed the firstamended complaint in part with prejudice and in part withoutprejudice on April 12, 2002. The portions dismissed with prejudicewere the requests for mandatory injunctive relief, which the courtdismissed because it found that the portion of the Act under whichthe State sought a mandatory injunction did not permit mandatoryinjunctive relief, and the counts charging Tang with failing tocomply with the reporting requirements because the court found thatthose sections of the Act impose duties on facilities, not onindividuals. After its first amended complaint was dismissed, theState filed motions to reconsider or alternatively to enter a Rule304(a) (155 Ill. 2d R. 304(a)) finding, allowing immediate appeal. The court denied the motions.

The State sought leave to file its second amended complaint. The State included those claims that were dismissed with prejudicefrom the first amended complaint. According to the State, theclaims were included only "to preserve the issue for appeal." Tangobjected to inclusion of the previously dismissed claims, and thecourt disallowed them.

As filed, the second amended complaint charged open dumping,improper waste disposal, developing a waste disposal site withouta permit, operation of a waste disposal site without an operatingpermit, water pollution, water pollution hazard, common law publicnuisance, failure to post landfill bond, and accumulation of wasteon site for over one year. Its allegations were very similar tothe allegations made in the original and first amended complaints. With regard to the first six counts, it alleged that Tang"conduct[ed] an automobile shredding operation at the site" and"caused and allowed" (1) the resultant "auto shredder residue andauto fluff to be piled outside, uncontainerized and uncovered"; (2)"auto shredder residue and/or auto fluff waste from off-siteautomobile shredding operations to be accepted at the site inaddition to that generated on-site"; and (3) "auto shredder residueand/or auto fluff waste to be consolidated." Further, it allegedthat Tang "fail[e]d to take any action to remove the wastes *** toa licensed disposal facility" and "fail[ed] to authorize theexpenditure necessary for proper removal of the [wastes]." Thecomplaint again sought mandatory injunctive relief and, this time,alleged:

"On information and belief, Midwest Metallics LP [the nowbankrupt entity that was formerly P Brothers LP] willraise no objection to Defendant Cyrus Tang entering thesite and taking such actions necessary to cease theviolations of the Act he is committing at the site ifordered to do so by this Court after trial."

Tang moved under section 2-619.1 (735 ILCS 5/2-619.1 (West2000)) to dismiss the second amended complaint, claiming that theallegations were insufficient to state a claim against himpersonally, that mandatory relief was not allowed under the Act,and that he had no legal interest in the property, which preventedthe court from ordering him to enter the property for remediation.

The trial court agreed with Tang on all three grounds. First,it found that the allegations were insufficient to state a claimagainst Tang personally. It found that Tang's "involvement andparticipation as alleged [was] not because he was operating thefacility *** but because he was chairman and chief executiveofficer and because of his controlling and ownership interest." Atmost, the court found that the complaint

"allege[d] that [Tang's] personal involvement and activeparticipation [was] due to his activities as Chairman andChief Executive Officer and controlling interest and hisfailure in that capacity to dispose of the residue or toauthorize sufficient funding to dispose of the residue orto authorize sufficient funding to dispose of the residueand 'in this fashion' caused or allowed the residue onthe site."

With regard to the additional issues, the court recognized that"Illinois law is clear that a mandatory injunction may not issue toa non-owner or non-controller of the property [citation] which isthe subject matter of the injunction." It also held that theportion of the Act relied upon by the State "allows onlyRestraining orders and not positive mandatory injunctions." Thus,the court dismissed the second amended complaint with prejudice.

The State appeals on three grounds. First, it claims that itsfirst and second amended complaints adequately state multiplecauses of action against Tang. Second, it maintains that mandatoryinjunctive relief is appropriate. Third, the State claims that thetrial court erred in finding that it lacked authority to grant therequested relief because Tang has no legal interest in the propertyat issue. The State urges us to "reverse the dismissal of itsfirst and second amended complaints and to remand all of the countsand remedies sought therein for further proceedings in the circuitcourt."

Tang contends that our review should be restricted to theState's second amended complaint because the State failed to"include in its Second Amended Complaint by restatement orincorporation by reference each theory of recovery argued in theFirst Amended Complaint" and, consequently, waived those claims onappeal. Regardless, Tang argues, even if the first amendedcomplaint is considered, the trial court's dismissal was proper forthe same reasons it was proper to dismiss the second amendedcomplaint. In reply, the State argues that it did not waive itsright to appeal the dismissal of its first amended complaint byfailing to incorporate the dismissed claims in its second amendedcomplaint because the State attempted to incorporate those claims,solely for the purpose of preserving them for appeal, but wasprevented from doing upon Tang's objection. The State failed toinclude the order dismissing its first amended complaint in itsappendix in violation of Rule 342(a) (155 Ill. 2d R. 342(a) ("Theappellant's brief shall include as an appendix, *** a copy of thejudgment appealed from ***")), and we need not consider the State'sarguments with regard to that order. Regardless, the claimsdismissed in the first amended complaint would be subject todismissal for the same reasons as the claims in the second amendedcomplaint as discussed below.⁽¹⁾ Thus, even if the claims were notwaived, we would hold that they were properly dismissed.

As to the merits, we first note that our review is de novo. Safeway Insurance Co. v. Daddono, 334 Ill. App. 3d 215, 218 (2002). "We take as true all well-pled facts and reasonable inferencestherefrom and consider only those facts in the pleading andincluded in attached exhibits." Safeway, 334 Ill. App. 3d at 218. Illinois law requires a plaintiff to "allege facts stating theelements of the cause of action," and unsupported legal conclusionsand factual conclusions are insufficient and will be disregarded inruling on a motion to dismiss. Safeway, 334 Ill. App. 3d at 222. Dismissal of a complaint should be affirmed only when "it is clearthat a plaintiff cannot prove a set of facts that will entitle himto the relief sought." Safeway, 334 Ill. App. 3d at 218.

In this case, we are not asked to determine whether, as ageneral proposition, a corporate officer may ever be held liablefor corporate wrongs under the Act; both parties concede that,under certain circumstances, a corporate officer may beindividually liable. Instead, we must determine whether thepleadings in this case are sufficient to state a claim for Tang'sindividual liability. Apparently, only one Illinois case hasspecifically addressed the issue of a corporate officer's potentialindividual liability under the Act. The trial court relied on thiscase in rendering its decision, and both parties claim the casesupports their contentions on appeal.

In People ex rel. Burris v. C.J.R. Processing, Inc., 269 Ill.App. 3d 1013, 1015 (1995), the appellate court for the ThirdDistrict considered "whether a corporate officer may be heldindividually liable for a corporation's violations of the Act whenhe or she is personally involved or actively participates in thoseviolations." The court found that the officer could be held liableunder those limited circumstances, i.e., "active participation orpersonal involvement." C.J.R., 269 Ill. App. 3d at 1020. InC.J.R., the court found that the complaint sufficiently alleged"active participation or personal involvement" to withstand amotion to dismiss. Specifically, the complaint alleged that thedefendant was "responsible for CJR and controll[ed] itsactivities." C.J.R., 269 Ill. App. 3d at 1014. He also served asexecutive vice president and chief operating officer for C.J.R.'sparent corporation. C.J.R., 269 Ill. App. 3d at 1014. Thedefendant was also alleged, in cooperation with C.J.R. and itsparent corporation to "own and operate a facility" to which they"transported large quantities of solid and liquid waste materials." C.J.R., 269 Ill. App. 3d at 1014. The appellate court found that"the complaint allege[d] [that the corporate officer] waspersonally involved and actively participated in the decisions andcorporate activities which caused the violations of the Act." C.J.R., 269 Ill. App. 3d at 1018. Specifically, the court placedsignificance on the fact that each count of the complaint allegedthat the defendant personally operated the facility. C.J.R., 269Ill. App. 3d at 1018. The court also considered significant in itsholding that "the operative allegations charge[d] that [thecorporate officer] 'caused or allowed' all of the violations tooccur in conjunction with the other defendants." C.J.R., 269 Ill.App. 3d at 1018.

The State argues that under C.J.R., it has adequately statedclaims against Tang individually. Tang also relies on C.J.R., butclaims that the complaint does not state a cause of action. NoIllinois court has interpreted or applied those portions of C.J.R.dealing with a corporate officer's potential individual liabilityunder the Act. Accordingly, both parties have referred us to casesfrom other jurisdictions in support of their positions.

Before analyzing those cases, we outline some of theprinciples underlying corporation law in Illinois. "One of thepurposes of a corporate entity is to immunize the corporate officerfrom individual liability on contracts entered into in thecorporation's behalf." National Acceptance Co. of America v.Pintura Corp., 94 Ill. App. 3d 703, 706 (1981). Accordingly, inmost instances, the law immunizes corporate officers from corporateliabilities and debts. Safeway, 334 Ill. App. 3d at 219("[C]orporate status generally shields corporate officers andshareholders from liability from corporate debts and obligations").However, "corporate officer status does not insulate [a corporateofficer] from individual liability for the torts of the corporationin which he actively participates." Pintura, 94 Ill. App. 3d at706; see also Safeway, 334 Ill. App. 3d at 219 ("[T]his protectiondoes not shield corporate officers from their own wrongdoing");Simon v. Pelouze, 263 Ill. App. 177 (1931) (recognizing thatcorporate officers and directors can be held liable for tortiousacts by the corporation only where the officer or directorparticipated in the tortious act). Some torts for which corporateofficers may be liable include negligence, fraud, trespass torealty, willfully inducing breach of contract, and conversion. Pintura, 94 Ill. App. 3d at 706.

We have reviewed the out-of-jurisdiction cases cited by theparties in support of their contrary claims regarding thesufficiency of the allegations in this case. Most of these casesdeal with liability under the "owned or operated" standard forliability under the Comprehensive Environmental Response,Compensation, and Liability Act of 1980 (CERCLA)(42 U.S.C.