FMC Corp. v. US Dept of Comm. ( 1994 )

Opinions of the United
1994 Decisions States Court of Appeals
for the Third Circuit
7-5-1994
FMC Corp. v. US Dept of Comm.
Precedential or Non-Precedential:
Docket 92-1945
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UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 92-1945
FMC CORPORATION
v.
UNITED STATES DEPARTMENT OF COMMERCE;
RONALD BROWN, SECRETARY OF
COMMERCE, in his official capacity;
UNITED STATES OF AMERICA,
Appellants
On Appeal from the United States District Court
for the Eastern District of Pennsylvania
(D.C. Civil No. 90-01761)
Argued September 15, 1993
BEFORE: SLOVITER, Chief Judge, and MANSMANN
and GREENBERG, Circuit Judges
Reargued in banc April 26, 1994
BEFORE: SLOVITER, Chief Judge, and BECKER,
STAPLETON, MANSMANN, GREENBERG, HUTCHINSON,
SCIRICA, COWEN, NYGAARD, ALITO, ROTH,
and LEWIS, Circuit Judges
(Filed: July 5, l994)
Vicki O'Meara
Acting Assistant Attorney
General
Department of Justice
Environment and Natural
Resources Division
Vicki L. Plaut (argued)
Peter R. Steenland, Jr.
Anne S. Almy
Dirk D. Snel
Ronald M. Spritzer
1
Glen Freyer
Attorneys, Department of Justice
Environment and Natural
Resources Division
P.O. Box 23795
L'Enfant Plaza Station
Washington, D.C. 20026
Attorneys for Appellants
Neil G. Epstein (argued)
Steven J. Engelmyer
Carol L. Press
Joyce L. Brong
Hangley Connolly Epstein
Chicco Foxman & Ewing
1515 Market Street
Ninth Floor
Philadelphia, Pa. 19102
Attorneys for Appellee
OPINION OF THE COURT
GREENBERG, Circuit Judge.
I. FACTUAL AND PROCEDURAL BACKGROUND
The United States and the United States Department of
Commerce appeal from a final judgment entered on September 17,
1992, by the United States District Court for the Eastern
District of Pennsylvania. The court held the United States
jointly and severally liable, as an "owner," "operator" and
"arranger," for response costs for which the plaintiff FMC
Corporation is or will be responsible under the Comprehensive
Environmental Response, Compensation, and Liability Act
("CERCLA") to clean up hazardous waste created at an industrial
facility during World War II. FMC acquired this facility many
2
years after the war. The district court entered the final
judgment in accordance with its opinion of February 19, 1992,
reported as FMC Corp. v. United States Dep't of Commerce, 786 F.
Supp. 471 (E.D. Pa. 1992). FMC brought this action because the
Environmental Protection Agency ("EPA") sought to recover the
response costs from it. FMC seeks contribution, claiming that
the United States also is liable because the War Production Board
("WPB"), which later was subsumed within the Department of
Commerce, owned parts of the facility, operated the facility
during World War II, and arranged for the disposal of the wastes
created. FMC and the United States have settled the claim
against the United States as an "owner," but the government
contends that its conduct other than as an owner was regulatory
activity from which the United States is protected from liability
by its sovereign immunity. It further argues that, in any event,
it was neither an "operator" nor an "arranger" within CERCLA.
Accordingly, it contends that it cannot be liable other than as
an owner. We reject the government's contentions and thus will
affirm.
A. Statutory Background
Section 104 of CERCLA empowers the government to use
money from the "Superfund" to clean up hazardous waste sites. 42
U.S.C. § 9604(a). Section 107(a)(1)-(4) provides that any
"person" who: (1) is the "owner" or "operator" of a facility
where there is a release or threat of release of a hazardous
substance, (2) was the "owner" or "operator" of a facility at the
3
time of the disposal of a hazardous substance, (3) "arranged" for
such disposal, or (4) "accepted" a hazardous substance for
transport to a facility, is liable for the response costs, i.e.,
the costs of removal and other remedial action incurred by the
United States. 42 U.S.C. § 9607(a)(1)-(4). Thus, an entity,
such as FMC, which becomes an owner of a facility after the
disposal of the hazardous waste is liable under CERCLA. Liability
for the costs incurred is strict. United States v. Alcan
Aluminum Corp., 964 F.2d 252, 259 (3d Cir. 1992). Section
101(21) defines "person" to include the "United States
Government." 42 U.S.C. § 9601(21).
From its inception, CERCLA has included a provision
waiving the sovereign immunity of the United States and, as
amended by the Superfund Amendments and Reauthorization Act of
1986, Pub. L. 99-499, § 120, 100 Stat. 1613, 1666 (1986), CERCLA
section 120(a)(1) includes the following waiver provision:
Each department, agency, and instrumentality
of the United States (including the
executive, legislative and judicial branches
of government) shall be subject to, and
comply with this chapter in the same manner
and to the same extent, both procedurally and
substantively, as any nongovernmental entity,
including liability under section 9607
[CERCLA section 107] of this title.
42 U.S.C. § 9620(a)(1) (emphasis added).
Persons assessed by the United States with response costs under
CERCLA may "seek contribution from any other person who is liable
or potentially liable under section 9607(a) of this title [CERCLA
section 107(a)], during or following any civil action under
section 9606 of this title or under section 9607(a) of this
title." 42 U.S.C. § 9613(f)(1). Therefore, we are concerned on
4
this appeal with the related but nevertheless distinct questions
of whether the sovereign immunity of the United States bars this
action against it, except as an owner, and whether the United
States, if not immune, is liable either as an operator or an
arranger, or both.
B. Factual Background
The facility at issue in this case is located in Front
Royal, Virginia, and was owned by American Viscose Corporation
from 1937 until 1963, when FMC purchased it. In 1940, American
Viscose constructed a plant on the Front Royal site and began
manufacturing textile rayon. Before World War II, the machines
at the facility were not set up to produce high tenacity rayon.
However, after Pearl Harbor, the government determined that the
country needed increased production of high tenacity rayon for
the manufacturing of war-related products, including airplane and
truck tires. Inasmuch as the demand anticipated for high
tenacity rayon greatly exceeded the projected supply, the WPB
commissioned American Viscose to convert its plant to make high
tenacity rayon and American Viscose did so.
Unquestionably, at least by current standards,
environmental controls were lax at the facility. Thus, it is not
surprising that inspections in 1982 revealed carbon disulfide, a
chemical used in manufacturing high tenacity rayon, in the ground
water in the vicinity of the plant. Consequently, the EPA began
cleanup operations and notified FMC of its potential liability
under CERCLA. In 1990, FMC filed this suit against the
5
Department of Commerce under section 113(f) of CERCLA, 42 U.S.C.
§ 9613(f), and the Declaratory Judgment Act, 28 U.S.C. §§ 2201-
02. FMC alleged that, as a result of the government's activities
during World War II, the United States was jointly liable with
FMC as an "owner" and "operator" of the facility, and as an
"arranger for disposal" of hazardous wastes there. In
particular, FMC claimed that the government became involved so
pervasively in the facility that it effectively operated the
plant along with American Viscose and, accordingly, should share
in the response costs.
The government filed a motion to dismiss, arguing that
the United States could not be shown to have been an operator or
an arranger for disposal within the meaning of CERCLA, as its
activities affecting the facility were regulatory. The district
court rejected the government's position, holding that the United
States is liable, regardless of the nature of its activities,
whenever the government's "involvement or control become[s] so
pervasive or significant as to warrant the imposition of CERCLA
liability."
In a subsequent motion for partial summary judgment,
the government argued that it had not waived sovereign immunity
under CERCLA for purely regulatory activities and that, in any
event, its activities at the site did not rise to the level of
ownership or operation necessary for the imposition of liability
under the statute. The district court denied the motion, holding
that there were disputes of material fact relating to the owner
and operator issues concerning the extent of the government's
6
activities at the plant. In March 1991, the district court held
a four-day non-jury trial on the liability issues.
Subsequently, in an opinion issued February 20, 1992,
the district court held the government liable on all three
theories articulated by FMC: as an owner, operator, and arranger.
See FMC Corp. v. United States Dep't of Commerce, 786 F. Supp.
471. The liability period for these categories varied, and no
period was identified specifically for "arranger" liability, but
all fell between January 1942 and March 1948.
The trial consisted largely of the introduction of
documents as most persons with knowledge of the activities at the
facility during the war had died. But the parties also
introduced depositions, and there was some in-court testimony.
Based on this evidence, the district court made extensive
findings of fact, many if not most of which are not in dispute,
and which we only need summarize.
The facility is a 440-acre site and includes a
manufacturing plant and 23 waste disposal basins and landfill
areas. The plant was owned and operated by American Viscose from
1940 to 1963, FMC from 1963 to 1976, and Avtex Fibers-Front
Royal, Inc. from 1976 to 1989. American Viscose is now out of
business, and Avtex is in bankruptcy reorganization. Id.
In January 1942, an executive order established the
WPB. The WPB was empowered to issue directives to industry
regarding war procurement and production, including directives
concerning purchasing, contracting, specifications, construction,
requisitioning, plant expansion, conversion, and financing.
7
Moreover, in 1942, the WPB's powers were expanded to include the
seizure and operation of non-complying industries. Id. at 474-
75.
At the outset of the war, the United States lost 90% of
its crude rubber supply because the Japanese occupied parts of
Asia from which this country previously had obtained rubber.
Consequently, we turned to synthetic substitutes, like high
tenacity rayon, to strengthen and lengthen the life of heavy duty
truck and aircraft tires, thus reducing natural rubber
consumption. The WPB designated high tenacity rayon as "one of
the most critical [products] in the entire production program."
Id. at 474-75. The WPB required American Viscose to convert the
Front Royal facility to enable it to produce high tenacity rayon,
and the facility became one of the few plants in the country
manufacturing that product. The WPB's requirement that American
Viscose convert the facility and expand its capacity to produce
high tenacity rayon diverted the facility's resources from the
production of regular textile rayon. Id. at 477.
The government considered facilities producing high
tenacity rayon to be "war plants" subject to its maximum control.
The director of the WPB's Textile, Clothing and Leather Division,
the division directly responsible for high tenacity rayon,
regarded the American Viscose facility to a considerable extent
to be a government project directly related to the war effort.
Inasmuch as the facility was used for a program critical to the
success of the war effort, if American Viscose did not comply
with the government's production requirements, the government
8
would have seized the facility. Indeed, during the war the
government took over numerous plants which failed to meet
production requirements, including a plant producing high
tenacity rayon owned by American Enka Corporation. Id. at 475-
76.
To implement the required plant conversion and
expansion, the government through the Defense Plant Corporation
("DPC") leased government-owned equipment and machinery for use
at the facility, including 50 spinning machines, an acid spin
bath system, piping for the spinning machines and spin bath
system, slashing equipment, and waste trucks. But the government
did not allow American Viscose to install the leased equipment.
Instead, the government contracted with Rust Engineering Company
to design and install the DPC-owned equipment at the facility.
Under its contract with Rust, the government had substantial
control over and participation in the work related to the DPC
equipment. For example, all plans, specifications, and drawings
were submitted to the DPC for approval; Rust had to obtain prior
DPC approval for the purchase of supplies; DPC could promulgate
rules governing all operations at the work site and require the
removal from work of any Rust employee; and DPC was represented
on-site by a government representative, who had the right to
direct Rust. The government collected rent from American Viscose
on the machinery through 1947, and owned the machinery until
March 1948. Id. at 478.
The five principal components of high tenacity rayon,
sulfuric acid, carbon bisulfide, wood pulp, chemical cotton
9
liners, and zinc, were quite scarce during the war. To assure
American Viscose an adequate supply of sulfuric acid, the
government built and retained ownership of a sulfuric acid plant
adjacent to the facility. The plant was connected to the
facility through a pipeline, and virtually its entire output was
delivered through the pipeline. To satisfy the facility's need
for carbon bisulfide, the government commissioned Stauffer
Chemical Company to build a plant in the Front Royal area to
produce 26.4 million pounds of carbon bisulfide per year. The
government required American Viscose to use the raw materials
that it obtained from the government or through the use of a
government priority rating system for the specific purpose
authorized. As a result of the government's involvement in the
production of the basic raw materials necessary for manufacturing
high tenacity rayon, and its control over the distribution of
these raw materials, it determined the operating level of each
rayon manufacturer. Id. at 479-80.
In October 1942, the WPB ascertained that the labor
force in the Front Royal area would be inadequate to meet future
needs at the facility. Consequently, the government obtained
draft deferments for personnel at the facility, directed workers
in other industries to come to the plant, and provided housing
for the additional workers. The government also participated in
managing and supervising the workers, by sending personnel to
investigate and resolve problems involving worker productivity,
to cut down on absenteeism, and to resolve labor disputes. In
May 1944, the WPB appointed a full-time representative to reside
10
at Front Royal to address problems at the facility concerning
manpower, housing, community services, and other related matters.
Moreover, although the government did not hire the employees, it
was obligated to reimburse American Viscose for the salaries of
certain employees under a lease between the DPC and American
Viscose. Id. at 480-81.
After production began, the government placed a
representative on-site with the authority to promulgate rules
governing all operations at the site and to remove workers who
were incompetent or guilty of misconduct. Through continuous
informal contacts and communications, the government was involved
directly and substantially with the facility's production
activities and management decisions. Id. The government
controlled the supply and price of American Viscose's raw
materials as well as the production level and the price of its
product. Therefore, inasmuch as the facility was doing only
government mandated work, the government significantly influenced
the profit that American Viscose could make at the facility. Id.
at 483. Of course, the government was the end-user of almost all
of the product manufactured at the facility, either because it
purchased the product directly or because the product was sold to
other industries for use in war materials.
The government knew that generation of hazardous waste
inhered in the production process because its personnel present
at the facility witnessed a large amount of highly visible waste
disposal activity. Wastes were placed in large unlined basins
located on site and, as basins were filled, new ones were dug.
11
Portions of the sulfuric acid utilized in the production process
that could not be reclaimed or treated at the facility were
deposited in the on-site waste basins, as were carbon bisulfide
and zinc contaminated wastes. From 1942 through 1945, at least
65,500 cubic yards of viscose waste were placed in the on-site
basins. The disposal basins were visible to any person visiting
the facility.
Inasmuch as the generation of waste was inherent in the
production of high tenacity rayon, an increase in production
automatically increased waste. This fact is significant because
governmental pressure to maximize production overtaxed the
machinery and equipment at the facility, thereby increasing the
amount of material scrapped for disposal in the waste basins.
Moreover, the government rejected material not adhering strictly
to the production specifications, thereby further increasing the
amount of waste. In addition, wastes were generated and disposed
of by the government-owned equipment that was installed at the
facility. Id. at 483-84.
The district court concluded that the government was an
owner and operator of the facility and an arranger of waste
disposal. It predicated these conclusions on its factual
findings, which can be summarized as follows:
(1) the government required American Viscose to
stop making regular rayon and start producing high tenacity
rayon;
(2) the government mandated the amount and
specifications of the rayon produced and the selling price;
12
(3) the government owned the equipment used to
make the high tenacity rayon and owned a plant used to make raw
materials;
(4) the government supervised the production
process through the enactment of specifications and the placement
of on-site supervisors and inspectors; it supervised the workers;
and it had the power to fire workers or seize the plant if its
orders were not followed; and
(5) the government knew that generation of waste
inhered in the production process; it was aware of the methods
for disposal of the waste; and it provided the equipment for the
waste disposal.
After making its factual findings and conclusions of
law, the district court ordered the case to trial to determine
the allocation of liability between FMC and the government.
However, FMC and the government settled the allocation issues,
subject to the government's right to appeal the ruling holding it
liable as an operator and arranger. Under the settlement, the
government conceded its liability as an owner with respect to its
property at the facility and accepted an allocation of 8% of the
cleanup costs as owner. But if we uphold the government's
liability as an operator and arranger, its total liability under
the settlement agreement will be increased to 26% of the cleanup
costs. The government asserts that if it is held liable on all
three theories, it will be responsible for between $26,000,000
and $78,000,000, a figure which FMC suggests is overstated. On
September 17, 1992, in accordance with the parties' agreement and
13
the district court's opinion issued on February 20, 1992, the
court entered final judgment.
II. JURISDICTION AND STANDARD OF REVIEW
The Government filed a timely notice of appeal on
November 11, 1992. We have jurisdiction pursuant 28 U.S.C.
§1291. The district court had subject matter jurisdiction
pursuant to 28 U.S.C. § 1331 and 42 U.S.C §§ 9613(b) and 9613(f).
We may set aside the district court's findings of fact only if
they are clearly erroneous. Levendos v. Stern Entertainment,
Inc., 909 F.2d 747, 749 (3d Cir. 1990). Our standard of review
with respect to alleged error in applying the law to the facts,
however, is plenary. Id.
III. DISCUSSION
A. Sovereign Immunity
The government's first argument is that the United
States did not waive its sovereign immunity under CERCLA for
claims arising from its wartime regulatory activities even though
CERCLA section 120(a)(1) provides that "[e]ach department,
agency, and instrumentality of the United States . . . shall be
subject to, and comply with, this chapter in the same manner and
to the same extent . . . as any nongovernmental entity including
liability under section" 107 of CERCLA. 42 U.S.C. § 9620(a)(1).
This argument starts from the well-settled principle that the
federal government is immune from suit "save as it consents to be
sued." United States v. Testan, 424 U.S. 392, 399, 96 S. Ct. 948,
14
953 (1976). Furthermore, such consent "cannot be implied but
must be unequivocally expressed," id., 96 S.Ct. 953-54, and
waivers of sovereign immunity must be construed narrowly in favor
of the government. United States v. Idaho, 113 S. Ct. 1893, 1896
(1993); United States v. Nordic Village Inc., 112 S. Ct. 1011,
1015 (1992). But see FDIC v. Meyer, 114 S. Ct. 996, 1003 (1994).
Accordingly, the government contends that CERCLA's waiver,
although express, is not unlimited and that we must construe it
narrowly. Based on a series of cases involving suits brought by
the owners of waste sites against the EPA for its activities in
taking over these sites for cleaning, the government argues that
the CERCLA waiver does not apply to federal regulatory actions
that a non-governmental entity cannot undertake. Thus, it argues
that because most of the WPB's activities impacting on the
facility were regulatory we must discount them in our analysis of
the government's possible liability. In its view, its remaining
non-regulatory activities did not involve the government
sufficiently with American Viscose to justify the imposition of
CERCLA liability on the government.
In re Paoli R. Yard PCB Litig., 790 F. Supp. 94, 95-96
(E.D. Pa.), aff'd, 980 F.2d 724 (3d Cir. 1992) (table), is an
example of the type of case on which the government relies.
There, the EPA took over a hazardous waste site in order to clean
it up. In so doing, the EPA allegedly caused the further release
of hazardous waste. Based on this release, the site's owner sued
the EPA for contribution and indemnification for response costs.
The owner argued that the EPA became an operator under CERCLA
15
when it conducted the cleanup activities at the site. The
district court dismissed the complaint, holding that the United
States does not subject itself to liability as an operator when
it is engaged in cleanup activities at a hazardous waste site.
Rather, the United States "would be liable under section 107(a)
of CERCLA if it was acting in a manner other than in its
regulatory capacity." 790 F. Supp. at 97.
Similarly, in another case where an owner alleged that
the EPA became an "owner" or "operator" by taking over a waste
site to initiate a cleanup, a district court held that the waiver
of sovereign immunity under CERCLA is limited. United States v.
Atlas Minerals and Chems., Inc., 797 F. Supp. 411, 420 (E.D. Pa.
1992). "[T]he waiver contained in [CERCLA section 120(a)(1)]
only applies to situations in which the government has acted as a
business," and "does not extend to situations in which the EPA
has undertaken response or remedial actions at a hazardous waste
site." The court reached this conclusion because:
when the EPA undertakes such actions, it is
not acting like a private party; it is acting
to ameliorate a dangerous situation that, but
for the prior actions of the generators and
transporters of the hazardous waste, would
not exist.
797 F. Supp. at 421. See also Reading Co. v. City of
Philadelphia, 155 B.R. 890, 897 (E.D. Pa. 1993) (indicating that
the "government, unlike private parties, has a regulatory and
response duty to assume a clean-up role. Therefore, inasmuch as
a government, unlike private entities, must act to remedy
16
environmental crises, a government cannot, in such circumstances,
be considered an owner, operator or arranger for CERCLA
purposes").
The government contends that these cases establish a
per se rule that regulatory activities cannot constitute the
basis for CERCLA liability, because only a government can
regulate. However, we think the distinction the government is
trying to draw between regulatory and non-regulatory activities
misreads CERCLA and the case law. In the first place, section
120(a)(1) does not state that regulatory activities cannot form
the basis of liability. Rather, it states that the government is
liable in the same manner and to the same extent as any non-
governmental entity. Thus, when the government engages in
activities that would make a private party liable if the private
party engaged in those types of activities, then the government
is also liable. This is true even if no private party could in
fact engage in those specific activities. For example, although
no private party could own a military base, the government is
liable for clean up of hazardous wastes at military bases because
a private party would be liable if it did own a military base.
Cf. United States v. Allied Corp., 1990 U.S. Dist. Lexis 20061,
at *7-9 (N.D. Cal. Apr. 26, 1990) (United States Navy found
liable under CERCLA because it authorized demolition which caused
release of hazardous substances). Just as the government can be
liable for hazardous wastes created at a military base it owns,
the government can be liable when it engages in regulatory
activities extensive enough to make it an operator of a facility
17
or an arranger of the disposal of hazardous wastes even though no
private party could engage in the regulatory activities at issue.
Our conclusion is consistent with our approach to
statutory construction in general, and to CERCLA in particular,
which is to read plain language to mean what it says. Alcan
Aluminum, 964 F.2d at 260. This conclusion is bolstered by
Indian Towing Co. v. United States, 350 U.S. 61, 76 S. Ct. 122
(1955), in which the Supreme Court interpreted the provision of
the Federal Tort Claims Act stating that, "[t]he United States
shall be liable . . . in the same manner and to the same extent
as a private individual under like circumstances," 28 U.S.C.
§2674, to waive sovereign immunity even with respect to
activities which private persons do not perform. The Court
stated that, "all Government activity is inescapably 'uniquely
governmental' in that it is performed by the Government." Id. at
67, 76 S.Ct. at 126. We find Indian Towing controlling.
Moreover, we disagree with the dissent's
characterization of the "activity at issue" in this case.
Typescript at 3. The dissent describes "the activity at issue
here" as "mobilizing the private economy in the war effort," and
concludes that the government cannot be held liable for this
activity because "no private party can replicate [it]." Id. In
our opinion, the mobilization of the private economy was the
purpose of the government's activity at the Front Royal site and
the war provided the authority for its activities. However, we
would characterize the "activity at issue here" as the day-to-day
18
actions taken by the government with relation to the Front Royal
site and adjudicate the case from that perspective.
Our reading of section 120(a)(1) comports with the rest
of CERCLA. First of all, the government's contention is
inconsistent with our previous recognition that "CERCLA is a
remedial statute which should be construed liberally to
effectuate its goals." Alcan Aluminum, 964 F.2d at 258. In
practice, the "regulatory" exception suggested by the government
would be inconsistent "with CERCLA's broad remedial purposes,
most importantly its essential purpose of making those
responsible for problems caused by the disposal of chemical
poisons bear the costs and responsibility for remedying the
harmful conditions they created." Lansford-Coaldale Joint Water
Auth. v. Tonolli Corp., 4 F.3d 1209, 1221 (3d Cir. 1993)
(internal quotation marks omitted). See also United States v.
Azrael, 765 F. Supp. 1239, 1245 (D. Md. 1991) (party benefiting
from commercial activity should internalize health and
environmental costs of the activity into costs of doing
business). By placing the burden of cleanups on responsible
parties, CERCLA was intended to "serve[] as an incentive for the
sound treatment and handling of hazardous substances." 125 Cong.
Rec. 17989 (1979) (statement of Senator John C. Culver of Iowa),
reprinted in, 1 Senate Committee on Environment and Public Works,
A Legislative History of CERCLA, Pub. Law 96-510 at 148-49 (Comm.
Print 1983). Accordingly, if the United States, even as a
regulator, operates a hazardous waste facility or arranges for
the treatment or disposal of hazardous wastes, it should be held
19
responsible for cleanup costs, just as any private business would
be, so that it will "'internalize' the full costs . . . [that
hazardous] substances impose on society and on the environment."
United States v. Atlas Minerals and Chems., Inc., 797 F. Supp. at
413 n.1.
Second, our reading comports with the rest of CERCLA
because section 107(b), 42 U.S.C. § 9607(b), lists the only three
defenses to section 107 liability available to any person,
including the government. See Alcan Aluminum, 964 F.2d at 265.
These enumerated defenses do not include the "regulatory"
exception which the government seeks to create and on which it
relies. Of course, in view of the plain waiver of sovereign
immunity in section 120, which places the government in the same
position as a nongovernmental entity, we cannot hold that a
regulatory defense provision is not required to uphold the
government's position on a theory that regulatory activity can
never form the basis for liability under CERCLA. We also point
out that our approach is consistent with United States v. Rohm
and Haas Co., 2 F.3d 1265, 1276 (3d Cir. 1993), in which we
refused to read the term "removal" in CERCLA section 101(23) to
include governmental oversight of private remedial actions, in
part because we found "it highly significant that Congress
omitted any mention of oversight . . . in the definition of
removal." Just as we would not read undesignated conduct into
the definition of "removal," we will not read the broad
regulatory exception advanced by the government into section
107(b) or section 120(a)(1).
20
Section 107(d)(2) provides further evidence that our
reading of section 120(a)(1) comports with the rest of CERCLA.
Although CERCLA permits the imposition of liability on states and
local governments for cleanup costs, section 107(d)(2) expressly
immunizes them from liability for actions "taken in response to
an emergency created by the release or threatened release of a
hazardous substance generated by or from a facility owned by
another person." 42 U.S.C. § 9607(d)(2). Congress's creation of
an exception for cleanup activities by state and local
governments plainly shows that it intended to treat these
activities differently from other government activities.
Accordingly, CERCLA does not protect a government from liability
simply because it acts in a regulatory capacity. Rather, a
government is protected under section 107(d)(2) because it is
responding to an environmental emergency.
We do not mean to suggest that the cases relied on by
the government which we have cited were decided wrongly. All of
those cases involved governmental regulatory activities
undertaken solely with the purpose of cleaning up hazardous
materials -- activities undertaken "to ameliorate a dangerous
situation that, but for the prior action of the generators and
transporters of the hazardous waste, would not exist." See
United States v. Atlas Minerals and Chems., Inc., 797 F. Supp. at
421. We do not think that CERCLA's "essential purpose of making
those responsible for problems caused by the disposal of chemical
poisons bear the costs and responsibility for remedying the
harmful conditions they created," Lansford-Coaldale, 4 F.3d at
21
1221 (internal quotation marks omitted), is served by making the
government liable for attempting to clean up wastes created by
others. CERCLA does not intend to discourage the government from
making cleanup efforts by making the government liable for such
efforts.
We believe that Congress intended to treat the federal
government in the same manner as state and local governments.
Thus, it stands to reason that inasmuch as state and local
governments are immune from CERCLA liability for the consequences
of cleanup activities in response to emergencies created by
others, but not for the consequences of regulatory conduct in
general, we should read this distinction as implied in the
federal government's waiver of sovereign immunity as well.0
Because the government's involvement with the American
Viscose plant was not in response to a threatened release of
hazardous materials, we hold that the relevant sovereign immunity
question under CERCLA is not whether the government was acting in
a regulatory capacity, but whether its activities, however
characterized, are sufficient to impose liability on the
government as an owner, operator, or arranger. Hence, we
consider both the government's regulatory and non-regulatory
activities with respect to the facility during the war and
determine whether these activities taken in toto were of the type
0
Judge Alito does not join the preceding two paragraphs of this
opinion. He does not believe that the question whether the
government may be liable for cleanup activities is before the
court in this case, and therefore he does not think that the
court should opine upon it.
22
commonly associated with being an operator or arranger under
CERCLA and are the type of activities in which private parties
could engage. We need not consider the "owner" question as the
parties have settled that issue. Thus, the liability issue is
simply whether the government is liable as an operator or
arranger. See FDIC v. Meyer, 114 S. Ct. at 1004.
In reaching our result, we recognize that section
120(a)(1) which waives sovereign immunity is a portion of a
section entitled "Federal facilities," thus permitting an
argument to be made that Congress only intended to impose
liability on the United States under CERCLA for federally owned
facilities. That argument, however, is unavailing for three
reasons.
First, of course, the language of section 120(a)(1)
does not limit government liability to federally owned
facilities. Rather, section 120(a)(1) deals with the application
of CERCLA to the "Federal Government" "[i]n general," and it
imposes liability on the government to the same extent as
liability is imposed on "any nongovernmental entity." Second,
even though Congress added section 120 dealing with "Federal
facilities" to CERCLA in 1986, see Pub. L. No. 99-499, Title I,
§120, 100 Stat. 1666, Congress waived sovereign immunity in the
original version of CERCLA in 1980 in language not materially
different from the amended language in 1986. Thus, Pub. L. No.
96-510, Title I, § 107(g), 94 Stat. 2783, an original CERCLA
provision, provided that "[e]ach department, agency, or
instrumentality of the executive, legislative, and judicial
23
branches of the Federal Government shall be subject to, and
comply with, this chapter in the same manner and to the same
extent, both procedurally and substantively, as any
nongovernmental entity, including liability under this section."
This waiver provision was not linked to the federal facilities
section, as that section did not exist in 1980.
Third, in 1986, when Congress moved the sovereign
immunity waiver provision from section 107 to section 120, it
provided that the governmental entities would be subject to
"liability under section" 107. This reference was an exact
counterpart to language in section 107 as originally enacted, as
that provision provided that the governmental entities would be
subject to "liability under this section." Thus, Congress did
not expressly limit the scope of the waiver.
Inasmuch as Congress did nothing in terms in 1986 to
narrow its earlier waiver of sovereign immunity, it would be
unreasonable for us to infer that it impliedly limited its
original waiver by moving the waiver section. Indeed, if
anything, through its enactment of section 120, Congress
reemphasized its intention that CERCLA be applied to the
government. Overall, we think it is quite clear that the
transfer of the waiver of sovereign immunity provision was
nothing more than a logical reordering of the waiver provision
accompanying the enactment of section 120.0 Accordingly, we now
0
We also point out that it would be difficult to understand why
Congress would have limited the waiver of sovereign immunity to
activities at federally owned facilities. In this regard, we
only need point to Alcan Aluminum and then consider whether
24
pass to the questions of whether the United States is liable as
an operator and arranger.
B. Operator Liability
The definition of "operator" in CERCLA gives little
guidance to the courts in determining if a particular person or
entity is liable as an operator because the statute circularly
defines "operator" as "any person . . . operating such facility."
42 U.S.C. § 9601(20)(A)(ii). Fortunately, however, the case law
provides us with criteria for identifying those who qualify as
"operators" under CERCLA.
We start our discussion of whether the government was
an operator by considering our opinion in Lansford-Coaldale Joint
Water Auth. v. Tonolli Corp., 4 F.3d 1209. In that case, we
adopted the "actual control" test in determining whether operator
liability should be imposed on one corporation for the acts of a
related corporation. The actual control test imposes liability
which would not be consistent with "traditional rules of limited
liability for corporations" but nevertheless is consistent "with
Congress intended that a private corporation but not the
government could be liable for response costs caused by the
deposit of liquid wastes generated at its facility into the
Borehole and subsequently released into the river. 964 F.2d at
255-56. Moreover, the discussion of the facts underlying Key
Tronic Corp. v. United States, 62 U.S.L.W. 4441, 4442 (U.S. June
6, 1994), indicates that the United States Air Force agreed to
settle a suit brought against it by the EPA under CERCLA charging
that it was liable for response costs as one of multiple parties
that used a site for the disposal of liquid chemicals which later
contaminated the water in the surrounding area. According to Key
Tronic Corp., the Air Force agreed to pay the EPA $1.45 million.
Thus, the government itself does not treat the waiver of
sovereign immunity as being limited to federal facilities.
25
CERCLA's broad remedial purposes, most importantly its essential
purpose of making those responsible for problems caused by the
disposal of chemical poisons bear the costs and responsibility
for remedying the harmful conditions they created." Id. at 1221
(internal quotation marks omitted). Under this test, a
corporation will be liable for the environmental violations of
another corporation if there is evidence that it exercised
"substantial control" over the other corporation. Id. At a
minimum, substantial control requires "active involvement in the
activities" of the other corporation. Id. at 1222. While
Lansford-Coaldale arose in the context of related corporations,
it is nevertheless instructive here.
In our view, it is clear that the government had
"substantial control" over the facility and had "active
involvement in the activities" there. The government determined
what product the facility would manufacture, controlled the
supply and price of the facility's raw materials, in part by
building or causing plants to be built near the facility for
their production, supplied equipment for use in the manufacturing
process, acted to ensure that the facility retained an adequate
labor force, participated in the management and supervision of
the labor force, had the authority to remove workers who were
incompetent or guilty of misconduct, controlled the price of the
facility's product, and controlled who could purchase the
product. While the government challenges some of the district
court's findings, it simply cannot quarrel reasonably with the
court's conclusions regarding the basic situation at the
26
facility. In particular, the government reasonably cannot
quarrel with the conclusion that the leading indicia of control
were present, as the government determined what product the
facility would produce, the level of production, the price of the
product, and to whom the product would be sold.
In these circumstances, we must conclude that the
government was an operator of the facility unless we overrule or
narrowly limit the unanimous panel decision in Lansford-Coaldale,
a step we will not take. Instead, we look to other cases which
construe "operator" insofar as they inform the overarching
Lansford-Coaldale test of actual and substantial control over
"the corporation's day-to-day operations and its policy making
decisions." Lansford-Coaldale, 4 F.3d at 1222. The government's
argument is no stronger, for under section 120 it is in the same
position "as any nongovernmental entity" with respect to CERCLA
liability. None of these factors is dispositive, and each is
important only to the extent it is evidence of substantial,
actual control.
For example, in United States v. New Castle County, 727
F. Supp. 854, 869 (D. Del. 1989), the district court listed the
following factors as being relevant: whether the person or entity
controlled the finances of the facility; managed the employees of
the facility; managed the daily business operations of the
facility; was responsible for the maintenance of environmental
control at the facility; and conferred or received any commercial
or economic benefit from the facility, other than the payment or
receipt of taxes. Another court in deciding whether a parent
27
could be liable as an operator along with the subsidiary, stated
that courts should consider: whether the parent has the power to
direct the activities of persons who control mechanisms causing
the pollution; whether and to what extent the parent controls the
subsidiary's marketing; whether the parent can execute contracts
on behalf of the subsidiary; and whether the parent controls
hiring, supervision, transfer and similar aspects of employment
at the subsidiary. Colorado v. Idarado Mining Co., 1987 U.S.
Dist. LEXIS 14254, 18 Envtl. L. Rep. 20,578 (D. Colo. Apr. 29,
1987).0
Courts have applied the Lansford-Coaldale standard and
factors such as those considered in New Castle County and Idarado
Mining in considering a state or local government's liability as
an operator under CERCLA. For example, in United States v.
Stringfellow, supra, a special master concluded that California
was liable under CERCLA as an operator and owner of a landfill.
The special master noted that the state chose the location for
the landfill, designed and constructed the site, hired, directed
and supervised the employees with day-to-day operational
responsibility for the site, and set the responsibilities for
these employees.
0
On an appeal from a mandatory injunction issued on February 22,
1989, ordering the state's cleanup plan implemented, the parent
challenged the earlier finding of the district court that it was
an operator. However, the court of appeals decided the case
without reaching this issue. Colorado v. Idarado Mining Co., 916
F.2d 1486, 1491 (10th Cir. 1990), cert. denied, 111 S. Ct. 1584
(1991).
28
In contrast, the Court of Appeals for the Fourth
Circuit affirmed a district court finding that the South Carolina
Department of Health and Environmental Control ("DHEC") was not
an owner or operator of the abandoned Fort Lawn waste site.
United States v. Dart Indus., Inc., 847 F.2d 144 (4th Cir. 1988).
In Dart, the generators of the hazardous wastes alleged, in their
third-party complaint, that DHEC was liable under CERCLA because
it controlled the activities at the site pursuant to a South
Carolina statute that gave it regulatory powers such as the power
to approve and disapprove applications to store wastes at the
site, to inspect the site, and to regulate the transportation of
the wastes delivered to Fort Lawn. The court of appeals found
that DHEC did not have operator status because there was no
evidence that it directly managed the waste site's employees or
finances or ran the day-to-day activities of the facility. Thus,
DHEC did not engage in "hands on" activities contributing to the
release of hazardous wastes. Similarly, in New Castle County,
727 F. Supp. 854, the district court declined to find the state
liable as an operator of a landfill where it only periodically
inspected the site and mandated the details of refuse soil
compaction and construction, but did not manage the day-to-day
operations of the landfill. But Dart and New Castle County are
distinguishable because in neither case did the governmental
entity implicated have the control that the federal government
exercised at Front Royal, and in neither case was the
governmental entity involved in the facility for the purpose of
obtaining a product for its own use.
29
The government exerted considerable day-to-day control
over American Viscose, and at the risk of being repetitious, we
will explain why. In the first place, American Viscose would not
have been making high tenacity rayon if not at the government's
direction. To obtain the commercial product it needed, the
government diverted American Viscose from its previous commercial
endeavors. Thus, every day American Viscose did what the
government ordered it to do. Second, although the government
officials and employees personally did not take over the plant,
the government maintained a significant degree of control over
the production process through regulations, on-site inspectors,
and the possibility of seizure. Third, the government built or
had built plants supplying raw materials to American Viscose,
controlled these plants, arranged for an increased labor force,
and supervised employee conduct, at least to the extent of
helping American Viscose deal with labor disputes and worker
absenteeism. Fourth, the government supplied machinery and
equipment for use in the manufacturing process. Fifth, the
government controlled product marketing and price. Given this
degree of control, and given the fact that the wastes would not
have been created if not for the government's activities, the
government is liable as an operator. Indeed, on the record
before us, if we rejected the district court's conclusion that
the government was an operator, we would create a precedent
completely out of harmony with the case law on what makes a
person an operator under CERCLA.
30
We are well aware that the government seeks to minimize
the scope of its involvement in American Viscose's activities by
arguing that its involvement revolved around the government-owned
equipment and machinery at the facility. While we do not doubt
that the government was concerned with that machinery and
equipment, it was involved with the facility's operations as a
whole. In order to demonstrate the government's overall
participation in the operation of the facility, we shall make
reference to representative evidence in the record.
We consider the minutes of a meeting held on March 7,
1944, attended by ten representatives of the WPB, three from
American Viscose, and one from Rust Engineering. See app. at
1716. O.T. Rhodes, a consultant to the Tire Cord Branch of the
WPB, opened the meeting by indicating that its "stated purpose"
was "to iron out Housing, Transportation, and Manpower Problems
at Front Royal, Virginia, area." During the course of the
meeting, American Viscose's Front Royal manager discussed labor
and transportation problems with the WPB representatives who were
concerned with their alleviation. At one point, when American
Viscose identified problems resulting from the draft, a WPB
representative noted that "Front Royal will notify us here in
case they get into a jam on any individual." App. at 1720. He
then indicated that "It was agreed on unanimously that a WPB
Priorities man was needed on the Housing situation." Id. The
government's concerns at this meeting simply cannot reasonably be
regarded as being confined to a concern over its equipment and
31
machinery or be characterized as that of an ordinary purchaser of
a product from a manufacturer.
A letter between high-level government officials on
March 14, 1944, demonstrates the real situation at the facility.
On that day Donald M. Nelson, Chairman of the WPB, wrote to Paul
V. McNutt, Chairman of the War Manpower Commission, as follows:
As you know the War Production Board
considers the production of tire type high-
tenacity rayon one of the most critical in
the entire production program. It calls for
an expansion from an annual rate of 66
million pounds in August, 1943 to 240 million
pounds for the year 1944. One-third of the
expansion will be accounted for by the new
facilities projected by the American Viscose
Corporation at Front Royal, Virginia.
It has been reported to me that the
preparations for manning the Front Royal
plant have been, in the judgment of the local
management and other responsible people,
inadequate to meet the production
requirements. I would like to request that
you assign immediately representatives of
your staff to go into this question with men
who are responsible for this production in
the War Production Board. I am asking Mr.
Golden's staff to act as the clearance point
in this matter. App. at 1746.
As the foregoing documents make plain, it simply is not
accurate to say that the government's activities at the facility
were limited to government-owned equipment and machinery, when
the government's overriding concern was the efficient operation
of the facility as a whole. The government's interest in the
facility's operation was, of course, understandable because in
the parlance of the 1940's used to explain the many dislocations
of the times, "There's a war on." It was altogether natural and
32
appropriate for government representatives to participate in
decisions concerning the production of a product which WPB
chairman Nelson characterized as "one of the most critical in the
entire production program." Overall, unless we adopt a
revisionist view of history, when we consider "the totality of
the circumstances presented" we cannot reject the district
court's "inherently fact-intensive" conclusion that the
government was an operator of the facility. See Lansford-
Coaldale, 4 F.3d at 1222.
C. Arranger Liability
The government also argues that it is not liable under
section 107(a)(3) of CERCLA, 42 U.S.C. § 9607(a)(3), as an
arranger for the disposal or treatment of hazardous wastes. The
court is equally divided on this point and consequently we will
affirm the judgment of the district court holding the government
liable as an arranger without discussion.
IV. CONCLUSION
We conclude with one final point. In its brief, the
government urges that its potential liability under the district
court's opinion "is massive and far outpaces anything Congress
could have imagined, much less intended" when it adopted section
120(a). Indeed, it contends that in this case alone it will be
responsible for between $26,000,000 and $78,000,000, if we affirm
the district court, and it goes so far as to list other pending
cases which it indicates "involve the same or similar issues to
33
those presented in this appeal." While it may be true that
application of the principles in this case by other courts could
lead to the imposition of broad liability on the government,0
that circumstance cannot influence our result as we cannot amend
CERCLA by judicial fiat. Rather, our approach must be the same
as that of the Supreme Court when responding to an argument that
the Racketeer Influenced and Corrupt Organizations Act (RICO), 18
U.S.C. § 1961 et seq., was being applied too broadly: "this
defect - if defect it is - is inherent in the statute as written,
and its correction must lie with Congress." Sedima, S.P.R.L. v.
Imrex Co., 473 U.S. 479, 499, 105 S. Ct. 3275, 3286-87 (1985).
Furthermore, we point out that at bottom our result simply places
a cost of the war on the United States, and thus on society as a
whole, a result which is neither untoward nor inconsistent with
the policy underlying CERCLA.
We will affirm the judgment of the district court of
September 17, 1992.
0
Of course, this outcome is by no means a certainty, as the
degree of governmental involvement at other facilities may not
have equaled that at Front Royal. As we emphasized in Lansford-
Coaldale, 4 F.3d at 1222, the "determination whether a
corporation has exerted sufficient control to warrant imposition
of operator liability requires an inherently fact-intensive
inquiry." Thus, our opinion obviously cannot be applied in other
situations involving wartime production without an analysis of
the facts in those cases.
34
35
FMC Corp. v. United States Department of Commerce., No. 92-1945
SLOVITER, Chief Judge, dissenting with whom Judges Cowen and Roth join, and with wh
Judge Stapleton joins as to Part II.
I respectfully dissent from the majority's holding that the intense activ
undertaken by the United States during World War II in coordinating and steering th
country's private industries to insure that they would produce the war supplies nec
to mount the country's military operations subjects the United States to liability
"operator" and "arranger" under the Comprehensive Environmental Response, Compensat
and Liability Act (CERCLA). I believe that Congress did not waive the sovereign im
of the United States for this unique governmental activity. The broad imposition o
liability that the majority opinion places on the government is unique in the histo
CERCLA and will have consequences far beyond any manifested intent of Congress. In
event, the quantum and nature of the government's activities set forth on this reco
not rise to the statutory "operator" and "arranger" level.
I.
It is of course well established that the government waives only so much
sovereign immunity as it has chosen to waive in clear and express language. See Un
States v. Testan, 424 U.S. 392, 399 (1976). That CERCLA contains a waiver of some
government's sovereign immunity is undisputed. See Pennsylvania v. Union Gas Co., 4
1, 10 (1989).
The relevant provision, located significantly in the section entitled "Fe
facilities," states:
Each department, agency, and instrumentality of the United States
(including the executive, legislative, and judicial branches of
government) shall be subject to, and comply with, this chapter in the
same manner and to the same extent, both procedurally and
substantively, as any nongovernmental entity, including liability
under section 9607 of this title.
36
CERCLA § 120(a)(1), 42 U.S.C. § 9620(a)(1) (1988) (emphasis added). However, the
existence of a waiver is only the beginning of the analysis. What is at issue here
scope of the waiver, limited as it is to the extent of liability of a private party
The government proffers a construction of CERCLA's waiver of sovereign im
that subjects it to liability when it is acting or has acted like a "nongovernmenta
entity," such as by owning facilities, but not when it is conducting a sovereign's
regulatory actions in connection with the operations of a private, for-profit entit
Thus, under the government's analysis, its operation of facilities such as a federa
or an army base or naval vessel would subject it to "operator" or "owner" liability
CERCLA but its regulation of private parks or other private facilities would not, e
that regulation may result in the discharge of hazardous waste. I find the governme
construction of the statute reasonable insofar as it would cover government ow
or operation of facilities, as opposed to government regulation of private faciliti
The majority construes the waiver to provide that "when the government en
in activities that would make a private party liable . . . then the government is a
liable . . . even if no private party could in fact engage in those activities." Ma
Typescript Op. at 17-18 (emphasis omitted). That construction of the statute is
illogical, not much different than saying that birds are required to have passports
across the borders of nations that require people to have passports. The fact is th
there are some activities inherent in the role of government which no private party
replicate, and mobilizing the private economy in the war effort, the activity at is
here, is one of them.0
0
While the Supreme Court has not yet addressed the issue, see Berkovitz v. United S
486 U.S. 531, 535 n.2 (1988); United States v. S.A. Empresa de Viacao Aerea Rio Gra
(Varig Airlines), 467 U.S. 797, 815 n.12 (1984), courts have generally held that th
similar waiver of sovereign immunity in the Federal Tort Claims Act does not extend
exercise of regulatory power because there are no private analogs to the government
regulatory power over its citizens. See, e.g., Meyers v. United States, 17 F.3d 89
37
Admittedly there are some government activities that may fairly be includ
within the rubric of regulation that can be performed by private parties, and the
operation of a lighthouse, prominently emphasized by the majority, is one of these.
Indian Towing Co. v. United States, 350 U.S. 61, 69 (1955). In contrast, there are
regulatory activities reserved exclusively to the federal government, such as winni
war, and it is these types of activities to which the waiver of sovereign immunity
forth in section 120(a)(1) of CERCLA does not extend. See The Federalist No. 41, a
(James Madison) (Jacob E. Cooke ed., 1961) ("Security against foreign danger is one
primitive objects of civil society. It is an avowed and essential object of the Am
Union. The powers requisite for attaining it, must be effectively confided to the
councils."); cf. Feres v. United States, 340 U.S. 135, 141-42 (1950) (government no
liable under Federal Tort Claims Act for injuries to members of the armed forces in
to service, in part because "no private individual has power to conscript or mobili
private army with such authorities over persons as the Government vests in echelons
command"); In re Air Crash Disaster at Mannheim, 769 F.2d 115, 121 (3d Cir. 1985)
("Although judges must decide cases arising from fields of endeavor of which they k
(6th Cir. 1994) (sovereign immunity not waived for suit alleging negligent mine ins
because enforcing safety regulations is a "situation[] in which only governments ca
themselves and, therefore, ordinary state-law principles of private liability do no
cannot, apply"); Akutowicz v. United States, 859 F.2d 1122, 1126 (2d Cir. 1988) (so
immunity not waived for suit challenging decertification of person's national citiz
because "the withdrawal of a person's citizenship constitutes a quasi-adjudicative
for which no private analog exists"); C.P. Chem. Co. v. United States, 810 F.2d 34,
Cir. 1987) (sovereign immunity not waived for suit alleging improper promulgation o
administrative regulation because "the United States cannot be held liable, for no
analog exists"); Jayvee Brand, Inc. v. United States, 721 F.2d 385, 390 (D.C. Cir.
(separate opinion of Bork, J.) (sovereign immunity not waived for suit seeking dama
ultra vires regulation because "quasi-legislative or quasi-adjudicative action by a
agency of the federal government is action of the type that private persons could n
engage in"); McMann v. Northern Pueblos Enterprises, 594 F.2d 784, 785-86 (10th Cir
("As the Miller Act deals exclusively with federal contracts, private persons would
be in a position to require the posting of a Miller Act bond by a contractor. It f
that private persons could not possibly be liable for any negligent failure to insi
the posting of such a bond. Since a private person could not be liable for such fa
the United States could not be under the provisions of the Federal Torts Claims Act
38
little, their otherwise omnicompetence confronts its limits in military matters. A
point, it must be acknowledged, separation of powers becomes a proper concern."), c
denied, 474 U.S. 1082 (1986) (quotation omitted).
Even the majority, as sweeping as its opinion is, recognizes that it is n
to eliminate all distinctions between the liability of the federal government and t
a private party. Instead, the majority finds an "implied" exception to its view of
unlimited waiver for those instances when the federal government acts "solely with
purpose of cleaning up hazardous materials," believing that such an exception furth
"essential purpose" of CERCLA. Majority Typescript Op. at 22-23.0 I believe, howe
that by limiting its implied exceptions solely to those that further CERCLA's purpo
majority ignores the important obligations the federal government has outside the
environmental arena.
0
The majority relies on Congress's inclusion of an express statutory exemption for
activities by state and local governments and then states that it "believe[s] that
Congress intended to treat the federal government in the same manner as state and l
governments." Majority Typescript Op. at 22. It cites no support for this asserti
it would seem to be a difficult proposition to sustain, particularly in light of th
majority's insistence that any exception for activities of the federal government b
explicit. Congress has treated federal and state governments differently throughou
statute's existence. While the federal government's sovereign immunity was waived i
to some extent, see Pub. L. No. 96-510, Title I, § 107(g), 94 Stat. 2767, 2783 (198
states' Eleventh Amendment immunity was not abrogated until six years later, see Pu
No. 99-499, Title I, § 101(b)(1), 100 Stat. 1614, 1615 (1986) (codified at CERCLA §
101(20)(D), 42 U.S.C. § 9601(20)(D) (1988)), and then only with explicit provisions
protect state and local governments (but not the federal government) from liability
arising out of "actions taken in response to an emergency created by the release .
a hazardous substance generated by or from a facility owned by another person." Se
107(d)(2), 100 Stat. at 1629 (codified at CERCLA §107(d)(2), 42 U.S.C. § 9607(d)(2)
(1988)).
Furthermore, the majority's implication of an exception for federal clean
hazardous materials from the waiver of sovereign immunity makes the statute's expli
exception for cleanup by state governments in section 107(d)(2) redundant because s
101(20)(D) abrogates the states' sovereign, i.e. Eleventh Amendment, immunity in la
virtually identical to its waiver of the federal government's sovereign immunity.
39
For example, in discussing the government's attempt to regulate the domes
economy to increase production during World War II, the Supreme Court has noted tha
government had "a primary obligation to bring about whatever production of war equi
and supplies shall be necessary to win a war." Lichter v. United States, 334 U.S.
765-66 (1948) (emphasis added). There is a coincidental irony that the majority's o
comes shortly after the 50th Anniversary of D-Day, when the attention of the nation
the media were focused on the crucial role in winning the war played by American in
See, e.g., ABC World News Tonight: Look Back at Preparations for D-Day Invasion, (A
television broadcast May 31, 1994) ("America's vast production might was mobilized
defeat Hitler. The U.S. war industries performed miracles."); ABC World News Tonig
Homefront Workers Made World War II Victory Possible, (ABC television broadcast Jun
1994) (Hitler "lost the battle of production. Before he lost anything else, he los
battle of production.").
Only the federal government - and exclusively the federal government - ha
power and the ability to organize the myriad details needed to accomplish this over
goal. Yet it is precisely this organization - the allocation of essential resources
specification of production quotas, the arrangement of manpower, and the control of
to prevent runaway inflation - on which the majority bases its imposition of liabil
Certainly no private party could have engaged in such activity, and the majority of
not one shred of evidence that when Congress limited its waiver of sovereign immuni
actions for which a nongovernmental entity would be liable, it intended to waive li
for these unique activities.
Instead, it is when the government undertakes to respond to society's pro
through operation of its own facilities (as distinguished from regulating the condu
others), for example a government hospital, prison or military base, that its activ
are analogous to those of private parties, and it is consequently subject to "opera
liability under CERCLA. This reading of the sovereign immunity waiver has its root
40
statute itself. The placement and title of the sovereign immunity waiver in sectio
entitled "Federal facilities" lends support to the government's proposition that th
provision was intended only to ensure CERCLA liability for
hazardous waste generated at federally-owned or federally- operated facilities. Se
S. Katzman, Note, The Waste of War: Government CERCLA Liability at World War II
Facilities, 79 Va. L. Rev. 1191, 1206-07 (1993).0
Although the majority responds that virtually identical language appeared
waiver of sovereign immunity in the original 1980 statute, and therefore placement
provision in 1986 under the title "Federal facilities" has no significance, the maj
fails to consider the likelihood that the new placement was intended to clarify the
of the waiver. In fact, remarks by Senators contemporaneous to the legislation tha
placed the waiver under the "Federal facilities" designation suggest that this was
Congress's view of the scope of the waiver, and the majority points to nothing to t
contrary in the legislative record. See 132 Cong. Rec. 28,413 (1986) (statement of
Stafford) (suggesting that section 120 exists to deal with "two to three potentiall
hazardous sites at each of 473 military bases across the country" and "sites operat
the Department of Energy"); 131 Cong. Rec. 24,733 (1985) (statement of Sen. Wilson)
Federal facilities, we are talking primarily of military bases, although the Depart
Energy has a few sites . . . and the Department of the Interior has some hazardous
cleanup responsibilities as well.").0
0
The majority errs in suggesting that my reading of the waiver would preclude holdi
government liable in cases like Key Tronic Corp. v. United States, 62 U.S.L.W. 4441
June 6, 1994), where the Air Force agreed to pay the EPA for a portion of a cleanup
local landfill in which it had deposited liquid chemicals. Majority Typescript Op.
n.2. Nothing in my construction of the statute precludes liability of the governme
operating its own facility or arranging for the disposal of its own hazardous waste
position that purely regulatory activities are not encompassed in the government's
liability would not have shielded it in Key Tronic, where, as distinguished from it
regulation in this case, the Air Force disposed of waste it had generated at a land
just as private entities do every day.
0
Neither of the statutory provisions relied upon by the majority supports its posit
that the CERCLA sovereign immunity waiver encompasses the government's regulatory
41
Reading the waiver in this manner does not nullify it. Studies suggest th
there are numerous government facilities dangerous enough to fall within the ambit
CERCLA, see Stan Millan, Federal Facilities and Environmental Compliance: Toward a
Solution, 36 Loy. L. Rev. 319, 321-24 (1990) (discussing scope of problem); 57 Fed.
31,758 (July 17, 1992) (list of 1,709 federal facilities for potential inclusion on
National Priorities List), and Congress was certainly aware of this, see, e.g., H.
No. 253(I), 99th Cong., 2d Sess. 58 (1985), reprinted in 1986 U.S.C.C.A.N. 2835, 28
also Review of Hazardous Waste Disposal Practices at Federal Facilities: Hearing B
Subcomm. of the House Comm. on Government Operations, 98th Cong., 1st Sess. 1-3, 17
215-17 (1983).
In our recent opinion in United States v. Rohm and Haas Co., 2 F.3d 1265,
(3d Cir. 1993), we held that the government could not recover from private parties
cost of government oversight of the removal and remedial activity performed and pai
by a private party. We recognized the incomparability between government and priva
action, and were unwilling to read CERCLA as treating government cleanups and priva
cleanups as equivalent actions for purposes of recovery of costs. See id. at 1277-
noted that it was "far more likely that Congress viewed EPA's overseeing of a priva
party's removal activities as qualitatively different from EPA's actually performin
removal activities." Id. at 1277 (emphasis added).
activities at issue here. There is no reason why section 107(b), which lists three
defenses such as act of God and act of war to section 107 liability, would also hav
specified a regulatory defense, as the majority argues, inasmuch as Congress had el
limited the government's liability to activity analogous to that of nongovernmental
entities, i.e. in section 120(a).
The other statutory provision referred to by the majority, section 107(d)
and previously discussed at note 2 supra, immunizes state and local governments fro
liability for certain cleanup activities of "a hazardous substance generated by or
Facility owned by another person." This provision thus posits that the state and l
governments would be otherwise liable. The failure to include the federal governme
the provision suggests that Congress did not envision liability for the federal gov
comparable to that of state and local governments, and therefore it was unnecessary
include it in the section 107(d)(2) immunity.
42
Of particular significance here, we stated in Rohm and Haas that the
government's oversight "is intended to protect the public interest rather than the
interests of those being overseen," and that therefore the government could not rec
its administrative costs from the regulated parties without "a clear statement of
congressional intent." Id. at 1273-74. A similar analysis is appropriate here in
converse of the Rohm and Haas situation, where we are considering the government's
liability for payment rather than its ability to receive payment. Just as the gover
oversight in Rohm and Haas was sui generis in the sense that it could not be perfor
a private party, so also was the government's activity in wartime in mobilizing pri
industry to produce necessary supplies.
If there were any ambiguity about the scope of the government's sovereign
immunity waiver, we would be obliged to apply the generally accepted principle that
waiver of sovereign immunity "must be strictly construed in favor of the United Sta
and not enlarged beyond what the language of the statute requires." United States
Idaho, 113 S. Ct. 1893, 1896 (1993) (emphasis added, quotation omitted). As Justic
Scalia wrote for the Court:
The foregoing [interpretations] are assuredly not the only readings of
[the provision], but they are plausible ones--which is enough to
establish that a reading imposing monetary liability on the Government
is not "unambiguous" and therefore should not be adopted. Contrary to
respondent's suggestion, legislative history has no bearing on the
ambiguity point. As in the Eleventh Amendment context, the
"unequivocal expression" of elimination of sovereign immunity that we
insist upon is an expression in statutory text. If clarity does not
exist there, it cannot be supplied by a committee report.
United States v. Nordic Village, Inc., 112 S. Ct. 1011, 1016 (1992) (citation omitt
This rule of strict construction applies even if the statute as a whole i
remedial in nature. See Library of Congress v. Shaw, 478 U.S. 310, 318 (1986) (Tit
VII); Pennsylvania v. National Ass'n of Flood Insurers, 520 F.2d 11, 19-20 (3d Cir.
43
(Federal Tort Claims Act), overruled in part by Pennsylvania v. Porter, 659 F.2d 30
(3d Cir. 1981) (in banc), cert. denied, 458 U.S. 1121 (1982).
Indeed, while the majority relies on CERCLA's policy of internalizing the
of waste cleanups, it ignores the countervailing policy interests that underlie the
of sovereign immunity. As we noted in another context, when construing a waiver of
sovereign immunity we must remember that "the process of governing almost always he
some and hurts others." Sea-Land Service, Inc. v. United States, 919 F.2d 888, 890
Cir. 1990) (quoting 5 K. Davis, Administrative Law Treatise § 27.11 (1983)), cert.
500 U.S. 941 (1991). To permit courts to extract money damages from the government
its regulatory activities "would necessarily involve a very substantial, if not
prohibitive, social cost not only in terms of the imposed liability itself, but als
terms of the constraining effect of that liability on the decisions of governmental
policymakers." Id.; see also Harold J. Krent, Reconceptualizing Sovereign Immunity
Vand. L. Rev. 1529, 1531 (1992) (Sovereign immunity "plays a vital role in our syst
is not so much a barrier to individual rights as it is a structural protection for
democratic rule."). We concluded that "[i]n the absence of compelling evidence to
contrary, we will decline to assume that Congress intended to impose that social co
the federal government." Sea-Land, 919 F.2d at 890.
In this case there is no compelling evidence demonstrating that when Cong
enacted CERCLA in 1980, or amended it in 1986, it unmistakably intended to hold the
government financially liable for the environmental consequences of its mobilizatio
domestic industry to increase production of numerous scarce products and materials
were indisputably needed in the war effort. The government produced evidence that
World War II, executive agencies closely regulated dozens of industries across the
at least to the same degree as here. Indeed, the government has demonstrated that
district court's opinion is already being used as the basis for numerous suits agai
44
government asserting claims for CERCLA contributions in a wide variety of industrie
arising from regulatory activity during World War II.
While it is not beyond Congress's power to do so, it is difficult to imag
that by the words of section 120 Congress intended to impose massive liability on t
United States for the environmental consequences of this regulation, running into t
hundreds of millions of dollars (estimated by the government to be between $26 and
million in this case alone), without some reference in the legislative history to i
intent to do so. I therefore believe the district court should have granted the
government's motion for summary judgment on the ground that the waiver of sovereign
immunity contained in section 120(a)(1) of CERCLA did not encompass the activities
which FMC predicated its claim against the government for operator and arranger lia
II.
Moreover, even if Congress had not limited its waiver of the government's
sovereign immunity to liability to the same extent as that of any nongovernmental e
the district court's judgment would still be erroneous because an examination of th
relevant facts demonstrates that the activities relied on by it and the majority ar
insufficient to render the government an "operator" of the American Viscose facilit
majority's definition of "operators" for CERCLA purposes is unassailable: "operator
persons who exercise "actual and substantial control over 'the corporations's day-t
operations and its policy-making decisions.'" Majority Typescript Op. at 28 (quoti
Lansford-Coaldale Joint Water Auth. v. Tonolli Corp., 4 F.3d 1209, 1222 (3d Cir. 19
Even the district court recognized that "'nuts-and-bolts' management decisions [are
necessary for [operator] liability under CERCLA." FMC Corp. v. United States Dep't
Commerce, No. 90-1761, 1990 U.S. Dist. LEXIS 8902, at *10 (E.D. Pa. Jul. 18, 1990).
The facts adduced by FMC do not evince any of the essential characteristi
"operation." Although a litany of factual conclusions adduced by the majority may
on the surface, to suggest the type of control at which the CERCLA operator liabili
45
directed, careful parsing of those conclusions demonstrates their evanescence. The
majority summarizes the facts on which it rests its conclusion of operation as foll
(1) the government's "diver[sion of] American Viscose from its previous commercial
endeavors;" (2) the maintenance by the government of "a significant degree of contr
the production process through regulations, on-site inspectors, and the possibility
seizure" if American Viscose had not followed the government's specifications; (3)
"government built or had built plants supplying raw materials to American Viscose,
controlled these plants, arranged for an increased labor force, and supervised empl
conduct;" (4) "the government supplied machinery and equipment for use in the
manufacturing process;" and (5) "the government controlled product marketing and pr
Majority Typescript Op. at 30 (emphasis added). I will consider each in turn, beca
believe that none of these facts individually nor all of them together sufficed to
the government an operator of the privately owned, privately financed, and for-priv
profit plant.
The diversion of "American Viscose from its previous commercial endeavors
part of the overall war effort can hardly, in and of itself, have rendered the gove
an operator of the plant. The War Production Board (WPB), the point agency during
War II, was authorized through Executive Orders to "'[f]ormulate and execute in the
interest all measures needful and appropriate in order . . . to increase, accelerat
regulate the production and supply of materials . . . required for the national def
See FMC Corp. v. United States Dep't of Commerce, 786 F. Supp. 471, 474 (E.D. Pa. 1
(quoting Exec. Order No. 8629, 6 Fed. Reg. 191 (1941) (citing Exec. Order No. 9040,
Reg. 527 (1942)). Its directives had the force of law. See id. at 475.
The principal focus of the mobilization of private industry in the war ef
was to coordinate procurement policy for goods and scarce materials vital to the wa
effort and to allocate resources to ensure their availability for fulfillment of
government military contracts. This required that firms give military needs priori
46
only if the government met regularly established prices and terms of sale. If a
manufacturer declined to give the requested priority, the government had the power
over the facility for "fair and just" compensation. It is important to emphasize t
under the majority's conclusion that the arrangement by which American Viscose prod
high tenacity rayon for needed tires and/or that the specification of the amount of
material needed made the government an "operator," the government would literally h
"operated" a large portion of the country's heavy production facilities during the
Instead, for the most part it left them in private hands.
The Supreme Court itself has recognized that for the most part the govern
did not choose to "operate" private industry in the war effort. See Lichter v. Uni
States, 334 U.S. 742, 766 (1948) (Congress chose not to "convert[] the nation in ef
into a totalitarian state" by operating all domestic industry and instead carefully
regulated to "reach[] unequalled productive capacity and yet retain[] the maximum o
individual freedom consistent with a general mobilization of effort"). The issuanc
directives to American Viscose does not evidence the type of "nuts and bolts" direc
management of the internal workings of the "facility" necessary to achieve operator
status. See United States v. Dart Indus., Inc., 847 F.2d 144, 146 (4th Cir. 1988).
The majority's second fact, that the government maintained a "significant
of control" over the production process, appears on its face to bring the governmen
closer to "operator" status than any of the majority's other facts. However, when t
basis for this conclusion is examined, it too falls short. Notably, the majority d
conclude, nor could it on this record, that the government exercised de facto day-t
control. After all, American Viscose management continued firmly in place. Instea
majority refers to the "possibility of seizure" by the government of the plant, wit
acknowledging that the mere "possibility" could not make it an "operator" unless an
it exercised that power. Although the potential of seizure may have had an in terr
47
effect by encouraging or coercing producers to comply with the government's require
the potential of seizure is not operation of the plant.
The "regulations" referred to but not identified by the majority in reach
conclusion do not differ in character from those applicable to all industries produ
essential products during that period. It is a fact of life that during the war,
production of consumer goods such as nylon stockings and rayon underwear was circum
by the government, even for producers who were inclined to put frivolous consumer i
above tires and parachutes needed by the military. It has not previously been sugg
by any court that the regulations accomplishing this made the government an operato
the plants in all of the affected industries. Finally, the "on-site inspector" ref
to by the majority in its discussion is duplicative of the similar references made
third factual conclusion and is best understood in that context.
In examining the third of the facts on which the majority relies to demon
day-to-day control (built and controlled raw material plants, arranged for an incre
labor plant, and supervised employees), we must once again consider each of the
components. The majority relies on the government's construction of a sulfuric aci
which it owned but leased to General Chemical Company and its sponsorship of the
construction of a carbon bisulfide plant by Stauffer Chemical Company, both of whic
provided raw materials needed by American Viscose in its production of high tenacit
rayon. Significantly the raw materials at issue were sold to American Viscose by o
not by the government. Moreover, although the sulfuric acid plant was adjacent to
American Viscose facility, the sulfuric acid plant was not the relevant "facility"
issue in the CERCLA cleanup. It follows that the government's involvement in the s
acid plant's construction and operation does not impact on whether the government o
the American Viscose plant a different "facility."
Thus, the persuasiveness of the third of the majority's relevant "facts"
on the government's involvement with American Viscose's employees, which it refers
48
the summary as the government's "arrang[ing] for an increased labor force [] and
supervis[ion] of employee conduct." Majority Typescript Op. at 30. To be sure, th
an on-site government representative who assisted American Viscose employees in an
to reduce shortages of housing and community services, and who assisted American Vi
in minimizing labor strife and absenteeism, but that representative did not control
workers. There is no evidence that it was anyone other than American Viscose superv
who directed the productive employees in where to work within the plant, what shift
work, when or if to take a vacation, what days to work, and all the details that go
employee supervision.0
While we agree with the majority that the government was interested in in
that American Viscose increased the production of a scarce resource, it is factuall
incorrect to give the impression that the government was supervising operating pers
at the American Viscose plant or had an input in the firing or retention of America
Viscose's employees. Instead the documents discussed by the majority, Majority Typ
Op. at 32-33, reinforce the premise that while government officials were concerned
the activities at the plant, their actions were in response to American Viscose's r
for assistance rather than part of any overarching scheme to control the workings o
plant.0 Thus the majority has arrived at its conclusion of day-to-day operational
0
The district court grouped a series of findings under the heading "Government On-S
Presence at the Facility," FMC, 786 F. Supp. at 481, which give the erroneous impre
that government personnel were supervising plant operations. In fact, the governme
personnel referred to in those findings were merely supervising installation of the
government-owned spinning wheels in the plant by a government selected contractor,
which the government has accepted ownership responsibility. Examination of the rele
documents makes clear that the references to "the project" or "on-site" are to the
construction and installation of the spinning wheels. There is simply no evidence
record that the government personnel supervised any American Viscose employee in
connection with the production of rayon, and to the extent that any findings by the
district court so suggest, they would be clearly erroneous.
0
For example, the majority's reliance on a WPB representative's statement that "[i]
agreed on unanimously that a WPB Prio[r]ities man [is] needed on the Housing situat
App. at 1720, is misplaced because the statement was the conclusion of a series of
initiated by American Viscose's request for trailers to house its workers. Initial
49
by the government based on unsupported or irrelevant snippets of findings by the di
court.
The majority's fourth fact is that the government leased machinery and eq
to American Viscose. The simplest response is that the government has already acce
"owner" liability for the equipment it owned at the facility. To count these items
in assessing "operator" liability would unjustifiably conflate these two distinct b
responsibilities.
The majority's fifth and final fact is the government control of "product
marketing and price." Inasmuch as the plant was converted to high tenacity rayon f
war effort, it is not surprising that government regulations required that the prod
produced be sold to authorized companies, who in turn were also regulated in this r
As for product marketing and price, control of price over almost all production dur
that period was effected through regulations and directives of the Office of Price
Administration, and such regulation, while pervasive, is not the involvement in day
management decisions to which the CERCLA operator inquiry speaks.
One aspect of operation of a plant is conspicuously absent from the major
discussion of operation - that of profit. FMC produced no evidence that American V
WPB representative responded to its request by instructing another to "see that AVC
through the proper form for [the] first hundred trailers." App. at 1719. When Ame
Viscose then asked if it should prepare a site for the trailers, one WPB representa
advised them to wait for approval, while a second stated that approval would be swi
Another WPB representative explained that "[t]he assignment of a priority represent
[will be] to take an interest in this project: To break bottlenecks," to which a f
replied "A swell idea if he is a live wire." App. at 1719.
Similarly, the letter quoted by the majority between the chairman of the
the chairman of the War Manpower Commission clearly states that the WPB is seeking
coordinate preparation for staffing the expanded Facility because "in the judgment
local management and other responsible people" previous planning was inadequate. A
1746 (emphasis added).
Thus, instead of asserting significant control over the day-to-day operat
a private facility, the government attempted to ensure a coordinated response to va
requests of American Viscose, a private for-profit plant important to the war effor
50
the real operator of the plant, who chose (as fortunately did almost all of America
private industry) to go along with the governmental wartime regulation, was not ade
paid for its efforts. The majority's suggestion that the costs of cleanup of the
hazardous wastes produced in the process of American Viscose's production should be
by society as the ultimate beneficiary of the war effort is inconsistent with CERCL
approach of treating cleanup costs as part of the cost of initial production. Amer
Viscose produced high tenacity rayon which was installed by another producer in tir
were eventually used by the armed forces. The fact that the government was the ult
consumer of that rayon is as irrelevant in assessing the cost of cleanup at the pla
operated by American Viscose as would be the fact that General Motors purchases and
spark plugs if there was an attempt to assess against it the cost of cleanup of any
hazardous waste generated by its independent spark plug supplier.
When examined, the totality of the government's procurement and allocatio
activities in the war effort simply did not constitute the type of "active[] and
substantial[] participat[ion] in the corporation's management" necessary for liabil
an "operator" under CERCLA. Lansford-Coaldale, 4 F.3d at 1222.0
0
Because the court is equally divided on the issue of the government's liability as
arranger, and it is our tradition not to write an opinion in that situation, I do n
forth what I believe are independent reasons to reverse the district court in that
51
FMC CORP. v. U.S. DEPARTMENT OF COMMERCE,
No. 92-1945
STAPLETON, Circuit Judge, dissenting:
I am uncertain whether § 120(a)(1) of CERCLA was intended to preserve the
sovereign immunity of the United States in situations of this kind. The teachings
Indian Towing Co. v. United States, 350 U.S. 61 (1955) suggests to me that it shoul
be so construed. I am confident, however, that when Congress used the word "operat
did not have in mind a governmental entity whose economic interest and involvement
production facility was limited to that of a regulator and ultimate consumer. The
for my confidence on this score have been thoroughly articulated in Chief Judge Slo
dissent.
I, therefore, respectfully dissent and join Section II of the Chief Judge
opinion.
52