United States v. Dico, Inc.

United States Court of Appeals
For the Eighth Circuit
___________________________
No. 14-2762
___________________________
United States of America
lllllllllllllllllllll Plaintiff - Appellee
v.
Dico, Inc.; Titan Tire Corporation
lllllllllllllllllllll Defendants - Appellants
____________
Appeal from United States District Court
for the Southern District of Iowa - Des Moines
____________
Submitted: June 11, 2015
Filed: December 10, 2015
____________
Before LOKEN, BYE, and KELLY, Circuit Judges.
____________
BYE, Circuit Judge.
Dico, Inc. ("Dico") owned several buildings in Des Moines, Iowa, that were
under an Environmental Protection Agency ("EPA") order regulating their use
because of hazardous substance contamination. Without informing the EPA, Dico,
through its corporate affiliate Titan Tire Corporation ("Titan Tire"), sold the buildings
to Southern Iowa Mechanical ("SIM"), which tore them down and stored them in an
open field where Polychlorinated Biphenyls ("PCBs") were later found. The
government brought this action against Dico to recover damages for its cleanup costs
and alleged that Dico violated the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980 ("CERCLA") by "arrang[ing] for disposal"
of the PCBs in the buildings and also violated the EPA order governing use of the
buildings. The district court found Dico liable for both violations, awarded response
costs, civil penalties, and punitive damages. On appeal, Dico argues material issues
of fact precluded summary judgment on the issues of liability and damages for both
"arranger" liability under CERCLA and the EPA order violation. Dico also argues
the district court erred in treating any alleged violation of the EPA order as a
continuing offense. We reverse the district court's summary judgment order with
respect to "arranger" liability under CERCLA and punitive damages but affirm the
summary judgment order as to the EPA order violation and civil penalties.
I
In the mid-1970s, the EPA took interest in the Dico buildings at issue in this
case because of the presence of trichloroethylene ("TCE") contamination in the
groundwater around them. See generally United States v. Dico, Inc., 266 F.3d 864,
868 (8th Cir. 2001). The EPA required Dico to implement a groundwater extraction,
treatment, and monitoring system. Later, the EPA also discovered pesticide and
herbicide contamination in soils adjacent to several buildings in the area; specifically,
Buildings 1 through 5 and the Maintenance Building. During the investigation for
pesticides, the EPA discovered PCBs in the adhesive contained in the building
insulation of all of the buildings except Building 1. Consistent with the findings in
the environmental investigator's August 1992 report, the EPA issued an
administrative order on March 4, 1994 ("EPA Order"), requiring Dico to remove
some of the PCB contamination and to encapsulate all remaining insulation to prevent
any further release of PCBs.
-2-
Dico and the EPA then agreed on an operation and maintenance plan to address
the PCB contamination. Dico submitted a report in 1997 ("1997 Report"), indicating
it had completed the required removal. In its report, Dico did not assert that it had
removed all PCB contamination and the author of the report testified that he believed
some PCBs remained after the removal action. The EPA approved the 1997 Report
but reminded Dico of its continuing obligations under the EPA Order. The operation
and maintenance plan required Dico to inspect and maintain the encapsulated surfaces
inside the buildings covered by the EPA Order. By 2002, Dico no longer occupied
or used the buildings and did not want to continue the required testing under the EPA
Order and operation and maintenance plan. The EPA and Dico agreed to discontinue
the required testing with the provision that Dico provide annual reports on whether
the buildings were back in use, which would again trigger the responsibilities and
obligations under the operation and maintenance plan.
In 2007, Dico, through Titan Tire, entered into three separate transactions with
SIM: one for the disassembly and removal of the Maintenance Building; one for the
western portion of Building 3; and one for the purchase of Buildings 4 and 5 and a
northern portion of the Production Building. Dico paid $1.00 per square foot to
acquire these buildings.1 Dico's intent in selling the buildings—whether Dico
intended to actually sell the buildings or merely wished to rid itself of the
responsibilities associated with the PCBs contained in the buildings—was heavily
disputed before the district court and is the central issue in this appeal. After
purchasing the buildings, SIM dismantled them and disposed of all materials except
for the steel beams.2
1
Dico also sold SIM a Weld Shop Building, which was disassembled, moved
to SIM's property, and reassembled there. Neither the Weld Shop Building nor the
Production Building was subject to the EPA Order.
2
Building 1, Building 2, the original section of Building 3, and the southern
portion of the Production Building remained on the Dico property.
-3-
During a five-year inspection of the Dico site in September 2007, EPA Project
Manager Mary Peterson observed that most of the buildings at issue were dismantled,
and the EPA for the first time learned the buildings had been sold. The EPA sent a
letter to Dico informing it that it will be responsible for any cleanup costs resulting
from contamination associated with the disassembly of the buildings. The EPA then
traced the steel beams to SIM's Ottumwa, Iowa, storage site, where it found them "in
piles in a large open area, many in direct contact with the ground . . . and not
protected from the elements," with visible insulation pieces attached. United States
v. Dico, Inc., 892 F. Supp. 2d 1138, 1145 (S.D. Ia. 2012). After taking samples from
the steel beam piles and the soil in the area, the EPA confirmed the presence of PCBs
in some of the beams, the soil, and the insulation attached to the beams. Although the
EPA was able to determine the steel beams came from the Dico buildings, it had no
way of tracing the specific origin of the PCBs and could not confirm whether the steel
beams came from Dico's buildings that were subject to the EPA Order. The EPA
eventually directed Dico to work with an environmental contractor to retrieve and
dispose of the insulation that had been removed from the Dico buildings, which
resulted in the removal of more than four tons of different types of insulation.
Testing of the material revealed the presence of PCBs.
II
We review a district court's grant of summary judgment de novo, viewing the
evidence in the light most favorable to the non-moving party and giving the
non-moving party the benefit of all reasonable inferences. Dowell v. Lincoln Cnty.,
Mo., 762 F.3d 770, 775 (8th Cir. 2014). Summary judgment is proper only if the
moving party satisfies its burden of demonstrating that no genuine issues of material
fact remain for trial. Fed. R. Civ. P. 56(a).
-4-
A
CERCLA imposes strict liability for environmental contamination on
any person who by contract, agreement, or otherwise arranged for
disposal or treatment, or arranged with a transporter for transport for
disposal or treatment, of hazardous substances owned or possessed by
such person, by any other party or entity, at any facility or incineration
vessel owned or operated by another party or entity and containing such
hazardous substances . . . .
42 U.S.C. § 9607(a)(3) (emphasis added). "Arranger liability ensures that owners of
hazardous substances may not free themselves from liability by selling or otherwise
transferring a hazardous substance to another party for the purpose of disposal."
Team Enters., LLC v. W. Inv. Real Estate Trust, 647 F.3d 901, 907 (9th Cir. 2011).
The statute does not define the word "arranged." However, in interpreting this
statutory language, the Supreme Court has held the word "'arrange' implies action
directed to a specific purpose." Burlington N. & Santa Fe Ry. Co. v. United States,
556 U.S. 599, 611 (2009). Under this definition of the provision, the Supreme Court
identified three possible scenarios: (1) "an entity [who] enter[s] into a transaction for
the sole purpose of discarding a used and no longer useful hazardous substance"
would plainly be liable under CERCLA; (2) an entity who merely "sell[s] a new and
useful product" to a purchaser who "unbeknownst to the seller, [later] dispose[s] of
the product in a way that [leads] to contamination" would clearly not be liable; and
(3) an entity who has "some knowledge of the buyers' planned disposal or whose
motives for the 'sale' of a hazardous substance are less than clear" may or may not be
held liable. Id. at 610.
In the third type of case, "the determination whether an entity is an arranger
requires a fact-intensive inquiry that looks beyond the parties' characterization of the
-5-
transaction as a 'disposal' or a 'sale' and seeks to discern whether the arrangement was
one Congress intended to fall within the scope of CERCLA's strict-liability
provisions." Id. In Burlington, the Court specifically rejected the government's
argument that "Congress intended to impose liability on entities not only when they
directly dispose of waste products but also when they engage in legitimate sales of
hazardous substances knowing that some disposal may occur as a collateral
consequence of the sale itself." Id. at 611-12 (internal footnote omitted).
Furthermore, the Court specifically rejected the notion that a seller's knowledge that
a buyer would dispose of a hazardous substance would alone be sufficient to
constitute arrangement for disposal:
While it is true that in some instances an entity's knowledge that its
product will be leaked, spilled, dumped, or otherwise discarded may
provide evidence of the entity's intent to dispose of its hazardous wastes,
knowledge alone is insufficient to prove that an entity "planned for" the
disposal, particularly when the disposal occurs as a peripheral result of
the legitimate sale of an unused, useful product.
Id. at 612; see also Team Enters., 647 F.3d at 908 ("While actions taken with the
intent to dispose of a hazardous substance are sufficient for arranger liability, actions
taken with the mere knowledge of such future disposal are not."); Consol. Coal Co.
v. Ga. Power Co., 781 F.3d 129, 149 (4th Cir. 2015) ("Anytime an entity sells a
product that contains a hazardous substance, it also 'intends' to rid itself of that
hazardous substance in some metaphysical sense. But intent to sell a product that
happens to contain a hazardous substance is not equivalent to intent to dispose of a
hazardous substance under CERCLA. For arranger liability to attach, there must be
something more.").
The only element of the liability language quoted above Dico disputes on
appeal is that it "arranged" for disposal of the PCBs. It argues the buildings had at
-6-
least some commercial value based on which a fact finder may find Dico did not
intend to dispose of the PCBs by selling the buildings to SIM. We agree.
The district court noted the case "exemplifie[d] the practical difficulties in
deciding whether an arrangement is a sale or disposal" but nevertheless concluded
that no reasonable fact-finder could conclude Dico did not intend to dispose of the
remaining PCBs when it sold the buildings to SIM. See Dico, 892 F. Supp. 2d at
1153. In reaching its conclusion, the district court relied primarily on two "battery
cracking" cases in which the district courts found the sellers to have "arranged for
disposal" when they sold "junk" batteries to a scrap yard that was only interested in
the lead within the batteries and would inevitably have to dispose of the contaminated
battery casings. See United States v. Atlas Lederer Co., 282 F. Supp. 2d 687 (S.D.
Ohio 2001); Catellus Dev. Corp. v. United States, 34 F.3d 748 (9th Cir. 1994). The
district court also relied on another district court decision in which the court found
a seller "arranged for disposal" when it sold scrap copper wire to a scrap metal
company knowing that the sole remaining useful purpose of this copper wire was to
reclaim the copper, which required "removal and disposal of the insulation material
covering the copper wire." EPA v. TMG Enters., Inc., 979 F. Supp. 1110, 1124
(W.D. Ky. 1997). Despite Dico's assertions that SIM intended to reuse the buildings
after disassembly, the district court found Dico "presented no evidence that SIM was
interested in any of the building components except for the steel beams." Dico, 892
F. Supp. 2d at 1154. Accordingly, it reasoned that just like in the battery-cracking
cases and the copper wire case, where the purchaser was only interested in one
internal and valuable part of the sale which would subsequently and necessarily result
in the disposal of the remaining parts, the seller arranged for disposal of a hazardous
substance. Id. at 1154-55. In other words, the district court believed where the seller
knew the buyer would use only part of the contaminated goods and would discard
part of the contaminated goods, the seller, as a matter of law, arranged for disposal.
However, under the Supreme Court's definition of "arrange," a seller's knowledge of
eventual disposal alone is insufficient to find liability as a matter of law.
-7-
In relying on the above cases, the district court improperly focused too closely
on the factual similarity between this case and the battery-cracking cases regarding
what the buyer was interested in and how it would have to obtain the desired part
rather than on the relevant question of the seller's intent with respect to the
transaction. In the battery-cracking cases, the sale product was "junk." Accordingly,
the district courts in those cases could have concluded at summary judgment—
consistent with Burlington's directive that knowledge of inevitable disposal alone is
not enough—that the seller was not selling a product but was intending to rid itself
of a hazardous substance by transferring a useless product, where it knew disposal of
a hazardous substance was certain. Where, however, the sale product has some
commercial value and was part of a legitimate sale, even if the seller knows disposal
will result, it is more difficult to hold that no reasonable juror could find the seller did
not actually intend to sell the product but merely intended to discard the hazardous
substance. See, e.g., Schiavone v. Ne. Utils. Serv. Co., No. 3:08CV429, 2011 WL
1106228, at *6 (D. Conn. Mar. 22, 2011) (finding that seller of transformers to a
scrap metal yard for the "commercial value of the metal" did not arrange for disposal
of a hazardous substance because even if the transformers contained PCBs and even
if the seller knew the buyer would inevitably have to dispose of the hazardous
substance, there was no "evidence that could support a conclusion that the [seller] had
as a purpose in their dealings with [the buyer] disposing of [the hazardous
substance]"); United States v. B&D Elec., Inc., No. 1:05CV63, 2007 WL 1395468,
at *5-6 (E.D. Mo. May 9, 2007) (finding that seller of operable, intact, and
non-leaking transformers did not arrange for disposal of the hazardous substances
contained in the transformers).
The parties before us, and other courts, have framed the issue on what has
sometimes been referred to as the "useful product defense."
The defense prevents a seller of a useful product from being subject to
arranger liability, even when the product itself is a hazardous substance
-8-
that requires future disposal. In other words, a person may be subject to
arranger liability "only if the material in question constitutes 'waste'
rather than a useful product." A plaintiff can overcome the defense by
showing that the substance involved in the transaction "has the
characteristic of waste at the time it is delivered to another party."
The useful product doctrine serves as a convenient proxy for the intent
element because of the general presumption that persons selling useful
products do so for legitimate business purposes. It would be odd, for
example, to say that an auto parts store sells motor oil to car owners for
the purpose of disposing of hazardous waste. Conversely, persons
selling or otherwise arranging for the transfer of hazardous waste (which
no longer serves any useful purpose) are more likely trying to avoid
incurring liability that might attach were they to dispose of the
hazardous waste themselves. In other words, the probable purpose for
entering into such a transaction is to dispose of hazardous waste.
Team Enters., 647 F.3d at 908 (internal citations and footnote omitted). We have not
previously considered the defense, and its viability after Burlington is not entirely
clear. While there would be liability in the first scenario where "an entity [enters]
into a transaction for the sole purpose of discarding a used and no longer useful
hazardous substance" and no liability in the second scenario where the entity arranges
for the sale of "a new and useful product" without knowledge of an eventual disposal,
in the third scenario, the Court imposed the requirement of a "legitimate sale." See
Burlington, 556 U.S. at 610, 612 (knowledge of eventual disposal insufficient to find
liability "when the disposal occurs as a peripheral result of the legitimate sale of an
unused, useful product" (emphasis added)).
As noted above, under the Supreme Court's definition of "arrange," the central
question is the intent of the seller in the particular transaction. See Team Enters., 647
F.3d at 909 ("Absent a showing that Street intended for its sale of the Rescue 800 to
result in the disposal of PCE, we must conclude that Street lacks the requisite intent
for arranger liability."). Like knowledge of eventual disposal, we believe the
-9-
usefulness of a product—however defined—is an important but not dispositive factor
to consider in determining the seller's intent.3 A party may sell a still "useful"
product, i.e., fit either for its intended purpose or some other purpose useful to the
buyer, with the full intention to rid itself of environmental liability rather than a
legitimate sale, for example where the cost of disposal or contamination remediation
would greatly exceed its purchase price (e.g., selling a working and useful piece of
machinery for $10,000 that comes along with a $100,000 price tag for remediation
costs). It appears to us that a seller who knew about the contamination in such a sale,
if it can be shown the seller intended to arrange for its disposal because the seller
knew the buyer would eventually dispose of it, could fall within the scope of the
statute, even though the product may be considered "useful." Thus, the "usefulness"
of a product does not dispositively show the character of the transaction or the seller's
intent. Rather, the touchstone remains whether "the arrangement was one Congress
intended to fall within the scope of CERCLA's strict-liability provisions." Burlington
N., 556 U.S. at 610.
Other circuit courts have identified some factors to consider in determining if
a transaction was an arrangement for disposal or a sale. See, e.g., Consol. Coal, 781
F.3d at 148 ("[1 T]he intent of the parties to the contract as to whether the materials
were to be reused entirely or reclaimed and then reused, [2] the value of the materials
sold, [3] the usefulness of the materials in the condition in which they were sold, and
[4] the state of the product at the time of transferral (was the hazardous material
contained or leaking/ loose)."); Miami-Dade Cnty., Fla. v. United States, 179 F.
3
If "usefulness" is narrowly defined to include only the product's intended
purpose, it is possible that no liability would attach even in the sale of a "useless"
product. For example, an entity may sell a "useless" product that carries a different
purpose to the buyer—either aesthetic or other functional purpose—such that the
seller may receive substantial value for the product, even beyond its commercial
value, which could make it a "legitimate sale" without an intention to arrange for its
disposal.
-10-
App'x 658, 661 (11th Cir. 2006) ("In determining whether a party arranged for the
disposal or treatment of hazardous substances, relevant factors include: (1) whether
a sale involved the transfer of a 'useful' or 'waste' product; (2) whether the party
intended to dispose of a substance at the time of the transaction; (3) whether the party
made the 'crucial decision' to place hazardous substances in the hands of a particular
facility; (4) whether the party had knowledge of the disposal; and (5) whether the
party owned the hazardous substances." (internal quotation marks omitted)). At least
one other circuit court has also considered the balance of the value received by the
seller compared to the cost avoided of having to address the proper disposal or
remediation cost. See United States v. Gen. Elec. Co., 670 F.3d 377, 390 (1st Cir.
2012) (finding liability where evidence showed the seller calculated its profits from
the sale in comparison to its avoided cost of proper disposal). We believe this to be
a valid and important consideration in discerning a seller's intent in a particular
transaction.
In this case, the considerations above are heavily disputed. First, the cost of
remediating the buildings is not clear from the record. The district court noted Dico
may have "eliminated a $2.87 million liability" but also noted Dico heavily disputed
the inflated figure. On appeal, Dico asserts the $2.87 million figure is a "wild
exaggeration" because it fails to take into account the remediation that was already
completed, that only some of the buildings were removed while others remained on
the property, and that most of the remediation cost would have been to remove any
concrete foundations which remained at the Dico property after the diassembly.
Since the district court did not make a finding as to how much it would have cost to
remove the contamination from the buildings, we cannot determine how much clean-
up-cost liability Dico potentially avoided by selling the buildings.4
4
Judge Kelly notes in her cost analysis that comparing the price for which Dico
sold the buildings to a reasonable estimate of the cleanup costs compels the
conclusion that Dico sold the buildings to avoid the cost of cleanup. While the record
contains some evidence Dico may have avoided substantial cleanup costs by selling
-11-
Second, we believe there exists an issue of fact regarding the usefulness of the
buildings. Indeed, the district court acknowledged there appeared to be an issue of
fact: "On the one hand, there is ample evidence supporting an inference that the
buildings were not commercially useful and that SIM purchased them only to extract
the valuable steel beams. . . . On the other hand, the record contains some evidence
suggesting that the entire structures were commercially useful." Dico, 892 F. Supp.
2d at 1158. Nevertheless, the district court reasoned that "there [did not] exist[] any
demand for used buildings of the type [Dico] sold to SIM" and that "even if the
buildings at issue were usable while erected on Dico's property, once sold, they lost
their usefulness because they had to be demolished and removed and could not be
disassembled in a way that preserved the integrity of their components for later use."
Id. at 1155.
In applying this analysis, the district court too narrowly focused on the value
of the buildings as a whole and what SIM specifically intended to do with them. The
fact that SIM planned to only use part of the buildings did not mean that other parties
could not use the buildings for other purposes. Similarly, the mere fact that some
portion of the buildings could not be reused did not necessarily render them entirely
commercially useless. The buildings at the heart of the sale were not hazardous
products themselves and the evidence in the record does not support a finding that
either Dico or SIM viewed the buildings as merely "waste." Indeed, SIM had reused
one of the buildings it previously purchased from Dico. Even the district court
acknowledged there was conflicting evidence on whether SIM intended to reuse the
buildings after it disassembled them. See Dico, 892 F. Supp. 2d at 1143-44.
the buildings, Dico continues to dispute this evidence and the district court did not
make a finding of the costs Dico actually avoided by selling the buildings rather than
disposing of them. This genuine dispute regarding a material fact precludes summary
judgment.
-12-
Moreover, there is no evidence that Dico itself viewed the buildings as useless.
To the contrary, evidence in the record shows Dico continued to view them as
commercially useful. Additionally, Dico sold the buildings for more than $140,000
and additional consideration, which the district court stated made it "impossible to
calculate the true value of SIM's bid." Id. at 1143 n.6. The insulation appears to be
the only material the parties agree could not be reused after disassembly of the
buildings. But we have no clear indication from the record how much the value of
the insulation was in comparison to the rest of the building materials. As such, if the
insulation represented a relatively minor portion of the value of the buildings, the
buildings may still have been commercially useful. Furthermore, contrary to the
district court's finding that the buildings became useless after disassembly, we find
the ability to reuse the building components to be a disputed fact. The government
relies on several other facts, such as the "commercial reality" of the transaction and
Dico's failure to inform SIM of the contamination, to "suggest" Dico's intent, but such
a showing, while suggestive, is not sufficient to support summary judgment.
In summary, we believe the district court placed too much emphasis on how
SIM specifically intended to use, and actually used, the buildings. The fact that some
parts from the buildings were worthless after disassembly does not necessarily
transform a potentially legitimate sale of the buildings in which Dico would receive
some commercial value into a ploy to simply get rid of the buildings just to dispose
of the hazardous substance. Indeed, Dico solicited bids for the sale of the buildings
and there was interest beyond just SIM. Overall, unlike cases finding liability at
summary judgment, we do not believe the evidence of record demonstrates as a matter
of law that Dico was merely trying to get rid of a hazardous substance. Thus, under
the particular circumstances of this case and on the record before us, we believe the
issue of Dico's intent should not have been decided at summary judgment.
For these reasons, we reverse and vacate the district court's summary judgment
order holding Dico "arranged" for disposal of hazardous materials as a matter of law
-13-
under § 9607(a)(3). Accordingly, we also vacate the district court's order with respect
to any response costs specifically associated with the district court's finding on the
issue of "arranger" liability.
B
The district court awarded both civil penalties and punitive damages against
Dico after finding Dico violated Paragraphs 31 and 59 of the EPA Order.
Specifically, the district court found Dico had violated Paragraphs 31 and 59 of the
EPA Order for 162 days, and awarded $10,000 per day for a total civil penalty of
$1,620,000. The district court also awarded $1,477,787.73 in punitive damages, an
amount equal to the "response costs" the Fund incurred by cleaning up the SIM site.
We affirm the district court's award of civil penalties. However, punitive
damages are available only if the Fund incurs costs cleaning up the damage caused
by a release or threat of release of hazardous substance. 42 U.S.C. § 9607(c)(3).
Because the Fund incurred no costs to clean up the teardown site, the Fund did not
incur any costs as a result of Dico's violation of the EPA Order and therefore the
district court erred when it awarded punitive damages based on cleanup costs of the
SIM site. Accordingly, we reverse the district court's award of punitive damages.
1. Civil Penalties
Under CERCLA, "[a]ny person who, without sufficient cause, willfully
violates, or fails or refuses to comply with, any [EPA] order . . . may . . . be fined not
more than $25,0005 for each day in which such violation occurs or such failure to
comply continues." 42 U.S.C. § 9606(b)(1). Even if the district court finds a willful
5
Indexed for inflation, the penalty amount for the applicable period is $32,500.
See 40 C.F.R. § 19.4.
-14-
violation, it has the discretion of whether to impose civil penalties. See Gen. Elec.
Co. v. Jackson, 610 F.3d 110, 119 (D.C. Cir. 2010). To demonstrate sufficient cause
for a violation or non-compliance as a defense, Dico must show it had "an objectively
reasonable basis for believing that the EPA's order was either invalid or inapplicable
to it." Solid State Circuits, Inc. v. EPA, 812 F.2d 383, 391 (8th Cir. 1987).
Dico asserts that four factual issues precluded the imposition of civil penalties.
We find no triable issues relevant to the civil penalties the district court imposed.
Paragraph 31 of the EPA Order required Dico to submit to the EPA for
approval an operation and maintenance plan "present[ing] the actions necessary to
ensure the protectiveness and integrity of the removal action, including long-term
maintenance of all interior surface sealing, encapsulation of all building insulation
and appropriate reporting, including, at a minimum, submittal of a written report on
an annual basis." Thus, through the operation and maintenance plan, the EPA Order
required Dico to maintain and protect the integrity of the sealing and encapsulation
of the building insulation. By allowing for the disassembly of the buildings such that
"lots of little pieces of insulation fell to the ground and were blown around,"
(undisputed testimony of SIM's President regarding his observations of the
disassembly process) Dico necessarily violated the terms of the EPA Order. Its
argument that the government failed to show any explicit evidence of the actual
release of PCBs through the disassembly process is immaterial to the issue.6
6
Judge Loken argues the district court award erred by finding a 162-day
violation when there was no actual release of hazardous substances. Paragraph 31 of
the EPA Order, however, required Dico to ensure "long term maintenance of all
interior surface sealing" and "encapsulation of all building insulation." Dico violated
this Order because it breached the interior surface sealing and failed to keep the
building insulation encapsulated during the entire 162-day building teardown.
Therefore, Dico action violated the EPA Order, regardless of whether the EPA proved
this violation released hazardous substances.
-15-
We also agree with the district court that Dico violated Paragraph 59 of the
EPA Order, which required Dico to "immediately take all appropriate action" and to
"immediately notify" the EPA in the event of any "change in site conditions . . . [that]
causes or threatens to cause an additional release of hazardous substances from the
Dico Property." Since there is no genuine dispute the disassembly destroyed the
protection and integrity of the encapsulation, we find little difficulty in holding that
the disassembly constituted a change in site conditions that, at the very least,
threatened the release of hazardous substances from the Dico buildings. Indeed, in
the operation and maintenance plan, Dico itself provided that "any event that causes
significant damage to the structure of any of the six buildings" would constitute "an
emergency event" that had the "potential [for] exposure suddenly and in quantities
that may be harmful to human health and the environment."
Dico argues it should not be subject to penalties because it had "sufficient
cause" to violate the EPA Order on two grounds: it reasonably believed (1) no PCBs
actually remained in the buildings; and (2) it had been relieved of its obligations. We
disagree on both accounts.
First, we find meritless Dico's argument that it could reasonably believe no
PCBs actually remained in the buildings after its initial remediation work in the
1990s. The fact that no PCBs were detected in surface wipe samples of the buildings
—which merely tested the effectiveness of the encapsulation—in no way indicated
that no PCBs remained within the insulation. To the contrary, the author of Dico's
own 1997 Report, James Fechter, explicitly testified that PCBs remained in the
buildings after encapsulation. Moreover, the notion that Dico would agree to such
extensive and expensive remediation responsibilities for so many years if it believed
no PCBs remained in the buildings seriously belies its litigation position now,
particularly in the absence of any evidence it took such a position prior to this
-16-
litigation.7 Thus, we find that if Dico believed no PCBs remained, its belief was
unreasonable.
Second, we reject Dico's assertion that a September 2003 EPA letter released
it from its obligations under the operation and maintenance plan. We do not believe
the letter can reasonably be read in such a way. The letter on its face makes no such
representation whatsoever and the sentence Dico relies on specifically states that any
future demolition of the buildings would be "subject to certain requirements for
operation and maintenance." Furthermore, as the district court explained in its
summary judgment order finding a violation of the EPA Order, on at least two
occasions after the 2003 EPA letter but before the disassembly began, the EPA
reaffirmed to Dico that the obligations under the operation and maintenance plan
remained in effect. See United States v. Dico, No. 4:10-cv-00503, Dkt. No. 128, at
36-37 (S.D. Ia. Mar. 6, 2013). Moreover, in its April 17, 2003, letter, Dico expressly
stated that it will send the EPA "an annual report . . . verifying that the buildings have
remained unused" and "[i]f operations resume inside the buildings, Dico will resume
the O&M [(operation and maintenance plan)] requirements." There is simply no
credible evidence to support an assertion that the EPA released Dico from its
operation and maintenance plan responsibilities entirely or that Dico could reasonably
believe so.
Dico's final argument is that any violation of the EPA Order was merely a one-
time violation and not a continuing violation. We agree with the district court that
Dico's argument confuses the basis of its violations. Regardless of Dico's failure to
notify the EPA of the disassembly, its failure to maintain the protection and integrity
7
Dico also implicitly acknowledges it cannot make this showing when it states
in its brief that "80 to 90 percent, and perhaps all, of the PCBs that once may have
existed in the insulation of those buildings had been removed by 1997." (emphasis
added).
-17-
of the encapsulation continued throughout the disassembly process and constituted
a continuing violation. We therefore affirm the award of civil damages.
2. Punitive Damages
42 U.S.C. § 9607(c)(3) allows a court to award punitive damages against a
party who "fails without sufficient cause to properly provide removal or remedial
action" in response to an EPA order like the 1994 EPA Order. Under this subsection,
punitive damages must be "at least equal to, and not more than three times, the
amount of any costs incurred by the Fund as a result of such failure to take proper
action." 42 U.S.C. § 9607(c)(3). The statute gives the district court discretion to
award punitive damages within a range, which is based on a specific dollar amount:
the amount the Fund incurred in cleanup costs as a result of the liable party's failure
to comply with the EPA order.
In this case, the Fund incurred cleanup costs at the SIM site, but it did not incur
these costs "as a result of" Dico's violation of the EPA Order. As discussed in Part
II.B.1 above, Dico violated Paragraph 31 when it disassembled the buildings without
EPA approval and without protecting the integrity of the sealing and encapsulation
of the building, and it violated Paragraph 59 when it failed to notify the EPA of this
change in conditions. As a result of these violations, Dico scattered pieces of
insulation on the ground at the teardown site. But the Fund did not clean up the
pieces of insulation that Dico scattered across the teardown site as a result of these
violations. Nor did it perform any cleanup at the teardown site. Rather, the Fund
only incurred cleanup costs from "locating the Dico building debris [at the SIM site],
conducting sampling at the SIM site, overseeing the SIM cleanup, and enforcing this
action for cost recovery and penalties at the SIM site." Dico, 892 F. Supp. 2d at 1147
n.17 (internal quotation omitted). All of these cleanup costs arose after SIM
purchased the beams from Dico and transported them from the teardown site to the
SIM site, approximately 100 miles away. Therefore, all of these cleanup costs arose
-18-
as a result of Dico's sale of the beams to SIM. None of them arose "as a result of"
Dico's violation of the EPA Order.
As discussed in Part II.A, Dico might ultimately be found liable under a theory
of arranger liability for its sale of the beams to SIM, but at this point a fact question
remains that precludes summary judgment on arranger liability. So too with punitive
damages. The cleanup costs at the SIM site derive from Dico's sale of the beams to
SIM. Therefore, since we cannot say as a matter of law Dico is liable for arranging
for the disposal of the beams it sold to SIM, nor can we say as a matter of law it is
liable (through punitive damages) for the cleanup costs the Fund incurred at the SIM
site as a result of the sale of the beams to SIM. Our holding that the district court
improperly granted summary judgment on the issue of arranger liability necessarily
requires us to reverse the district court's award of punitive damages based on cleanup
costs at the SIM site.
In short, since the Fund did not perform any cleanup at the teardown site, it did
not incur any costs "as a result of" Dico's violation of the EPA Order, and without
cleanup costs Dico cannot be liable for punitive damages under § 9607(c)(3). The
district court's award of punitive damages is vacated and remanded for further
proceedings consistent with this opinion.
III
For these reasons, we reverse the district court's summary judgment orders with
respect to the issues of "arranger" liability and punitive damages and affirm its orders
with respect to the EPA Order violations and civil penalties.
-19-
LOKEN, Circuit Judge, concurring in part and dissenting in part.
I concur in Parts II.A. and II.B.2. of Judge Bye’s opinion. I also agree that
Dico is subject to an award of civil penalties for willful violation of an administrative
order but would remand for redetermination of the amount of the penalties and
therefore respectfully dissent in part from Part II.B.1.
A. Arranger Liability. I join Part II.A. of Judge Bye’s opinion but add the
following to clarify my interpretation of the Supreme Court’s controlling decision in
Burlington N. & Santa Fe Ry. v. United States, 556 U.S. 599, 608-13 (2009), where
the Court addressed the “fact-intensive” question of when 42 U.S.C. § 9607(a)(3)
arranger liability attaches.
In Burlington Northern, after a six-week bench trial, the district court
concluded that Shell Oil Company was liable as an arranger for selling hazardous
chemicals to a “sloppy” distributor, knowing there would be leaks and spills in the
delivery and storage process. Id. at 605. The Ninth Circuit affirmed, concluding that
an entity can “arrange for disposal” even if it did not intend to dispose of a hazardous
substance. The Supreme Court reversed, concluding “that Shell was not liable as an
arranger for the contamination that occurred at [the distributor’s] facility.” Id. at 613.
The Court explained that arranger liability is “less clear” in
cases in which the seller has some knowledge of the buyers’ planned
disposal or whose motives for the “sale” of a hazardous substance are
less than clear. In such cases . . . determin[ing] whether an entity is an
arranger requires a fact-intensive inquiry that looks beyond the parties’
characterization as a “disposal” or a “sale” and seeks to discern whether
the arrangement was one Congress intended to fall within the scope of
CERCLA’s strict-liability provisions.
-20-
Id. at 609-10 (citations omitted). The Court rejected the government’s contention that
“Congress intended to impose liability on entities . . . when they engage in legitimate
sales of hazardous substances knowing that some disposal may occur as a collateral
consequence of the sale itself.” Id. at 611-12. Instead, the Court ruled,
In order to qualify as an arranger, Shell must have entered into the sale
of D-D with the intention that at least a portion of the product be
disposed of during the transfer process by one or more of the methods
described in § 6903(3). . . . [T]he evidence does not support an inference
that Shell intended such spills to occur. . . . Shell’s mere knowledge that
spills and leaks continued to occur is insufficient. Id. at 612-13
(emphasis added).
This is not a case like Burlington Northern where there is no evidence that Dico
intended to dispose of a hazardous substance. But as the Fourth Circuit explained:
Anytime an entity sells a product that contains a hazardous substance,
it also intends to rid itself of that hazardous substance in some
metaphysical sense. But intent to sell a product that happens to contain
a hazardous substance is not equivalent to intent to dispose of a
hazardous substance under CERCLA. For arranger liability to attach
[under Burlington Northern], there must be something more.
Consol. Coal Co v. Ga. Power Co., 781 F.3d 129, 149 (4th Cir. 2015). This is the
fact-intensive inquiry Burlington Northern requires.
Despite acknowledging numerous fact disputes, the district court granted
summary judgment for plaintiff United States because “no reasonable fact-finder
could conclude that . . . [Dico] did not intend to dispose of the remaining PCB when
they sold the buildings to SIM,” and “no reasonable fact-finder could conclude that
the buildings at issue were commercially useful.” United States v. Dico, Inc., 892 F.
Supp. 2d 1146, 1156-57 (S.D. Ia. 2012). I agree with Judge Bye the district court
-21-
placed too much emphasis on the value of the buildings and what SIM intended to do
with them, losing sight of the touchstone issue -- whether “the arrangement was one
Congress intended to fall within the scope of CERCLA’s strict-liability provisions.”
Burlington Northern, 556 U.S. at 610.
I am somewhat concerned that Judge Bye’s opinion places too much emphasis
on the analysis of arranger liability in pre-Burlington Northern cases. In my view, the
earlier “battery cracking” cases should be disregarded, not distinguished. Even if
those decisions were sound, the analysis was inconsistent with the Supreme Court’s
in Burlington Northern. Likewise, the pre-Burlington Northern “useful product”
doctrine, which the Ninth Circuit has continued to apply, was not adopted by the
Supreme Court in Burlington Northern. Rather, the Court expressly put in the middle
category of cases requiring fact-intensive inquiry those “in which the seller has some
knowledge of the buyers’ planned disposal or whose motives for the sale of a
hazardous substance are less than clear.”
Most of the cases in which our sister circuits developed what might be called
multi-factor tests involved appeals from the grant of summary judgment imposing or
denying arranger liability. See, e.g., Consol. Coal, 781 F.3d 129 (4th Cir. 2015)
(affirming summary judgment of no liability); NCR Corp. v. George A. Whiting
Paper Co., 768 F.3d 682 (7th Cir. 2014) (same); United States v. Gen. Elec. Co., 670
F.3d 377 (1st Cir. 2012) (affirming summary judgment imposing arranger liability);
Team Enters., LLC v. W. Inv. Real Estate Tr., 647 F.3d 901 (9th Cir. 2011) (affirming
no liability). Under Burlington Northern, comprehensive analysis is needed when a
court is entering final judgment on arranger liability, and these opinions contain a
great deal of useful analysis geared to the fact situations there at issue. But here, I
conclude there are genuine disputes as to facts that are material to the issue of
arranger liability under Burlington Northern. That is all we need decide. Therefore,
I agree we should vacate the grant of summary judgment imposing arranger liability,
-22-
the order assessing response costs for government expenses in remedying
contamination at the SIM site in Ottumwa, and the award of punitive damages.
B. Civil Penalties. A confusing aspect of this case is the fact that Dico’s
alleged arranger liability turns on contamination found at one CERCLA site, the SIM
property in Ottumwa, whereas the district court assessed civil penalties and punitive
damages for Dico’s alleged violation of the EPA’s 1994 administrative order
requiring remedial actions at a second CERCLA site that includes Dico’s property in
Des Moines. CERCLA provides that any person “who, without sufficient cause,
willfully violates, or fails or refuses to comply with” an administrative order issued
in connection with a CERCLA abatement action “may . . . be fined not more than
[$32,500] for each day in which such violation occurs or such failure to comply
continues.” § 9606(b)(1). I agree with the district court that the statutory standard
that governs the EPA in assessing administrative penalties governs a district court
exercising its discretion to determine the amount of a civil penalty:
In determining the amount of any penalty assessed . . . the
President shall take into account the nature, circumstances, extent and
gravity of the violation or violations and, with respect to the violator,
ability to pay, any prior history of such violations, the degree of
culpability, economic benefit or savings (if any) resulting from the
violation, and such other matters as justice may require.
42 U.S.C. § 9609(a)(3); cf. 33 U.S.C. § 1319(d) (mandating nearly identical standards
when a court determines the amount of civil penalties to impose for violation of an
EPA compliance order issued under the Clean Water Act).
The district court concluded as a matter of law that Dico violated two
paragraphs of the 1994 administrative order for 162 days, the time it took to complete
disassembly of the buildings on the Dico property -- paragraph 31, which required
Dico to implement a Maintenance Plan that included “long term . . . encapsulation of
-23-
all building insulation,” and paragraph 59, which required Dico to “immediately
notify EPA’s designated Project Coordinator” if any “change in site conditions,
during the action conducted pursuant to this Order causes or threatens to cause an
additional release of hazardous substances from the Dico Property.” After a bench
trial to determine the amount of civil penalties and punitive damages, the court
assessed penalties of $10,000 per day for 162 days, a total of $1,622,000.00.
I agree with my colleagues that the record established at least a one-day
violation of paragraph 59 for Dico’s willful failure to notify EPA before it demolished
or disassembled the buildings in 2007. That was a change in site conditions that
threatened the release of any PCBs that remained in insulation that was not destroyed
during the primary site clean-up completed in 1997. See All Regions Chem. Labs,
Inc. v. EPA, 932 F.2d 73, 74-75 (1st Cir. 1991), where the EPA assessed, and the
court upheld, a one-day administrative penalty of $20,000 for the failure to give
immediate notice of a far more serious actual release of hazardous chemicals into the
atmosphere. But the finding of multiple violations of paragraph 31 is more
problematic. In September 2003, after Dico submitted a revised work plan advising
that it may demolish the buildings in question, EPA replied:
The EPA does not necessarily object to demolition of the buildings, but
urges Dico to coordinate any plans for demolition of the buildings with
EPA. Certain disposal requirements may apply for building debris, and
the EPA or state would want to oversee the demolition.
Demolition of the buildings would necessarily end permanent encapsulation of their
insulation. No doubt the failure to notify was at least a one-day violation of
paragraph 31, as well as paragraph 59, but the finding of 162 days is unsupported.
The dominant purposes of CERCLA, and therefore the administrative order in
question, are to prevent the release of hazardous substances and to take appropriate
-24-
remedial action when releases have occurred. See 42 U.S.C. §§ 9604, 9606(a). Thus,
Dico’s failure to give timely notice of a change in site conditions that threatened a
release of the encapsulated insulation was clearly at least a one-day violation. But
disassembling the buildings at the site for 162 days was not even arguably a 162-day
violation if there was no actual release of hazardous substances during that activity.
The district court granted summary judgment that a 162-day violation had occurred
because reports from the 1990’s established that “demolishing the buildings
necessarily resulted in a release of PCB.” Dico, 4 F. Supp. 3d at 1066 n.36. But there
was no proof of an actual release. An EPA report following discovery of the
demolition stated that “EPA is following up to determine whether PCB contaminated
insulation may have been disposed of improperly.” Yet the government asserted no
claim for response costs at the Dico site, and presented no evidence that hazardous
substances were in fact released by debris, including insulation, that was deposited
on the property during the disassembly process. Indeed, the district court expressly
found that “[t]here has been no evidence of actual harm to people and/or animals as
a result of the dismantling/demolition of the Dico Buildings.” Id. at 1055.
In determining the amount of civil penalties to assess, the district court stated
that “discussing the evidence concerning PCB concentration is unnecessary in this
case.” Id. at 1064 n.40. In my view, this was an erroneous interpretation of
§ 9609(a)(3) and therefore an abuse of the court’s discretion in determining the
amount of civil penalties. The court also observed that “Dico created another
Superfund site (the SIM site in Ottumwa, Iowa), thus causing the EPA to spend
Superfund money in investigating the PCB release at the SIM site.” Id. at 1064. I
agree that if, in fact, Dico’s actions in disassembling the buildings without notice to
EPA resulted in the transfer of PCB-contaminated steel beams that proximately
caused the release of hazardous substances at the SIM site, that would be highly
relevant in determining the amount of civil penalties to assess for Dico’s violation of
the 1994 administrative order. But that question turns on disputed issues of material
-25-
fact that have led us to reverse the grant of summary judgment holding Dico liable as
an arranger for response costs at the separate SIM CERCLA site.
A massive civil penalty may not be assessed unless it is warranted by the
“extent and gravity of the violation.” § 9609(a)(3). Accordingly, I would remand for
a redetermination of the amount of civil penalties that should be assessed.
KELLY, Circuit Judge, concurring in part and dissenting in part.
I agree with the court’s decision to affirm the summary judgment order with
respect to the EPA order violation and civil penalties. I disagree that the district court
erred in granting summary judgment on the question of arranger liability, and
therefore with this court’s decision to reverse the district court’s award of punitive
damages on that basis. Therefore, I respectfully dissent from Part II.A of the court’s
opinion and the portions of Part II.B that discuss punitive damages.
According to Burlington Northern, “[i]n order to qualify as an arranger, [Dico]
must have entered into the sale of [the buildings] with the intention that at least a
portion of the [hazardous] product be disposed of during the transfer process.”
Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599, 612 (2009). My
reading of the undisputed facts leads me to conclude that Dico had the requisite intent
to dispose of the PCB-laden insulation to support a finding of arranger liability.
As the court notes, other circuits have developed multi-factor tests that are
useful in determining whether a given transaction qualifies as an arrangement for
disposal. The Fourth Circuit has outlined the following four relevant, and helpful,
factors:
[1] the intent of the parties to the contract as to whether the materials
were to be reused entirely or reclaimed and then reused, [2] the value of
-26-
the materials sold, [3] the usefulness of the materials in the condition in
which they were sold, and [4] the state of the product at the time of
transferral (was the hazardous material contained or leaking/loose).
Consol. Coal Co. v. Ga. Power Co., 781 F.3d 129, 148 (4th Cir. 2015) (quotation
omitted). In my view, each of these factors weighs in favor of finding Dico liable as
an arranger.
The first factor is the “intent of the parties to the contract as to whether the
materials were to be reused entirely or reclaimed and then reused.” Id. According
to the testimony of Jim Hughes, president of SIM, SIM only ever intended to buy the
beams. And according to Hughes’s testimony, Dico was aware of SIM’s intent.
Hughes testified that prior to the sale he told Dico consultant and former employee
Don Brown “that SIM wanted to buy only the steel beams from the buildings” and
that they had discussed “the need to discard other building components.” Hughes
testified that during the dismantling process “lots of little pieces of insulation fell on
the ground and were blown around,” that the “insulation was being loaded into Waste
Management Inc. dumpsters for disposal,” and that Brown was on-site during these
activities.8 He also said he specifically told Brown “that debris including the
insulation was going to be hauled to a landfill.” The president of Titan testified that
he himself visited the site “on a weekly basis” during the dismantling process.
Defendants’ own Statement of Additional Material Facts states that when he
sold the building to SIM, Titan Tire president Bill Campbell “believed that Titan Tire,
on behalf of Dico, was selling a commercially useful product—being the steel
beams—for a reasonable value, inasmuch as it was his understanding that SIM
8
Prior to the transaction presently at issue, SIM had bought a similar building
from Dico—one not covered by the 1994 UAO—and this building had been
dismantled and its insulation disposed of in the same fashion.
-27-
intended to reassemble the steel beams on its property in Ottumwa for use in its
business operations.” (Emphases added.) It was “the intent of the parties to the
contract” that the beams would be “reclaimed and then reused,” not that the buildings
would be reused in their “entirety.” In fact, there was testimony from defendants’
own witness that “it doesn’t make sense” to re-use insulation and that he had never
seen it done in forty years of demolition experience. The contract itself instructed
SIM to “demo” (demolish) the buildings. Cf. Pneumo Abex Corp. v. High Point,
Thomasville and Denton R.R. Co.,142 F.3d 769, 775 (4th Cir. 1998) (“The intent of
both parties to the transaction was that the wheel bearings would be reused in their
entirety in the creation of new wheel bearings.” (emphasis added)).
A second relevant factor is the “value of the material sold.” Consol. Coal, 781
F.3d at 148. The court acknowledges that a comparison of the price received by the
seller to the avoided cost of proper disposal is a relevant indication of a seller’s intent
in a transaction. See United States v. Gen. Elec. Co., 670 F.3d 377, 390 (1st Cir.
2012). Dico sold Building 2 for $5,000 and the Maintenance Building for $12,000.
SIM paid $143,200 for Buildings 4 and 5, as well as the Production Building, which
was not subject to the 1994 UAO. While the district court did not make a finding on
the exact amount of clean-up cost Dico avoided by selling the buildings, in 1996 the
EPA estimated that it would cost $2.87 million to properly remediate the Dico
buildings governed by the 1994 UAO—$4.39 million in today’s dollars. This court
properly notes that Dico disputes this number, arguing that the buildings sold to SIM
represent only four out of the six buildings included in the remediation estimate and
SIM was not responsible for the removal of the foundations. While their objection
is noted, there is nothing in the record to suggest that a building such as Building 2
could be properly remediated for less than $5,000, even leaving its foundation
untouched. Indeed, after the demolition was discovered, Dico hired an environmental
contractor to properly dispose of the insulation, employing a three-man crew over two
separate days to haul the insulation in a HAZMAT truck to an EPA-approved toxic
-28-
landfill in Nevada (the total cost of this endeavor is not in the record). The EPA
additionally spent $91,727.51 in the cleanup effort.
Most notably in this cost analysis, SIM was never informed that the buildings
contained PCBs, and SIM’s president testified that this information would have
affected his estimation of the value of the property. PCB-contaminated beams are
worth less than PCB-free beams, and SIM assumed it was purchasing the latter, not
the former. Dico presented no evidence even to suggest that it took any precautionary
steps to ensure any possible contamination was contained prior to or during the
dismantling process. Cf. Consol. Coal, 781 F.3d at 149–50 (ruling that defendant did
not have requisite intent to dispose of PCBs when it only sold transformers that
contained less than 50 ppm of PCBs and those that had higher contaminations were
destroyed in accordance with the Toxic Substances Control Act of 1964); Burlington
N., 556 U.S. at 613 (explaining that defendant had taken precautionary measures in
order to prevent leaks from occurring, including providing safety manuals to its
purchasers, and “providing discounts for those that took safety precautions”).
The third factor of the Fourth Circuit’s test is “the usefulness of the materials
in the condition in which they were sold.” Consol. Coal, 781 F.3d at 148. The beams
were useless with the insulation still attached, i.e., in the condition in which they were
sold. Dico’s own building demolition expert Daniel Hoffman admitted that it was
necessary to strip away the insulation to “get at the beams.” He also testified that in
his forty years of demolition experience he had never seen a commercial buyer reuse
the insulation from these kind of buildings and that it “doesn’t make sense to reuse
it.” The court speculates about whether other parties could have used other parts of
the buildings, but no evidence to this fact was presented to the district court.9 The
9
The court distinguishes the “battery-cracking” cases and the copper wire case
by saying the sale product in those circumstances was “junk.” Yet the buildings in
the present case had been left abandoned for years, one building was sold for a mere
$5,000, most of its components were discarded on site, and its beams were hauled
-29-
only evidence presented was Campbell’s assertions that it was his intent to sell a
useful product. In determining arranger liability, however, courts must undergo a
“fact-intensive inquiry that looks beyond the parties’ characterization of the
transaction as a ‘disposal’ or a ‘sale’” to discern whether arranger liability is
appropriate. Burlington N., 556 U.S. 610. “Frequently, the most probative evidence
of intent will be objective evidence of what happened rather than evidence describing
the subjective mind of the actor.” United States v. Cello-Foil Prods., Inc., 100 F.3d
1227, 1233 (6th Cir. 1996) (quotation omitted).
The fourth factor is “the state of the product at the time of transferral (was the
hazardous material contained or leaking/loose).” Consol. Coal, 781 F.3d at 148. A
key fact that cannot be overlooked in this case is that the PCB-laden insulation was
discarded at the Dico site in the presence of Dico employees. At the time of
transferral the toxic product was not just “leaking” or “loose”—it was actively being
discarded as a part of the transfer. On this issue, there is no dispute.
Taken together, these factors support the conclusion that Dico intended to
dispose of the PCB-laden insulation contained within its buildings. Hughes testified
that he was told Dico “wanted the buildings torn down to accommodate” a “large
development project.” The fact that Dico was able to receive a sum of money for the
beams contained within the buildings does not negate the fact that they wanted the
buildings, and their PCB-contaminated insulation, gone.10 See Consol. Coal, 781
away to an open field and left there among old motors and twisted pipes. One of
defendants’ own experts, Dr. Remy Hennet, called the SIM site “a junk yard.” If the
sale product in the battery-cracking cases was “junk,” the Dico buildings could be
viewed in largely the same way.
10
I agree with the court’s conclusion in Part II.B that Dico could not have
reasonably believed no PCBs remained in the buildings.
-30-
F.3d at 147 (stating that Burlington Northern does not “foreclose arranger liability as
a matter of law based on secondary intent” (emphasis added)).
Knowledge alone is insufficient to find that a party had the intent to arrange for
disposal. Burlington N., 556 U.S. at 612. But the evidence in this case supports
significantly more than Dico’s mere awareness that somewhere down the road some
amount of toxic material could be released by the purchaser of their otherwise useful
buildings. Dico cites to a Seventh Circuit decision finding that once a defendant sells
a useful product to a third party, the toxins contained in the product are “out of the
seller’s hands.” NCR Corp. v. George A. Whiting Paper Co., 768 F.3d 682, 706 (7th
Cir. 2014). The court ruled that this “lack of control is a good reason to find” that
defendants did not arrange for disposal. Id. However, the court added: “we do not
mean to suggest that an ostrich approach would work.” Id. And an ostrich approach
should not work here, either, where Dico hid the very fact of the buildings’
contamination from their purchaser. Dico presented no evidence at the district court,
beyond its own characterization of its intent, to create a genuine dispute of material
fact regarding whether it qualified as an arranger. The facts, viewed in the light most
favorable to Dico, still show that it intended “at least a portion of [the hazardous
product] be disposed of during the transfer process.” Burlington N., 556 U.S. at 612.
______________________________
-31-