US v. Aceto Agr. Chemicals Corp.

• Decision Date: 26 February 1988
• Docket Number: Civ. No. 87-21-W.
• Citation: 699 F. Supp. 1384
• Parties: UNITED STATES of America, Plaintiff, and State of Iowa ex rel., Iowa Department of Natural Resources, Plaintiff-Intervenor, v. ACETO AGRICULTURAL CHEMICALS CORP., Ciba-Geigy Corporation, The Dow Chemical Corporation, Farnam Companies, Inc., Mobay Corporation, Mobil Oil Corporation, Velsicol Chemical Corporation, and Platte Chemical Corporation, Defendants.
• Court: U.S. District Court — Southern District of Iowa

699 F. Supp. 1384

UNITED STATES of America, Plaintiff and State of Iowa ex rel., Iowa Department of Natural Resources, Plaintiff-Intervenor, v. ACETO AGRICULTURAL CHEMICALS CORP., Ciba-Geigy Corporation, The Dow Chemical Corporation, Farnam Companies, Inc., Mobay Corporation, Mobil Oil Corporation, Velsicol Chemical Corporation, and Platte Chemical Corporation, Defendants.

Civ. No. 87-21-W.

United States District Court, S.D. Iowa, W.D.

February 26, 1988.

Sarah P. Robinson, U.S. Dept. of Justice, Land and Natural Resources Div., Appellate Section, Washington, D.C., for plaintiffs.

Eliza Ovrom, Asst. Atty. Gen., Des Moines, Iowa, for intervenor.

Thomas C. McGowan, Omaha, Neb. and Christopher J. Tinley, Council Bluffs, Iowa, for defendant Platte Chemical Corp.

Theodore Garrett, Keith A. Teel, Washington, D.C. and Edward Remsburg, Des Moines, Iowa, for defendants.

ORDER

DONALD E. O'BRIEN, Chief Judge.

This matter comes to the Court on motions to dismiss for failure to state a claim filed on behalf of each defendant. These motions challenge the authority of the United States and the State of Iowa to recover the costs of cleaning up a contaminated site of a defunct pesticide formulator through civil actions against the manufacturers who sent active pesticide ingredients to the site for formulation and packaging. The United States and the State have filed actions under § 107(a)(3) of the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), codified at 42 U.S.C. § 9607(a)(3), and § 7003 of the Resource Conservation and Recovery Act ("RCRA"), codified at 42 U.S.C. § 6973.¹ For the following reasons, the Court denies the motions with regard to the CERCLA counts, but grants them with regard to the RCRA counts.

From 1974 until its Chapter 7 liquidation in 1981, Aidex Corporation formulated, packaged and distributed pesticides and herbicides at a site in the Missouri River floodplain near Glenwood, Iowa. At the time of the liquidation, the Aidex site included four metal buildings, an 8,000-gallon underground storage tank, two waste burial trenches, the foundation of a liquid formulation building destroyed by fire in 1976, and hundreds of storage drums and tanks containing hazardous wastes and other hazardous substances. According to the United States' complaint, the 1976 fire and the water used to extinguish it caused various chemicals stored in the building to spill onto the ground and spread over the surface of the site, contaminating the soil. In addition, the storage tank was deteriorating, and chemical wastes were leaking from many of the storage drums.

These conditions attracted the attention of the Environmental Protection Agency, which was empowered under CERCLA with authority to clean up sites in response to imminent and substantial dangers to the public health or welfare created by the release of hazardous substances. See CERCLA, § 104(a), 42 U.S.C. § 9604(a). The State of Iowa's Department of Natural Resources possesses similar authority under Iowa law. See Iowa Code § 455B.418(1)(c) (1987). Solid and liquid chemical wastes and contaminated debris were collected and transported to EPA-approved sites for incineration or disposal. Contaminated surface soils were removed from the drum storage area and placed in a storage area constructed on-site. (U.S. Complaint, ¶ 26.) Additional remedial actions were taken in 1986, and future actions may be necessary. "As of November 30, 1986, EPA has expended approximately $10,013,700.00 on these response actions." (U.S. Complaint, ¶ 27.) As of March 1, 1987, the State of Iowa has incurred expenses of $95,451.00, and is committed by contract with the EPA to pay an additional $780,000.00. (Iowa Complaint at ¶ 7.)

THE CERCLA CLAIMS

To fund the EPA's response efforts, Congress created the Hazardous Substance Response Trust Fund, better known as the "Superfund", which is financed through a combination of appropriations, taxes on the manufacture of petroleum products and certain inorganic chemicals, and judgments received through legal actions under § 107 of CERCLA. "CERCLA does not identify expressly the elements of a prima facie case of liability for cleanup costs. Instead, the statute merely lists classes of potentially liable parties § 107(a) and provides three causation-based defenses § 107(b)." United States v. Bliss, 667 F.Supp. 1298, 1304 (E.D.Mo.1987). Because the defenses are relatively weak,² the critical issue in most cases is whether each defendant is a member of one of the following classes of potentially liable parties:

(1) The owner and operator of a vessel or a facility,

(2) Any person who at the time of disposal of any hazardous substance owned or operated any facility at which such hazardous substances were disposed of,

(3) 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, and

(4) Any person who accepts or accepted any hazardous substances for transport to disposal or treatment facilities, incineration vessels or sites selected by such person, from which there is a release, or a threatened release which causes the incurrence of response costs, of a hazardous substance.

CERCLA, § 107(a), 42 U.S.C. § 9607(a) (emphasis added).

In an ordinary situation, liability under subdivision (a)(3) will extend to generators of hazardous wastes.³ Generators are typically liable not because they generate wastes, but because they typically arrange for the disposal of wastes they have generated. Bliss, 667 F.Supp. at 1306; Violet v. Picillo, 648 F.Supp. 1283, 1288 (D.R.I. 1986); United States v. Ward, 618 F.Supp. 884, 893-94 (E.D.N.C.1985); United States v. Conservation Chemical Co., 619 F.Supp. 162, 190 (W.D.Mo.1985); United States v. Mottolo, 629 F.Supp. 56, 60 (D.N. H.1984).

Generators of wastes seldom operate at the first point in the stream of production; usually other companies operate "upstream" from waste generators, and sell raw materials and unfinished products which are purchased by generators. Because the involvement of upstream producers in the production of wastes ordinarily ends at the point of the sale of raw materials, it could hardly be said that such producers thereby arrange for the disposal of hazardous wastes. Thus, they are not ordinarily liable under § 107(a)(3). Cf. United States v. Westinghouse, 14 Env.Law Rptr. 20,483, 20,484 (S.D.Ind.1983).

Because the pesticides industry is structured in a unique manner, the liability of pesticide manufacturers must be considered separately. According to the United States, "it is a common practice in the pesticide industry for a manufacturer of a technical grade pesticide to arrange for another company to formulate and package a commercial grade pesticide from a technical grade pesticide and to package the resulting product for the manufacturer." (¶ 46.) The formulator is more of an independent contractor than a purchaser, because the manufacturer normally maintains ownership of the technical grade pesticide, the work in progress, and the commercial grade pesticide even after possession passes to the formulator. (¶ 50.) If the plaintiffs' allegations are true, as the Court must assume at this stage, "the generation of wastes containing a pesticide through spills, cleaning of equipment, mixing and grading operations, production of batches that do not meet specifications and other means, is inherent in the formulation process." (¶ 47.)

The plaintiffs contend that all defendants except Mobil and CIBA-GEIGY arranged for the disposal of hazardous substances within the meaning of § 107(a)(3) by arranging for Aidex to formulate and package their pesticides through processes which necessarily result in the generation of wastes. These defendants respond that the language of § 107(a)(3) cannot be stretched to cover manufacturers which did not generate wastes or take any affirmative action to dispose of wastes, but merely sent valuable products to a generator with the intent that the products would be processed and not discarded.

The defendants must surmount two obstacles in order to persuade this Court to dismiss the CERCLA claims at so early a stage in the litigation. The first obstacle is procedural. "A complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d 80 (1957). "This rule, which has been stated literally hundreds of times, precludes final dismissal for insufficiency of the complaint except in the extraordinary case where the pleader makes allegations that show on the face of the complaint some insuperable bar to relief." Lewis v. Chrysler Motors Corp., 456 F.2d 605, 607 (8th Cir.1972).

The second obstacle is the canon of construction which federal courts have employed when interpreting CERCLA. "CERCLA has acquired a well-deserved notoriety for vaguely-drafted provisions and an indefinite, if not contradictory, legislative history." United States v. Mottolo, 605 F.Supp. at 902. "Nevertheless, Congress intended broad judicial interpretations of CERCLA in order to give full effect to two important legislative purposes: to give the federal government the tools necessary for a prompt and effective response to hazardous waste problems and to force those responsible for creating hazardous waste problems to bear the costs of their actions." Violet v. Picillo, 648 F.Supp. at 1288; United States v. Reilly Tar & Chemical Corp., 546 F.Supp. 1100, 1112 (D.Minn.1982). Thus, the First and Second Circuits have ruled that "we will not interpret § 107(a...