810 F.2d 726 (8th Cir. 1986), 84-1837, United States v. Northeastern Pharmaceutical & Chemical Co., Inc.

Docket Nº:84-1837, 84-1853.
Citation:810 F.2d 726
Party Name:UNITED STATES of America, Appellee, v. NORTHEASTERN PHARMACEUTICAL & CHEMICAL CO., INC., a Dissolved Delaware Corporation, Edwin Michaels and John W. Lee, Appellants. Ronald Mills and Syntex Agribusiness, Inc. UNITED STATES of America, Appellant, v. NORTHEASTERN PHARMACEUTICAL & CHEMICAL CO., INC., a Dissolved Delaware Corporation, Edwin Michaels a
Case Date:December 31, 1986
Court:United States Courts of Appeals, Court of Appeals for the Eighth Circuit

Page 726

810 F.2d 726 (8th Cir. 1986)

UNITED STATES of America, Appellee,



Dissolved Delaware Corporation, Edwin Michaels and

John W. Lee, Appellants.

Ronald Mills and Syntex Agribusiness, Inc.

UNITED STATES of America, Appellant,



Dissolved Delaware Corporation, Edwin Michaels and

John W. Lee, Appellees,

Ronald Mills and Syntex Agribusiness, Inc.

Nos. 84-1837, 84-1853.

United States Court of Appeals, Eighth Circuit

December 31, 1986

Page 727

[Copyrighted Material Omitted]

Page 728

[Copyrighted Material Omitted]

Submitted March 25, 1985.

Rehearing and Rehearing En Banc Denied April 8, 1987.

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Ted L. Perryman, St. Louis, Mo., for (NEPACCO) and George Freeman, Richmond, Va., for (Syntex Agribusiness, Inc.).

David C. Shilton, Washington, D.C., for appellee.

Before McMILLIAN, JOHN R. GIBSON and BOWMAN, Circuit Judges.

McMILLIAN, Circuit Judge.

Northeastern Pharmaceutical & Chemical Co. (NEPACCO), Edwin Michaels and John W. Lee appeal from a final judgment entered in the District Court 1 for the Western District of Missouri finding them and Ronald Mills jointly and severally liable for response costs incurred by the government after December 11, 1980, and all future response costs relative to the cleanup of the Denney farm site that are not inconsistent with the national contingency plan (NCP) pursuant to Secs. 104, 107 of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), 42 U.S.C. Secs. 9604, 9607 (appeal No. 84-1837). For reversal, appellants argue the district court erred in (1) applying CERCLA retroactively, (2) finding Michaels and Lee individually liable, (3) failing to dismiss NEPACCO as a party defendant, (4) awarding response costs absent affirmative proof that the response costs were consistent with the NCP, (5) refusing to reduce the award of response costs by the amount of a prior settlement, and (6) denying appellants a jury trial.

The United States cross-appeals from that part of the district court judgment denying recovery of response costs incurred before December 11, 1980, and finding appellants and Mills were not liable for response costs pursuant to Sec. 7003(a) of the Resource Conservation and Recovery Act of 1976 (RCRA) (also known as the Solid Waste Disposal Act), as amended, 42 U.S.C.A. Sec. 6973(a) (West Supp.1986) (appeal No. 84-1853). For reversal the government argues the district court erred in (1) finding the government could not recover response costs incurred before the effective date of CERCLA, December 11, 1980, and (2) finding appellants and Mills were not liable for response costs under RCRA Sec. 7003(a), 42 U.S.C.A. Sec. 6973(a) (West Supp.1986).

For the reasons discussed below, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion.


The following statement of facts is taken in large part from the district court's excellent memorandum opinion, United States v. Northeastern Pharmaceutical & Chemical Co., 579 F.Supp. 823 (W.D.Mo.1984) (NEPACCO ). NEPACCO was incorporated in 1966 under the laws of Delaware; its principal office was located in Stamford, Connecticut. Although NEPACCO's corporate charter was forfeited in 1976 for failure to maintain an agent for service of process, NEPACCO did not file a certificate of voluntary dissolution with the secretary of state of Delaware. In 1974 its corporate assets were liquidated, and the proceeds were used to pay corporate debts and then distributed to the shareholders. Michaels formed NEPACCO, was a major shareholder, and was its president. Lee was NEPACCO's vice-president, the supervisor of its manufacturing plant located in Verona, Missouri, and also a shareholder. Mills was employed as shift supervisor at NEPACCO's Verona plant.

From April 1970 to January 1972 NEPACCO manufactured the disinfectant hexachlorophene at its Verona plant. NEPACCO leased the plant from Hoffman-Taff, Inc.; Syntex Agribusiness, Inc. (Syntex), is the successor to Hoffman-Taff. Michaels and Lee knew that NEPACCO's manufacturing

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process produced various hazardous and toxic byproducts, including 2,4,5-trichlorophenol (TCP), 2,3,7,8-tetrachlorodibenzo-p-dioxin (TCDD or dioxin), and toluene. The waste byproducts were pumped into a holding tank which was periodically emptied by waste haulers. Occasionally, however, excess waste byproducts were sealed in 55-gallon drums and then stored at the plant.

In July 1971 Mills approached NEPACCO plant manager Bill Ray with a proposal to dispose of the waste-filled 55-gallon drums on a farm owned by James Denney located about seven miles south of Verona. Ray visited the Denney farm and discussed the proposal with Lee; Lee approved the use of Mills' services and the Denney farm as a disposal site. In mid-July 1971 Mills and Gerald Lechner dumped approximately 85 of the 55-gallon drums into a large trench on the Denney farm (Denney farm site) that had been excavated by Leon Vaughn. Vaughn then filled in the trench. Only NEPACCO drums were disposed of at the Denney farm site.

In October 1979 the Environmental Protection Agency (EPA) received an anonymous tip that hazardous wastes had been disposed of at the Denney farm. Subsequent EPA investigation confirmed that hazardous wastes had in fact been disposed of at the Denney farm and that the site was not geologically suitable for the disposal of hazardous wastes. Between January and April 1980 the EPA prepared a plan for the cleanup of the Denney farm site and constructed an access road and a security fence. During April 1980 the EPA conducted an on-site investigation, exposed and sampled 13 of the 55-gallon drums, which were found to be badly deteriorated, and took water and soil samples. The samples were found to contain "alarmingly" high concentrations of dioxin, TCP and toluene.

In July 1980 the EPA installed a temporary cap over the trench to prevent the entry and run-off of surface water and to minimize contamination of the surrounding soil and groundwater. The EPA also contracted with Ecology & Environment, Inc., for the preparation of a feasibility study for the cleanup of the Denney farm site. Additional on-site testing was conducted. In August 1980 the government filed its initial complaint against NEPACCO, the generator of the hazardous substances; Michaels and Lee, the corporate officers responsible for arranging for the disposal of the hazardous substances; Mills, the transporter of the hazardous substances; and Syntex, the owner and lessor of the Verona plant, seeking injunctive relief and reimbursement of response costs pursuant to RCRA Sec. 7003, 42 U.S.C. Sec. 6973 (count I). In September 1983 the feasibility study was completed.

In the meantime the EPA had been negotiating with Syntex about Syntex's liability for cleanup of the Denney farm site. In September 1980 the government and Syntex entered into a settlement and consent decree. Pursuant to the terms of the settlement, Syntex would pay $100,000 of the government's response costs and handle the removal, storage and permanent disposal of the hazardous substances from the Denney farm site. The EPA approved Syntex's proposed cleanup plan, and in June 1981 Syntex began excavation of the trench. In November 1981 the site was closed. The 55-gallon drums are now stored in a specially constructed concrete bunker on the Denney farm. The drums as stored do not present an imminent and substantial endangerment to health or the environment; however, no plan for permanent disposal has been developed, and the site will continue to require testing and monitoring in the future.

In August 1982 the government filed an amended complaint adding counts for relief pursuant to CERCLA Secs. 104, 106, 107, 42 U.S.C. Secs. 9604, 9606, 9607 (counts II and III). CERCLA was enacted after the filing of the initial complaint. In September 1982 the district court granted partial summary judgment in favor of the government, holding NEPACCO had the capacity to be sued under Delaware law. In September 1983 the district court denied the defense demand

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for a jury trial, holding the government's request for recovery of its response costs was comparable to restitution and thus an equitable remedy. The trial was conducted during October 1983. The district court filed its memorandum opinion in January 1984.


The district court found that dioxin, hexachlorophene, TCP, TCB (1,2,3,5-tetrachlorobenzene, also found at the Denney farm site), and toluene have high levels of toxicity at low-dose levels and are thus "hazardous substances" within the meaning of RCRA Sec. 1004(5), 42 U.S.C. Sec. 6903(5), and CERCLA Sec. 101(14), 42 U.S.C. Sec. 9601(14). 579 F.Supp. at 832, 845; see also United States v. Vertac Chemical Corp., 489 F.Supp. 870, 874-79 (E.D.Ark.1980) (dioxin). The district court also found there was a substantial likelihood that the environment and human beings would be exposed to the hazardous substances that had been disposed of at the Denney farm site. 579 F.Supp. at 846 & n. 28 (discussing meaning of "imminent and substantial endangerment" standard). A state geologist testified the Denney farm site is located in an area in which substances rapidly move through the soil and into the groundwater and, although no dioxin had been found in the water in nearby wells, dioxin had been found as far as 30 inches beneath the soil in the trench. Id. at 832-33.

A. RCRA Findings

The district court held that RCRA Sec. 7003(a), 42 U.S.C. Sec. 6973(a), requires a finding of negligence in order to hold past off-site generators and transporters...

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