Aug. Mack Envtl., Inc. v. U.S. Envtl. Prot. Agency

Decision Date07 January 2021
Docket NumberNo. 19-1962,19-1962
PartiesAUGUST MACK ENVIRONMENTAL, INC., Plaintiff - Appellant, v. UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Defendant - Appellee.
CourtU.S. Court of Appeals — Fourth Circuit

UNPUBLISHED

Appeal from the United States District Court for the Northern District of West Virginia, at Clarksburg. Thomas S. Kleeh, District Judge. (1:18-cv-00012-TSK)

Before KING and DIAZ, Circuit Judges, and Stephanie A. GALLAGHER, United States District Judge for the District of Maryland, sitting by designation.

Vacated and remanded by unpublished opinion. Judge King wrote the opinion, in which Judge Gallagher joined. Judge Diaz wrote a dissenting opinion.

ARGUED: Philip R. Zimmerly, BOSE MCKINNEY & EVANS, LLP, Indianapolis, Indiana, for Appellant. Katelin Shugart-Schmidt, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Bradley R. Sugarman, Andrew M. McNeil, BOSE MCKINNEY & EVANS LLP, Indianapolis, Indiana, for Appellant. Jeffrey Bossert Clark, Assistant Attorney General, Eric Grant, Deputy Assistant Attorney General, Evelyn Ying, Austin Saylor, Environment and Natural Resources Division, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C.; Benjamin Cohan, Lee Tyner, UNITED STATES ENVIRONMENTAL PROTECTION AGENCY, Washington, D.C., for Appellee.

Unpublished opinions are not binding precedent in this circuit.

KING, Circuit Judge:

The plaintiff in these proceedings, August Mack Environmental, Inc., seeks to recover nearly $2.7 million in costs incurred cleaning up a contaminated industrial property in Fairmont, West Virginia, that has been designated as a so-called "Superfund" site under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"). The defendant, the Environmental Protection Agency (the "EPA"), dismissed August Mack's administrative claim. In principal part, the EPA determined that August Mack's failure to properly seek preauthorization for the cleanup work precluded a recovery of its costs from the Superfund. When August Mack sought review of the EPA's adverse decision in the Northern District of West Virginia, the district court dismissed the operative complaint under Federal Rule of Civil Procedure 12(b)(6), for failure to state a claim upon which relief can be granted. See Order Granting Motion to Dismiss Amended Complaint, August Mack Env't, Inc. v. EPA, No. 1:18-cv-00012 (N.D. W. Va. July 11, 2019), ECF No. 46 (the "Dismissal Order"). August Mack appeals from the court's judgment and, as explained herein, we vacate and remand.

I.
A.

In July 2000, the thirty-eight-acre contaminated industrial property in Fairmont — known as the Big John's Salvage-Hoult Road Superfund Site (the "BJS Site," or simply the "Site") — was added to the EPA's National Priorities List (the "NPL"), which renderedthe BJS Site eligible to receive money from the Superfund for cleanup.1 The Site includes land historically used in the operation of a coal tar refining facility and for salvage and waste disposal operations. Reilly Tar and Chemical Corporation owned a portion of the Site and operated a coal tar processing plant there for about forty years, from at least 1933 to 1973. Domestic Coke Corporation sold crude coal tar to Reilly until 1948 and owned a railroad right-of-way that traversed a portion of the Site. In January 1973, Reilly sold the property to Big John's Salvage, Inc., which operated a junk salvage facility on the Site until approximately 1984. Big John's Salvage accepted and stored waste materials that contained hazardous substances and various salvageable materials, including crushed non-saleable fluorescent light bulbs, lead dust, oil containing mercury, drummed liquid wastes, and other wastes from Westinghouse Electric's light bulb manufacturing plant.

The foregoing uses of the BJS Site resulted in its adulteration with contaminated tar and other hazardous substances. After the Site was placed on the NPL, the EPA identified Vertellus Specialties, Inc., ExxonMobil Corporation, and CBS Corporation as "Potentially Responsible Parties" under CERCLA.2 On October 10, 2012, the three PotentiallyResponsible Parties entered into a Consent Decree with the EPA and the West Virginia Department of Environmental Protection. The Potentially Responsible Parties were explicitly listed as being bound by the Consent Decree, which further provided that "[n]othing in this Consent Decree shall be construed to create any rights in, or grant any cause of action to, any person not a Party to this Consent Decree." See Consent Decree, August Mack Env't, Inc. v. EPA, No. 1:18-cv-00012, at 77 (N.D. W. Va. June 1, 2018), ECF No. 23-1. Further, according to the Consent Decree's terms, the Northern District of West Virginia was given jurisdiction over the subject matter of the Consent Decree.

Pursuant to the Consent Decree, Vertellus was required to perform cleanup work on the Site, as specified and approved by the EPA. With the EPA's approval, Vertellus hired August Mack, the plaintiff here, as the supervising contractor of the Site's cleanup. August Mack is an Indiana-based environmental firm that provides, among other things, regulatory compliance and remediation services.

Additionally, the Potentially Responsible Parties were required to provide the EPA with nearly $37 million in cash and financial assurances to be used to clean up the BJS Site, which constituted funds specific thereto. These Site-specific funds served as a performance guarantee for the cleanup efforts. Under the Consent Decree, if Vertellus ceased performing the cleanup work, or if the EPA determined that Vertellus's work was unsatisfactory, the EPA could issue a Work Takeover Notice. Such a Notice would trigger the EPA's rights to take custody of the Site-specific funds and allow the EPA to complete the work itself.

August Mack performed cleanup work at the BJS Site for more than three years, from about October 2012 to May 2016. The EPA monitored and approved all of August Mack's actions during those cleanup efforts. For example, August Mack prepared and submitted a Removal Design Work Plan that specifically identified the cleanup work to be conducted, which the EPA then reviewed and approved. August Mack also engaged in other pre-design investigation activities, including evaluation of sediment, soil, and groundwater, in support of the Work Plan.

August Mack expected to be reimbursed for its work at the BJS Site by Vertellus or from the $37 million in Site-specific funds. In May 2016, Vertellus declared Chapter 11 bankruptcy and notified the EPA that it would cease cleanup efforts at the BJS Site. Pursuant to the Consent Decree, the EPA issued a Work Takeover Notice of the Site and assumed responsibility for the cleanup operations. The Site-specific funds were then transferred to the EPA and placed in a Special Account.

After Vertellus filed for bankruptcy, August Mack made a series of efforts to recover nearly $2.7 million it had expended in cleaning up the BJS Site and had not been paid. August Mack unsuccessfully filed claims against Vertellus in bankruptcy court. It also requested reimbursement of its response costs from both CBS and ExxonMobil, but those requests were rejected. In January 2017, August Mack requested that the EPA reimburse it from the Superfund or from the Special Account. The EPA denied any reimbursement or recovery to August Mack.

B.

In March 2017, August Mack appealed the EPA's denial of reimbursement to the EPA's Office of Administrative Law Judges and was accorded an administrative hearing. The EPA moved for a dismissal of the August Mack administrative proceedings. On December 18, 2017, an EPA administrative law judge (the "ALJ") granted the EPA's motion to dismiss, ruling that August Mack had not secured the agency's express preauthorization, pursuant to 40 C.F.R. § 307.21(b), before it sought reimbursement from the Superfund for the response costs it had incurred in cleaning up the BJS Site.3 More specifically, the ALJ applied a strict compliance standard and faulted August Mack for failing to fill out and submit the EPA's preauthorization form, i.e., EPA Form 2075-3. In so doing, the ALJ rejected August Mack's contention that substantial compliance with the preauthorization process is sufficient and that strict compliance is not required. Additionally, the ALJ denied August Mack's claim for disbursement from the Special Account because August Mack was not a party to the Consent Decree and because the ALJ lacked jurisdiction over those Site-specific funds.

On January 17, 2018, August Mack filed its action in the Northern District of West Virginia, pursuant to 42 U.S.C. § 9612(b)(5), requesting court review of the ALJ's denial of its administrative claim for reimbursement from the Superfund. August Mack lateramended its complaint to add a claim for reimbursement from the Special Account. The EPA then filed a motion in the district court to dismiss the operative complaint under Rule 12(b)(6), for failure to state a claim upon which relief can be granted.

By its Dismissal Order of July 11, 2019, the district court granted the EPA's motion to dismiss, being satisfied that the ALJ had not acted arbitrarily or capriciously in denying August Mack's reimbursement claims. According to the Dismissal Order, August Mack had neither sought nor received preauthorization from the EPA and was therefore ineligible for reimbursement from the Superfund. The court rejected August Mack's argument that the doctrine of substantial compliance applies to the question of whether a claimant has fulfilled the preauthorization requirements for Superfund reimbursement. The court also ruled that August Mack could not recover its response costs from the Special Account because August Mack was not a party to the Consent Decree. This appeal followed, and we possess jurisdiction pursuant to 28 U.S.C. § 1291.

II.

We review de novo a district court's dismissal of a complaint for...

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