U.S. v. Cello-Foil Products Inc.

• Decision Date: 22 November 1996
• Docket Number: 94-1568,Nos. 94-1419,s. 94-1419
• Citation: 100 F.3d 1227
• Parties: United States of America (94-1568), Frank J. Kelley, Attorney General of the State of Michigan, and the State of Michigan (94-1419), Plaintiffs-Appellants, v. Cello-Foil Products, Inc., Clark Equipment Company, General Foods Corporation, and Hoover Universal, Inc., Defendants-Appellees
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1227

100 F.3d 1227

United States of America (94-1568), Frank J. Kelley, Attorney General of the State of Michigan, and the State of Michigan (94-1419), Plaintiffs-Appellants, v. Cello-Foil Products, Inc., Clark Equipment Company, General Foods Corporation, and Hoover Universal, Inc., Defendants-Appellees.

Nos. 94-1419, 94-1568

United States Court of Appeals Sixth Circuit

Argued May 19, 1995

Decided November 22, 1996

On Appeal from the United States District Court for the Western District of Michigan

David C. Shilton (argued and briefed), U.S. Department of Justice, Land & Natural Resources Division, Washington, DC, Robert P. Reichel, Asst. Attorney Gen., Lansing, MI, for U.S. in No. 94-1419.

John R. LaParl, Jr., Smith, LaParl & Mequio, Portage, MI, for Cello-Foil Products, Inc.

Thomas W. Daggett, Cynthia A. King, Wildman, Harrold, Allen & Dixon, Chicago, IL, Larry C. Willey, Grand Rapids, MI, for Clark Equipment Company.

John C. Martin (argued and briefed), Suzanne R. Schaeffer, Patton Boggs & Blow, Washington, DC, Larry C. Willey, Grand Rapids, MI, for General Foods Corp. in No. 94-1419.

Larry C. Willey, Grand Rapids, MI, Timothy C. Russell (argued and briefed), Pamela A. Welty, Stuart E. Hunt, Sonnenschein, Nath & Rosenthal, Washington, DC, for Hoover Universal, Inc. in No. 94-1419.

David C. Shilton (argued and briefed), U.S. Department of Justice, :and & Natural Resources Division, Washington, DC, Robert P. Reichel, Asst. Attorney Gen., Lansing, MI, Leslie E. Lehnert, Unites States Department of Justice, Environmental Enforcement Section, Washington, DC, for U.S. in No. 94-1568.

John C. Martin (argued and briefed), Suzanne R. Schaeffer, Patton, Boggs & Blow, Washington, DC, for General Foods Corp. in No. 94-1568.

Timothy C. Russell (argued and briefed), Pamela A. Welty, Stuart E. Hunt, Sonnenchein, Nath & Rosenthal, Washington, DC, for Hoover Universal, Inc. in No. 94-1568.

Before: JONES and NORRIS, Circuit Judges; DOWD, District Judge.^*

NATHANIEL R. JONES, Circuit Judge.

Plaintiffs, the United States, the Michigan Attorney General and the State of Michigan, appeal the district court's grant of summary judgment to Defendants Cello-Foil Products, Inc., Clark Equipment Company, General Foods Corporation, and Hoover Universal, Inc., in this action for environmental response costs brought pursuant to the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). We conclude the district court erred in its application of the arranger liability portion of CERCLA and genuine issues of material fact exist that preclude summary judgment. Therefore, we reverse and remand this case for further proceedings.

I.

This case involves a major hazardous waste cleanup involving the Verona Well Field, which is the primary public water supply to over 35,000 residents of Battle Creek, Michigan. See Kelley v. Thomas Solvent Co., 727 F. Supp. 1532, 1535 (W.D. Mich. 1989). In 1981, Michigan authorities determined volatile organic chemicals were contaminating the well field. With the assistance of the United States Environmental Protection Agency, the State determined that two of Thomas Solvent Company's ("Thomas Solvent") facilities, known as the Raymond Road Facility and the Annex, were two of the sources of the contamination.

Thomas Solvent, a producer and seller of solvents, operated in Battle Creek from the time of its incorporation in 1963 until 1984, the year it filed for voluntary bankruptcy. During these years, Thomas Solvent sold virgin solvents to numerous customers, including Defendants. Thomas Solvent usually delivered the solvents in fifty-five gallon drums.

Thomas Solvent used the Raymond Road Facility for the storage, transfer, and packaging of solvents and for the cleaning of tanker trucks. Through a drum-deposit arrangement, Thomas Solvent shipped the solvents in its re-usable drums and charged its customers a deposit. Most often, the Thomas Solvent delivery person retrieved the used drums when delivering new, full drums. The returned drums were usually taken to the Raymond Road Facility. The customers were credited for the amount of the drum deposit, when they returned the old drums to Thomas Solvent.

The contents of the returned drums varied. Some of the drums' contents had been emptied as much as possible, some had been refilled with water, and some contained unused solvents of up to fifteen gallons. Thomas Solvent employees inspected the drums when the drums reached either the Raymond Road Facility or the Annex. Drums in need of reconditioning were sent to a reconditioner, often without being rinsed or cleaned. Drums not in need of reconditioning were emptied of any remaining contents, often, onto the ground. The emptied drums were either immediately refilled with solvent or cleaned with a rinseate solution. Prior to 1978, the used rinseate was usually dumped onto the ground. In later years, Thomas Solvent began to recycle the rinseate at off-site locations.

In 1992, the United States and the State each filed complaints against Defendants. The Defendants are four longstanding customers of Thomas Solvent, which returned drums to Thomas Solvent during the period when Thomas Solvent employees were rinsing drums and disposing of the rinseate on the ground. The complaints, brought pursuant to CERCLA 107, 42 U.S.C. Section(s) 9607, collectively sought over $5 million in past response costs for cleanup activities at the Raymond Road Facility plus a declaratory judgment for future response costs. Plaintiffs alleged that Defendants had arranged for disposal of hazardous substances when they returned the drums to Thomas Solvent. The two actions were consolidated for discovery and pretrial purposes.

The magistrate judge decided that this case presented exclusively questions of law and stayed discovery so the parties could file motions for summary judgment. Pursuant to the direction of the magistrate judge, the Defendants filed motions for summary judgment. The Defendants argued that their contract agreement with Thomas Solvent did not impliedly suggest an arrangement for disposal of residual amounts remaining in the drums. Defendants Cello-Foil and Hoover filed a supplemental motion for summary judgment on the ground that the Plaintiffs had failed to offer proof that a disposal ever occurred of solvent residues returned from Cello-Foil or Hoover. After oral argument, the district court granted Defendants' motions for summary judgment on the issue of arranger liability. The court then dismissed, as moot, the joint motion for summary judgment filed by Cello-Foil and Hoover. The Plaintiffs filed this timely appeal.

II.

In this case we are called upon to interpret the scope of CERCLA arranger liability. The relevant provision of CERCLA states that:

Notwithstanding any other provision or rule of law, and subject only to the defenses set forth in subsection (b) of this section--

* * * *

(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, . . . shall be liable . . . .

42 U.S.C. Section(s) 9607(a). The Plaintiffs do not contend that the Defendants arranged for disposal by contract or agreement; rather, they assert that the Defendants "otherwise arranged for disposal" of their unused hazardous solvents through the drum-deposit arrangement. The Plaintiffs claim that the Defendants entered into an arrangement, whereby Thomas Solvent would pick up the residue-containing drums, take them to its Raymond Road Facility, dispose of the residue, and then credit the Defendants with their drum deposit. The district court found that the Defendants could not be held liable because they lacked "intent" to dispose of the residual hazardous substances.

CERCLA does not define the phrase "arrange for." Amcast Indus. Corp. v. Detrex Corp., 2 F.3d 746, 751 (7th Cir. 1993). We conclude that the requisite inquiry is whether the party intended to enter into a transaction that included an "arrangement for" the disposal of hazardous substances. The intent need not be proven by direct evidence, but can be inferred from the totality of the circumstances.

At first blush, discussing state of mind in a CERCLA case appears inappropriate. After all, if the tortured history of CERCLA litigation has taught us one lesson, it is that CERCLA is a strict liability statute. See generally United States v. R.W. Meyer, Inc., 889 F.2d 1497, 1507 (6th Cir. 1989), cert. denied, 494 U.S. 1057 (1990); J.V. Peters & Co. v. Administrator, EPA, 767 F.2d 263, 266 (6th Cir. 1985). Notwithstanding the strict liability nature of CERCLA, it would be error for us not to recognize the indispensable role that state of mind must play in determining whether a party has "otherwise arranged for disposal . . . of hazardous substances." 42 U.S.C. Section(s) 9607(a).

We derive the intent element from the canons of statutory construction. "Otherwise arranged" is a general term following in a series two specific terms and embraces the concepts similar to those of "contract" and "agreement." 2A Norman J. Singer, Sutherland Statutory Construction Section(s) 47.17 (1992); Woods v. Simpson, 46 F.3d 21, 23 (6th Cir. 1995). All of these terms indicate that the court must inquire into what transpired between the parties and what the parties had in mind with regard to disposition of the hazardous substance. Therefore, including an intent requirement into the "otherwise arranged" concept logically follows the structure of the arranger liability provision.

The theory that intent is relevant in this context is no stranger to us. The district court correctly noted that this circuit has read an intent or state of mind...