U.S. v. Dico, Inc., 17-3462

• Citation: 920 F.3d 1174
• Decision Date: 11 April 2019
• Docket Number: No. 17-3462,17-3462
• Parties: UNITED STATES of America, Plaintiff - Appellee v. DICO, INC.; Titan Tire Corporation, Defendants - Appellants
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

920 F.3d 1174

UNITED STATES of America, Plaintiff - Appellee

v.DICO, INC.; Titan Tire Corporation, Defendants - Appellants

No. 17-3462

United States Court of Appeals, Eighth Circuit.

Submitted: January 15, 2019

Filed: April 11, 2019

Eric David Albert, Litigation Counsel, Elizabeth L. Loeb, Zachary Moor, Steven D. Shermer, U.S. DEPARTMENT OF JUSTICE, Environment & Natural Resources Division, Environmental Enforcement Section, Washington, DC, Thekla Hansen-Young, U.S. DEPARTMENT OF JUSTICE, Environment & Natural Resources Division, Office of Assistant Attorney General, Washington, DC, Robyn E. Hanson, U.S. DEPARTMENT OF JUSTICE, Environmental Defense Section, Denver, CO, for Plaintiff - Appellee.

Joel David Bertocchi, AKERMAN, LLP, Chicago, IL, Michael F. Iasparro, HINSHAW & CULBERTSON, Rockford, IL, Stephen H. Locher, Mark McCormick, I, BELIN & MCCORMICK, Des Moines, IA, Thomas D. Lupo, HINSHAW & CULBERTSON, Chicago, IL, for Defendants - Appellants.

Before BENTON, MELLOY, and KELLY, Circuit Judges.

BENTON, Circuit Judge.

Dico and Titan appeal the district court’s¹ finding that they violated the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA), that they are jointly and severally liable for response costs, and that Dico is liable for punitive damages. Having jurisdiction under 28 U.S.C. § 1291, this court affirms.

I.

Dico, Inc. owned several buildings in Des Moines contaminated with Polychlorinated Biphenyls (PCBs) in the insulation. In 1994, the Environmental Protection Agency issued an administrative order that Dico remove some of the PCB contamination, encapsulate the remaining insulation, and submit a long-term maintenance plan for EPA approval. See 42 U.S.C. § 9606(a) (authorizing the EPA to issue "such orders as may be necessary to protect public health and welfare and the environment"). The order also required ongoing testing, annual reports to the EPA, and immediate notification if changes in site conditions threatened further release of PCBs. Without informing the EPA, Dico—through its corporate affiliate Titan Tire Corporation—sold the buildings to Southern Iowa Mechanical (SIM) in 2007. Titan did not tell SIM that the buildings were contaminated with PCBs and subject to an EPA order. SIM tore down the buildings and stored them in an open field, where the EPA later found PCBs.

The EPA sued Dico to recover damages for its cleanup costs. It alleged Dico violated the CERCLA by arranging to dispose of a hazardous substance. See 42 U.S.C. § 9607(a)(3) (establishing liability for those who "arrange[ ] for disposal ... of hazardous substances"). The EPA also alleged Dico violated the 1994 order by circumventing the long-term maintenance plan, failing to prevent the additional release of PCBs, and failing to notify the EPA of changed site conditions. See 42 U.S.C. § 9606(b)(1) (establishing liability for those who violate the terms and conditions of an EPA order). The district court granted summary judgment, finding CERCLA arranger liability and a violation of the 1994 order. United States v. Dico, Inc. , 892 F.Supp.2d 1138, 1163 (S.D. Iowa 2012). After a bench trial, it imposed civil penalties and punitive damages. United States v. Dico, Inc. , 4 F.Supp.3d 1047, 1068 (S.D. Iowa 2014). This court affirmed summary judgment on Dico’s violation of the 1994 order and civil penalties, but held that questions of fact precluded summary judgment on arranger liability and punitive damages. United States v. Dico, Inc ., 808 F.3d 342, 354–355 (8th Cir. 2015).

On remand, the district court conducted a bench trial. United States v. Dico, Inc. , 265 F.Supp.3d 902, 906 (S.D. Iowa 2017). It found that Dico and Titan arranged to dispose of a hazardous substance in violation of the CERCLA, and held them jointly and severally liable for $ 5,454,370 in response costs. Id. at 967, 970. It held Dico liable for the same amount in punitive damages, an amount equal to the costs incurred from Dico’s violation of the 1994 order. Id. at 970–71. It also found Dico and Titan jointly and severally liable for all costs not yet reported, all future costs, all enforcement costs, and attorney’s fees. Id. at 970. Dico and Titan appeal.

II.

The CERCLA imposes strict liability for environmental contamination upon an entity that "arrange[s] for disposal ... of hazardous substances." 42 U.S.C. § 9607(a)(3) . "[U]nder the plain language of the statute, an entity may qualify as an arranger under § 9607(a)(3) when it takes intentional steps to dispose of a hazardous substance." Burlington N. & Santa Fe Ry. Co. v. United States , 556 U.S. 599, 611, 129 S.Ct. 1870, 173 L.Ed.2d 812 (2009). Dico and Titan qualify as arrangers if they "entered into the sale ... with the intention that at least a portion of the product be disposed of" as a result of the transfer. Id. at 612, 129 S.Ct. 1870.

"[T]he determination whether an entity is an arranger requires a fact-intensive inquiry." Id. at 610, 129 S.Ct. 1870. "After a bench trial, this court reviews the district court’s findings of fact for clear error." Schaub v. VonWald , 638 F.3d 905, 915 (8th Cir. 2011). This court will affirm "the district court’s account of the evidence" if it is "plausible in light of the record viewed in its entirety." Id. , c iting Anderson v. City of Bessemer City , 470 U.S. 564, 573–74, 105 S.Ct. 1504, 84 L.Ed.2d 518 (1985).

Dico and Titan argue that the district court gave insufficient weight to evidence that the transaction was legitimate. For example, the terms of the 2007 sale mirror the terms of Dico and Titan’s 2004 sale of a Weld Shop to SIM. Dico and Titan argue that because the 2004 sale was legitimate, the 2007 was legitimate too. The district court properly found that similarities in the transactions are "by no means conclusive evidence that [Dico and Titan’s] intent regarding the former was the same as their intent regarding the latter." Dico , 265 F.Supp.3d at 966.

Next, Dico and Titan argue the usefulness of part of the buildings is evidence of a legitimate transaction. The district court found that the contaminated buildings’ structural-steel beams were reusable if sampled and decontaminated. Dico , 265 F.Supp.3d at 957. An entity that "enter[s] into a transaction for the sole purpose of discarding a used and no longer useful hazardous substance" is liable under the CERCLA. Burlington N. , 556 U.S. at 610, 129 S.Ct. 1870. But, "an entity could not be held liable as an arranger merely for selling a new and useful product if the purchaser of that product later, and unbeknownst to the seller, disposed of the product in a way that led to contamination." Id.

SIM’s disposal of the contaminated insulation was not "unbeknownst to the seller." Id. The district court found that Dico and Titan Tire "knew the buildings would be dismantled once they were sold" and "sold the buildings with the intention they would be dismantled and removed from the real property on which they were located." Dico , 265 F.Supp.3d at 954–55. Though "knowledge alone is insufficient to prove" arranger liability, "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." Burlington N. , 556 U.S. at 612, 129 S.Ct. 1870.

Dico and Titan argue that the district court erred by failing to presume that the sale of useful products is a legitimate transaction. Even if there were a "presumption that persons selling useful products do so for legitimate business purposes," Team Enterprises, LLC v. W. Inv. Real Estate Tr. , 647 F.3d 901, 908 (9th Cir. 2011), it is not determinative. "[T]he usefulness of a product—however defined—is an important but not dispositive factor to consider in determining the seller’s intent." Dico , 808 F.3d at 349. Sellers of useful products may be liable as arrangers if they intend to dispose of hazardous substances through the sale. See Burlington N. , 556 U.S. at 612, 129 S.Ct. 1870. Here, the district court found that the commercial usefulness of the beams "weigh slightly in favor of concluding Defendants did not intend to arrange for the disposal of hazardous substance by selling the contaminated buildings to SIM." Dico , 265 F.Supp.3d at 957. But, the district court found this factor outweighed by evidence that Dico and Titan intended to dispose of the PCB contamination through the sale. See id. at 966–67.

"A party may sell a still ‘useful’ product ... 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." Dico , 808 F.3d at 349. Here, the cost of disposal or contamination remediation greatly exceeded the contaminated buildings’ purchase price. The district court found that the removal, disposal, and sampling costs Dico avoided from the sale exceeded by ten times the value received from SIM in exchange. Dico , 265 F.Supp.3d at 963. "Consequently, ... the balance of the value Defendants received from SIM compared to costs Dico avoided for proper disposal or remediation constitutes strong evidence of Dico’s intent to avoid environmental liability through the sale of the contaminated buildings to SIM." Id. The district court found that the costs avoided were also strong evidence of Titan’s intent to assist Dico in avoiding environmental liability, because Titan knew of the magnitude of the costs avoided by the sale, and Titan acted on behalf of Dico for environmental matters on the Dico site and the sale to SIM. See id.

Dico and Titan argue that the district court gave too much weight to costs avoided, because the precise costs avoided are debatable, and there is no evidence that Dico and Titan actually calculated costs avoided before the sale. To calculate costs avoided, the district court relied on a feasibility study—prepared for the EPA—evaluating remedial alternatives at the contaminated...