U.S. v. Ottati & Goss, Inc., s. 89-1063

• Citation: 900 F.2d 429
• Decision Date: 03 October 1989
• Docket Number: Nos. 89-1063,89-1065,s. 89-1063
• Parties: , 58 USLW 2611, 20 Envtl. L. Rep. 20,856 UNITED STATES of America, Plaintiff, Appellant, v. OTTATI & GOSS, INC., et al., Defendants, Appellees. UNITED STATES of America, Plaintiff, Appellee, v. OTTATI & GOSS, INC., et al., Defendants, Appellees. Appeal of STATE OF NEW HAMPSHIRE, Intervenor/Plaintiff. . Heard
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 429

900 F.2d 429

31 ERC 1121, 58 USLW 2611, 20 Envtl.

L. Rep. 20,856

UNITED STATES of America, Plaintiff, Appellant, v. OTTATI & GOSS, INC., et al., Defendants, Appellees.

UNITED STATES of America, Plaintiff, Appellee, v. OTTATI & GOSS, INC., et al., Defendants, Appellees.

Appeal of STATE OF NEW HAMPSHIRE, Intervenor/Plaintiff.

Nos. 89-1063, 89-1065.

United States Court of Appeals First Circuit.

Heard Oct. 3, 1989.

Decided April 4, 1990.

William B. Lazarus, with whom David B. Hird, Michael O. Hill, Anne S. Almy, Dept. of Justice, Lands Div., Appellate Section, Donald A. Carr, Acting Asst. Atty. Gen., Peter E. Papps, U.S. Atty., Joseph Freedman and Nancy Elizabeth Caldwell, U.S. E.P.A., were on brief for appellant.

Keith A. Jones, with whom Carol Barthel, J.B. Ruhl, Fulbright & Jaworski, Frank E. Kenison, Nixon, Hall & Hess, and Howard E. Post, were on brief for appellee, Intern. Minerals & Chemical Corp.

Before CAMPBELL, Chief Judge, BROWN, ^* Circuit Judge, and BREYER, Circuit Judge.

BREYER, Circuit Judge.

Nearly ten years ago the Environmental Protection Agency ("EPA") began this lawsuit by asking a court to require several companies to clean up a thirty-four acre hazardous waste site near Kingston, New Hampshire. The suit eventually consisted of two claims that are relevant here, both made under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"). First, EPA said that "actual or threatened release[s]" of "hazardous substance[s]" from the site posed "an imminent and substantial endangerment to the public health or welfare or the environment." It therefore asked the district court, in light of the problem, "to grant such relief as the public interest and the equities of the case may require." 42 U.S.C. Sec. 9606(a) (first sentence). Second, EPA pointed out that it had spent considerable government money beginning to clean up the site. It asked the court to require defendants in the case, various owners, operators, and handlers, to repay the government for "all costs of removal or remedial action incurred by the United States ... not inconsistent with the national contingency plan." 42 U.S.C. Sec. 9607(a).

The suit was complicated. The United States originally brought suit under Sec. 7003 of the Resource Conservation and Recovery Act (RCRA), 42 U.S.C. Sec. 6973, but later amended its complaint to allege causes of action under CERCLA, 42 U.S.C. Secs. 9601-9657. By 1983 the State of New Hampshire and the Town of Kingston had joined as plaintiffs, many of the defendants had filed third-party claims and crossclaims, and a total of seventeen individuals and firms (present or previous owners, handlers, or operators) had become defendants. The site itself consisted of several different areas, including a one-acre site leased to defendant Ottati & Goss, Inc. (the "O & G site"), and a six-acre site owned by defendant Great Lakes Container Corporation (the "GLCC site"). On or near the site were two brooks, a pond, and a marsh area.

While the litigation proceeded, EPA itself began to clean up part of the site, adding to the costs it intended to recover, and two of the defendants also began to help clean up. In the meantime, the court divided the trial itself into two phases. The first phase would determine which defendants the law required to help clean up and to pay costs. The second phase would determine precisely what further cleanup actions the law (42 U.S.C. Sec. 9606(a) (first sentence)) required, and how much the liable firms should pay EPA (42 U.S.C. Sec. 9607).

The court began the first phase of trial on December 5, 1983, concluded the trial on June 13, 1985, and found that the law required fifteen defendants either to engage in further cleanup or to pay part of the costs, or both. See United States v. Ottati & Goss, Inc., 630 F.Supp. 1361 (D.N.H.1985). The second phase of trial began on February 2, 1987, concluded on July 16, 1987, and culminated in injunctive orders requiring particular defendants to engage in certain specified additional cleanup, and to pay certain specified costs. See United States v. Ottati & Goss, 694 F.Supp. 977 (D.N.H.1988). Before, during, or just after the trial, all but one of the defendants agreed to settle their dispute with EPA. One of the defendants, International Minerals & Chemical Corporation (IMC), which had owned and operated the GLCC portion of the site for about three years between 1973 and 1976, would not settle. The EPA has appealed the court's final injunctive order insofar as it applies to that single remaining defendant.

EPA raises three sorts of legal issues on this appeal. First, its appeal raises a general question of statutory interpretation--a question with implications for other cases as well as this one. It asks what legal standard a court should use in deciding whether to grant the particular relief EPA requests when EPA brings an action under the first sentence of 42 U.S.C. Sec. 9606(a). Must a court simply grant EPA's requested injunctive relief unless it determines that EPA's request is "arbitrary, capricious, an abuse of discretion?" 5 U.S.C. Sec. 706(2)(A). Or is the district court free to make its own determinations of fact and to exercise its own judgment in fashioning relief? We conclude that the court, acting pursuant to that statutory sentence, is not bound by administrative law's "arbitrary, capricious" standard.

Second, EPA argues that the record does not adequately support the relief determinations that the district court made. It believes that the record required that court to order IMC to clean up the site somewhat more thoroughly. EPA's arguments are highly fact-specific and evidence-related. We have examined those portions of the record (compiled over ten years and amounting to more than 40,000 pages) that the parties have cited in their briefs. Having done so, we conclude that the district court's determinations of fact and of proper relief are adequately supported, with one exception. The exception consists of the cleanup ordered in respect to volatile organic compounds (VOCs).

Third, EPA raises two "miscellaneous" arguments, one dealing with a district court statement about liability, the other dealing with that court's refusal to award EPA certain indirect costs, a refusal apparently meant as a kind of "sanction" for improper behavior. We have rejected EPA's "liability" related argument as not now properly before us. We have decided to remand the case for further explanation about the "sanction."

In sum, we have affirmed the district court's decision with two exceptions, each of which requires further district court proceedings. The first exception concerns VOC-related relief; the second concerns sanctions.

We shall now explain how we have reached these legal conclusions.

I APA "Arbitrary/Capricious" Review and a CERCLA Injunction

The EPA's initial argument--an argument with implications beyond the confines of this case--concerns application of the Administrative Procedure Act's "arbitrary/capricious/abuse of discretion" standard in determining a proper injunctive remedy. The issue arises because, while the court was in the midst of the liability phase of the trial, EPA began an administrative proceeding to determine an appropriate cleanup remedy. This proceeding lasted about two years, it involved the creation of a seven-volume administrative record, and it led to an EPA document called the "Record of Decision" (ROD), U.S. Exh. 375 (Phase II), which said, among other things, that IMC should undertake the very kind of cleanup for which EPA later argued in court. Once it produced this document, EPA's lawyers told the district court judge that, when he ordered a cleanup remedy, the law required him to order just what the ROD set forth, unless he found the ROD to be "arbitrary and capricious or otherwise not in accordance with law." 42 U.S.C. Sec. 9613(j)(2). The district court rejected this EPA claim; and the EPA now argues that the district court was wrong in doing so.

To understand our evaluation of this argument, the reader must keep two sets of background circumstances in mind. The first set concerns the statute here at issue, the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. Secs. 9601-9657. That statute is designed to help clean up hazardous waste sites. It gives necessary enforcement powers to EPA. It provides, roughly speaking, four separate statutory paths that EPA might follow:

1. EPA clean up/private party reimbursement, 42 U.S.C. Secs. 9604, 9607. EPA itself can clean up a hazardous waste site, use money from a "Superfund" to pay the cost of clean up, and then obtain reimbursement from the site's owners or operators (and various other private persons). Section 9604(a)(1) authorizes EPA "to act ... to remove or arrange for the removal of, and provide for remedial action relating to such hazardous substance...." Section 9607(a) makes relevant private parties "liable for ... all costs of removal or remedial action incurred by the United States Government...."

2. EPA seeks court injunction, 42 U.S.C. Sec. 9606(a) (first sentence). Where there is an "imminent and substantial endangerment to the public health or welfare or the environment," the EPA may ask the Department of Justice "to secure such relief as may be necessary" and the "district court ... shall have jurisdiction to grant such relief as the public interest and the equities of the case shall require." (Emphasis added.)

3. EPA order/court enforcement, 42 U.S.C. Sec. 9606(a) (second sentence) and Sec. 9606(b). The second sentence of 42 U.S.C. Sec. 9606(a) gives EPA the power to "take other action ... including ... issuing such orders as may be necessary to protect public health and welfare and the environment." Subsection (b) provides that EPA may bring an action in "district court to enforce such order" (and to obtain a fine for its violation).

4. EPA order/EPA...