Determining An Intent To Dispose Under CERCLA Remains a Puzzlement

Determining when a person has “arranged” for the disposal of a hazardous substance has long been difficult.  The Supreme Court brought some clarity to the issue in Burlington Northern, when it said that:

While it is true that in some instances 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, knowledge alone is insufficient to prove that an entity “planned for” the disposal, particularly when the disposal occurs as a peripheral result of the legitimate sale of an unused, useful product.

In short, intent is necessary.  Unfortunately, ambiguity remains.  The most recent manifestation of this ambiguity was in Thursday’s decision in United States v. Dico, in which the 8th Circuit reversed the District Court’s grant of summary judgment to the government, finding that genuine disputes of fact precluded entry of summary judgment.

In Dico, the defendant owned property that was already a Superfund site.  EPA had learned that there were PCBs in building insulation and issued an order requiring Dico to comply with an O&M plan to ensure that the PCBs did not pose a risk and to notify EPA of changes in conditions of the PCBs.

Dico sold the buildings to a third party, basically for the scrap value of the steel.  The third party demolished the buildings and moved the steel, still covered with PCB-containing insulation, to its facility 100 miles away.  Oops.

The government argued that Dico had “arranged” for the disposal of the PCBs.  The District Court agreed, and imposed $1.62M in civil penalties for violating the order and approximately $1.5M in punitive damages, based on the cost to remediate the PCBs at the third party site.

A divided 8th Circuit concluded that a genuine dispute existed whether Dico intended to dispose of the PCBs through the building sale.  The court found that the cost to remediate the buildings on the Dico site was disputed and that the usefulness of the buildings was also disputed.  The Court also noted that Dico did not view the buildings as useless; it actually solicited multiple bids and ultimately received $140,000 in the sale.

The bottom line is that these cases really are fact-specific.  The important lesson of Dico is the Court’s emphasis that the state of mind of the defendant, not the buyer, is what matters.

Discerning intent to dispose remains a puzzlement.

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