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Eighth Circuit Upholds Finding that Dico Arranged For Disposal under CERCLA

In yet another installment of the long-running Dico case, on April 11, 2019, the United States Court of Appeals for the Eighth Circuit unanimously affirmed a district court’s $11 million judgment against Dico, Inc., and Titan Tire Corporation, two related entities of Titan International Inc. United States v. Dico Inc., No. 17-3462 (8th Cir. Apr. 11, 2019). The judgment was based on the finding that the entities were “arrangers” under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) when they sold contaminated buildings to an unaware buyer in what the Court determined was an intentional act to rid themselves of environmental obligations to safely dispose of PCBs.

The facts of the case arise out of the 2007 sale by Dico Inc. and its affiliate Titan Tire Corporation of certain buildings to Southern Iowa Mechanical (“SIM”) in Des Moines, Iowa. The buildings at issue were impacted by polychlorinated biphenyls (“PCBs”), and were subject to a 1994 Administrative Order issued by EPA which required the removal of portions of the contaminated materials, encapsulation of the remainder, and a long-term maintenance plan that would include ongoing testing and annual reports to the EPA of the site conditions. The Order also importantly required that Dico and Titan Tire immediately notify EPA upon any changes at the site that would threaten release of the PCBs.

At the time of the sale to SIM, Dico did not disclose the presence of PCBs, or EPA’s Order, to SIM. Further, Dico was aware of SIM’s plan to demolish the buildings, therefore threatening the release of the PCBs, but failed to notify EPA under the Order as required.  And as expected, shortly after the sale, SIM indeed tore the buildings down and stored the salvageable materials in an open field, where EPA later encountered the PCB contamination. EPA undertook remedial actions, and then sought to recover the costs from Dico.

In 2012, at the District Court for the Southern District of Iowa, EPA alleged that Dico violated CERCLA, as it “arranged” for the disposal of the PCBs, and that Dico violated the 1994 Order by failing to adhere to the long-term maintenance plan, failing to prevent the release of PCBs, and failing to notify EPA of the change in site conditions. EPA succeeded on summary judgment, and the district court imposed civil penalties and punitive damages in 2014. On appeal, in 2015 the Eighth Circuit, as we wrote about here, affirmed summary judgment on the issue of the Administrative Order, but remanded the arranger liability and punitive damages issue as it held that questions of fact existed.

Then in 2017, on remand, as we blogged about here, the district court again held Dico and Titan Tire liable as arrangers and held them jointly and severally liable for $5.4 million. The district court also held Dico liable for the same amount of punitive damages, and found both Dico and Titan liable for all costs not yet reported, all future costs, all enforcement costs, and attorney’s fees.

Once more before the Court of Appeals for the Eight Circuit, Dico argued that the court below placed insufficient weight on the facts evidencing that the sale of the buildings was a legitimate transaction not intended to result in the disposal of hazardous materials.  This included that in 2004 Dico has sold a separate building to SIM in a bona fide transaction, that the buildings were "useful products" and the disposal of PCBs merely an unintended consequence of the sale, and that the precise costs of disposal were unknown and hence could not be a motivating factor relied upon by the court to find intent.

All of these arguments were rejected.  The Court of Appeal reasoned that the similarities between the 2004 and 2007 transactions were by no means conclusive evidence of Dico’s intent regarding the sale of the building, particularly in light of Dico's withholding of information from SIM regarding the contamination and EPA’s requirements.  Moreover, because Dico and Titan Tire knew that the contaminated building materials were to be moved to another location where the PCBs would, in effect, be disposed of, the Court held inapplicable the dictate that "mere knowledge" is insufficient to confer liability as expressed in Burlington N. & Santa Fe Ry. Co. v. United States, 556 U.S. 599.  Lastly, the Court of Appeal sided with the district court’s holding below, finding that regardless of the precision of the estimate of the disposal costs that Dico likely avoided, the record supported the finding that proper disposal costs would have far exceeded the building’s purchase price.

In summary, relying on the "clear error" standard of review, the Eighth Circuit held that the district court’s findings were not clearly erroneous, affirming the judgment below and holding Dico and Titan Tire jointly and severally liable as arrangers under CERCLA for the unlawful disposal of the PCB contaminated waste.