United States: US Eighth Circuit Overturns Summary Judgment In Favor Of Government In CERCLA Arranger Liability Case Arising Out Of Sale Of Contaminated Buildings

Keywords: Summary Judgment, Government, CERCLA, Liability

If a defendant sells a product containing hazardous waste to a buyer that later disposes of the product, and if the product has commercial value and was part of a "legitimate sale," the defendant may avoid so-called "arranger liability" under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA")1,even if the seller knows that the buyer intends to dispose of the hazardous product. That was the holding in United States v. Dico, Inc.,2 in which the US Court of Appeals for the Eighth Circuit partly reversed summary judgment that had been entered in favor of the government and against defendant tire manufacturer Dico. The court also affirmed $1.6 million in civil damages based on Dico's inability to prove that it had sufficient cause for violating a related EPA order, but declined to impose punitive damages against Dico for its violation of that order.


Several decades ago, the EPA identified polychlorinated biphenyls ("PCBs") in insulation adhesive in several buildings on Dico's property in Iowa. In 1994, the EPA issued an order requiring Dico to remove or otherwise encapsulate the contaminated insulation. Dico removed some of the insulation and encapsulated what remained. Dico had a continuing obligation under the 1994 order to inspect and maintain the encapsulated surfaces, as well as to notify the EPA of any change in site conditions. By 2002, Dico no longer occupied or used the buildings, and the EPA agreed that Dico could discontinue testing on the condition that DICO alert the EPA should the buildings come back into use.

In 2007, acting through an affiliate, Dico paid Southern Iowa Mechanical ("SIM") to remove parts of certain contaminated buildings and sold SIM several other buildings. After learning of the dismantling and sale, the EPA took the position that Dico was responsible for related cleanup costs. In addition, the EPA tracked insulated steel beams from the disassembled buildings to SIM's facility elsewhere in Iowa, where the beams were in direct contact with the ground. Samples from the surrounding soil confirmed that PCBs resided in the beams and had contaminated nearby soil at SIM's facility. The government subsequently incurred costs related to cleanup of the SIM site.

Arranger Liability

The government sued Dico for recovery of cleanup costs under Section 107(a)(3) of CERCLA, which creates liability for any person who "arranged for disposal or treatment . . . of hazardous substances owned or possessed by such person."3 The district court granted the government's motion for partial summary judgment on its claim that Dico was liable as an arranger of the disposal of hazardous waste.4

After a bench trial on damages, the district court imposed $1,620,000 in civil penalties – $10,000 for each of the 162 days the court deemed Dico to be in violation of the EPA Order – and punitive damages of $1,477,787.73.5 Dico then appealed.

Relying on the US Supreme Court's decision in Burlington Northern & Santa Fe Railway v. United States,6 the Eighth Circuit noted that liability was not immediately apparent because Dico's motives in selling the buildings were unclear, thus requiring a "fact-intensive inquiry" to determine liability. Mere knowledge on the part of the seller that the buyer would dispose of the items in the future is not enough for CERCLA liability. According to the Eighth Circuit, a plaintiff must show that the seller intended for those items to be disposed of when selling them.

Under these principles, the Eighth Circuit held that Dico could not be liable as a matter of law for selling its buildings to SIM. The court criticized the district court for focusing too intently on the buyer's motive for purchasing the buildings and explained that the "relevant question" boils down to "the seller's intent with respect to the transaction."7 The court then stated that if "the sale product has some commercial value and was part of a legitimate sale, even if the seller knows disposal will result," the question whether "the seller did not actually intend to sell the product but intended to discard the hazardous substance" is ordinarily one for a jury to decide.

The court concluded that a dispute of fact regarding Dico's intent precluded summary judgment, as there was evidence that Dico manifested its intent to derive more from the sale than simply the disposal of hazardous materials. The court held that Dico's expectation of commercial value from the sale was reasonable. There was no evidence that the buildings were "merely waste" or "commercially useless," and the buildings were not hazardous products themselves. Further, Dico solicited bids, and other entities beyond SIM were interested in buying. In sum, the court held that the government had not shown that Dico "was merely trying to get rid of a hazardous substance" by selling the buildings.8

Judge Jane Kelly dissented from this conclusion. She maintained that the record indicated both parties' intent that the buildings would not be reused and that the price for which Dico sold the buildings was far lower than the probable cost of remediating them. Furthermore, Judge Kelly noted that SIM was unaware that the buildings contained PCBs, that the steel beams were useless with the insulation still attached and that the hazardous material was discarded at the time of the transfer of ownership. For Judge Kelly, these factors supported the conclusion that Dico intended through its sale of the buildings to dispose of contaminated materials. (Because of this reasoning, Judge Kelly also dissented from the court's reversal of the district court's imposition of punitive damages, discussed below.)

Violation of EPA Order

Though the Eighth Circuit rejected summary judgment against Dico on CERCLA arranger liability, it affirmed the district court's imposition of $1.62 million in civil penalties on Dico for violating the EPA's 1994 order,9 holding that there was little question that Dico had violated the order. Although a defendant can avoid liability for such a violation under CERCLA if it shows "sufficient cause" for doing so,10 the court held that Dico failed to make that showing.

The Eighth Circuit rejected the district court's imposition of punitive damages on Dico for the same violation. Under CERCLA, a court may impose punitive damages against a party that "fails without sufficient cause to properly provide removal or remedial action" in response to an EPA order and if the EPA incurs cleanup costs as "a result of such failure."11 The district court had levied nearly $1.5 million in punitive damages, which was equal to the government's costs in cleaning up contamination at the SIM site. Yet the court held that these costs were not "a result of" Dico's violations of the EPA order. Those violations led to the scattering of contaminated insulation at the building teardown site, not at the SIM site, where the government performed the cleanup. Because the court had held that the government was not entitled to summary judgment with respect to Dico's liability for arranging for disposal of the beams, which went to the SIM site, the punitive damages had to be vacated pending resolution of the arranger liability issue.

Judge James Loken concurred in part and dissented in part. Of particular significance, he agreed that Dico was liable for civil penalties, but would have remanded the case for redetermination of the amount of penalties. As he saw it, although the record showed that Dico violated the EPA order on the day the buildings were demolished, there were no grounds for finding a continuing violation after that day because "there was no proof of an actual release" of hazardous substances on days subsequent to the demolition. Thus, Judge Loken wrote, a one-day fine of $10,000 may have been appropriate, but no more, given that a penalty may not be assessed under CERCLA unless the "extent and gravity of the violation" warrants it. In contrast, the majority gave no consideration to whether the seriousness of this violation warranted a penalty of $10,000 per day, instead perfunctorily holding that Dico's "failure to maintain the protection and integrity of the encapsulation continued throughout the disassembly process and constituted a continuing violation."


While the situation the Eighth Circuit considered in Dico is fairly unique—a defendant violating a standing EPA order in selling buildings containing contaminants, which the buyer then disposes of on a different property— the case's holding on arranger liability has broader applicability. To avoid arranger liability under CERCLA, entities planning to sell items containing hazardous materials would be wise, under both Dico and Burlington Northern, to substantiate the fact that the items have commercial value and are not merely "waste." In such circumstances, sellers should also consider soliciting bids for the items or having them appraised. Doing so could provide evidence that the seller is not "merely trying to get rid of a hazardous substance," in the court's words—a key consideration for determining arranger liability under CERCLA.

The division between the majority and Judge Loken regarding the calculation of the civil penalties is also significant. The determination of civil penalties under statutes that provide for daily penalties is a recurring issue that can have enormous consequences. Here, there really were two debates, both of which Dico lost.

The first was whether Dico's violation was limited to a single day or could be treated as continuing. The majority gave a very elastic interpretation to the concept of a "continuing violation." Arguably, Dico lacked fair notice that its alleged failure to maintain the integrity of the encapsulation after the buildings were demolished could be treated as a violation of the order that could continue—and be the basis for daily penalties—ad infinitum. If a court could be persuaded that the statute does not provide fair notice that it could be applied in this way, imposing penalties based on the notion that Dico had engaged in a continuing violation would violate the US Constitution's Due Process Clause.12

The second question involves the reasonableness of imposing a daily fine of $10,000 under the circumstances described. Even if Dico's violation could be deemed to be a continuing one, its seriousness pales in comparison to the kinds of daily violations that Congress likely had in mind when it enacted the statute (e.g., intentional discharges of hazardous substances in defiance of an EPA order). The Supreme Court's punitive damages jurisprudence applies fully to civil penalties imposed by the government—albeit under the Eighth Amendment's excessive fines clause in addition to, or in lieu of, the Due Process Clause. Companies confronted with governmental demands for massive daily fines should keep that in mind.


1 42 U.S.C. § 9607(a)(3).

2 No. 14-2762, 2015 WL 8479378 (8th Cir. Dec. 10, 2015).

3 42 U.S.C. § 9607(a)(3).

4 United States v. Dico, Inc., 892 F. Supp. 2d 1138 (S.D. Iowa 2012).

5 United States v. Dico, Inc., 4 F. Supp. 3d 1047 (S.D. Iowa 2014).

6 556 U.S. 599 (2009).

7 Judge Loken, concurring and dissenting in part, wrote separately to stress that cases prior to Burlington Northern that focus on a buyer's intent are now irrelevant.

8 Judge Kelly dissented from this conclusion.

9 Damages were calculated by multiplying $10,000 per day for 162 days of violations.

10 42 U.S.C. § 9606(b)(1).

11 42 U.S.C. § 9607(c)(3).

12 See BMW of N. Am., Inc. v. Gore, 517 U.S. 559, 574 (1996) ("Elementary notions of fairness enshrined in our constitutional jurisprudence dictate that a person receive fair notice not only of the conduct that will subject him to punishment, but also of the severity of the penalty that a State may impose."); see also F.C.C. v. Fox Television Stations, Inc., 132 S. Ct. 2307, 2317 (2012) ("A fundamental principle in our legal system is that laws which regulate persons or entities must give fair notice of conduct that is forbidden or required.").

Originally published on January 13, 2016

Visit us at mayerbrown.com

Mayer Brown is a global legal services provider comprising legal practices that are separate entities (the "Mayer Brown Practices"). The Mayer Brown Practices are: Mayer Brown LLP and Mayer Brown Europe – Brussels LLP, both limited liability partnerships established in Illinois USA; Mayer Brown International LLP, a limited liability partnership incorporated in England and Wales (authorized and regulated by the Solicitors Regulation Authority and registered in England and Wales number OC 303359); Mayer Brown, a SELAS established in France; Mayer Brown JSM, a Hong Kong partnership and its associated entities in Asia; and Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. "Mayer Brown" and the Mayer Brown logo are the trademarks of the Mayer Brown Practices in their respective jurisdictions.

© Copyright 2016. The Mayer Brown Practices. All rights reserved.

This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.