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United States v. Northeastern Pharmaceutical & Chem. Co.

Citation: 17 ELR 20603
No. Nos. 84-1837, -1853, 810 F.2d 726/25 ERC 1385/(8th Cir., 12/31/1986) Aff'd in part, rev'd in part, & remanded

The court determines that a hazardous waste transporter and a corporate generator and two of its officers are liable for response costs incurred at the Denney farm site near Verona, Missouri, under Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) § 107 and Resource Conservation and Recovery Act (RCRA) § 7003. The court first rules that CERCLA § 107 imposes retroactive liability for acts committed before its effective date of December 11, 1980. Although there is a presumption in statutory interpretation against retroactive interpretation, and although CERCLA does not explicitly provide for retroactive application, the use of verbs in the past tense in CERCLA § 107(a) makes clear that Congress intended CERCLA to have retroactive effect. Moreover, CERCLA's overall structure and legislative history indicate retroactivity is intended. Retroactive application does not violate due process, because cleaning up inactive and abandoned hazardous waste disposal sites is a legitimate legislative purpose and imposition of retroactive liability on those who created the sites and the industry as a whole is a rational manner to achieve this purpose. The court also holds that retroactivity does not constitute an unconstitutional taking of property, since the government's cleanup eliminated a public nuisance and restored value to the property.

The court next rules that CERCLA § 107 permits recovery of response costs incurred before the statute's enactment. The court adopts the analysis of the court in United States v. Shell Oil Co., 15 ELR 20337, which noted that failing to include preenactment response costs as part of CERCLA liability would eliminate liability at the most threatening sites, because it is these sites which the government had begun to clean up even before CERCLA's enactment.

Turning to the defendants' liability under RCRA, the court rules that § 7003 imposes a standard of strict liability, not negligence, and can be imposed even though the acts of disposal occurred before RCRA's enactment in 1976. Reviewing the 1984 amendments to RCRA, the court finds that Congress has now made clear that it intends the section to apply to past nonnegligent off-site generators. The court holds that the 1984 RCRA amendments are not a substantive change in existing law, but merely a clarification of preexisting law. The court then rules that RCRA § 7003 is not retroactive because it imposes liability for the present and future conditions that result from past acts.

The court next rules on the scope of liability. It holds that defendants are not liable under CERCLA § 107(a)(1), because they did not own or operate the Denney farm site and thus were not owners or operators of the "facility." The court rules that individual corporate officers and employees may be liable under CERCLA § 107, and that "possession" of hazardous substances under § 107(a)(3) depends on actual control over the substances. Personal ownership or actual physical possession is not required. The court next rules that holding individual officers or employees liable is not "piercing the corporate veil," since it attaches liability to the individual for his own personal acts rather than attaching derivative liability to the owner of the corporation. Similarly, individuals may be personally liable for their acts as corporate officers or employees under RCRA § 7003. The court next holds that defendant Northeastern Pharmaceutical may be sued even though it had previously forfeited its corporate charter under applicable Delaware state law, since it had not been dissolved.

Turning to the burden of proof to show that the government's response costs are recoverable under CERCLA § 107, the court rules that defendants have the burden of proof to show that the government's response costs are inconsistent with the National Contingency Plan. The court distinguishes this case from privately incurred response costs, where nongovernmental entities must show that their response costs are consistent with the National Contingency Plan to recover them. For government plaintiffs, all costs incurred not inconsistent with the National Contingency Plan are conclusively presumed to be reasonable. The court rules that in evaluating a challenge to the remedy the government has selected, the applicable standard of review is whether the agency's choice is arbitrary and capricious and finds that there was no such showing in this case.

The court next finds that the government did not improperly seek to recover twice for costs it had already received reimbursement for, pursuant to an earlier settlement with another party, because the government had reduced its total recovery request by this amount. Finally, the court rules that cost recovery under CERCLA or RCRA is equitable relief in the form of restitution or reimbursement, and thus not entitling defendants to a jury trial.

One judge dissents from the court's holding that RCRA § 7003, as in effect before the 1984 amendments, imposes liability on past off-site nonnegligent generators and transporters. The dissent also would remand to the district court whether two individual defendants are factually liable for response costs under RCRA § 7003.

[The lower court opinion appears at 14 ELR 20212, and related opinions by the lower court appear at 13 ELR 20992, 16 ELR 20361, 16 ELR 20368, and 17 ELR 20616.]

Counsel for Appellant
Ted L. Perryman
Robers, Perryman & Bomkamp
Suite 700, 1015 Locust St., St. Louis MO 63101
(314) 421-1850

George Freeman
Hunton & Williams
707 East Main St., P.O. Box 1535, Richmond VA 23212
(804) 788-8200

Counsel for Appellee
David C. Shilton
Land and Natural Resources Division
Department of Justice, Washington DC 20530
(202) 633-5580

Before McMILLIAN, JOHN R. GIBSON and BOWMAN, Circuit Judges.