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United States v. Dico, Inc.

Citation: 28 ELR 20608
No. 97-2254, 136 F.3d 572/46 ERC 1193/(8th Cir., 02/12/1998)

The court holds that a lower court improperly awarded summary judgment to the U.S. Environmental Protection Agency (EPA) for its claim to recover response costs from a corporation allegedly responsible for groundwater contamination at a national priorities list site. However, the lower court properly dismissed the corporation's counterclaim against EPA for costs incurred complying with an administrative cleanup order. The court first holds that the corporation failed to exhaust its administrative remedies when it filed its counterclaim against EPA. The corporation's claim that the exhaustion requirement should be waived is without merit. Congress fully intended that petitioners seeking reimbursement for costs expended complying with an administrative cleanup order should not have a cause-of-action in the courts until they have exhausted the administrative remedies set forth in the Comprehensive Environmental Response, Compensation, and Liability Act. Even if the lower court were permitted to exercise discretion in determining if the corporation was required to exhaust its administrative remedies before bringing the same claim in court, the court concludes that the corporation demonstrated insufficient reason that such discretion should be exercised in favor of waiver. The court rejects the corporation's argument that because it filed its administrative petition for reimbursement before EPA filed its lawsuit in federal court, it exhausted its administrative remedies, because the proceedings were not complete. The administrative remedies required by statute are not exhausted absent a final administrative decision. The court also rejects the corporation's claim that it should be excused from exhausting its administrative remedies because it otherwise loses all recourse to the courts on its claim for reimbursement. Excuse is not necessary because the corporation's counterclaim is not compulsory and, therefore, is not lost if it is dismissed for failure to exhaust administrative remedies. The corporation's administrative claim before the EPA Environmental Appeals Board, required by statute to be resolved before filing suit in court, is another pending action within the meaning of the compulsory counterclaim exception set forth in Fed. R. Civ. P. 13(a)(1). However, because the counterclaim is not compulsory, the lower court should have dismissed it without prejudice.

The court next holds that the corporation carried its burden of establishing genuine issues of material fact as to its liability for contamination at the site, and that summary judgment was inappropriate in this case. Although the corporation may have conceded that its operations over the years could have caused soil contamination at the site, nothing in the record supports the proposition that the corporation admitted that any such soil contamination caused the groundwater contamination. In addition, the testimony of witnesses raised genuine issues of material fact. Assessing the credibility of witnesses and evaluating the weight to assign to their testimony is the job of the fact finder and is not a function for the court on a motion for summary judgment. Therefore, the United States should be put to its proof on its claim that the corporation's disposal of hazardous materials caused the groundwater contamination that led to the response costs EPA incurred at the site. Because the court remands the case for trial, it holds that the corporation's innocent third-party defense should be determined at trial, and it sets aside the money judgment entered for the United States.

Counsel for Appellee
Jacques B. Gelin
Environment and Natural Resources Division
U.S. Department of Justice, Washington DC 20530
(202) 514-2000

Counsel for Appellant
Charles F. Lettow
Cleary, Gottlieb, Steen & Hamilton
1752 N St. NW, Washington DC 20036
(202) 728-2700

Before Murphy and Conmy,1 JJ.