USA v. Dico, Inc. ( 2002 )

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 00-3906
___________
United States of America, *
*
Plaintiff-Appellee, *
*
v. *
*
BP Amoco Oil PLC; BP Amoco PLC; *
Chevron Chemical Company; Bayer * Appeal from the United States
Corporation; Monsanto Company; * District Court for the
Shell Oil Company, * Southern District of Iowa
*
Defendants-Appellees. *
*
DICO, Inc., *
*
Intervenor-Appellant. *
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Submitted: June 13, 2001
Filed: January 24, 2002 (Corrected 2/4/02)
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Before McMILLIAN and RICHARD S. ARNOLD, Circuit Judges, and
ROSENBAUM,1 District Judge.
___________
1
The Honorable James M. Rosenbaum, United States District Judge for the
District of Minnesota, sitting by designation.
McMILLIAN, Circuit Judge.
The United States of America (“the government”), on behalf of the
Administrator of the United States Environmental Protection Agency (“EPA”),
brought the present action pursuant to the Comprehensive Environmental Response,
Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601-9675, in the
United States District Court2 for the Southern District of Iowa, against BP Amoco Oil
PLC, BP Amoco PLC, Chevron Chemical Company, Bayer Corporation, Monsanto
Company, and Shell Oil Company, seeking reimbursement of costs incurred by the
government in cleaning up a site located in Des Moines, Iowa, contaminated with
trichloroethylene (“TCE”) and other hazardous substances. Dico, Inc. (“Dico”), an
intervenor in the action, now appeals from a final order of the district court granting
the government’s motion to enter a proposed consent decree (“the consent decree”),
denying Dico’s request for an evidentiary hearing on the government’s motion to
enter the consent decree, and denying Dico’s motion to consolidate this action with
Dico v. Amoco Oil Co., No. 4-97-10130 (S.D. Iowa 1997) (“the contribution action”).
United States v. BP Amoco Oil PLC, No. 4-99-10671 (S.D. Iowa Sept. 29, 2000)
(“slip op.”). For reversal, Dico argues that the district court (1) abused its discretion
and violated Dico’s constitutional rights in failing to hold an evidentiary hearing and
(2) abused its discretion in approving and entering the consent decree. For the
reasons set forth below, we affirm.
Jurisdiction was proper in the district court based upon 28 U.S.C. § 1331.
Jurisdiction is proper in this court based upon 28 U.S.C. § 1291. The notice of appeal
was timely filed pursuant to Fed. R. App. P. 4(a).
2
The Honorable Ronald E. Longstaff, United States District Judge for the
Southern District of Iowa.
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Background
The following is a summary of the factual and procedural background, as set
forth in the district court's order of September 29, 2000. See slip op. at 1-5.
In 1974, TCE was detected in water coming from underground wells located
near property owned by Dico and maintained by the Des Moines Water Works. The
EPA designated the area the “Des Moines TCE Site” and placed it on the national
priority list. The Des Moines TCE Site was divided into several “operable units.”
Operable Unit-2 (“OU-2”) and Operable Unit-4 (“OU-4”) (together “OU-2/4”) are
within Dico’s property. Each was found to be contaminated with TCE, and OU-4 was
also found to be contaminated with herbicides and pesticides.
Dico’s corporate predecessor, Di-Chem, had operated a chemical formulation
business on the Dico property until the 1970s. In 1994, pursuant to two Unilateral
Administrative Orders issued by the EPA, Dico conducted two removal actions at
OU-2/4. A group of former customers of Di-Chem (BP Amoco Oil PLC, BP Amoco
PLC, Chevron Chemical Co., Bayer Corp., Monsanto Co., and Shell Oil Co.)
conducted a third removal action pursuant to an Administrative Order on Consent.
The EPA also incurred costs associated with the removal actions at OU-2/4.
In 1996, the EPA signed a Record of Decision (“ROD”), which confirmed the
completion of the three removal actions at OU-2/4. The former Di-Chem customers
requested settlement negotiations with the government regarding the costs associated
with the OU-2/4 cleanup efforts. Pursuant to CERCLA, 42 U.S.C. § 9622(e)(3), the
EPA undertook a nonbinding preliminary allocation of responsibility (“NBAR”) and
allocated 61% of the responsibility to Dico and 39% to the former Di-Chem
customers collectively. In April 1998, the EPA formally notified the former Di-Chem
customers and Dico that they were potentially responsible parties (“PRPs”) and
provided them each with copies of the NBAR and a proposed consent decree. The
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PRPs were also notified that settlement with the government would provide
protection from liability in the contribution action brought by Dico, arising out of the
same remediation. Dico did not respond to the letter and did not participate in the
settlement negotiations, despite repeated invitations by the government to do so. On
November 2, 1998, when an agreement was imminent between the government and
the former Di-Chem customers, the government sent Dico a reminder that a final
consent decree would include contribution liability protection for the “settling
defendants.”
On November 29, 1999, the government filed the present action in the district
court and simultaneously lodged the proposed consent decree, as signed by the
government and the former Di-Chem customers (hereinafter referred to as “the
settling defendants”). As required by CERCLA, 42 U.S.C. § 9622(d)(2), the consent
decree was published in the Federal Register, in response to which Dico submitted
objections and comments. Dico also moved in the district court to intervene in the
present action and to consolidate it with the contribution action, which it had filed
against the settling defendants in 1997. The district court granted Dico's motion to
intervene, but deferred ruling on Dico’s motion to consolidate the two actions.
On March 10, 2000, the government formally moved to enter the consent
decree. Dico requested an evidentiary hearing on the government’s motion to enter
the consent decree, arguing that (1) a hearing was necessary because the government
had failed to provide a fair and complete record and (2) it had a vested property
interest in the contribution action, which, under the Fifth Amendment, could not be
“taken” without due process (i.e., an evidentiary hearing) and just compensation.
Upon review of the parties’ submissions, the district court entered the order
from which Dico now appeals. The district court denied Dico’s request for an
evidentiary hearing, reasoning that a hearing was not necessary to supplement the
record because Dico had been provided sufficient opportunities to supplement the
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record before and after the consent decree had been lodged in the district court. See
slip op. at 5-9. The district court also rejected Dico’s assertion of a constitutional
right to an evidentiary hearing, reasoning that Dico never had a right to contribution
because its statutory contribution claim was at all times limited by 42 U.S.C.
§ 9613(f)(2) (“A person who has resolved its liability to the United States or a State
in an administrative or judicially approved settlement shall not be liable for claims
for contribution regarding matters addressed in the settlement.”). See id. at 8-9.
Next, the district court granted the government’s motion to enter the consent decree.
Upon careful consideration of the parties’ arguments and the record before it, the
district court concluded that the consent decree had resulted from a fair process, that
it was substantively fair, and that it was reasonable and consistent with CERCLA.
See id. at 9-17. The district court then denied as moot Dico’s motion to consolidate
the contribution action with the action at bar. See id. at 17.
Judgment was entered accordingly, and Dico appealed. Both the government
and the settling defendants oppose Dico’s appeal.
Discussion
Denial of Dico’s motion for an evidentiary hearing
Dico first argues that the district court improperly denied its motion for an
evidentiary hearing. Dico contends that the administrative record was incomplete,
biased, and inaccurate, and that an evidentiary hearing was the only meaningful way
for Dico to rebut the government’s evidence. Dico asserts, among other things, that
the district court erroneously relied on the settlement process as a basis for
concluding that Dico had been given an opportunity to supplement the record. On the
contrary, Dico argues, the settlement process offered nothing more than an
opportunity for Dico to bargain away its contribution rights. Dico also points out that
it was notified of the potential settlement between the government and the settling
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defendants only after Dico had already invested approximately $5.7 million in
response costs and $300,000 in litigation costs. Therefore, Dico argues, its refusal
to participate in the settlement negotiations was justified. Dico further maintains that
a hearing was necessary to examine the evidentiary basis for a nine-page sworn
statement by Daniel Shiel, an EPA attorney, whose statement was submitted by the
government in support of its motion for entry of the consent decree. Shiel’s statement
(hereinafter “the Shiel declaration”) purported to explain, among other things, the
government’s methodology in assigning 61% and 39% of the responsibility to Dico
and the settling defendants, respectively, using eight specific factors.3 According to
Dico, the Shiel declaration was the government’s primary evidence in support of the
EPA’s 61/39 liability allocation, the Shiel declaration did not include or identify
supporting documentation, and Dico was entitled to examine Shiel under oath
regarding the bases for his assertions. Likewise, Dico contends, the government’s
allegations of costs were not adequately supported by the evidence in the record and
therefore should have been subjected to examination, which only an evidentiary
hearing could have adequately provided.
3
The district court set forth the eight factors used in the EPA’s analysis as
follows:
1) distinguishable costs (based on specific wastes of specific waste
types); 2) degree of involvement in management or operations at the
facility; 3) degree of care (including measures taken by a party to
prevent or minimize contamination); 4) fault (culpability and actual
cause of the contamination); 5) degree of cooperation (degree to which
a PRP cooperates or assists in cleanup efforts); 6) financial capability
(whether the PRP is financially viable); 7) financial benefits derived
from waste-producing activity; and 8) financial benefits derived from
remediation.
United States v. BP Amoco Oil PLC, No. 4-99-10671, slip op. at 11 n.4 (S.D. Iowa
Sept. 29, 2000) (citing NBAR Guidance, published at 52 Fed. Reg. 19919 (May 28,
1987)).
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Alternatively, Dico argues that its constitutional rights were violated as a result
of the district court’s denial of its motion for an evidentiary hearing. Dico maintains
that it paid well more than its fair share of the remediation costs and also notes that
it filed its contribution claim before the government ever sought to have the consent
decree entered. Therefore, Dico contends, at the time it filed its motion for an
evidentiary hearing, its contribution claim had become a vested property interest,4
which could not be “taken” without just compensation and due process of the law, as
recognized in Mathews v. Eldridge, 424 U.S. 319, 349 (1976) (due process requires
that procedures be tailored, in light of the decision to be made, to ensure a meaningful
opportunity to be heard).
We review the district court’s denial of Dico’s request for an evidentiary
hearing for an abuse of discretion. United States v. Union Elec. Co., 132 F.3d 422,
430 (8th Cir. 1997) (Union Electric) (quoting United States v. Metropolitan St. Louis
Sewer Dist., 952 F.2d 1040, 1044 (8th Cir. 1992) (“It is within the sound discretion
of the trial court to decide whether an evidentiary hearing is necessary before ruling
on a proposed consent decree.”)). We agree with the district court that Dico was
given a meaningful and sufficient opportunity to present arguments and submit
evidence in opposition to the government’s motion to enter the consent decree.
4
In support of its argument that it had a vested property interest in its
contribution claim, Dico cites 42 U.S.C. § 9657, which provides in part:
If an administrative settlement under section 9622 of this title has the
effect of limiting any person’s right to obtain contribution from any
party to such settlement, and if the effect of such limitation would
constitute a taking without just compensation in violation of the fifth
amendment of the Constitution of the United States, such person shall
not be entitled, under other laws of the United States, to recover
compensation from the United States for such taking, but in any such
case, such limitation on the right to obtain contribution shall be treated
as having no force and effect.
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Therefore, while Shiel’s live testimony might have been helpful in this context, we
cannot say that it was an abuse of discretion for the district court to decide that an
evidentiary hearing was not necessary. Accord United States v. Cannons Engineering
Corp., 899 F.2d 79, 93-94 (1st Cir. 1990) (Cannons Engineering) (holding that district
court did not abuse its discretion in declining to hold evidentiary hearing on
government’s motion for entry of consent decrees).
We further conclude that Dico’s constitutional argument is without merit. To
begin, we agree with the district court that Dico did not have a right to contribution
at the time the government moved for entry of the consent decree. The basis for
Dico’s statutory contribution claim against the settling defendants is § 9613(f)(1)
(“Any person may seek contribution from any other person who is liable or
potentially liable under section 9607(a) of this title . . .”), which is subject to and
limited by § 9613(f)(2) (“A person who has resolved its liability to the United States
. . . in [a] judicially approved settlement shall not be liable for claims for contribution
regarding matters addressed in the settlement.”). In other words, Dico never had a
vested property interest to be taken.5 Moreover, an evidentiary hearing would not
have been required as a matter of due process. Due process is a “flexible concept that
varies with the particular situation,” and its “fundamental requirement . . . is the
opportunity to be heard at a meaningful time and in a meaningful manner.” Winegar
v. Des Moines Independent Community Sch. Dist., 20 F.3d 895, 899-900 (8th Cir.
1994) (citing Zinermon v. Burch, 494 U.S. 113, 127 (1990); Mathews v. Eldridge,
424 U.S. at 333), cert. denied, 513 U.S. 964 (1994). Due process does not always
require an evidentiary hearing, even where a significant interest is at stake. See,
e.g.,United States v. Papajohn, 701 F.2d 760, 763 (8th Cir. 1983) (due process does
not mandate an evidentiary hearing to establish the accuracy of a presentence
investigation report before such report can be considered by district court for
5
Because Dico did not have a vested property interest to be “taken,” 42 U.S.C.
§ 9657 was not implicated by the district court’s decision.
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sentencing purposes). As we have stated, Dico was, in any event, given a meaningful
opportunity to be heard.
Grant of the government’s motion to enter the consent decree
Dico next contends that the district court improperly granted the government’s
motion for entry of the consent decree. Dico maintains that the consent decree is
fatally flawed in all essential respects: procedural and substantive fairness,
reasonableness, and consistency with the meaning and purposes of CERCLA. See
Cannons Engineering, 899 F.2d at 85 (“Reasonableness, fairness, and fidelity to the
statute are . . . the horses which district judges must ride.”).
Dico argues that the consent decree resulted from a procedurally unfair
settlement process. Dico disputes the district court’s reasoning that Dico, having
refused to participate in the settlement negotiations despite the government’s repeated
invitations, was foreclosed from arguing that the settlement process was unfair. On
the contrary, Dico again argues, the entire process was fundamentally unfair from the
beginning and therefore Dico was justified in refusing to participate. According to
Dico, it had already paid the vast majority of the response costs for OU-2/4 when the
government invited it to participate in the negotiations, upon the express assumption
that any resulting consent decree would give the “settling defendants” protection from
contribution liability to Dico. That offer of contribution protection made by the
government to the other PRPs, Dico argues, was unnecessary and fundamentally
unfair to Dico.
Dico further argues that the consent decree is substantively unfair. Dico cites
Cannons Engineering, 899 F.2d at 87, for the proposition that, to be substantively
fair, settlement terms must be “based upon, and roughly correlated with, some
acceptable measure of comparative fault, apportioning liability among the settling
parties according to rational (if necessarily imprecise) estimates of how much harm
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each PRP has done.” Dico maintains that the EPA lacked a rational basis for: (1)
assigning Dico 61% responsibility for the overall OU-2/4 response costs compared
with 39% responsibility assigned to the settling defendants, (2) assigning to Dico the
entire amount of “volatile organic chemicals” (VOC) remediation and oversight costs,
and (3) including complete protection for the settling defendants from contribution
liability to Dico. Dico contends that the district court merely rubber stamped the
EPA’s actions by wholly adopting Shiel’s unsubstantiated and contradicted
conclusory allegations which purported to justify the consent decree based upon the
eight factors: distinguishable costs, degree of involvement, degree of care, fault,
degree of cooperation, financial capability, financial benefit from waste-producing
activities, and financial benefits from the remediation. Regarding distinguishable
costs, Dico argues that the district court blindly adopted Shiel’s claim that Dico
should pay 100% of the VOC remediation costs, even though the NBAR allegedly
suggested that those costs were indistinguishable from costs for which the settling
defendants were responsible. Regarding degree of involvement and financial benefit
from the waste-producing activities, Dico argues that the evidence in the record does
not show that either Dico or any of its corporate predecessors conducted or benefitted
from the formulation process, while the settling defendants were arrangers of the
formulation process and thus were more involved in, and benefitted more from, the
generation of hazardous wastes. As to Dico’s degree of care and fault, Dico argues
that short term releases and flooding at the OU-2/4 area caused contamination for
which Dico cannot be blamed. As to the degree of cooperation, Dico contends that
the district court ignored Dico’s removal actions and only considered its decision not
to participate in the settlement negotiations. Regarding relative financial capabilities,
Dico argues that, contrary to the EPA’s and the district court’s apparent assumptions,
the settling defendants have vastly greater resources than Dico. Finally, as to
financial benefits, Dico suggests that it has suffered more of a loss than a benefit
because it has already paid the vast majority of the response costs. Dico thus
concludes that the district court abused its discretion in holding that the consent
decree fairly allocates liability among the parties.
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Finally, Dico argues that the consent decree is manifestly unreasonable and
inconsistent with the underlying objectives of CERCLA. Dico contends that, in this
particular case, the consent decree penalizes the party that forthrightly remediated at
its own expense, takes undue advantage of the party with the weaker bargaining
strength, and awards the government costs to which it is not entitled. Therefore, Dico
continues, the consent decree violates CERCLA’s objectives by sending the message
that contribution rights are illusory and the best strategy to minimize one’s exposure
is outright refusal to incur any response costs. The end result, Dico concludes, will
be to discourage prompt and efficient cleanup efforts, to undercut PRP confidence in
the CERCLA process, and to render meaningless contribution rights under 42 U.S.C.
§ 9613(f)(1).
We review the district court’s decision to grant the government’s motion to
enter the consent decree for an abuse of discretion. Union Electric, 132 F.3d at 430.
We will not reverse unless Dico has shown that the district court committed a material
error of law or a ‘“meaningful error in judgment.’” Cannons Engineering, 899 F.2d
at 84 (quoting Anderson v. Cryovac, Inc., 862 F.2d 910, 923 (1st Cir. 1988)). In the
present case, the district court’s order granting the government’s motion for entry of
the consent decree reveals to us that the district court carefully considered the
underlying facts and legal arguments and did not mechanistically “rubber stamp” the
consent decree, as Dico suggests. We therefore exercise restraint on review – because
we are deferring both to the EPA’s inherent experience and expertise in handling such
matters and to the district court’s carefully-exercised informed discretion. Id. (“on
appeal, a district court’s approval of a consent decree in CERCLA litigation is
encased in a double layer of swaddling”), quoted in Union Electric, 132 F.3d at 430.
Dico therefore bears a heavy burden to establish a basis for reversal. See Cannons
Engineering, 899 F.2d at 84 (“The doubly required deference . . . places a heavy
burden on those who purpose to upset a trial judge’s approval of a consent decree.”).
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To begin, we cannot agree with Dico’s claims that the settlement process was
inherently unfair and that Dico was justified in refusing to participate because its
contribution rights were at stake. Nothing in the record suggests that the government
and the settling defendants were not negotiating in good faith and at arm’s length.
See id. (respect for agency’s role is heightened where “the cards are dealt face up”
and parties with conflicting interests “hammer out an agreement at arm’s length”).
Moreover, Dico failed even to make a good faith effort to participate in the
negotiations. Dico had the opportunity, through the settlement process, to express
and defend its position and to seek reimbursement of past expenditures; by contrast,
Dico’s refusal even to come to the table precluded its position from ever being heard
or considered. As for Dico’s claim that it was not necessary for the EPA to offer the
settling defendants protection against exposure to contribution liability, that assertion
is debatable,6 but, in any event, beside the point. By providing contribution
protection to the settling defendants, the government neither exceeded nor abused its
authority. Indeed, providing protection from exposure to duplicate liability promoted
fairness in the overall process.
We next consider the substantive fairness of the consent decree, a matter
particularly appropriate for our deferential review. “Substantive fairness introduces
into the equation concepts of corrective justice and accountability: a party should bear
the cost of the harm for which is it legally responsible.” Id. at 87. In the present case,
we agree with the district court’s conclusion that the consent decree reflects a
6
42 U.S.C. § 9613(f)(2) provides:
A person who has resolved its liability to the United States or a
State in an administrative or judicially approved settlement shall not be
liable for claims for contribution regarding matters addressed in the
settlement. Such settlement does not discharge any of the other
potentially liable persons unless its terms so provide, but it reduces the
potential liability of the others by the amount of the settlement.
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reasonable allocation of legal responsibility between Dico and the settling defendants.
Dico was not inappropriately assigned complete responsibility for the VOC-related
costs, because those costs were found to be related to operations of Dico or one of its
corporate predecessors, but could not be traced to the settling defendants. See slip
op. at 11-12. As the district court concluded, the costs resulting from pesticide
contamination were reasonably split between Dico and the settling defendants. See
id. at 12. Regarding the parties’ relative roles in managing the pertinent operations,
the relative degree of care they exercised, their relative fault, and the relative benefits
to them from the waste-producing activity, we agree with the district court that there
is factual and evidentiary support for the EPA’s decision to assign most of the
responsibility to Dico, as the “entity in charge of the facility.” See id. at 12-13. As
to factors such as the degree of cooperation and the benefit of the remediation to the
parties, we note that Dico conducted the first and second removal actions at OU-2/4
only after the EPA obtained unilateral administrative orders commanding Dico to do
so. See id. at 13. By contrast, the third removal action was performed by the settling
defendants pursuant to an administrative consent order. Each of the three removal
actions benefitted Dico, as the owner of the property. Finally, although the exact
amounts of response costs incurred by the parties are subject to debate, it appears
from the record that Dico’s share constitutes significantly less than the 90% Dico
claims.
Finally, we reject Dico’s assertions that the consent decree is manifestly
unreasonable and inconsistent with CERCLA. Regarding Dico’s argument based
upon the contribution protection provided to the settling defendants, we emphasize
that such protection is explicitly authorized under 42 U.S.C. § 9613(f)(2). Moreover,
the contribution protection is reasonable and consistent with the underlying policies
and goals of CERCLA because it prevents duplicate liability and encourages
cooperation with the government, thereby serving the goals of efficient and effective
environmental cleanup and regulation.
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In sum, we hold that the district court did not abuse its discretion in entering
the consent decree upon determining that it is sufficiently fair, reasonable, and
consistent with CERCLA.
Conclusion
The judgment of the district court is affirmed.
A true copy.
Attest:
CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.
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