United States v. Aceto Agricultural Chemicals Corp.
872 F.2d 1373 (1989)
Rule of Law:
Manufacturers who contract with a formulator to process their owned hazardous substances may be held liable under CERCLA as having "arranged for disposal" and under RCRA as having "contributed to" the disposal of hazardous wastes, especially when waste generation is an inherent part of the formulation process and they retain ownership throughout.
Facts:
- Aidex Corporation operated a pesticide formulation facility in Mills County, Iowa, from 1974 through 1981.
- In 1981, Aidex was declared bankrupt.
- EPA investigations in the early 1980s discovered the Aidex site was highly contaminated with hazardous substances in deteriorating containers, surface soil, fauna, and shallow groundwater.
- The EPA, in cooperation with the State of Iowa, undertook various remedial actions to clean up the site using funds from the "Hazardous Substance Superfund."
- Eight pesticide manufacturers contracted with Aidex to formulate their technical-grade pesticides into commercial-grade products according to their specifications.
- The manufacturers owned the technical-grade pesticide, the work-in-process, and the resulting commercial-grade pesticide while the substances were in Aidex’s possession.
- The generation of pesticide-containing wastes through spills, cleaning of equipment, mixing and grinding operations, and production of off-specification batches is an "inherent" part of the pesticide formulation process.
- Aidex in fact generated such wastes and disposed of them on the Aidex site.
Procedural Posture:
- The United States, on behalf of the EPA Administrator, filed a complaint against eight pesticide manufacturers in the United States District Court for the Southern District of Iowa to recover response costs for the cleanup of the Aidex facility.
- The State of Iowa intervened as a plaintiff, seeking to recover its share of response costs under federal and state law.
- The defendants moved to dismiss the action under Fed.R.Civ.P. 12(b)(6), arguing they contracted for product processing, not waste disposal, and Aidex alone controlled waste disposal.
- The district court granted the defendants' motion to dismiss the claims brought under the Resource Conservation and Recovery Act (RCRA).
- The district court denied the defendants' motion to dismiss the claims brought under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA).
- The district court then granted all parties leave to file interlocutory appeals regarding its rulings on both the RCRA and CERCLA claims.
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Issue:
Does a pesticide manufacturer "arrange for" the disposal of hazardous substances under CERCLA or "contribute to" the disposal of hazardous wastes under RCRA when it contracts with a formulator to process its technical-grade pesticides into commercial products, retains ownership of the substances throughout the process, and the generation of wastes is an inherent part of the formulation?
Opinions:
Majority - LARSON, Senior District Judge
Yes, a pesticide manufacturer can be held liable under both CERCLA for "arranging for disposal" and RCRA for "contributing to" the disposal of hazardous wastes under these circumstances. The court found that Congress used broad language in CERCLA section 9607(a)(3), "by contract, agreement, or otherwise arranged for," reflecting an "overwhelmingly remedial" statutory scheme. A liberal interpretation is consistent with CERCLA's goals of prompt government response and holding responsible parties accountable. The court looks beyond defendants’ characterizations of their arrangement as solely for product formulation, noting that courts have found liability even when arrangements were disguised as sales. Crucially, the defendants retained ownership of the hazardous substances throughout the formulation process, and the generation of waste was an "inherent" part of that process. Therefore, defendants could not have hired Aidex to formulate their pesticides without also "arranging for" the disposal of the waste. The court rejected the argument that an intent to dispose or direct control over disposal was required, emphasizing that NEPACCO imposed liability even without ownership, whereas here, ownership was retained. Common law principles, particularly those regarding abnormally dangerous activities, support the imposition of liability. Allowing defendants to "close their eyes" to the method of disposal would frustrate CERCLA’s policies. For the RCRA claims under section 6973(a), the court held that the "imminent and substantial endangerment" language does not require the EPA to sue while the endangerment still exists, especially in a reimbursement action, as this would be an "absurd and unnecessary" requirement. RCRA, like CERCLA, is a remedial statute and should be liberally construed, with legislative history supporting a broad interpretation of "contributed to." The court disagreed with the district court that an explicit allegation of "control" was required, finding that retained ownership, inherent waste generation, and supplying specifications were sufficient facts to infer defendants "contributed to" Aidex’s disposal of wastes. Given that "contributing to" implies less involvement than "arranging for," and the complaint satisfied the latter, it necessarily satisfied the former.
Analysis:
This case significantly broadens the scope of liability under both CERCLA's "arranger" provision and RCRA's "contributor" provision, especially in the context of manufacturing and processing contracts. It establishes that retaining ownership of hazardous substances during a third-party processing activity, where waste generation is an inherent and foreseeable part of the process, is sufficient to incur liability, regardless of direct intent to dispose or explicit control over disposal methods. The ruling underscores the courts' commitment to a liberal interpretation of environmental statutes to ensure cleanup costs are borne by those whose commercial activities are inherently linked to hazardous waste generation, thus making it harder for manufacturers to evade responsibility by contracting out polluting activities.
