Disposed of in Place: The Sale of Contaminated Buildings Results in CERCLA Arranger Liability

The United States 8^th Circuit Court of Appeals recently decided that a tire company and its affiliate could be held liable under the Comprehensive Environmental Response, Compensation and Liability Act at 42 U.S.C. § 9601 et seq. (“CERCLA”) for selling property knowing that the contaminated buildings thereon would be demolished.  Dico, Inc. (“Dico”) owned several old industrial buildings in Des Moines, Iowa. The buildings were all well past their commercially useful lives, and needed costly repairs and upkeep. They were also contaminated with PCBs.

The buildings soon came to the attention of the EPA, which ordered Dico to address the PCBs and submit a long term maintenance plan for review. EPA also required ongoing testing, annual reports, and immediate notification if changes in site conditions threatened further release of PCBs. Without performing any remediation of its own, Dico, through its corporate affiliate, Titan Tire Corporation (“Titan”), sold the buildings to Southern Iowa Mechanical (“SIM”) with the understanding that it would demolish the PCB-laden structures. Dico and Titan did not inform SIM of the PCBs, and they did not inform EPA of the sale. Instead of incurring a $1 million remediation, Dico and Titan saw a $100,000 profit. Thereafter, EPA undertook its own PCB remediation, and later sued Dico and Titan under CERCLA on the theory that they had arranged for the disposal of hazardous substances.

The 8^th Circuit employed the United States Supreme Court’s analytical framework for arrangers set forth in Burlington Northern & Santa Fe Railway Company v. United States, 556 U.S. 599 (2009). In that case, the Supreme Court found that Shell was not liable as an arranger when it shipped product to third-party distributors who happened to spill its products. Shell knew that various minor spills and leaks of its products occurred while in the custody of the third-party distributors, and Shell took steps, such as issuing manuals and advisories, to prevent such spills. Nonetheless, third-party distributors continued to leak Shell’s products. The Supreme Court held that, because Shell never specifically planned for its products to be spilled while in the custody of the third-party distributors, as evidenced by its conduct, it was not liable as an arranger.

Applying this rationale, the 8^th Circuit concluded that Dico and Titan were liable as arrangers. There was enough evidence that Dico and Titan planned to dispose of the PCB contaminated buildings through the sale to SIM. Indeed, despite knowing that the buildings were contaminated and subject to an EPA order, Dico and Titan never related these facts to SIM.  This indicated Dico and Titan intended to rid themselves of known PCB contamination.  Other facts also evidenced the intent to dispose.  The buildings were well past their useful life and not likely to be used again.  Dico and Titan knew SIM would demolish the buildings.  The PCBs were not destined for any further, useful purpose. Dico and Titan also knew that the remediation would cost roughly $1 million, but before doing any remediation of their own, they sold the property to SIM for $100,000. These facts led the 8^th Circuit to conclude that the lower court had an adequate basis for finding that Dico and Titan were properly liable as arrangers under CERCLA.

The 8^th Circuit decision makes clear that courts are willing to consider a wide variety of facts and circumstances when considering arranger liability.  Further, disposal does not require active disposal.  Inaction coupled with intent to dispose was enough to impose CERCLA liability in this case.