Petition for Writ of Certiorari — Northeastern Pharmaceutical & Chemical Co. v. United States

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87-68 78a

JOSEPH F. SPANIOL, JR.

No. wee...

IN THE

Supreme Court of the United States

OCTOBER TERM, 1986

NORTHEASTERN PHARMACEUTICAL AND CHEMICAL

ComMPANY, INC., ef al.,

Petitioner,

VS.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

TED L. PERRYMAN*

JOHN L. WALKER

ROBERTS, PERRYMAN & BOMKAMP, P.C.

1015 Locust Street, Suite 700

St. Louis, Missouri 63101

(314) 421-1850

Attorneys for Petitioners

* Counsel of Record

St. Louis Law Printing Co.,Inc., 411 No. Tenth Street 63101 314-231-4477

QUESTIONS PRESENTED

The questions presented below involve the construction and

constitutionality of two feders! statutes known as the Com-

prehensive Environinental Resporse, Compensation, and

Liability Act of 1980 (CERCLA), 42 U.S.C. § 9601 et seq., and

the Resource Conservation and Recovery Act of 1976 (RCRA),

42 U.S.C. § 6901, et seq.

1. Whether CERCLA applies retroactively to hold non-

negligent parties liable for cleanup costs of an inactive waste

disposal site?

2. Whether RCRA applies retroactively to hold non-negligent

parties liable for cleanu > costs of an inactive waste disposal site?

3. If CERCLA and RCRA are applied retroactively, does the

retroactive application violate Article I, Section 8 prohibiting

standardless delegation of legislative authority; Article I, Sec-

tion 9 prohibiting a ‘‘Bill of Attainder or ex post facto Law,”’ or

the Due Process Clause of the Fifth Amendment of the United

States Constitution.

4. Whether a corporate officer may be held personally liable

for his non-wrongful conduct while carrying out his respon-

sibilities on behalf of the corporate entity?

5. Whether Congress intended to impose strict liability or

negligence as the standard of care?

6. Whether petitioners are entitled to a trial by jury as

guaranteed by the Seventh Amendment of the United States

Constitution?

7. If peritioners are liable under CERCLA and RCRA, what

costs are recoverable by the United States?

ii

PARTIES

The other parties to this case are peti*ioners Edwin Michaels

and John Lee. Defendant Ronaid Mills was not represented by

counsel in the district court and has not appealed. Defendant

Syntex Agribusiness, Inc. settled with the government prior to

trial. It filed an amicus curiae brief with the Court of Appeals,

generally in support of petitioners’ retroactivity arguments.

iil

TABLE OF CONTENTS

Page

ee ecg hk eed eta cenecess l

Tee dices a secs sidnesdcenencs 2

Constitutional and Statutory Provisions Involved...... 2

eed nck yb ea tesaseseascess 2

Reasons for granting the Petition.................... 7

Neha shake sek eserecnessss 25

Appendix A - Opinion of Court of Appeals ........... A-l

Appendix B - Judgment of Court of Appeals.......... A-48

Appendix C - Order of Court of Appeals denying peti-

Ec ceases eceeennes A-49

Appendix D - Memorandum Opinion of District Court. A-50

Appendix E - Order for final Judgment .............. A-109

Appendix F - Order of District Court denying motion to

alter or amend judgment.............. A-112

Appendix G - Notice of Appeal ..................... A-114

Appendix H - Notice of Cross-Appeal ............... A-115

Appendix I - Constitutional and statutory provisions

rr A-116

iv

TABLE OF AUTHORITIES

Page

Cases:

Buckley v. Valeo, 424 U.S. 1, 96S.Ct. 612) ........... 14

Consumers Product Safety Commission v. GTE

Srtvamin, GE7 UD. CECT 2a esc cssccereicns 20

Continental v. N.E. Pharm. & Chem. Co., 811 F.2d

fo eS er ree rere 22

Dupuy v. Dupuy, 434 U.S. 911 (1977)................ 19

Greene v. United States, 376 U.S. 149, 84S.Ct. 615 .... 12

Gulf Oil Corporation v. Copp Paving Co., 419 U.S.

RE, Fe es CE bb we Wik os oS eaacssekd cs 13

Hassett v. Welch, 303 U.S. 303, 58 S.Ct. 559 (1938) .... 12

I.N.S. v. Chadha, ___ U.S. ____, 103 S.Ct. 2764 (1983)

C3, PG COCURTOROR) onus wc ccc cn sccananess 14

Pension Benefit Guaranty Corporation v. R.A. Gray

and Co., 467 U.S. 717, 104S.Ct. 2709 (1984) ..... 14, 15

Pernell v. Southall Realty, 416 U.S. 363 (1974) ........ 20

State ex rel. Brown v. Georgeoff, 562 F.Supp. 1300

Sh CIEE xb nc 4b 6 6 6n000 00554 a seneas 12

Tillman v. Wheaton-Haven Recreation Association,

ac. S17 F.2e URE CR Gat. UBT a) nw 2 cnc cn csnss 17

United States v. Donovan, 429 U.S. 413 (1977) ........ 19

United States v. Northeastern Pharm. & Chem. Co.,

579 F.Supp. 823 (W.D. Mo. 1984) .............. 22

United States v. Northeastern Pharm. & Chem. Co.,

(we oe | lm | ere |

United States v. Price, 361 U.S. 304 (1960)............ 20

United States v. Wade, 546 F.Supp. 785 (E.D. Pa. 1982) 19

United States v. Wade, 20 Env’t. Rep. Cases (BNA)

was ass 24

United States v. Waste Industries, Inc., 556 F.Supp.

ef RF ale ee ree 19

Usery v. Turner Elkhorn Mining Co., 428 U.S. 1, 96

acc caacakhwskeacenccanccaes 14, 15

Constitution and Statutes:

United States Constitution

ee eee eee 2

PE on v'oe ccd ected cows cwvennave< 2

I id biun an cadedcek een ke suc 2, 15, 16

IIIS bk cc btckweNhidevanweences 20

Comprehensive Environmental Response, Compensa-

tion, and Liability Act of 1980 (CERCLA), 42

Ros EL, Sascha wsdbiscarncubsenans passim

Section 104, 42 U.S.C. §9604...............000. 2,4

Section 106(a), 42 U.S.C. §9606(a) .............. 2,4

Section 107, 42 U.S.C. §9607................05. 2,4

Section 107(a), 42 U.S.C. §9607(a) .............. 12, 18

Section 113(b), 42 U.S.C. §9613(b)... 2.2.2.2... 2

OUI Bay ee Woes Gs 6s wk ca wncnvccecces 12

Resource Conservation and Recovery Act of 1976

(RCRA), 42 U.S.C. §6901 ef seg. ............... passim

Section 7003, 42 U.S.C. §6973 .............. 2, 4, 18, 19

vi

Section 7003(a), 42 U.S.C. §6973(a) .............

- tS hod >.) Peer Teer Ter ee Terr rere ere ye

(LI k E 6 PRP eee Leer reer ee arer eee ee

Miscellaneous:

Committee on Environment and Public Works, A

Legislative History of the Comprehensive En-

vironmental, Response, Compensation, and

~ Liability Act of 1980 (Superfund), Pub. L. 96-510

USE ChE G Od EME AAS HAS REO RARE LA Wana

1979 Congressional Record, S 13243 (June 4, 1979) ....

Senate Bill, S 1480 [Section 4(n)] .................08-

Restatement of Restitution (1937) Part I, introductory

SE uch ches ncvsdeeenesscdOes

McCormick, Law of Evidence, §343 (2d ed. Cleary

SR a ech eee Gas ae ek ok Oa BA CRRA RO ORC KES

Shipman, Handbook of Common Law Pleadings,

DN soy Dene CUES yee cba RNS Shek

Woodward, The Law of Quasi Contract, §§1-3 (1913) ..

2, 6

10

14

13

21

24

21

21

No.

IN THE

Supreme Court of the United States

OcTOBER TERM, 1986

NORTHEASTERN PHARMACEUTICAL AND CHEMICAL

ComPANY, INC., ef ai.,

Petitioner,

VS.

UNITED STATES OF AMERICA,

Respondent.

PETITION FOR WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Petitioners Northeastern Pharmaceutical and Chemical Com-

pany, Inc., Edwin Michaels and John Lee respectfully pray that

a Writ of Certiorari issue to review the judgment and opinion of

the United States Court of Appeals for the Eighth Circuit

entered December 31, 1986.

OPINIONS BELOW

The opinion of the court of appeals (App. A, infra, Al - A47)

is reported at 810 F.2d 726. The opinion of the district court

(App. D, infra, A50-A108) is reported at 579 F.Supp. 823.

tr

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JURISDICTION

The judgment of the court of appeals (App. B, infra, A48)

was entered on December 31, 1986. A petition for rehearing

was denied on April 8, 1987 (App. C, infra, A49). The jurisdic-

tion of this Court is invoked under 28 U.S.C. §1254()).

CONSTITUTIONAL AND STATUTORY

PROVISIONS INVOLVED

This case involves Article I, Sections 8 and 9 and the Fifth

Amendment to the United States Constitution; section 107 of

the Comprehensive Environmental Response, Compensation,

and Liability Act of 1980 (CERCLA), Pub. L. 96-510, 94 Stat.

2781, codified at 42 U.S.C. §9607; section 7003 of the Resource

Conservation and Recovery Act of 1976 (RCRA), as amended

in 1980, Pub. L. 96-482, 92 Stat. 2348, codified at 42 U.S.C.

§6973; and section 7003 of RCRA as amended in 1984, Pub. L.

98-616, 98 Stat. 3271, codified at 42 U.S.C. §6973.

STATEMENT OF THE CASE

The United States of America brought this action under sec-

tion 7003 of the Resource Conservation and Recovery Act of

1976 (RCRA), as amended in 1980; 42 U.S.C. §6973, and sec-

tions 104, 106(a), and 107(a) of the Comprehensive En-

vironmental, Response, Compensation and Liability Act of

1980 (CERCLA), 42 U.S.C. §§9604, 9606(a), and 9607(a)

against Northeastern Pharmaceutical and Chemical Company,

Inc. (NEPACCO), Edwin Michaels (Michaels), and John Lee

(Lee), officers of NEPACCO, Ronald Mills (Mills), and Syntex

Agribusiness, Inc. (Syntex), for the recovery of response costs

incurred in cleaning up hazardous waste at the James Denney

farm. The jurisdiction of the district court was invoked pur-

suant to 28 U.S.C. §1345, 42 U.S.C. §6973, and 42 U.S.C.

§§9604, 9606(a) and 9613(b). A detailed statement of facts is set

forth in the district court’s memorandum opinion. (App. D, in-

fra, ASO-A108).

NEPACCO was organized and incorporated in Delaware in

1966 for the purpose of manufacturing pharmaceuticals, in-

cluding hexachlorophene, a germicidal agent used widely by

hospitals and physicians throughout the United States. In

response to an order from the United States Food and Drug Ad-

ministration limiting the use and sale of hexachlorophene,

NEPACCO closed its operation and ceased doing business in

1972. In 1974 NEPACCO liquidated its assets pursuant to a

stockholder approved liquidation plan. Although NEPACCO

did not file a certificate of dissolution, the Delaware Secretary

of State forfeited NEPACCO’s charter to do business on

August 22, 1976 and NEPACCO became a dissolved corpora-

tion.

During the time period in question, the individual defen-

dants, Edwin Michaels and John Lee, were officers, directors

and stockholders of NEPACCO. Defendant, Ronald Mills,

was an independent contractor who contracted with NEPAC-

CO to haul certain waste materials to a farm owned by James

Denney. Mills was not represented by counsel in the underlying

trial of this matter.

In 1971 NEPACCO was engaged in the production of hex-

achlorophene. Certain waste materials, including filter clays,

second crop hexachlorophene, toluene, and unidentified liquid

materials were placed in 55 gallon drums for disposal.

In July, 1971, defendant Mills approached plant manager,

Bill Ray, concerning the removal and disposal of the drummed

material referred to above. Ray discussed this proposal with

Lee and Lee made suggestions concerning the soil characteristics

desirable for disposal of filter clays and second crop hex-

achlorophene. Although there is a dispute as to the extent of

Lee’s involvement in approving of Mill’s services and the selec-

tion of a disposal site, the district court found that Lee knew

and approved of the proposed use of Mills’ services and the

disposal site. Michaels was not at the NEPACCO plant during

ie eon

this time period and had no personal involvement in the selec-

tion of Mills or the disposal of drummed waste at the Denney

farm.

In October of 1979 the Environmental Protection Agency

(EPA) received an anonymous tip that waste material from the

NEPACCO plant had been transported to the Denney farm.

The EPA commenced an investigation and it found toluene,

trichlorophenol (TCP), and 2,3,7,8-TCD (dioxin). Other

remedial investigation and work was conducted by the EPA and

in June, 1980 a temporary cap was placed over the trench where

the drums were stored.

On August 1, 1980 the United States of America filed a cum-

plaint against NEPACCO, Michaels, Lee, Mills and Syntex pur-

suant to section 7003 of RCRA, 42 U.S.C. §6973 (1980) for the

reimbursement of its response costs. On August 19, 1982 the

United States filed a First Amended Complaint adding counts

for relief pursuant to sections 104, 106(a) and 107(a) of

CERCLA, 42 U.S.C. §§9604, 9606(a) and 9607(a).

On October 3, 1983, a non-jury trial was held before the

Honorable Russell G. Clark. The district court issued its

memorandum opinion on January 3, 1984, finding the Jefen-

dants jointly and severally liable under section 107(a) of

CERCLA, 42 U.S.C. §9607(a). On April 16, 1984, the district

court entered an order of final judgment against the defendants

in the amount of $155,171.93 (App. E, infra, A109-A111). The

defendants’ motion to alter or amend the judgment was denied

on May 3, 1984. (App. F, infra, Al12-A113). NEPACCO,

Michaels and Lee timely filed a notice of appeal on June 27,

1984, (App. G, infra, A114), and the United States filed a notice

of cross-appeal on June 29, 1984. (App. H, infra, A115).

On December 31, 1986, the United States Court of Appeals

for the Eighth Circuit rendered its opinion (App. A, infra,

A1-A47) and entered judgment (App. B, infra, A48). In a split

decision the court of appeals affirmed in part, reversed in part

my

and remanded for further proceedings. In reversing the district

court, the court of appeals held: (1) the United States can

recover its pre-enactment costs under CERCLA; (2) section

7003 of RCRA imposes strict liability upon past off-site

generators and transporters of hazardous substances; and (3)

Michaels and Lee are personally liable under section 7003(a) of

RCRA, 42 U.S.C. §6973(a) (Supp. 1986).

Judge John R. Gibson concurred wiih the majority in all

aspects except the majority’s holding that RCRA §7003(a), 42

U.S.C. §6973(a) (1982), imposes liability on past off-site non-

negligent generators and its determination that the government

could recover response costs from Michaels and Lee under sec-

tion 7003(a). In dissent Judge Gibson stated:

I think the 1984 House Conference Report is nothing

more than a blatant effort by members of a later Congress

to graft their personal views of the scope of liability under

the RCRA onto the original act. It is bootstrapping, and

the majority fail to recognize it as such. The Conference

Re>ort characterizes the 1984 amendments as ‘‘clarifying”’

the RCRA....The amendments to section 7003(a) are

directed toward changing the scope of the section to reach

past as well as present and future generators and

transporters of hazardous waste. I believe this to be a

substantive change, rather than a clarification. In any

event, because the amendments did not relate to the ‘‘con-

tributing to’’ language, the statements in the House Con-

ference Report regarding the standard of liability under

section 7003(a) — negligence versus strict liability — are

wholly gratuitous.

* * * *

I would affirm [the district court’s] reasonable conclu-

sion that Congress did not intend to impose strict liability

On past generators and transporters of hazardous waste. |

would not accept at face value the assertion by certain

x

members of the 98th Congress that they can divine the in-

tent of the 94th Congress in enacting the RCRA some eight

years earlier.

(App. A infra A45-A46)

NEPACCO, Michaels and Lee filed a petition for rehearing

en banc and this was denied on April 8, 1987. (App. C, infra,

A49). Judges John R. Gibson, the author of the dissenting opi-

nion, and Theodore McMillian, the author of the majority opi-

nion, would have granted the petition. This Court has jurisdic-

tion by virtue of 28 U.S.C. §1254(1).

a

REASONS FOR GRANTING THE PETITION

In order to understand the significance of this lawsuit, one

need only examine the significance of the so-called Superfund

Act. In 1980, when the legislation was signed by President

Carter, the Environmental Protection Agency estimated that

some 2,000 abandoned hazardous waste sites existed. Approx-

imately $1.6 billion was appropriated to administer the clean-up

of 400 sites considered to be the most hazardous to public

health.

By 1985, the EPA recognized that it had _ grossly

underestimated the scope of the problem and admitted that

CERCLA and RCRA were inadequately drafted to meet its

needs. The Office of Technology Assessment now estimates

that there may be as many as 10,000 sites with a total cost pro-

jection of $100 billion. By 1990, the number of abandoned sites

discovered will no doubt increase along with the resultant costs.

The Superfund program was initially scheduled for comple-

tion by 1985. The legislation was drafted based upon the

assumption that cleanup was rclatively inexpensive and involved

scraping a few inches of soil off the ground. Unfortunately, the

EPA failed to recognize that we are a society which buries its

waste.

For decades we have buried our waste. This method of

disposal was not only permitted, it was encouraged by govern-

mental authorities. Even today, burial is the most prevelant

method we use in disposing of our wastes. The historical

prediliction to burial, coupled with cur present practice, places

a tremendous burden upon legislation which was enacted to

resolve the problem.

As drafted, CERCLA and RCRA could not withstand the

burden alone. The district court below recognized the inade-

quacies:

“ |

po

‘*CERCLA is in fact a hastily drawn piece of compromise

legislation, marred by vague terminology and deleted pro-

visions. The courts are once again placed in the

undesirable and onerous position of construing inade-

quately drawn legislation.”’ (App. D, infra, A100).

Consequently, the EPA has prevailed upon the lower courts to

‘judicially construe’’ the statutes in order to support an other-

wise tenuous foundation. In its petition, NEPACCO seeks a

constitutional examination of the foundation.

This case was tried without a jury in October 1983. At that

time, industry and environmentalists were closely monitoring

the case since it was the first lawsuit to be tried on the merits

under CERCLA and RCRA. The district court made detailed

findings of fact upon which the case can be examined. Further-

more, the issues were presented on appeal before the Eighth Cir-

cuit Court of Appeals. The length of the appendix is testimony

to efforts of the lower courts in grappling with the issues involv-

ed. The petitioners and the United States have fully exhausted

their remedies. The record before the Court is complete and

ripe for resolution.

Since its enactment in 1980, the Superfund Act has been

litigated in virtually every circuit court of appeals. Not only

has the United States filed hundreds of lawsuits, but many state

and private actions have been maintained. A significant body

of law has developed in the lower courts. These decisions are

reported on a daily basis in journals and reporters specializing in

toxic waste law. The legal literature dealing with CERCLA and

RCRA has proliferated proportionately with the number of

Superfund sites discovered. Notwithstanding the plethora of

appellate and district court decisions, the Supreme Court has

not heard or been requested to hear a case concerning the con-

stitutionality of RCRA or CERCLA. This will be a case of first

impression. Given the undisputed factual nature of the case and

its involvement with only one site, the case lends itself to resolu-

tion by our highest court.

= oo

The importance of this case reaches beyond the litigants who

have a financial interest at stake. However, one should not

overlook its importance to petitioners, Michaels and Lee. Both

have been held strictly liable for response costs in excess of

$500,000. Their liability, in part, is premised upon their posi-

tions as officers of NEPACCO. In particular, Michaels was

held responsible solely because he was president of the cor-

porate entity. The United States conceded that he did not per-

sonally ‘‘arrange for’’ the disposal of waste. However, as a cor-

porate officer he was held vicariously liable for the conduct of

the corporation. When NEPACCO disposed of its waste in

1971, CERCLA or RCRA did not exist. No regulatory

framework existed to control the buriai of waste. More impor-

tantly, the technology concerning hazardous waste we rely upon

in the 1980’s did not exist in 1971. Yet, the United States and

the EPA insist that Michaels and Lee be judged by today’s stan-

dards. It is with 20-20 hindsight that liability is being imposed.

For iid Michaels and John Lee, it is being imposed unconstitu-

tionally.

If the EPA is correct and some 10,000 abandoned sites exist,

the number of Superfund actions will grow exponentially. By

1990, every chemical manufacturer in the United States will be

involved directly or indirectly in a cleanup action. Since burial

of wastes was the preferred choice, the entire industry is involv-

ed. Congress has enacted legislation which established a $1.6

billion fund to be used by the EPA for cleanup. The industry

provided the funds for Congress through direct taxation.

In 1985, when the Superfund Amendments and Reauthoriza-

tion Act of 1986 (SARA) was considered by Congress, congres-

sional hearings concluded that the administration of the Super-

fund program undermined the intent of the program. It was

found that the program ‘‘was victimized by gross mismanage-

ment.’’ After years of mismanagement, the EPA continues to

file lawsuits seeking wide ranging remedies including money

damages for reimbursement of its costs. The industry is once

=

again being taxed, but this time through litigation where the

standard is one of liability without fault.

If the imposition of liability for practices engaged in decades

ago fell upon the industry equally, it might be tolerated. Unfor-

tunately, the United States seeks ‘‘joint and several liability’’ re-

quiring those with assets to pay the entire cost. NEPACCO is

defunct and has no assets. The burden is borne personally by

Michaels and Lee.

The costs to both the industry and the public are

astronomical. For example, the EPA has estimated that the

cost to clean up Times Beach, Missouri by incinerating the diox-

in contaminated soil to be in excess of $400 million. This is only

one of 2,000 sites across the country in need <1 cleanup. If the

legal issues are not resolved, the industry will have no choice but

to litigate every site. The litigation will be endless.

Perhaps Congressman Harsha of Ohio was prophetic when he

stated during debates on the Superfund Law of 1980:

‘‘These are not spurious issues...they are going to be

litigated and the courts are going to have a field day

ridiculing the Congress on passing laws that are vague, in-

ternally inconsistent. .. without any further guidance This

bill is not a superfund bill, its a welfare and relief act for

lawyers.”’

1 Committee on Environment and Public Works, A Legislative

History of the Comprehensive Environmental Response, Com-

pensation, and Liability Act of 1980 (Superfund), Pub. L.

96-510, 1, 788-789 (1983).

!

The number of lawsuits, the astronomical costs associated

with cleanup and the substantial constitutional questions in-

herent in the legislation itself, require that petitioners’ writ be

seriously considered.

Unfortunately, there are other equally important reasons why

this case is appropriate for further consideration. Since its

ee ee

a ns

enactment in 1980, CERCLA lawsuits have proliferated. Ob-

viously, it is to the advantage of both the environment and the

industry if cleanup of the sites can be carried out completely and

expeditiously. In order for the EPA and potentially responsible

parties to engage in meaningful negotiations leading to settle-

ment, the parties must have a clear understanding of the law. At

present, the EPA construes the legislation to incorporate ab-

solute liability for any conduct which has occurred during the

last century. Negotiations are seldom meaningful because the

EPA refuses to concede that certain acts may not create liability

or that some costs may not be recoverable. Accordingly,

negotiations often conclude with the United States instituting a

superfund action.

The certainty of the law not only fosters settlemets, it likewise

is Often determinative of who must bear the costs. In many

cases, chemical manufacturers and transporters are insured. If

the insurers have a clear understanding of the liability and costs,

cases can be resolved without the necessity of a declaratory

judgment action determining the rights of the insurer. Typical-

ly, when a chemical manufacturer is sued by the EPA a demand

is made upon the insurer to defend and indemnify. Not know-

ing the extent of liability or responsibility for costs, the insurer

denies coverage and a declaratory judgment action follows.

Again, another round of litigation involving insurance coverage

and the superfund act begins.

The final chapter on waste disposal and cieanup will not be

written for decades. Congress has drafted the introduction

through enactment of CERCLA and RCRA. As we begin to

cleanup the nation’s hazardous waste sites, we must have a

mechanism that will afford due process to those who are

targeted as responsible parties. As the number of discovered

disposal sites grow and as the cleanup costs escalate, the need

for due process becomes acute. Petitioners were denied due

process of law for sake of expediency in dealing with a serious

national problem. It is difficult for a lower court to declare that

—

RCRA and CERCLA apply prospectively or that a retroactive

imposition of liability creates new liabilities resulting in a viola-

tion of due process. It is difficult because our environment and

economy hang in the balance.

Petitioners appeal to the Supreme Court of the United States

for a final hearing on the issues confronting not only the parties,

but also the issues confronting our society as we begin to

cleanup our nation. We begin by examining the retroactive ap-

plication of CERCLA and RCRA.

1. Retroactivity of CERCLA. In general ‘‘rules of statutory

construction. . .teach that the law is presumed, in the absence of

clear expression to the contrary, to operate prospectively. ..’’

Hassett v. Welch, 303 U.S. 303, 314, 58 S.Ct. 559, 565 (1938).

Congressional intent must be ‘‘unequivocal and inflexible’’ in

order to impose liability retroactively. Greene v. Unitec! States,

376 U.S. 149, 160, 84 S.Ct. 615, 621-622 (1962). CERCLA

became effective on December 11, 1980. 42 U.S.C. §9652(a).

The conduct of NEPACCO occurred in July, 1971 when its

waste was buried at the Denney farm site.

The statute is silent on the issue of retroactivity. The lower

courts have seized upon certain ‘‘verb tenses’’ and the legislative

history to support the conclusion that liability can be imposed

retroactively. Section 107(a)(3) imposes liability on ‘‘any per-

son who...arranged...for disposal.’’ It is contended that the

past tense use of the verb ‘‘arranged’’ manifests an intent by

Congress for retroactive application.

By definition, the disposition of hazardous wastes must

always precede the point in time at which a release or threatened

release will occur. The only logical verb tense is the past tense

since the disposer will always have ‘‘arranged’’ for liability-

inducing disposal regardless of whether such arrangements were

made before or after enactment of CERCLA. Indeed, in State

ex rel Brown v. Georgeoff, 562 F.Supp. 1300, 1310 (N.D. Ohio

oe

1983) the court pointed out that any argument which suggests

the past-tense nature of ‘‘arranged’’ evidences retroactive ap-

plication would serve to nullify any prospective application

because it does not contain any present or future tense

language. Accordingly, verb tenses alone are not a ‘‘clear ex-

pression’’ that liability be retroactively imposed.

The legislative history is likewise silent on whether Congress

intended retroactive application. The original Senate bill,

S.1480, did in fact expressly impose liability on ‘‘prior owners,

lessees and generators, transporters, or disposers of. . .hazar-

dous substances.’” However, the later markups and the final

bill indicate that this language was expressly deleted from the

liability provisions. A deletion of such an important provision

‘*strongly militates against a judgment that Congress intended a

result that it expressly declined to enact.’’ Gulf Oil Corporation

v. Copp Paving Co., 419 U.S. 186, 200, 95 S.Ct. 392, 401 (1974)

Contrary to the interpretation of the lower courts, CERCLA

does not unequivocally or clearly manifest an intent by Con-

gress to retroactively impose liability. The United States has not

rebutted the presumption of prospective application and as a

result petitioners seek review.

2. Retroactivity of RCRA. The district court held that peti-

tioners were not liable under RCRA since it did not apply

retroactively to past non-negligent generators. The court relied

upon the statutory language and legislative history in refusing to

impose liability retroactively.

The court of appeals reversed the district court on this issue

by relying solely upon the 1984 amendments to RCRA which

were enacted after the trial and district court opinion in this

case. In the 1984 amendments, Congress specifically amended

the statute to expressly provide for retroactive application. As

Judge Gibson articulately stated in his dissent:

a

‘* the 1984 House Conference Report is nothing more

than a blatant effort by members of a later Congress to

graft their personal views of the scope of liability under

RCRA onto the original act. It is bootstrapping, and the

majority fail to recognize it as such.”’

Prior to the 1984 amendments, Congress debated a prior

amendment in 1979. During the debate, the 1979 Congress

stated:

‘*The major criticism levied against (RCRA) is not correc-

tive legislation but preventitive legislation. RCRA is not

designed to cleanup the Love Canals of the United States,

but to prevent future Love Canals.’’ 1979 Congressional

Record. $13243 (June 4, 1979)

In amending RCRA, Congress expressly stated that it was ef-

fecting a legislative reversal of the district court’s holding. The

concept of the legislature overruling a decision of the judiciary

has been held unconstitutional. The framers of our Constitu-

tion recognized the ‘‘tyranny of shifting majorities’ in

the legis}ature. /.N.S. v. Chadha, ___ U.S. ___, 103 S.Ct.

2764, 2789 (1983) (J. Powell concurrence); Buckley v. Valeo,

424 U.S. 1, 138, 96 S.Ct. 612, 691 (1976).

3. Due process retroactivity. The Supreme Court has

rendered two principle opinions on the constitutionality of

retroactive federal statutes and on each occasion the retroactive

application has withstood cons..tutional muster. Pension

Benefit Guaranty Corporation v. R.A. Gray and Co., 467 U.S.

717, 104 S.Ct. 2709 (1984), and Usery v. Turner Elkhorn Min-

ing Co., 428 U.S. 1, 96 S.Ct. 2882 (1976).

In Pension Benefit and Usery, both statutes expressly and

clearly contain language stating that they were to be applied

retroactively. To the contrary, CERCLA contains no such

language as discussed above.

—"

Another important distinguishing characterist): concerns the

nature of liability to be imposed. In Usery and Pension Benefit,

the defendants had already been subjected to the same or

similar ‘‘liability’’ at the time the statutes in question were

enacted. The statutes in Usery and Pension Benefit were simply

modifications and extensions of already existing law. Liability

under CERCLA involves a new and wholly unexpected form of

liability for anyone who was involved in the disposal of hazar-

dous substances.

Although liability under CERCLA has been described as

‘*strict liability’’, it is in effect, absolute liability as applied to

this case. The lower courts took judicial notice that the

substances found at the waste site were hazardous a”' as a

result the United States needed to only prove that pe’ © ners

‘*arranged for the disposal’’ and that the hazardous substances

‘‘might present an imminent hazard or substantial endanger-

ment.”’

Not only is liability absolute under the lower court’s inter-

pretation, causation in its traditional sense need not be proved.

The plaintiff need only prove that it ‘‘might’’ cause a problem

and it has met its burden. In practice, the United States can im-

pose absolute liability for all costs by proving that petitioners’

waste was disposed at a site 12 years ago which might some day

cause a hazard. This interpretation not only operates as a new

and wholly unexpected form of liability for those involved in

hazardous waste, it likewise operates as a new cause of action

unheard of at common law or in any statute imposing liability.

Retroacti,e liability under CERCLA is also violative of the

Fifth Amendment due process clause because the statutory pro-

vision, by definition, is intended to act as a deterrent to im-

proper disposal. As the Supreme Court noted in Usery:

‘*We would nevertheless hesitate to approve the retroactive

imposition of liability on any theory of deterrence.’’ Usery

v. Turner Elkhorn Mining Co., 428 U.S. at 17, 96 S.Ct. at

2893.

—_—

Testimony at the debate surrounding the passage of

CERCLA evidences the deterrent nature of the legislation. In

particular, during hearings on a predecessor version of

CERCLA, an EPA official made the following statement:

‘*The deterrent aspects come from the fact that if the

government spends money out of that fund that there is a

recovery back against those who discharge, plus penalties.

It is the liability provisions that are the deterrent.’’

(Remarks of Thomas C. Jorling, assistant administrator

for water and hazardous materials of the Environmental

Protection Agency, at hearings on June 20, 1979 before the

Senate Committee on environment and public works, sub-

committees on research protection and environmental

pollution).

Retroactive liability is particularly arbitrary and irrational

when applied personally to individuals that are performing their

functions on behalf of the corporate entity. For example, if an

employee on one instance several years ago disposed of certain

hazardous waste, he would be personally liable for ‘‘all costs’’

regardless of fault. Potentially, any person involved in the so-

called ‘‘chain of disposal’’ would have liability under the lower

court’s interpretation of CERCLA.

The arguments pertinent to CERCLA are likewise applicable

to RCRA. The United States maintains that petitioners are

strictly or absolutely liable under RCRA for ‘‘contributing to”’

the disposal of hazardous waste. If that contention is adopted,

the liability envisioned therein constitutes a ‘‘new and wholly

unexpected form”’ of liabililty. As such, it is violative of peti-

tioners’ rights to due process of law under the Fifth Amend-

ment.

4. Individual liability of corporate officers. Petitioners, Ed-

win Michaels and John Lee, were corpo.ate officers of

NEPACCO at the time the waste was disposed of in 1971. The

—

court of appeals recognized that Michaels had no personal in-

volvement whatsoever in the disposal of waste at Denney’s

farm. Notwithstanding that recognition, he was held liable

under RCRA because ‘‘he had ultimate authority to control the

disposal of NEPACCO’s hazardous substances.’’ Thus,

Michaels was held to be vicariously liable for the conduct of the

corporation.

This construction of RCRA is not only contrary to the provi-

sions of the Act, it is contrary to the common law. It is ax-

iomatic that a corporation can be vicariously liable for the con-

duct of its officers. However, we turn the law inside out when

we contend that an officer is liable for the conduct of tne cor-

poration. It is interesting to note that the district court found

Michaels liable under CERCLA, but not RCRA. The court of

appeals found the opposite by imposing liability under RCRA,

but not CERCLA.

The legislative history discloses that ‘‘traditional and evolving

principles of common law’’ are to be used in determining liabili-

ty. As to Michaels, what is required is some showing of direct

personal involvement. If a director does not directly participate

in the corporation’s wrongful conduct, common law does not

subject him to liability simply by virtue of his office. 7i//man v.

Wheaton-Haven Recreation Association, Inc., 517 F.2d 1141,

1144 (4th Cir. 1975). Michaels was not involved in the negotia-

tion of the disposal of waste nor did he approve such disposal.

More importantly, Michaels was not even in Missouri when the

material was arranged for disposal. There is no evidence what-

soever that Michaels had a direct personal involvement in the

decision to dispose of waste at the site in question. Further-

more, he was not ‘‘contributing to’’ the disposal of hazardous

waste since he had no personal involvement with this particular

incident.

As to petitioner Lee, there are several reasons as to why

liability should not be imposed. First, the United States did not

allege nor did the trial court find that there was any tortious

—

conduct on the part of Lee or NEPACCO. The district court

did find that Lee personally participated in the disposal in ques-

tion. However, there was no allegation nor finding of fact that

the participation was tortious or wrongful. To the contrary,

liability was imposed ‘‘without fault.’’ The concept of strict

liability does not address personal blameworthiness. Strict

liability is based upon the evaluation of a risk and the value of

the activity to the community. There is no consideration of

knowledge or personal invovlement when this legal concept is

applied. All of the cases cited by the lower courts involve torts

that have scienter or culpability as an element. Under the pre-

sent posture, all officers ana <irectors will be personally liable

where the corporate entity is found liable on a theory of strict

liability. Thus, the officers and directors of General Motors

would be held individually liable for each design or manufactur-

ing defect of every automobile if this were app}i-d to a products

liability case.

The policy behind holding an officer liable for the torts of a

corporation is that he haz participated in blameworthy activity,

and the courts will not allow an officer to shield himself behind

the corporate form for his own conduct. However, the trial

court did not find that Michaels and Lee engaged in any

blameworthy activity. Likewise, the district court did not find

that NEPACCO had engaged in any blameworthy activity. An

officer should not be held personally liable under a theory of

Strict liability for the corporation’s conduct when conduct is not

based upon any degree of blameworthiness.

Given the far reaching implications of individual liability

under the court’s interpretation of CERCLA and RCRA, we

seek review from this Court in order to protect the rights and

due process of Michaels and Lee.

5. Standard and Scope of Liability. Equz:ly important to the

Covrt’s determination is the standard and scope of liability to

be applied under section 107(a) of CERCLA, 42 U.S.C.

§9607(a), and section 7003 of RCRA, 42 U.S.C. §6973. Cer-

— on

tiorari should be granted to resolve issues which concern the

construction of major federal statutes. United States v.

Donovan, 429 U.S. 413, 422 (1977).

Early Senate proposals for strict, joint and several liability

were omitted from the final version of CERCLA, raising the

question of whether Congress intended for the standard of

liability to be one of strict liability or negligence, and whether

liability among defendants is to be joint and several. A

clarification of the standard and scope of liability to be imposed

under CERCLA would promote early and efficient settlement

and cleanup of hazardous waste sites. See Dupuy v. Dupuy, 434

U.S. 911, 912 (1977) (White, J. dissenting from denial of writ of

certiorari).

For similar reasons the Court should examine the standard

and scope of liability under section 7003 of RCRA, 42 U.S.C.

§6973. The district court determined that the legislative history

to the 1980 amendments of RCRA required a finding of

negligence to hold off-site generators and transporters liable

under section 7003. (App. D, infra, A68). Accord, United

States v. Waste Industries, Inc., 556 F.Supp. 1301, 1308

(E.D.N.C. 1982), rev’d on other grounds, 734 F.2d 159 (4th Cir.

1984); United States v. Wade, 546 F.Supp. 785, 790 (E.D. Pa.

1982). The court of appeals reversed based upon the legislative

history of the 1984 amendments to section 7003 which state that

RCRA was always intended to reach past off-site generators and

that the standard of liability was one of strict liability. (App. A,

infra, A25-26).

In dissent, Judge John R. Gibson reasoned that the legislative

history was a blatant attempt by some members of Congress to

graft their persona! views of the scope of liability under RCRA

onto the original act, amounting to bootstrapping. (App. A, in-

fra, A45). Indeed, the ‘‘clarifying amendments’’ did not ad-

dress the crucial ‘‘contributing to’’ phrase and did not attempt

to define this phrase. (App. A, infra, A45). This Court has

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held that ‘‘the views of a subsequent,Congress form a hazardous

basis for inferring the intent of an earlier one’’, United States v.

Price, 361 U.S. 304, 313 (1960), and that ‘‘subsequent legislative

history will rarel:’ override a reasonable interpretation of a

statute that can be gleaned from its language and legislative

history prior to its enactment.’’ Consumers Product Safety

Commission v. GTE Sylvania, 447 U.S. 102, 110 n.13 (1980).

It is imperative for the Court to resolve the conflict between

the 1980 legislative history which would impose a standard of

negligence on past off-site generators and the legislative history

to the 1984 amendment which seeks to impose strict liability.

6. Right to a jury trial. Of extreme importance to the Court’s

consideration in granting a writ of certiorari is the issue of peti-

tioners right to a jury trial.

The Seventh Amendment right to a jury trial attaches

whenever ‘‘the action involves rights and remedies of the sort

traditionally enforced in an action at law.’’ Pernell v. Southall

Realty, 461 U.S. 363, 375 (1974). The district court and court of

appeals held that petitioners did not have a right to a jury trial

as guaranteed by the Seventh Amendment because the United

States was seeking equitable relief in the form of restitution.

(App. A, infra, A43). Unfortunately, the courts have mistaken-

ly equated ‘‘restitution’’ as being synonomous with equitable

relief. Petitioners believe that the government’s attempt at

recovery of response costs is most closely analogous to general

assump.it, a legal form of action for restitution.

‘‘Restitution’’ originated in the common law courts, but

because of the difficulties associated with early common law

procedures, suitors were driven to seek the aid of the equity

courts. Restatement of Restitution, Part I, introductory note at

5 (1937). In the equity courts, restitutionary principles were

developed in cases in which a fiduciary had failed to perform a

duty to a third person, and in cases where a person was deprived

= pm

of property by fraud, mistake or duress and could not regain the

property through the legal remedies then available. Jd., at 9.

In response to the expanding power of the Court of

Chancery, the common law judges invented the remedy of

general assumpsit. /d., at 5-7. In its most common form

general assumpsit lies where a party is unjustly enriched. The

law courts imply a promise to pay by the person receiving the

benefit. Restatement of Restitution, §5 comment a (1937). This

is commonly called quasi contract. General assumpsit also in-

cludes the action for indebitatus assumpsit, which allows for the

recovery of money where the obligation is imposed by an of-

ficial, customary or statutory duty to pay money. Restatement

of Restitution, Part I introductory note at 7; Shipman, Hana-

book of Common Law Pleadings, §§59, 62 (1923); Woodward,

The Law of Quasi Contract, §§1,2,3 (1913).

The nature of recovery under CERCLA and RCRA is most

closely analogous to quasi contract (unjust enrichment) or in-

debitatus assumpsit (statutory obligation to pay). Under the

statutory framework of CERCLA and RCRA, if the govern-

ment cannot force an abatement action against a defendant,

then it must cleanup the site and seek recovery of response costs

from that party. There is a statutory duty obligating the defen-

dant to reimburse the Superfund. It may also be implied that a

defendant promises to pay the government for a benefit incur-

red on it by the government in cleaning up a site (quasi

contract). Restitutionary actions in equity usually lie where

there is 2 breach of a fiduciary duty or where fraud, mistake and

duress are involved. The equitable remedies do not fit the fac-

tual and statutory scheme of CERCLA and RCRA. General

assumpsit is a ‘‘traditional legal remedy’’ wherein a jury trial is

guaranteed.

The preceeding summary of common law pleading is intended

to demonstrate that ‘‘the obligation to pay money’’ imposed by

CERCLA is not exclusively an equitable remedy and, as a

iii iis is

—_ .

Lise etme wena

result, invokes the requirements of the Seventh Amendment.

An equally important rationale for imposing a jury trial require-

ment is the type of ‘‘remedy’’ which was obtained by the plain-

tiff in the district court. Joint and several strict liability was im-

posed on two individuals because of their non-negligent conduct

as officers of a corporation. While it may ultimately be deter-

mined that CERCLA has such breadth and scope, the sweeping

nature of such a determination demands that it should be im-

posed by a jury. The trial by jury is the last “‘buffer’’ between

defendants and their government. When a citizen is being sued

by its own government under a statute created by its own

government in a court established by its own government, the

citizen is entitled to a trial by jury.

The petitioners would also direct the Court’s attention to

Continental V. N.E. Pharm. & Chem. Co., 811 F.2d 1180 (8th

Cir. 1987) (rehearing en banc granted), where the court of ap-

peals, in a related insurance coverage case, held that response

costs under CERCLA are compensatory damages within the

meaning of the CGL policy. In dissent, Judge Theodore

McMillian noted that the majority’s holding, making response

costs legal damages, was in conflict to the holding of United

States v. NEPACCO, (App. A, infra, Al) where it was held that

response costs constituted equitable monetary relief. If

response costs are legal damages and covered by insurance, then

the petitioners are entitled to a jury trial. Alternativeiy, if

response costs are equitable damages, then there is no coverage

under the insurance policy. The impact of such a finding on in-

surance companies and individual defendants is obvious. Many

defendants would be forced into bankruptcy if there is no in-

surance coverage. The Court must determine which interpreta-

tion is correct at this early stage so that petitioners will not be

denied their right to a jury trial.

Ee Ae

a. en

7. Recoverable costs under CERCLA and RCRA. A final

reason for granting the petitioners’ writ concerns the important

issue Of what response costs are recoverable under CERCLA

and RCRA. Under CERCLA the Court is confronted with the

issues Of what type of response costs are recoverable by the

government; whether there is a presumption that response costs

incurred by the government are consistent with the National

Contingency Plan (NCP); whether there is a presumption that

the response costs incurred by the government are reasonable;

and who bears ..c burden of proving consistency and

reasonableness. Also included is the issue of whether the

government can recover response costs incurred prior to

CERCLA’s effective date and, if so, who bears the burden of

proving reasonableness or consistency when there was no NCP

at the time to provide guidelines.

Under RCRA, there are no restrictions that response costs be

consistent with the NCP or that they be reasonable. If RCRA

allows for the recovery of response costs which petitioners deny,

then such cost recovery devolves purely from the court’s

equitable discretion and places the burden on plaintiff in prov-

ing its damages.

The court of appeals affirmed the district court’s ruling that

under CERCLA there is a presumption that the government’s

actions are consistent with the NCP, despite the fact that the

NCP was not in existence at the time the government incurred

the majority of its response costs. The court of appeals’ holding

is not supported by statutory rules of construction or by the

legislative history to CERCLA.

Presumptions arise where human experience reveals that cer-

tain basic facts, if believed, can by the process of inferential

reasoning lead to a related factual conclusion that is ‘‘com-

pulsory’’ if the basic facts are accepted as true. Because of this

mandatory effect, there must be some logical connection bet-

ween the basic and presumed fact. The consequences must be

|

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so highly probable that it saves time by assuming the presumed

fact to be true. Petitioners argue that there is no logical connec-

tion between costs incurred and consistency with the NCP, nor

is it highly probable that the costs are consistent with the plan.

Placing the burden of disproving the government’s damages on

the petitioners places an undue burden on the petitioners where

the facts are peculiarly within the possession of the government.

Presumptions are created to correct imbalances resulting from

one party’s superior access to proof. McCormick, Law of

Evidence, §343 (2d ed. Cleary 1972). Presumptions may also be

created by legislative fiat. Ther is nothing in the legislative

history to indicate that Congress intended to create such a

presumption.

These reasons also hold true for the appellate court’s affir-

mance that CERCLA provides an irrebuttable presumption that

response costs incurred by the government are reasonable.

Common law requires a plaintiff show that its damages are

related to injury and a reasonable reflection of the costs incur-

red. An irrebuttable presumption provides the government with

a ‘‘blank check’’ and removes its methods of cleanup, investiga-

tion and expenditures from public scrutiny. Surely, this was not

the intent of Congress.

The petitioners would also draw the Court’s attention to the

court of appeals reversal of the district court on the issue of

recovery of pre-enactment costs. The district court held the

government could not recover its pre-enactment costs. (App.

D, infra, A76). Accord, United States v. Wade, 20 Env’t Rep.

Cases (BNA) 1849, 1850-51 (E.D. Pa. 1984). The court of ap-

peals reversed a holding that CERCLA authorized recovery of

pre-enactment response costs. Resolution of this conflict is im-

portant not only to the petitioners but to other parties who may

be held liable for pre-CERCLA response costs.

The court of appeals, in authorizing recovery of pre-

enactment response costs, failed to provide guidance as to

—

which party has the burden of proving response costs. In this

case the majority of response costs were incurred prior to

CERCLA’s enactment. There was no NCP in existence at the

time these costs were incurred. The petitioners argue that in the

event pre-CERCLA response costs are recoverable, the govern-

ment has the burden of proving that its costs are necessary and

reasonable, and would be consistent with the NCP.

CONCLUSION

Based upon the significance of the issues presented and their

constitutional ramifications in this case of first impression, peti-

tioners pray that a writ of certiorari issue to review the judgment

of the United States Court of Appeals for the Eighth Circuit.

Furthermore, petitioners request that briefs be submitted with

Oral argument.

Respectfully submitted,

Ted L. Perryman*

John L. Walker

Roberts, Perryman & Bomkamp, P.C.

1015 Locust Street, Suite 700

St. Louis, Missouri 63101

(314) 421-1850

Attorneys for Petitioners

*Counsel of Record