Petition for Writ of Certiorari — Hercules Inc. v. United States

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Supreme Court, u.5s.

FILED

ia 84 180 0 APR 28 1995,

OFFICE OF THE CLERK

IN THE

Supreme Court of the Tnited States

OCTOBER TERM, 1994

ARKANSAS DEPARTMENT OF POLLUTION

CONTROL AND ECOLOGY

And

VERTAC CHEMICAL CORPORATION,

Petitioners,

Vv.

UNITED STATES OF AMERICA,

Respondent.

Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Eighth Circuit

PETITION FOR A WRIT OF CERTIORARI

SCOTT E. SLAUGHTER* WINSTON BRYANT*

SIMON E. DANCE ATTORNEY GENERAL and

COFFIELD UNGARETTI & HARRIS CHARLES L. MOULTON

1747 Pennsylvania Ave., N.W. ASSISTANT ATTORNEY GENERAI

Suite 900 OFFICE OF THE ATTORNEY

Washington, D.C. 20006 GENERAL

(202) 872-4310 323 Center Street,

Suite 200

Counsel for Petitioner, Tower Building

Vertac Chemical Corporation — Little Rock, Arkansas

72201-2610

*Counsel of Record (SO1) 682-2007

Counsel for Petitioner,

Arkansas Department

of Pollution

Control and Ecology

Balmar Legal Publishing Services. Washington, D.C., (202) 682-9800

QUESTIONS PRESENTED

1. Contrary to Federal Deposit Ins. Corp. v. Mever, 114 S.Ct.

996 (1994), may a federal court decide the substantive merits of

claims against the United States without ever deciding the

United States’ sovereign immunity challenge to the court's

jurisdiction?

2. Whether the United States’ sovereign immunity from

claims under the Comprehensive Environmental Response,

Compensation, and Liability Act of 1980 (“CERCLA”), 1s

waived in accordance with Pennsylvania v. Union Gas, 491 U.S

8 (1989), when those CERCLA claims are based on the United

States’ actions and authority under the Defense Production Act

and the Walsh-Healey Public Contracts Act’

3. Whether the United States is liable under CERCLA for any

environmental cleanup costs at a private contractor’s facility

when, under the Defense Production Act and the Walsh-Healey

Public Contracts Act, the Federal Government compelled the

contractor to devote its entire facility to the manufacture of

Agent Orange according to the government’s own specifica-

tions; the government knew that production of Agent Orange

generated dioxin-contaminated hazardous wastes; the govern-

ment was the sole and exclusive customer for Agent Orange: the

government controlled the volume of product made and its price:

the government controlled the supply and use of raw materials

necessary to make the product; and the government had substan-

tial contractual control over the contractor’s hazardous waste

disposal practices?

LIST OF PARTIES

The parties to the proceedings in the United States Court of

Appeals for the kighth Circuit were as tollows:

(1) Appellant, the Arkansas Department of Pollution Control

and Ecology:

(2) Appellant, the Vertac Chemical Corporation (no parent

and no publicly traded subsidiaries or affiliates):

(3) Appellant, Hercules Incorporated (a wholly owned sub-

sidiary, Copenhagen Pectin A/S, a Danish Corporation, in turn

owns a forty (40) percent share of Genu Products Philippines,

Inc., a Philippines Corporation; the other sixty (60) percent of

Genu Products 1s owned by individuals, but the shares are not

traded on any market);

(4) Appellant, Uniroyal Chemical, Ltd. (a wholly owned sub-

sidiary; Parent: Uniroyal Chemical Company, Inc.; Ultimate

Parent: Uniroyal Chemical Corporation); and

(5S) Appellee, The United States of America.

TABLE OF CONTENTS

QUESTIONS PRESENTED ......--+e-ee.

LIST OF PARTIES ......

TABLE OF CONTENTS.......-.

TABLE OF AUTHORITIES .........

PETITION FOR A WRIT OF CERTIORARI . . .

PRE VEU CPIIUIUINS 66 wt ee ee

GROUNDS FOR JURISDICTION .........

STATUTES AND REGULATIONS .

meee GP eee SRA. 8 tt tw

The United States’ Authority And Control

Over Hercules’s Production And Disposal!

BO) a ee

The Courts Below Failed To Decide The United

States’ Sovereign Immunity Issue. . .

BASIS FOR FEDERAL JURISDICTION

ee Pee es GPU ww ee

REASONS FOR GRANTING THE WRIT

eo 5 Sd ss aw 8 eb

The Courts Below Failed To Comply With

Their Duty To Determine Whether They

Had Jurisdiction To Review These Claims

The United States’ Sovereign Immunity

0 NO a

The United States Is Liable As A CERCLA

ee ee ee

The Circuits Conflict On The Control Stand-

ards For CERCLA Operator Liability

Page

bho

t )

Page

The kighth Circut krred In Adopting The

fetual Control” Standard kor

CERCLA Operator Liahilit 2|

lhe kighth Circuit Improperly Applied The

fotual Control” Standard for CERCLA

Operator Liahilit . 23

The United States Is Also Liable As A

CERCLA Arranger | 7 25

CONCLUSION ra 29

TABLE OF AUTHORITIES

Cases Pages

len v. Wright, 468 U.S. 737 (1984) 13.14

Capron v. Van Noorden, 6 U.S. (2 Cranch) 126

(1804) 1S

Carden v. Arkoma Assocs., 494 U.S. 185 (1990). . 9.13.14.18

CPC Int'l. Inc. v. Aerojet-General Corp

759 F. Supp. 1269 (W.D. Mich. 1991). 2

Cross-Sound Ferry Services, Inc. v. Interstate

Commerce Comm'n, 934 F.2d 327

(D.C. Cir. 1991) 7 Sr 9.

Federal Deposit Ins. Corp. v. Mever, \\4

a.Ot. 996 (1994)... ..... . Ob554,35

Federal Housing Admin. v. Burr, 309 U.S. 242

(1940) ...... ee | x

First National Bank v. Lamon Livestock Sales Co

417 N.W.2d 443 (lowa 1987). . . 26

FMC Corp. v. United States Dept. of Comm... 29

F.3d 833 (3rd Cir. 1994) (en hanc) . 9.10.17.18.19.23.28

FW/PBS. Inc. v. City of Dallas, 439 U.S. 215 (1990) . 9.13.14.15

George v. Mitchell, 282 F.2d 486 (D.C. Cir. 1960) . 23

Great Southern Fire Proof Hotel Co. v. Jones.

177 U.S. 449 (1900) Pie hee ; 14

Hercules Inc. v. United States. 24 F.3d 188 (Fed.

271 -

Cir. 1994). cert. granted, 63 U.S.L.W. 3

(U.S. April 4, 1995) (No. 94-818) Res 11.18

In re Lee Road Partners, Ltd. 155 B.R. 55 ( Bankr.

E.D.N.Y. 1993) 26

Indian Towing Co. v. United States, 350 U.S. 61

(1955) |

Cases Pages

Jacobson v. Aetna Casualty & Surety Co., 46

N.W.2d 868 (Minn. 1951). ......2.2.2.~. 27

Jenkins v. McKeithen, 395 U.S. 411 (1969) 2 2. . 14

Levin Metals Corp. v. Parr-Richmond Terminal Co.,

781 F. Supp. 1454 (N.D. Cal. 1991) 2 2... 20

Loeffler v. Frank, 486 U.S. 549 (1988). 2 Wo... ns

Mansfield, Coldwater & Lake Mich. Rv. Co. v.

ee es te, SPP RED 2 ass 0-4) ews 14,15

Mitchell v. Maurer, 293 U.S. 237 (1934) 2... |. 13

New York v. Shore Realty Corp., 759 F.2d 1032

I Se a ea 20

Northwestern Mut. Life Ins. Co. v. Atlantic

Research Corp., 847 F. Supp 389

aR el ee age ee 20

Nurad, Inc. v. Hooper & Sons Co., 966 F.2d 837

(4th Cir. 1992), cert. denied, 113 S.Ct. 377

SNE ao -g tock a a 8 ea eee eee 19,21

Pennsvivania v. Union Gas, 491 U.S. 8 (1989) |. 16

Perkins v. Lukens Steel Co., 310 U.S. 113 (1940). 17,22

Ravonier, Inc. v. United States, 352 U.S. 315 (1957) . 18

Riverside Market Devel. Corp. v. International

Bldg. Prods., Inc. 93\ F.2d 327

SEE ig a as ok a ea 20

Robert-Shaw Controls Co. v. Watts Regulator Co..,

807 F. Supp. 144(D. Me. 1992) 2... 2... 20

Sewell v. United States, 406 F.2d 1289

Ps WO enc 5 a & Se oe bw ae ee 26

Sidney S. Arst Co. v. Pipefitters Welfare Educ. Fund.

FoR em Loree 1 & Ae) | ee 20

Cases

(nited States v. Aceto Agric. Chem. Corp

S72 F.2d 1373 (&th Cir. 1989)

United States v. Allied Corp., 1990 U.S. Dist

LEXIS 20061 (N.D. Calif. 1990)

United States v. Arrowhead Ref'g Co., 829 F

Supp. 1078 (D. Minn. 1992)

l/nited States v. Bovkin, 986 F.2d 270 (Sth Cir.).

cert denied. 114 S.Ct. 241 (1993)

United States v. Carolina Transformer Co.,

97& F.2d 832 (4th Cir. 1992)

United States v. Caves, 890 F.2d 87 (8th Cir. 1989)

United States v. Gurley, 43 F.3d 1188

(Sth Cir. 1994)

United States v. Khang, 904 F.2d 1219

(Sth Cir. 1990) .

United States v. Mitchell, 463 U.S. 206 (1983)

United States v. New Castle County, 727 F. Supp

854 (D. Del. 1989)

United States v. Northeastern Pharmaceutical &

Chem. Co., Inc., 810 F.2d 726 (8th Cir. 1986).

cert. denied, 484 U.S. 848 (1987) .

United States v. Sherwood, 312 U.S. 584 (1941)

United States of America v. Vertac Chem. Corp..,

46 F.3d 803 (8th Cir. 1995), petition for cert.

filed sub nom., Hercules Inc. v. United States.

63 U.S.L.W.__ (U.S. March 21, 1995)

(No. 94-__)

United States v. Vertac Chem. Corp., 489 F.

Supp. 870 (D. Ark. 1980) . .

Pages

16 97 DK

9 13

9.13

Pas Sin

‘A

Vill

Cases

United States v. Vertac Chem. Corp., 671 F.

Supp. 595 (E.D. Ark. 1987), vac ‘d, 855 F.2d

ak ae a ree

United Siates v. Vertac Chem. Corp., 841 F.

Supp. 884 (E.D. Ark. 1993) ..........

United States v. Vertac Chem. Corp., Civil Action

Nos. LR-C-89-109 and LR-C-80-110, in the

United States District Court for the Eastern

District of Arkansas. Western Division... .

United States v. Wesley, 990 F.2d 360 (8th Cir. 1993) .

United States v. Wiltherger, 18 U.S. (S Wheat.)

CRE ae Gs ee ee ln ke a

Wirtz v. Baldor Electric Co., 337 F.2d 518

i A og ge we ew tiee eee

Statutes

28 U.S.C. §

Da a ee. ss ee Se ee eee ee

28 U.S.C. §

CERCLA Section 101(20)(A), 42 U.S.C. §

GEE 5 dl sf "Srac d's Ke OS 8 OR

CERCLA Section 101(21), 42 U.S.C. § 9601(21) .

CERCLA Section 107(a)(2), 42 U.S.C. § 9607(a)(2)

CERCLA Section 107(a)(3), 42 U.S.C. § 9607(a)(3)

CERCLA Section 113,42 U.S.C.§ 9613 .....

CERCLA Section 120(a)(1), 42 U.S.C.

EID ata e 0e a ee ee Ve

Pages

bho

passim

16,17

Defense Production Act. Section 103, 50 U.S.C.

ee re ee by a ee

Walsh-Healey Public Contracts Act. Section 36.

as iS be Se ee

Walsh-Healey Public Contracts Act, Section 37.

We RI OT 6 x eb ee Se:

Walsh-Healey Public Contracts Act, Section 43a(c).

i , -)

Regulations

Fed. R. Civ. P. Rule 12:3). ......2~....

32A C.F.R., Chapter VI, BDSA Reg. 2,

§§ 1,3, 16, & 27 a

40 C.F.R.

41 C.F.R.

PUR eee 6 oo wk.

50-204. 1(a)-(e) (1960). 2 2.

20-204.233 (1960). .........

9 50-204.234(1960)...........

Miscellaneous

David Sims, Suspension and Debarment: Potent

Government Tools, SONREEL News. ABA

Sec. Nat. Res., Energy, & Envtl. |

(Jan./Feb., 1994)

Appellee’s, United States’, Petition for Rehearing

and Suggestion of Rehearing /n [sic] Banc,

FMC Corp. v. United States, 29 F.3d 833

(3rd Cir. 1994) (en banc). . . .

Brief for Appellee, United States v. Vertac Chem

Corp., 46 F.3d 803 (8th Cir. 1995). | |

Pages

12,17

Pages

Comment, Assuming Jurisdiction Arguendo:

The Rationale and Limits of Hypothetical

Jurisdiction, 127 U. Pa. L. Rev. 712 (1979)... 15

Transcript of Appellant’s, United States’, Oral

Argument, FMC Corp. v. United States

(3rd Cir. en banc) (No. 92-1945)... 0. 022:~: 9

S. Rep. No. 2352, 82d Cong., 2d Sess., reprinted in

98 Cong. Rec. 6246 (May 29,1952) ..... 23

No. 94-

IN THE

Supreme Court of the United States

OCTOBER TERM, 1994

ARKANSAS DEPARTMENT OF POLLUTION

CONTROL AND ECOLOGY

And

VERTAC CHEMICAL CORPORATION.

Petitioners,

UNITED STATES OF AMERICA,

Respondent.

Petition For Writ Of Certiorari

To The United States Court Of Appeals

For The Eighth Circuit

PETITION FOR A WRIT OF CERTIORARI

The Arkansas Department of Pollution Control and Ecol-

ogy (“State of Arkansas”) and the Vertac Chemical Corporation

(“Vertac”) hereby petition for a writ of certiorari to review the

judgment and opinion of the United States Court of Appeals for

the Eighth Circuit, entered in this action on January 31, 1995.

PREVIOUS OPINIONS

A reprinted copy of the opinion of the United States Court

of Appeals for the Eighth Circuit, entered January 31, 1995,

reported as United States of America v. Vertac Chem. Corp., 46

F.3d 803 (8th Cir. 1995), is attached hereto as Appendix A.

A reprinted copy of the Order entered October 7. 1993. in

United States v. Vertac Chem. Corp., Civil Action Nos. LR-C-

80-109 and LR-C-80-1 10, in the United States District Court for

the Eastern District of Arkansas, Western Division, 1s attached

hereto as Appendix B.

A reprinted copy of the Memorandum Opinion and Order

of the District Court entered October 12, 1993, reported as

United States v. Vertac Chem. Corp., 841 F. Supp. 844 (B.D.

Ark. 1993), is attached hereto as Appendix C.

A reprinted copy of the Judgment of the District Court,

entered March |, 1994, is attached hereto as Appendix D.

GROUNDS FOR JURISDICTION

This Court has jurisdiction pursuant to 28 U.S.C. § 1254

to review by writ of certiorari the judgment of the United States

Court of Appeals for the Eighth Circuit dated January 31, 1995,

which is the subject of this Petition.

STATUTES AND REGULATIONS

The provisions of the statutes and regulations involved in

this case are lengthy. Accordingly, pursuant to Rule 14(f) of the

Rules of the Supreme Court of the United States, their individual

citations are set forth below, and the pertinent text is reprinted

and attached hereto as Appendix E.

Statutes

28 U.S.C. § 1254:

28 U.S.C. § 1331;

28 U.S.C. § 1346(b):

28 U.S.C. § 2674;

CERCLA Section 101(20)(A), 42 U.S.C. § 9601(20)(A):

CERCLA Section 101(21), 42 U.S.C. § 9601(21);

CERCLA Section 107(a)(2), 42 U.S.C. § 9607(a)(2);

CERCLA Section 107(a)(3), 42 U.S.C. § 9607(a)(3):

CERCLA Section 113, 42 U.S.C. § 9613:

CERCLA Section 120(a)(1), 42 U.S.C. § 9620(a)(1 );

Defense Production Act, Section 101(a), 50 U.S.C. app. § 207 (a):

Defense Production Act, Section 103, 50 U.S.C. app. § 2073:

Walsh-Healey Public Contracts Act, Section 35(e),41 U.S.C § 35(e):

Walsh-Healey Public Contracts Act. Section 36,41 U.S.C. § 36:

Walsh-Healey Public Contracts Act, Section 37, 41 U.S.C. § 37; and

Walsh-Healey Public Contracts Act, Section 43a(c), 41 U.S.C. § 43 afc)

Regulations

The Business and Defense Services Administration’s

(“BDSA’s”) regulations implementing the Defense Production

Act (“DPA”):

32A C.F.R., Chapter VI, BDSA Reg. 2. 8§ 1, 3, 16, & 27:

40 C.F.R. § 302.4 (1993):

The United States Department of Labor’s regulations im-

plementing the Walsh-Healey Public Contracts Act (“Walsh-

Healey Act”):

41 C.F.R. § 50-204. 1(a)-(e) (1960);

41 C.F.R. § 50-204.233 (1960): and

41 C.F.R. § 50-204.234 (1960).

STATEMENT OF THE CASE

The United States’ Authority And Control Over

Hercules’s Production And Disposal Of Agent Orange

During the period 1964 through 1968, Hercules Incorpo-

rated (“Hercules”) produced millions of gallons of Agent Or-

Agent Orange is composed of equal parts of the undiluted

n-butyl! esters of 2.4.5-trichlorophenoxyacetic acid (“2,4,5-T”) and

2,4-dichlorophenoxyacetic acid (“2,4-D”). Both 2.4,5-T and 2.4-D

are listed as hazardous substances under CERCLA.

ange! at its Jacksonville, Arkansas, herbicide plant (the “Jack-

sonville Plant”) pursuant to government contracts with the

United States.2. The Department of Defense (“DOD”) used this

Agent Orange as a defoliant in the Vietnam War. The DOD

developed and provided to Hercules the product specifications

for Agent Orange. The United States also dictated the price it

would pay for Agent Orange. Although Hercules separately

produced the components of Agent Orange for its private cus-

tomers, it produced Agent Orange solely and exclusively for the

DOD.

Hercules’s production of Agent Orange for the DOD gen-

erated a “‘staggering’ amount of waste,” and increased the

amount of waste generated at the plant.4 The Agent Orange

waste was contaminated with high levels of dioxin and other

CERCLA hazardous substances.° In addition to all of its other

production wastes, Hercules buried much of the dioxin-contami-

nated Agent Orange waste at the Jacksonville Plant.© This

Agent Orange waste remains there today. The United States

Environmental Protection Agency (“EPA”) estimated that the

Several federal entities were involved in the production of Agent

Orange at the Arkansas Superfund Sites. Unless the context requires

otherwise, they will be referred to collectively as the “United States”

in order to avoid confusion.

> Joint Appendix (“J.A.”) at 02591, 02594, 02168, 05853-56,

OS858. J.A. refers to the Joint Appendix, Volumes 1-X XIII, filed in

the proceeding before the United States Court of Appeals for the

Eighth Circuit.

+ JA. at 05878-81.

2,3,7,8-tetrachlorodibenzo-para-dioxin, or TCDD, is consid-

ered the most toxic isomer of the family of chemicals known as

dioxins. TCDD is a byproduct of the 2,4,5-T manufacturing process.

J.A. at 05878. Hercules admitted that it buried all of its produc-

tion wastes on-site during the entire time that it owned and operated

the Jacksonville Plant: December 28, 1961, to September 30, 1971. /d.

total remedial costs for the Jacksonville Plant and its associated

Superfund Sites (hereinafter referred to collectively as “Arkan-

sas Superfund Sites”) could exceed $150 million.’

Hercules made Agent Orange for the United States at the

Jacksonville Plant pursuant to directives and rated order con-

tracts issued under the DPA. These directives and rated order

contracts were issued by the BDSA, a branch of the United

States Department of Commerce. The DPA authorizes the

United States to require acceptance and performance of supply

contracts which the President deems necessary or appropriate

for national defense. Willful failure to accept and perform these

DPA contracts is a criminal offense, punishable by imprison-

ment and fines. The United States may also obtain injunctions

requiring that rated orders and directive contracts be accepted

and performed. Rated order and directive contracts have prior-

ity over any private contract. They must be accepted and fully

performed even if their performance requires that preexisting

private contracts are abrogated.*

At first, Hercules did not object to the Agent Orange

contracts. In 1967, however, the United States ordered Hercules

under the DPA to devote its entire Jacksonville Plant to the

production of Agent Orange for the DOD. Hercules requested

relief from this order on the ground that to comply might destroy

its private herbicide market, which did not include any Agent

Orange customers. The United States denied Hercules’s request

for relief from this order, and Hercules complied with it.”

During the time Hercules made Agent Orange for the DOD,

Hercules was required to comply with standards promulgated

, E.g., United States v. Vertac Chem. Corp., 671 F. Supp. 595,

608-09 (E.D. Ark. 1987), vac 'd, 855 F.2d 856 (8th Cir. 1987); United

States v. Vertac Chem. Corp., 489 F. Supp. 870 (D. Ark. 1980).

8 Eg., 50 U.S.C. app. § 2073: 32A C.F.R., Chapter VI, BDSA

Reg. 2, §§ 1, 3, 16, & 27, reprinted in Appendix E to this Petition at E-8

to E-10.

J.A. at 00190, 02215-16, 02218, 02586-88, 02596, 0291 1-12.

by the United States Department of Labor (“DOL”) under the

Walsh-Healey Act. The Walsh-Healey Act standards only ap-

plied to government contracts for the supply of goods in excess

of $10,000. These standards were incorporated as terms of the

Agent Orange contracts.' If a government contractor violated

any of the Walsh-Healey Act standards, then the United States

could: (i) terminate its contract with the contractor; (11) sue the

contractor for any damages caused the government by the

contractor’s failure to comply with the standards; and (1ii) debar

the contractor from any other government contract for three

years. |!

The Walsh-Healey Act standards imposed specific Agent

Orange waste disposal requirements on Hercules.'? During the

time Hercules made Agent Orange for the DOD, the United

States’ inspectors frequently visited the Jacksonville Plant. Her-

cules disposed of the Agent Orange wastes in plain view of

anyone at the site. Further, the United States had actual knowl-

edge that the toxic wastes generated during the production of

Agent Orange could cause pollution problems and employee

health problems. The United States knew that the production of

Agent Orange would generate dioxin as a byproduct. The

United States Army had actually considered using 2,4,5-T

wastes as a chemical warfare agent. 2, 4, 5-T is one of the

components of Agent Orange.!?

For its part in the manufacture of Agent Orange at the

Jacksonville Plant, Hercules has been found jointly, severally,

0 ‘Id. at 02942; Appendix E at E-3.

41 U.S.C. §§ 36, 37: Appendix E at E-4. The EPA’s Chief

Hearing Officer for government contractor debarment and suspension

recently described these sanctions as “extremely potent authorities.”

David Sims, Suspension and Debarment: Potent Government Tools,

SONREEL News, ABA Sec. Nat. Res., Energy, and Envtl. L. (Janu-

ary/February 1994).

These waste disposal standards are reprinted and set forth in

Appendix E to this Petition at E-8.

5 Eg. JA. at 00319-320, 02918-21, 03215, 03220-21, 05855.

and strictly liable under CERCLA. Although the State of Ar-

kansas claims that the United States is also liable under CER-

CLA for some portion of the Arkansas Superfund Sites’ cleanup

costs, it has never claimed that the United States is liable for all

of those costs. If the United States is held liable under CER-

CLA, its share of liability will be determined later through trial

or settlement.

The Courts Below Failed To Decide The United States’

Sovereign Immunity Issue

In the District Court, the State of Arkansas, Vertac, and

Hercules claimed that the United States was liable for cleanup

costs at the Arkansas Superfund Sites both as an “operator”

under Section 107(a)(2) of CERCLA, 42 U.S.C. § 9607(a)(2),

and as an “arranger” under Section 107(a)(3) of CERCLA, 42

U.S.C. § 9607(a)(3). These CERCLA claims were based on the

United States’ actions and authority during the production and

disposal of Agent Orange at the Jacksonville Plant, which is one

of these sites. The State of Arkansas, Vertac, and Hercules filed

summary judgment motions on their claims. In response, the

United States filed a cross motion for summary judgment,

raising a threshold jurisdictional issue: the United States argued

that its sovereign immunity from CERCLA liability had not

been waived for purposes of the claims in this case. In the

alternative, the United States asserted that even if its sovereign

immunity had been waived, it was not liable under CERCLA as

either an “operator” or an “arranger.” The District Court granted

the United States’ summary judgment motion on the merits,

without ever addressing the sovereign immunity issue

On appeal, the United States Court of Appeals for the

Eighth Circuit affirmed the District Court’s opinion. In reach-

ing its conclusions on the merits, the Eighth Circuit Court of

Appeals neither addressed its own jurisdiction nor the District

Court’s failure to decide the United States’ sovereign immunity

argument. Rather, the Eighth Circuit stated that its “conclusions

{on the merits] that the United States is neither an operator nor

an arranger under CERCLA obviates the need to address the

United States* sovereign immunity arguments.” Vertac, 46 F.3d

at 811 n.10.

BASIS FOR FEDERAL JURISDICTION

IN THE DISTRICT COURT

If the United States’ sovereign immunity was waived. then

the District Court had jurisdiction pursuant to 28 U.S.C. § 1331

and 42 U.S.C. § 9613. However, both the District Court and the

Eighth Circuit Court of Appeals failed to determine whether

there was a waiver of sovereign immunity, even though the

United States vigorously argued that there was no waiver.

REASONS FOR GRANTING THE WRIT

First and foremost, this writ should be granted because the

opinions below squarely conflict with over 190 years of Su-

preme Court precedents requiring federal courts to determine

whether they have jurisdiction to decide the merits of claims.

The District Court completely ignored the threshold jurisdic-

tional issue raised by the United States in this case: whether the

United States” sovereign immunity from CERCLA liability had

been waived. The Eighth Circuit compounded the lower court’s

error and held in a footnote that it could decide the merits of this

case without deciding the United States’ challenge to its subject

matter jurisdiction. This holding conflicts with numerous Su-

preme Court opinions, including the recent opinion in Federal

Deposit Ins. Corp. v. Mever, 114 S.Ct. 996 (1994).

In Mever, Justice Thomas explained for a unanimous court

that:

Absent a waiver, sovereign immunity shields the Fed-

eral Government and its agencies from suit. Loeffler

v. Frank, 486 U.S. 549, 554 (1988); Federal Housing

Admin. v. Burr, 309 U.S. 242, 244 (1940). Sovereign

immunity is jurisdictional in nature. Indeed, the

“terms of [the United States’] consent to be sued in

any court define that court’s jurisdiction to entertain

the suit.” United States v. Sherwood, 312 U.S. 584,

586 (1941). See also United States v. Mitchell, 463

U.S. 206, 212 (1983) (“It is axiomatic that the United

States may not be sued without its consent and that

the existence of consent is a prerequisite for jurisdic-

tion’). Therefore, we must first decide whether |the

Federal Government’s| immunity has been waived.

Id. at 1000 (emphasis added).

As then Circuit Judge Thomas explained in an earlier case

before the District of Columbia Circuit:

Read in light of one hundred and eighty-seven years

of other precedents, the Supreme Court’s opinions . . .

confirm that federal courts must first assure them-

selves that they have authority to hear a dispute before

they may decide the dispute on the merits.

Federal courts simply may not assume jurisdiction

hypothetically. Some cases might cry out for decision

on the merits; some might pose difficult jurisdictional

problems. Our threshold duty to examine our own

jurisdiction is no less obligatory in either instance.!4

Many pending cases present the same issue of the United

States’ sovereign immunity from CERCLA liability. According

to the Federal Government, it is defending “nearly two dozen

[24]” such cases.'> The Eighth Circuit’s opinion is now prece-

4 Cross-Sound Ferry Services, Inc. v. Interstate Commerce

Comm'n, 934 F.2d 327, 346(D.C. Cir. 1991) (Thomas, J., dissenting)

(citing FW/PBS, Inc. v. Citv of Dallas, 439 U.S. 215, 231-35 (1990):

Carden v. Arkoma Assocs., 494 U.S. 185, 196 (1990)).

9 Transcript of Appellant’s, United States’, oral argument at 9,

FMC Corp. v. United States (3rd Cir. en banc) (No. 92-1945) (April

26, 1994).

dent for other courts to ignore this jurisdictional issue when

reviewing these CERCLA claims against the United States.

Moreover, the jurisdictional issue presented by this case tran-

scends CERCLA. If this writ is not granted, the Eighth Circuit's

opinion can and will be cited as precedent for any federal court

to decide the merits of any claim without ruling on challenges

to the court’s jurisdiction to hear that claim. Petitioner, State of

Arkansas, has a special interest in this issue because it too has

sovereign immunity from suit unless that immunity has been

unequivocably waived.

This writ should also be granted because the lower courts

need guidance clarifying when the United States can be sued

and when the United States is liable under CERCLA. The

Eighth Circuit Court of Appeals held in this case that the United

States was not liable, without deciding the sovereign immunity

jurisdictional issue. In contrast, the Third Circuit in FMC Corp.

v. United States Dept. of Comm., 29 F.3d 833 (3rd Cir. 1944)

(en banc), correctly decided the sovereign immunity issue first,

finding that there was a waiver, and then held that the United

States was liable under CERCLA in a case which involved the

same or similar issues as here.!© In both cases, the United States

identified many other pending proceedings which involve the

same or similar questions of Federal Government CERCLA

liability.'7 The United States believes that these cases could

result in “massive” Federal Government liability.'* The thresh-

old question in all these other pending cases is the sovereign

immunity and jurisdictional issue presented by this case. The

lower courts, therefore, urgently need this Court’s review and

guidance on these CERCLA liability issues.

16 FMC. 29 F.3d at 842.

'" See Id. at 846; Appellee’s, United States’, Petition for Rehear-

iag and Suggestion of Rehearing /n [sic] Banc, at 14 and n.6, and

Addendum A thereto at 20, FMC Corp. v. United States, 29 F.3d 833

(3rd Cir. 1994) (en banc).

FMC, 29 F.3d at 846.

This writ should be also granted because there is a conflict

among the circuit courts as to whether an “authority to control”

or an “actual control” standard should be used to determine

“operator” liability under CERCLA Section 107(a)(2), 42

U.S.C. § 9607(a)(2). Even those circuits that have adopted the

“actual control” standard conflict in its application. These con-

flicts present important questions of federal law that affect many

pending cases, including cases where the United States is not a

defendant.

Finally, this Court has already granted certiorari to review

Hercules’s Agent Orange claims in an appeal from the Federal

Circuit. In this separate but related case, Hercules contends that

the United States is required by the DPA to indemnify Hercules

for its settlement of the Agent Orange product liability claims

against it. Hercules Inc. v. United States, 24 F.3d 188 (Fed. Cir.

i994), cert. granted, 63 U.S.L.W. 3717 (U.S. April 4, 1995)

(No. 94-818). Hercules has also petitioned this Court to review

the Eighth Circuit’s CERCLA liability decision.'? In its Eighth

Circuit petition, Hercules raises DPA and CERCLA indemnifi-

cation questions that are closely related to the questions the

Supreme Court has already decided to review in the Agent

Orange product liability settkement case from the Federal Cir-

cuit.

The United States’ authority and actions under the DPA

also form part of the basis for the Petitioners’ CERCLA claims

against the United States here. Consequently, the Supreme

Court’s decision in Hercules’s Federal Circuit case will impact

the CERCLA claims against the United States. The coextensive

interests of judicial economy and uniformity thus require that

the two cases be reviewed together. A resolution of these related

DPA cases will not, however, resolve the conflict among the

United States of America v. Vertac Chem. Corp., 46 F.3d 803

(8th Cir. 1995), petition for cert. filed sub nom., Hercules Inc. v. United

States, 63 U.S.L.W.___ (U.S. March 21, 1995) (No. 94 -__ ).

circuits over the standards for CERCLA liability. Nor will it

resolve the issue of when the United States” sovereign immunity

is waived under CERCLA. These issues directly affect many

pending suits. Therefore, all of the questions raised in this

Petition should be reviewed by the Supreme Court.

ARGUMENT

The Courts Below Failed To Comply With Their Duty

To Determine Whether They Had Jurisdiction To

Review These Claims

Contrary to a long line of applicable Supreme Court prece-

dents, spanning some 190 years, the District Court failed to

examine -- or even comment on -- its jurisdictional power to

adjudicate the merits of the claims before it, even though the

United States explicitly challenged its jurisdiction. On appeal

to the Eighth Circuit, the United States argued that:

Congress did not consent to suit against the federal

government on such sovereign matters, and thus, even

if Hercules and Vertac could prove that the United

States had the authority to control Hercules’ opera-

tions . . . this Court would lack jurisdiction to

consider Hercules’ and Vertac’s claims.”

Notwithstanding the United States’ jurisdictional argu-

ment, the Eighth Circuit Court of Appeals sanctioned the lower

court’s extreme departure from the accepted and usual course of

judicial proceedings by ignoring its omission, and by relegating

the threshold jurisdictional question to a mere footnote: “Our

conclusions [on the merits] that the United States is neither an

operator nor an arranger under CERCLA obviates the need to

address the United States’ sovereign immunity arguments.”

Vertac, 46 F.3d at 811 n.10 (emphasis added).

Both the District Court and the Eighth Circuit are wrong.

A federal court’s threshold examination of its own jurisdiction

’ Brief for Appellee, United States, at 36, United States v. Vertac

Chem. Corp., 46 F.3d 803 (8th Cir. 1995) (emphasis added).

is not discretionary. As Justice Scalia admonished in Carden v.

Arkoma Assocs., 494 U.S. 185, 196 (1990):

This will not do. Since [diversity of citizenship] is a

jurisdictional requirement, the Court is always ‘called

upon to decide’ it.

The Supreme Court reiterated this tenet in FW/PBS. Inc..

493 U.S. 215, 231-235 (1990) and, most recently, in Mever,

where Justice Thomas stated for a unanimous court that because

the question of the United States’ consent to be sued is jurisdic-

tional, the Supreme Court “must first decide whether [the

government agency’s] immunity has been waived.” 114 S.Ct.

at 1000 (emphasis added).

It is axiomatic that neither the United States nor any other

sovereign may be sued without its consent. It is also axiomatic

that sovereign immunity is jurisdictional in nature. Indeed. the

“terms of [the United States’] consent to be sued in any court

define that court’s jurisdiction to entertain the suit.” Mever, 114

S.Ct. at 1000 (citing United States v. Sherwood, 312 U.S. 584.

586 (1941) and United States v. Mitchell, 463 U.S. 206. 212

(1983)). Moreover, the Supreme Court has consistently held

that federal courts are courts of limited jurisdiction; thus “every

federal appellate court has a special obligation to ‘satisfy itself

[at the outset] not only of its own jurisdiction, but also that of

the lower courts in a cause under review’... .” FW/PBS. Inc.

493 U.S. at 231 (quoting Allen v. Wright, 468 U.S. 737. 750

(1984) and Mitchell v. Maurer, 293 U.S. 237, 244 (1934)).

This “special obligation” of the federal courts to appraise,

as a threshold question, their own jurisdiction is without regard

to whether the parties, or the lower courts, have raised any

jurisdictional questions themselves. FW/PBS, Inc., 493 U.S. at

231; Carden, 494 U.S. at 196; see Fed. R. Civ. P. Rule 12(h)(3)

(“Whenever it appears by suggestion of the parties or otherwise

that the court lacks jurisdiction of the subject matter, the court

shall dismiss the action”). As the Supreme Court, per Justice

O'Connor, explained in FW/PBS, Inc., “Neither the District

Court nor the Court of Appeals determined whether the petition-

ers had standing . .. Although neither side raises the issue here,

we are required to address the issue even if the courts below

have not passed on it.” 493 U.S. at 231 (emphasis added) (citing

Jenkins v. McKeithen, 395 U.S. 411,421 (1969)). “The federal

courts are under an independent obligation to examine their own

jurisdiction ....” Allen, 468 U.S. at 750.

In Carden, relying on a long line of the Supreme Court’s

earlier decisions, the majority concluded:

[T]he failure of parties to urge objections [to diversity

of citizenship] cannot relieve this court from the duty

of ascertaining from the record whether the Circuit

Court could properly take jurisdiction of this suit... ..

‘The rule... is inflexible and without exception,

which requires this court, on its own motion, to deny

its own jurisdiction, and, in the exercise of its appel-

late power, that of all other courts of the United States,

in all cases where such jurisdiction does not affirm-

atively appear in the record on which, in the exercise

of that power, it is called to act.’

494 U.S. at 196 (emphasis added) (citing Great Southern Fire

Proof Hotel Co. v. Jones, 177 U.S. 449, 453 (1900) (quoting

Mansfield, Coldwater & Lake Mich. Ry. Co. v. Swan, 111 U.S.

379, 382 (1884)).

Moreover, in Mever, this Court unanimously reaffirmed that

absent assuring itself that it has actual jurisdiction, a court has

no authority or power to proceed. 114 S.Ct. at 1000.

In an eloquently expressed dissent on this very question,

then Circuit Judge Thomas wrote in a case before the District of

Columbia Circuit:

The truistic constraint on the federal judicial power,

then, is this: A federal court may not decide cases

when it cannot decide cases, and must determine

whether it can, before it may. The majority here

changes this fundamental precept to read, in effect,

that under certain circumstances a federal court

should decide cases regardless of whether it can, and

need not determine whether it can, before it does.

This revision . . . [is] difficult to square with the

Supreme Court’s regular warnings to the federal

courts to fulfill their “special obligation” to inquire

into their own jurisdiction at the outset.

Cross-Sound Ferry Services, 934 F.2d at 340 (citing Capron v.

Van Noorden, 6 U.S. (2 Cranch) at 127 and Mansfield, 111 U.S.

at 382).

Following a detailed historical review, Judge Thomas cor-

rectly concluded that “not a single Supreme Court case author-

izes federal courts to shuffle around unambiguously

jurisdictional problems in order to issue judgments unambigu-

ously on the merits.” Cross-Sound Ferry, 934 F.2d at 345.2!

This conclusion remains true today. In fact, the Supreme Court

in Meyer expressly buttresses this opinion by holding that the

first and fundamental question is that of jurisdiction: “whether

FSLIC’s sovereign immunity was waived.” 114 S.Ct. at 1000

(citations omitted); accord Carden, 494 U.S. at 196; FW/PBS,

Inc.. 493 US. at 231-32 (dismissing claim for lack of U.S.

Const. art. III standing).

In the present case, the United States extensively briefed

and argued that the courts below lacked jurisdiction to review

the CERCLA claims against the government because there had

been no waiver of its sovereign immunity. Yet, neither the

District Court nor the Eighth Circuit examined its own jurisdic-

21 See also Comment, Assuming Jurisdiction Arguendo: The

Rationale and Limits of Hypothetical Jurisdiction, 127 U. Pa. L. Rev.

712. 745 (1979) (“there is. .. no Supreme Court opinion unequivocally

holding that it is permissible to assume Jjusticiability and rule on the

substantive merits”).

tion prior to proceeding to the merits, in direct conflict with a

long line of Supreme Court precedents. Although the Petition-

ers assert that the United States’ sovereign immunity argument

is Wrony on the facts of this case, the courts below still had no

choice: they had a duty to decide this threshold jurisdictional

question first in order to determine whether they could decide

the merits. The lower courts’ failure to examine their own

jurisdiction in this case is clear error on one of the most funda-

mental of all federal questions.

The United States’ Sovereign Immunity Was Waived

Section 107(a)(2) and Section 107(a)(3) of CERCLA state

that any “person” who is an operator or an arranger is liable.-?

The term “person” ts defined to include the “United States.**

Section 120(a)(1) of CERCLA states that:

Each department, agency, and instrumentality of the

Federal Government [including the executive, legis-

lative and judicial branches of government] shall be

subject to, and comply with this chapter in the same

manner and to the same extent, both procedurally and

substantively, as any nongovernmental entity, includ-

ing liability under section [107] of this title.-4

In Pennsvivania v. Union Gas, 491 U.S. 8 (1989), the

Supreme Court construed these provisions when it held that the

States’ Eleventh Amendment immunity from CERCLA liability

had been abrogated. The Supreme Court explained that Section

12Q(ay.1) of CERCLA 1s:

|Djoubtless an “unequivoca|l] express{ion]” of the

Federal Government’s waiver of its own sovereign

immunity, .... since we cannot imagine any other

plausible explanation for this unqualified language.

ie)

2 42 U.S.C. §8 9607(a)(2), 9607(a)(3).

3 Id § 9601(21).

+ Id. § 9620(a\( 1).

It can be no coincidence that in describing the poten-

tial liability of the States in § 101(20)(D), Congress

chose language mirroring that of § 120(a)(1), there-

fore, Congress must have intended to override the

State’s immunity from suit, just as it waived the

Federal Government’s immunity in § 120(a)(1).

491 US. at 10 (emphasis added) (citations omitted).

Notwithstanding the Supreme Court's explicit finding of

an “unequivoca[!]” waiver, the United States argued below that

it is immune from CERCLA liability whenever, as here, the

Walsh-Healey Act is involved because the United States’

Walsh-Healey Act authority is purely regulatory.2> This mis-

interpretation of the Walsh-Healey Act conflicts with Perkins v.

Lukens Steel Co.. 310 U.S. 113, 128-29 (1940) (emphasis

added), wherein the Supreme Court explained that the Walsh-

Healey Act:

[Djoes not represent an exercise by Congress of

regulatory power over private business or employ-

ment. In this legislation Congress did no more than

instruct its agents who were selected and granted final

authority to fix the terms and conditions under which

the Government will permit goods to be sold to it. The

Secretary of Labor is under a duty to observe those

instructions just as a purchasing agent of a private

corporation must observe those of his principal.

The United States made a similar sovereign immunity

argument in FMC, which involved Government control over the

product made at a private facility under federal “war powers”

statutes analogous to the DPA. The Third Circuit in FMC

correctly rejected this sovereign immunity argument because It

had no basis in CERCLA. its legislative history, of the case law.

29 F.3d at 839-40. The FMC court also correctly looked to

-> Brief for Appellee. United States, at 33-36, United States v

Vertac Chem. Corp., 46 F.3d 803 (8th Cir 1995).

)

Supreme Court opinions interpreting the sovereign immunity

waiver in the Federal Tort Claims Act, 28 U.S.C. §§ 1346 (b),

2674, for guidance in determining the scope of CERCLA’s

similar sovereign immunity waiver. /MC, 29 F.3d at 840. In

these cases, the Supreme Court rejected the government’s argu-

ment that there 1s a “uniquely governmental” function exception

to the FTCA’s sovereign immunity waiver. See, ¢.g., Ravonier,

Inc. v. United States, 352 U.S. 315, 318-20 (1957) (United

States’ sovereign immunity waived by FTCA for claims based

on negligence of federal employees acting as public firemen);

Indian Towing Co. v. United States, 350 U.S. 61 (1955) (United

States’ sovereign immunity waived by FTCA for claims based

on Coast Guard’s negligence in operating lighthouse). The

Third Circuit correctly found /ndian Towing controlling on the

CERCLA sovereign immunity issue on facts similar to those in

this case: /.e., pervasive Federal Government control over a

private contractor's operation of a facility in order to guarantee

production of material needed by the United States. 29 F.3d at

840.

The extent of the United States’ control over Hercules at

the Jacksonville Plant was perhaps best summarized by the

dissent in the Federal Circuit’s Agent Orange settlement indem-

nification opinion, review of which was granted by the Supreme

Court at its April 3, 1995, session:*°

The Government took away appellants’ [including

Hercules] control over their businesses. By assuming

control, the Government deprived appellants of their

ability to conduct themselves prudently, and instead

forced appellants to engage in a dangerous enterprise,

the manufacture of Agent Orange.?’

26 Hercules Inc. v. United States, 24 F.3d 188 (Fed. Cir. 1994),

cert. granted, 63 U.S.L.W. 3717 (U.S. April 4, 1995) (No. 94-818).

Hercules Inc. v. United States, 24 F.3d at 210 (Plager. C.J.,

dissenting).

If a private party had exercised this type of control over a

Superfund site, it should and would be liable under CERCLA

for some portion of that site’s cleanup Costs. Congress did not

intend a different result when the United States 1s the controlling

party. See FMC, 29 F.3d at 840 (“when the government engages

in activities that would make a private party liable if the private

party engaged in those types of activities, then the government

is also liable... even if no private party could in fact engage in

those specific activities”) (emphasis in the original).

The United States Is Liable As A CERCLA Operator

The Circuits Conflict On The Control Standards

For CERCLA Operator Liability

Under Section 107(a)(2) of CERCLA, the United States 1s

liable for cleanup costs at the Arkansas Superfund Sites if there

was a sovereign immunity waiver, and if the United States was

an “operator” of the Jacksonville Plant during the time Hercules

made Agent Orange there. 42 US.C. § 9607(a)(1 (4). The

statute itself provides no guidance on the meaning of the term

“operator.”*5 The legislative history is also unilluminating on

the meaning of this term.

Predictably, this ambiguity has led to conflict among the

circuits as to who is an “operator” for purposes of CERCLA

liability. The United States Court of Appeals for the Fourth

Circuit has adopted an “authority-to-control” standard, holding

that an individual defendant “need not have exercised actual

control in order to qualify as an operator under [CERCLA] so

long as the authority to control the facility was present.” United

States v. Carolina Transformer Co., 978 F.2d 832, 836-37 (4th

Cir. 1992) (emphasis added) (quoting Nurad, Inc. v. Hooper &

Sons Co., 966 F.2d 837, 842 (4th Cir.), cert. denied, 113 S.Ct.

2% im 6,8 . . oT

The statutory definition of operator reads in relevant part: “The

term owner or operator means... any person owning or operating

such facility.” 42 U.S.C. § 9601 (20)(A).

377 (1992)). Several district courts have also adopted this

“authority-to-control” standard for CERCLA operator liabil-

ity.*?

Conversely, the Eighth Circuit, the Third Circuit, and other

courts have adopted an “actual control” test for CERCLA op-

erator liability. Under this “actual control” liability standard:

[A] plaintiff must prove that an individual defendant

had actual responsibility for, involvement in, or con-

trol over the disposal of hazardous waste at a facility

See Sidney S. Arst Co. v. Pipefitters Welfare Educ.

Fund, 25 F.3d 417, 421 (7th Cir. 1994) (holding that

plaintiff must allege that individual defendant “di-

rectly and personally engaged in conduct that led to

specific environmental damage at issue”); Riverside

Market Devel. Corp. v. International Bldg. Prods.,

Inc., 931 F.2d 327, 330 (Sth Cir.) (holding that proper

focus 1s “the extent of [individual] defendant’s per-

sonal participation in the alleged wrongful conduct”),

cert. denied, 112 S.Ct. 636 (1991): New York v. Shore

Realty Corp., 759 F.2d 1032, 1052 (1st Cir. 1985)

(holding that individual defendant was an “operator”

because he was “in charge of the operation of the

facility”): see also Levin Metals Corp. v. Parr-Rich-

mond Terminal Co., 781 F. Supp. 1454, 1457 (N.D.

Cal. 1991) (“an individual cannot be liable as an

‘operator’ under CERCLA Section 107(a)(2) [42

U.S.C. § 9607(a)(2)] unless that individual actually

participates in the operation of the facility at which

See, e.g., Northwestern Mut. Life Ins. Co. v. Atlantic Research

Corp., 847 F. Supp. 289, 397 (E.D. Va. 1994) (holding that an

individual defendant may be liable if she has the authority to contro]

activities on the facility); Robert-Shaw Controls Co. v. Watts Regula-

tor Co., 807 F. Supp. 144, 152-53 (D. Me. 1992) (holding that liability

1s proper if an individual defendant had authority such that she could

have prevented the hazardous waste discharge).

hazardous substances are disposed of, exercised con-

trol over the company immediately responsible for the

operation of that facility, or is otherwise intimately

involved in that company’s operations”).

United States v. Gurley, 43 F.3d 1188, 1192-93 (8th Cir. 1994)

(emphasis in the original).

The Eighth Circuit specifically acknowledged this conflict

among the circuits when it first adopted the “actual control”

standard for operator liability in Gurley. Id. at 1192-93. The

Eighth Circuit also applied the “actual control” standard in this

ease when it held that the United States was not liable as a

CERCLA operator. Vertac, 46 F.3d at 809.

The Eighth Circuit Erred In Adopting The “Actual Control”

Standard For CERCLA Operator Liability

The conflicting “authority-to-contro!” standard adopted by

the Fourth Circuit is consistent with congressional intent be-

cause it “properly declines to absolve from CERCLA liability a

party who possessed the authority to abate the damage caused

by the disposal of hazardous substances but who declined to

actually exercise that authority by undertaking efforts at a

cleanup.” Nurad, 966 F.2d at 842. Here, the United States had

contractual authority to control Hercules’s Agent Orange waste

disposal under the Walsh-Healey Act and the DPA. One of the

DOL’s Walsh-Healey Act standards required that ‘all solid or

liquid waste . . . shall be removed in such a manner as to avoid

creating a nuisance or menace to health... 3° Other Walsh-

Healey Act standards expressly governed waste disposal. One

standard was entitled “receptacles for waste disposal,” and

required that such receptacles not leak.3! Another standard

prohibited any working condition which “a rational and prudent

3041 CER. § 50-204.234 (1960); Appendix E at E-8.

Id. § 50-204.233; Appendix E at E-8.

~—

person of common experience” would believe “hazardous or

dangerous to the health and safety of employees.”

As the Supreme Court explained in Perkins, the DOL had

a “duty” to require compliance with the Walsh-Healey Act

Standards. 310 U.S. at 128-29. Consequently, the DOL often

brought administrative enforcement actions against government

contractors whose waste disposal practices violated the Walsh-

Healey Act standards.33 Here, however, the Federal Govern-

ment failed -- without cause -- to comply with its statutory duty

at the Jacksonville Plant. In so doing, the Federal Government

allowed Hercules to dispose of the Agent Orange wastes in a

manner which clearly violated the Walsh-Healey Act standards.

Ten years after Hercules ceased making Agent Orange for

the Federal Government, the United States claimed, under fed-

eral statutes other than the Walsh-Healey Act, that Hercules’s

disposal of the Agent Orange wastes was negligent, caused a

nuisance, and caused an imminent and substantial endangerment

to human health and the environment.*4 That negligence,

nuisance, and endangerment also violated the Walsh-Healey Act

standards, which were terms of the Agent Orange contracts. The

United States thus had both contractual authority and a duty to

prevent them from occurring.*> The United States had no

32 Id. § 50-204. 1(d); Appendix E at E-7.

E.g., J.A. at 03081, 03089, 03117, 03129-30. For example, in

one of these actions, the DOL’s Hearing Examiner concluded that the

Walsh-Healey Act standards were violated because “[s]olvents were

dumped into a ditch adjacent to the plant where they constituted a fire

hazard.” J.A. at 03081.

‘4 J.A. at 00561-00625, 00813-00818, 03321. The United States

brought claims against Hercules pursuant to the Resource Conserva-

tion and Recovery Act of 1976, 42 U.S.C. §§ 6901 er seg., and the

Clean Water Act, 33 U.S.C. §§ 1251-1376.

Perkins, 310 U.S. at 128-29. The DOL’s own rules required

that it enforce compliance with the standards. 40 C.F.R. § 50-203.1.

In 1952, Congress amended the Walsh-Healey Act to allow “any

interested party,” including plant employees, to seek judicial review

excuse for not fulfilling its duty. Hercules buried the Agent

Orange wastes at the Jacksonville Plant in plain view of anyone

at the plant.3¢ And various United States’ representatives visited

the plant site almost 200 times during Hercules’s production of

Agent Orange.*’

The Eighth Circuit Improperly Applied The “Actual Control”

Standard For CERCLA Operator Liability

Even under an “actual control!” standard, the Eighth Circuit

erred because the United States is liable as an operator under

that standard as correctly interpreted by the Third Circuit. In

FMC, the Third Circuit concluded that the United States was

liable as a CERCLA operator under an “actual control” standard

because:

[T]he leading indicia of control were present, as the

government determined what product the facility

would produce, the level of production, the price of

the product, and to whom the product would be sold.

_.. Inthese circumstances, we must conclude that the

government was an operator of the facility for pur-

poses of CERCLA liability.

FMC, 29 F.3d at 843.

The identical “leading indicia of control” are present here.

The United States determined the specifications and the product

(Agent Orange) that Hercules would produce at its Jacksonville

Plant by issuing DPA directives and rated order contracts. The

of whether the DOL was properly applying the Act at a particular

contractor’s facility; thus, the standards were judicially enforceable

through what were, in effect, citizen suits. 41 U.S.C. § 43a (c). Wirtz

v. Baldor Electric Co., 337 F.2d 518, 532-33 (D.C. Cir. 1963); George

v. Mitchell, 282 F.2d 486, 488-89 (D.C. Cir. 1960); 41 U.S.C.A. §

43(a), Historical and Statutory Notes (quoting Conference Report No.

2352); 98 Cong. Rec. 6246 (May 29, 1952).

36 JA. at 05855,

J.A. at 003 19-320, 02918-02921, 03215, 03220-03222, 05855.

United States could have forced Hercules to accept these direc-

tives and rated orders through injunctions and criminal penal-

ties. In 1967, the United States issued a directive which required

Hercules to devote the Jacksonville Plant’s entire production

capacity to the sole and exclusive production of Agent Orange

for the DOD. Hercules requested relief from this 1967 directive

on the ground that to comply might destroy its private herbicide

market, which did not include Agent Orange. Hercules’s re-

quest for relief was denied by the United States, and Hercules

complied with the directive.°** Thus, the United States deter-

mined both the product and the level of production by mandating

that Hercules devote its entire plant to the production of Agent

Orange for the DOD, a product for which Hercules had no

private customers.

By issuing the DPA directives and rated order contracts,

the United States also determined the price of the product, and

determined to whom the product would be sold: the sole and

exclusive customer was the United States.*°

In addition to the “leading indicia of control,” the United

States also controlled Hercules’s supply and use of raw materi-

als. Tetrachlorobenzene (““TCB”) is necessary to produce Agent

Orange. Because TCB was in short supply during the time

Hercules made Agent Orange, the United States ordered Hooker

Chemical (“Hooker”) to devote its entire TCB production ca-

pacity to supply Agent Orange producers. In 1967, the United

States issued a DPA directive that ordered Hooker to make and

deliver specified amounts of TCB to Hercules on specified

dates. This DPA directive was enforceable against Hooker by

injunctive relief and criminal penalties. Under its rated order

contracts and the DPA directives, Hercules was required to use

the Hooker-directive TCB to make Agent Orange for the DOD.

E.g., J.A. at 00190, 022 15-16, 02218, 02586-88, 02596, 0291 1-13.

J.A. at 05853-56, O5858.

Hercules could not use this TCB for any other purpose.4? TCB

is a CERCLA hazardous substance.*!

In sum, the same “leading indicia of control” for purposes

of the “actual control” standard are present in this case, as they

were in FMC. The FMC Court held the United States liable as

a CERCLA operator under the “actual control” standard. Yet

the Eighth Circuit held that the United States was not liable as

a CERCLA operator under the same standard. Thus, not only

is there a conflict among the circuits as to what standard to use

for “operator” liability, but there is also a conflict between those

circuits that have adopted the “actual control” standard.

The United States is Also Liable As A CERCLA Arranger

Under Section 107(a)(3) of the CERCLA, the United States

is liable for the clean-up costs of the Arkansas Superfund Sites

as an “arranger” if there was a waiver of sovereign immunity,

and if the United States “arranged for treatment or disposal” of

hazardous substances which it “owned or possessed” during the

time Hercules made Agent Orange at the Jacksonville Plant. 42

U.S.C. § 9607(a)(3). The statute is equally ambiguous with

regard to the meaning of “arranged for treatment or disposal”

and “owned or possessed” as it is in regard to the meaning of

“operator.” For example, CERCLA does not define the term

“possessed.” Faced with this ambiguity, the lower courts have

agreed with the Department of Justice that “arranger” liability

should be broadly construed in order to achieve CERCLA’s

“overwhelmingly remedial statutory scheme.”4

The United States is liable as a CERCLA arranger under

the requisite liberal interpretation of these terms. With respect

40 J A.at 02915, 02991. 03074. 03219.

40 C.F.R. § 302.4 (1993).

E.g., United States v. Aceto Agric. Chem. Corp., 872 F.2d 1373,

1380 (8th Cir. 1989); United States v. Arrowhead Ref'g Co., 829 F.

Supp. 1078, 1090 (D. Minn. 1993); CPC Int'l, Inc. v. Aerojet-General

Corp., 759 F. Supp. 1269, 1279 (W.D. Mich. 1991).

to the “arranged for treatment or disposal” requirement, the

United States concedes -- as it must -- that it knew or should

have known that Hercules’s manufacture of Agent Orange for

the DOD would inevitably generate hazardous waste. The

United States imposed Agent Orange waste disposal standards

under the Walsh-Healey Act. These standards were incorpo-

rated into the Agent Orange contract terms. Thus, there was an

express contractual arrangement between the United States and

Hercules for the treatment or disposal of hazardous substances.

Accordingly, the first requirement of CERCLA “arranger” li-

ability is satisfied.

The second, “owned-or-possessed,” requirement is also

satisfied in this case. The relevant statutory language is written

in the disjunctive: “owned or possessed.” /d. Consequently,

arranger liability does not require both ownership and posses-

sion; possession alone is sufficient. Nor is actual physical

possession required for arranger liability. Constructive posses-

sion is sufficient.

Even in criminal cases, courts have uniformly held that

constructive possession is sufficient to constitute “possession:”

The law recognizes two kinds of possession: actual

and constructive possession. A person who, although

not in actual possession, xnowingly has both the

power and the intention at a given time to exercise

dominion or control over a thing, either directly or

though another person or persons, is then 1n construc-

tive possession of it.43

Sewell v. United States, 406 F.2d 1289, 1293 n.3 (8th Cir. 1969)

(approving this statement of Arkansas law in a narcotics possession

case); accord, e.g., United States v. Wesley, 990 F.2d 360, 364 (8th

Cir. 1993); United States v. Boykin, 986 F.2d 270, 274 (8th Cir.), cert.

denied, 114 S.Ct. 241 (1993): United States v. Caves, 890 F.2d 87,95

(8th Cir. 1989). The same definition of constructive possession has

frequently been applied in civil cases. E.g., In re Lee Road Partners,

Ltd., 155 B.R. 55,59 (Bankr. E.D.N.Y. 1993) (bankruptcy code); First

National Bank v. Lamon Livestock Sales Co., 417 N.W.2d 443, 447-48

If constructive possession is sufficient to assess criminal liabil-

ity, then it is sufficient to establish liability under CERCLA.

CERCLA’s liability provisions must be liberally construed; they

should not be more strictly construed than penal statutes.*4

In this instance, the United States knowingly had the power

and the intention at all times relevant here to exercise control

over both the raw materials used and the product made at the

Jacksonville Plant, either directly or through another person or

persons (e.g., Hercules). Moreover, the United States actually

exercised its power by controlling Hercules’s supply and use of

raw materials; by controlling the product, and the specifications

thereof, made at the Jacksonville Plant; by controlling the pur-

chaser of those products; and by controlling the price of those

products. The United States also had substantial control over

Hercules’s waste disposal practices under the Walsh-Healey Act

standards. At a minimum, therefore, the United States had

constructive possession over the Agent Orange hazardous sub-

stances at the Jacksonville Plant; and the United States’ con-

structive possession is sufficient to satisfy the second

requirement of CERCLA arranger liability. 49

(lowa 1987) (Uniform Commercial Code); Jacobson v. Aetna Casu-

alty & Surety Co., 46 N.W.2d 868, 870-72 (Minn. 1951) (insurance

contract).

™ Cf. e.g., United States v. Khang, 904 F.2d 1219, 1222 (8th Cir.

1990) (‘“** The rule that penal laws are to be construed strictly, is perhaps

not much older than construction itself’’) (quoting United States v.

Wiltberger, 18 U.S. (5 Wheat.) 76, 95 (1820)) with Aceto, 872 F.2d

at 1380 (courts should liberally construe arranger liability in order to

achieve CERCLA’s “‘overwhelmingly’ remedial statutory scheme”)

(quoting United States v. Northeastern Pharmaceutical & Chem. Co.,

Inc., 810 F.2d 726, 773 (8th Cir. 1986), cert. denied, 484 U.S. 848

(1987) (“NEPACCO”)).

See United States v. New Castle County, 727 F. Supp. 854, 873

(D. Del. 1989) (constructive possession is sufficient for CERCLA

arranger liability). In United States v. Allied Corp., 1990 U.S. Dist.

LEXIS 20061 (N.D. Calif. 1990), the United States was held liable as

The Eighth Circuit has held private parties liable as CER-

CLA arrangers in circumstances similar to the facts of this

case.” C ongress intended that the United States be treated the

same as private parties in regard to the CERCLA liability. FMC,

29 F.3d at 840. The FMC court adhered to congressional intent

when it held the United States liable as a CERCLA arranger on

facts similar to this case.4’ By contrast, the Eighth Circuit

violated congressional intent by creating a double standard: the

United States is not liable under CERCLA in circumstances

where a private party unquestionably would be.

a CERCLA arranger even though it never owned or physically pos-

sessed the hazardous substances.

7 29 F.3d at 845-46 (affirming district court decision by evenly

divided court en hanc).

CONCLUSION

The decisions below conflict with a long line of Supreme

Court precedents that require federal courts to determine whether

they have jurisdiction to review the merits of claims, before they

do. Here, both courts proceeded directly to the merits without ever

examining the threshold jurisdictional question of sovereign immu-

nity. According to the United States, some twenty-four (24)

pending CERCLA cases involve the same or similar CERCLA

sovereign immunity issues. If the Eighth Circuit’s decision is left

undisturbed by this Court, the federal courts will be granted a license

to rely on flawed precedent and to ignore the jurisdictional question

of sovereign immunity. Moreover, this extreme departure from

well settled jurisprudence manifestly transcends CERCLA. Ab-

sent action by this Court, the Eighth Circuit’s opinion will be

favorably cited by other federal courts as a basis for deciding

any cases on the merits without deciding jurisdiction.

Further, there is conflict among the circuits concerning the

appropriate control standards to apply in order to determine

liability under CERCLA. The Supreme Court has never re-

viewed these CERCLA liability standards. There are many

pending cases which present the same or similar issues as those

presented by this Petition, and the lower courts urgently need

guidance on both the waiver of sovereign immunity under

CERCLA and the Act’s liability standards.

Finally, this Court has already granted certiorari to review

Hercules’s closely related DPA claims in the Federal Circuit

case. Hercules made the Agent Orange which is the subject of

that appeal at the same Jacksonville Plant that is at issue here.

The DPA issues which the Supreme Court has decided to review

are closely related to the issues presented by this Petition for

review of the Eighth Circuit’s CERCLA liability decision. But

a decision in the Federal Circuit case will neither resolve the

sovereign immunity issue nor the conflicts among the circuits

regarding CERCLA’s liability standards. The Supreme Court

should, therefore, grant this Petition on all questions presented

and issue a writ of certiorari.

Respectfully submitted,

SCOTT E. SLAUGHTER* WINSTON BRYANT*

SIMON kL. DANCE! ATTORNEY GENERAL and

COFFIELD UNGARETTI& HARRIS CHARLES L. MOULTON

1747 Pennsylvania Ave., N.W. ASSISTANT ATTORNEY GENERAL

Suite 900 OFFICE OF THE ATTORNEY

Washington, D.C. 20006 GENERAL

(202) 872-4310 323 Center Street,

Suite 200

Counsel for Petitioner, Tower Building

Vertac Chemical Corporation — Little Rock, Arkansas

72201-2610

| hue hee

*Counsel of Record (SO1) 682-2007

Counsel for Petitioner,

Arkansas Department

of Pollution

Control and Ecology

A- |

UNITED STATES COURT OF APPEALS

FOR THE EIGHTH CIRCUIT

Nos. 94-1946/1956/1960/2006

United States of America”,

Plaintff-Appellee,

Vertac Chemical Corporation,

Defendant-Appellant.

Hercules, Incorporated;

Uniroyal Chemical, Limited;

Defendants.

Standard Chlorine of Delaware.Inc..

Third Party-Defendant.

Arkansas Department of Pollution

Control and Ecology,

Plaintiff,

Vertac Chemical Corporation;

Defendant-Appellant.

Hercules, Incorporated,

Defendant.

Appeals from the United States District Court

for the Eastern District of Arkansas

Submitted: November 14, 1994

Filed: January 31, 1995

“Title per counsel. Because of multiple cross-, counter- and third-party

Issues, caption is 106 pages long. Full caption is on file with the Clerk’s

Office of the Eighth Circuit Court of Appeals in St. Louis, MO.

A-2

Before McMILLIAN, WOLLMAN and HANSEN,

Circuit Judges.

McMILLIAN, Circuit Judge.

Vertac Chemical Corp. (Vertac), the Arkansas Department

of Pollution Control and Ecology (ADPCE), Hercules, Inc.

(Hercules), and Uniroyal Chemical, Ltd. (Uniroyai) (collec-

tively appellants), appeal from an interlocutory order entered in

the United States District Court! for the Eastern District of

Arkansas denying their motions for summary judgment and

granting a cross-motion for summary judgment brought by the

United States of America. United States v. Vertac Chem. Corp.,

841 F. Supp. 884 (E.D. Ark. 1993) (Vertac). For reversal,

appellants argue that the district court erred in holding that the

undisputed facts establish as a matter of law that the United

States cannot be held liable as either an operator or an arranger

within the meaning of § 107(a) of the Comprehensive Environ-

mental Response, Compensation, and Liability Act of 1980

(CERCLA), 42 U.S.C. § 9607(a). Hercules additionally argues

that the district court erred in holding that it is not entitled to

immunity under § 707 ot the Defense Production Act of 1950

(DPA), 50 U.S.C. app. § 2157, or implied indemnity from the

United States. For the reasons discussed below, we affirm the

order of the district court.

Background

This case began as a cost recovery action brought by the

United States under CERCLA against numerous potentially

responsible persons associated with a former herbicide manu-

facturing facility located in Jacksonville, Arkansas (the Jackson-

ville facility). The present appeal arises from motions for

summary judgment filed by Vertac, ADPCE, and Hercules, and

1 The Honorable George Howard, Jr., United States District Judge for

the Eastern District of Arkansas.

A-3

across-motion for summary judgment filed by the United States.

By memorandum opinion and order dated October 12, 1993, the

district court granted the United States’ motion and denied the

motions brought by Vertac, ADPCE and Hercules. Vertac, 841

F. Supp. 884. This appeal followed.-

Undisputed Facts

The following summary of facts is largely taken from the

district court’s statement of undisputed facts.* See id. at 886-88.

During the late 1950s, Reasor-Hill Corp. owned and operated

the Jacksonville facility, where it manufactured, among other

things, chemical herbicides known as 2,4-D4 and 2,4,5-T. In

December of 1961, Hercules purchased the Jacksonville facility

from Reasor-Hill. In 1964, in response to contract solicitation

proposals published by the United States, Hercules submitted

and won competitive bids to supply the United States with an

herbicide known as Agent Orange, to be used as a defoliant in

Vietnam. Hercules began producing Agent Orange, a mixture

2 The United States asserts that this court lacks jurisdiction to consider

Uniroyal’s arguments on appeal beczuse Uniroyal failed either to join in the

other appellants’ motions for summary judgment or to oppose the United

States’ cross-motion for summary judgment. We note, however, that Uni-

royal did “adopt by reference pursuant to Rule 10(c) of the Federal Rules of

Civil Procedure the responses of the State [of Arkansas], Vertac and Dow to

the Motion for Summary Judgment of the United States.” See Appellee’s

Supplementary Appendix at 139. That adoption is sufficient to confer

appellate jurisdiction, and we have considered Uniroyal’s arguments to the

extent they are within the proper scope of issues on appeal.

3 Appellants do not argue that the district court erred in stating the

undisputed material facts. Rather, they maintain that the district court erred

in applying the law.

4 2,4-D is 2,4-dichlorophenoxyacetic acid.

5 2.4.5-T is 2,4,5-trichlorophenoxyacetic acid. The manutacture of

2.4.5-T creates a by-product known as TCDD or dioxin.

A-4

of the butyl esters of 2,4-D and 2,4,5-T, at the Jacksonville

facility.

From 1964 through 1968, Hercules produced and supplied

Agent Orange to the Department of Defense (DOD) under rated

contracts or orders and directives issued pursuant to the DPA,

50 U.S.C. app. § 2061 et seg. The DPA provides, among other

things, that the President has authority to designate a contract or

order as a “rated order” which shall take priority over the

performance of any other contract or order, on grounds that it is

deemed necessary or appropriate to promote the national de-

fense. Rated orders may also require the suppliers of a govern-

ment contractor to give the government contractor similar

priority. A “directive” is an official action taken by the Depart-

ment of Commerce (DOC) under its regulations. It requires a

person to take an action or to refrain from taking an action and

may take precedence over a rated or unrated contract, to the

extent stated in the directive. The rated orders and directives

issued to Hercules were subject to rules promulgated by the

Business and Defense Services Administration, a unit of DOC.

The rated contracts contained standardized government

contract terms and conditions. The contract specifications,

which governed matters such as physical properties of the

product, packaging, labeling, and quality control, were mainly

developed by the United States Army. Hercules and other

manufacturers were allowed some input regarding the contract

specifications. While DOD allowed Hercules limited opportu-

nities to negotiate and modify the terms of the contract specifi-

cations, the specifications remained substantially dictated by

DOD.

The rated contracts also subjected Hercules to the terms of

the Walsh-Healey Act, 41 U.S.C. § 35. Under the Walsh-Healey

Act, Hercules was required to meet certain health and safety

standards. Regulations under the Walsh-Healey Act gave the

Department of Labor authority to conduct random inspections

A-5

at the Jacksonville facility, which it did on two occasions during

the period Hercules was producing Agent Orange.

In 1967, the United states issued a directive ordering Her-

cules to accelerate its production and delivery of Agent Orange.

As a result, Hercules devoted all of its efforts at the Jacksonville

facility to producing Agent Orange. When Hercules was stil!

unable to meet the United States’ production demands, it con-

tracted for the foreign importation of 2,4,5-T and 2,4-D. The

government facilitated this importation by waiving import du-

ties, pursuant to 10 U.S.C. § 2383, which provided for duty-free

treatment of emergency war materials purchased abroad.

None of the raw materials used by Hercules for the produc-

tion of Agent Orange was ever owned or directly supplied by

the United States. The United States did, however, issue direc-

tives to Hooker Chemical (Hooker), to ensure Hooker’s supply

of tetrachlorobenzene (TCB) to Hercules and other producers of

Agent Orange. The United States aiso did not hold any financial

ownership interest in the land, buildings, tools, machinery, or

equipment used by Hercules during the time Hercules was

producing Agent Orange. In fact, Hercules protected certain

aspects of its Agent Orange production process as proprietary

information. No representative of the United States ever hired,

fired, disciplined, managed, or trained any Hercules personnel

who worked on the production of Agent Orange.

The United States knew or should have known that the

production of Agent Orange produced wastes. Some of the

wastes generated by the production of 2,4,5-T contained haz-

ardous substances, including dioxin. The rated contracts be-

tween Hercules and the United States did not address the manner

in which Hercules was to handle wastes generated by the pro-

duction of Agent Orange. Hercules chose to bury wastes gen-

erated by the production of 2,4,5-T on-site, which had been its

practice before it began producing Agent Orange for the United

States. Hercules chose to bury the wastes without consulting

A-6

representatives of DOD or DOC. The United States did not take

part in designing, performing, or supervising activities related

to the handling, treatment, or disposal of wastes while Hercules

owned and operated the Jacksonville facility.

Hercules profited from its sales of Agent Orange to the

United States under the rated contracts. After Hercules stopped

supplying Agent Orange to the United States, it continued to

produce and sell to commercial customers other products manu-

factured with the use of 2,4-D and 2,4,5-T.

Discussion

We review a grant of summary judgment de novo. The

question before the district court, and this court on appeal, is

whether the record, when viewed in the light most favorable to

the non-moving party, shows that there is no genuine issue as to

any material fact and that the moving party is entitled to judg-

ment as a matter of law. Fed. R. Civ. P. 56(c); see. e.g., Celotex

Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986); Get Away

Club, Inc. v. Coleman, 969 F.2d 664, 666 (8th Cir. 1992); Sz.

Paul Fire & Marine Ins. Co. v. FDIC, 968 F.2d 695, 699 (8th

Cir. 1992). Where the unresolved issues are primarily legal

rather than factual, summary judgment is particularly appropri-

ate. Crain v. Board of Police Comm'rs, 920 F.2d 1402, 1405-06

(Sth Cir. 1990). In the present case, the district court held as a

matter of law that, under the undisputed facts of the case, the

United States cannot be held liable as either an operator or an

arranger under 42 U.S.C. § 9607(a)(2) and § 9607(a)(3). Vertac,

841 F. Supp. at 890. The district court also held as a matter of

law that Hercules is not entitled to immunity under the DPA or

implied indemnity from the United States. /d. at 891. We agree.

Operator Liability

Under CERCLA, there are four classes of responsible

persons who may be held liable for response costs incurred by

the United States or another person. 42 U.S.C. § 9607(a). One

class includes persons who operated a facility at the time haz-

ardous substances were disposed of at the facility. /d.

§ 9607(a)(2) (owners and operators of facility at time of dis-

posal). This court recently addressed the legal standards for

determining an individuals operator liability under § 9607(a)(2)

in United States v. Gurley, No. 93-2699 (8th Cir. Dec. 28, 1994)

(Gurley). We determined under the facts of that case that an

individual’s actual exercise of control over the waste disposal

activities conducted at a dump site resulted in personal liability

under CERCLA. /d., slip op. at 5-11.

In the present case, we consider the legal standards for

determining the government’s operator liability under

§ 9607(a)(2), which we view as similar to corporate liability.

As noted in Gurley, slip op. at 5-7, the statute itself does not

provide much guidance; it simply imposes liability upon “any

person who at the time of disposal of any hazardous substance

owned or operated any facility at which such hazardous sub-

stances were disposed of.” 42 U.S.C. § 9607(a)(2). The Third

Circuit, however, recently addressed this precise issue and held

that the United States was an operator under CERCLA in a case

involving similar, but not identical, facts to those of the present

case. FMC Corp. v. United States Dep’t of Commerce, 29 F.3d

833 (3d Cir. 1994) (en banc) (FMC).© Upon review, we agree

with the Third Circuit’s conclusion that operator liability may

result from actual or substantial control exercised by one entity

over the activities of another. /d. at 843-45. Determining

whether an entity has exerted such actual or substantial contro!

6 FMC Corp. v. United States Dep't of Commerce, 29 F.3d 833 (3d Cir.

1994) (en banc) (FMC), had not been decided at the time the district court

rendered its decision in the present case.

A-&

requires a fact-intensive inquiry and consideration of the totality

of circumstances. /d. at 845. In the present case, we hold that

the United States cannot be held liable as an operator under

CERCLA because it did not exercise actual or substantial con-

trol over the operations at the Jacksonville facility.

In /MC. the Environmental Protection Agency brought a

CERCLA action against potentially responsible persons seek-

ing response costs for cleaning up hazardous substances at a

facility in Front Royal, Virginia (the Front Royal facility). The

owner of the site, FMC corporation (FMC), sought contribu

tion from the United States pursuant to 42 U.S.C. § 9613(f).

FMC alleged that the United States was lable as an owner,

operator, and arranger under 42 U.S.C. §§ 9607(a)(2) and

§$ 9607(a)(3) because the War Production Board (WPB)’ CX-

ercised control over the manufacture of high tenacity rayon at

the Front Royal facility during the 1940s. Following a bench

trial, the district court held that the United States was liable as

an owner, operator, and arranger. On appeal, the Third Circuit

affirmed, discussing only the United States’ lability as an

operator.” 29 F.3d at 843-45. The Third Circuit applied an

“actual control” test for operator liability as set forth in its

decision in Lansford-Coaldale Joint Water Auth. v. Tonolli

Corp., 4 F.3d 1209 (3d Cir. 1993) (corporate liability). FMC,

29 F.3d at 843.

Under the “actual control” test, the Third Circuit consid-

ered whether the United States had exercised “substantial con-

trol” over the production of high tenacity rayon at the Front

Roval site. That standard in turn required, ata minimum, “active

involvement in the activities” at the Front Royal facility. /d.

Based upon the specific facts of the case, the Third Circuit

The War Production Board was later subsumed within the Department

of Commerce.

& By an evenly divided vote, the Third Circuit also affirmed, without

discussion, the district court's holding that the United States was liable as an

arranger under § 9607(a)(3). FMC, 29 F.3d at 845-46.

A.9

concluded that the United States had exercised actual control

over the activities at the Front Roval facility during the relevant

time frawre. The Third Circuit reasoned as follows:

In our view, it 1s clear that the government had

“substantial control” over the facility and had “active

involvement in the activities” there. The government

determined what product the facility would manufac

ture, controlled the supply and price of the facility’s

raw materials, in part by building or causing plants to

be built near the facility for their production, supplied

equipment for use in the manufacturing process, acted

to ensure that the facility retained an adequate Jabor

force, participated in the management and supervision

of the labor force, had the authority to remove workers

who were incompetent or guilty of misconduct, con

trolled the price of the facility’s product, and control-

led who could purchase the product. While the

government challenges some of the district court’s

findings, it simply cannot quarrel reasonably with the

court’s conclusions regarding the basic situation at the

facility. In particular, the government reasonably

cannot quarrel with the conclusion that the leading

indicia of control were present, as the government

determined what product the facility would produce.

the levei of production, the price of the product, and

to whom the product would be soid.

Id.

A key fact in FMC was that American Viscose, the owner

of the Front Royal facility at the time high tenacity rayon was

manufactured, had been ordered by the WPB to convert its

facility to production of high tenacity rayon, rather than the

regular textile rayon it had been producing. /d. at 836. In other

words, American Viscose itself did not choose its product: “the

government determined what product the facility would pro-

A- 10

duce.” Jd. at 843. Thus, the United States was directly and

entirely responsible for introducing a new manufacturing proc-

ess at the Front Royal facility. That manufacturing process

generated hazardous substances that were disposed of on-site.

Moreover, the United States implemented the required plant

conversion by leasing government-owned equipment and ma-

chinery and contracting with a third party to install the equip-

ment at the Front Royal plant. /d. at 837. By contrast, in the

present case, Hercules elected to bid for the Agent Orange

government contracts. To the extent Hercules had to change its

operations to produce Agent Orange, as opposed to other herbi-

cides using 2,4-D and 2,4,5-T, those changes resulted from its

own decision to seek the government’s wartime business. Ver-

tac, 841 F. Supp. at 886, 890.

Another important fact in FMC was that the United states

“exerted considerable day-to-day control over American Vis-

cose” during the relevant time period. FMC, 29 F.3d at 844.

For example, the United States participated in managing and

supervising workers, and even appointed a full-time repre-

sentative to reside at Front Royal to address problems at the

facility concerning manpower, housing, community services,

and other related matters. /d. at 837. By contrast, in the present

case, no representative of the United States ever managed or

supcivised any Hercules personnel during the relevant time

period. Vertac, 841 F. Supp. at 888. Upon review, we hold that

it cannot genuinely be disputed that the United States was never

actively involved on a regular basis in, and thus never exerted

substantial control over, operations at the Jacksonville facility

while Hercules was producing Agent Orange. Moreover, the

facts that Hercules was required to comply with the worker

health and safety regulations under the Walsh-Healey Act, and

that on two occasions inspectors visited the Jacksonville plant

to investigate such compliance, are insufficient bases for impos-

ing CERCLA liability on the United States as an operator of the

facility. See, e.g., United States v. Dart Indus., Inc., 847 F.2d

A- 11

144 (4th Cir. 1988) (state environmental agency not an owner

or operator of waste site under CERCLA despite allegations that

agency issued permits for waste storage, performed inspections,

and failed to effectuate a cleanup); United States v. New Castle

County, 727 F. Supp. 854, 867-70 (D. Del. 1989) (state’s

regulation of hazardous waste site insufficient to establish op-

erator liability where state did not have a financial or proprietary

interest in the site and did not actively participate in daily

management and operations of the site).

In sum, the United States was not sufficiently involved,

directly or indirectly, in the activities that took place at the

Jacksonville facility to constitute actual or substantial control.

Accordingly, we hold that, under the facts of the present case,

the United States cannot be held liable as an operator of a facility

under § 9607 (a)(2).

Arranger Liability

CERCLA also imposes liability for response costs on “any

person who by contract, agreement, or otherwise arranged for

disposal or treatment . . . of hazardous substances owned or

possessed by such person, by any other party or entity, at any

facility owned or operated by another party or entity and con-

taining such hazardous substances.” 42 U.S.C. § 9607(a)(3).

This court addressed the legal standards for finding arranger

liability under CERCLA in United States v. Northeastern Phar-

maceutical & Chem. Co., 810 F.2d 726 (8th Cir. 1986)

(NEPACCO), cert. denied, 484 U.S. 848 (1987), and United

States v. Aceto Agric. Chems. Corp., 872 F.2d 1373 (8th Cir.

1989) (Aceto). Appellants argue that the United States is an

arranger under NEPACCO and Aceto because it had authority

to control, and did control, many aspects of the production of

Agent Orange. Upon review, we agree with the district court’s

analysis of this issue.

Liability under § 9607(a)(3) requires, among other things,

that the hazardous substances be “owned or possessed by” the

A-12

person who ar anged for the disposal. In NEPACCO, we ex-

plained that “[i]t is the authority to control the handling and

disposal of hazardous substances that is critical under the statu-

tory scheme. ... We believe requiring proof of personal own-

ership or actual physical possession of hazardous substances as

a precondition for liability under CERCLA § 107(a)(3), 42

U.S.C. § 9607(a)(3), would be inconsistent with the broad

remedial purposes of CERCLA.” 810 F.2d at 743. NEPACCO

involved a question of whether or not a corporate employee

could be found to have “owned or possessed” hazardous sub-

stances within the meaning of § 9607 (a)(3) by virtue of his

specific responsibilities within the corporation, his knowledge

of the hazardous nature of substances with which he was dealing,

and the specific actions he took. In the present case, we must

consider whether or not the United States “owned or possessed”

hazardous substances within the meaning of § 9607(a)(3) by

virtue of its statutory authority under the DPA and the Walsh-

Healey Act, its presumed knowledge that the production of

Agent Orange was gencrating hazardous wastes, and the specific

actions it took to facilitate Hercules’ production of Agent Or-

ange. Appellants maintain that the United States constructively

possessed the hazardous substances disposed of at the Jackson-

ville facility because the United States had the authority to

control, and did control, the product made at the facility and the

raw materials necessary to make that product. We disagree.

To begin, we note that a governmental entity may not be

found to have owned or possessed hazardous substances under

§ 9607(a)(3) merely because it had statutory or regulatory

authority to control activities which involved the production,

treatment or disposal of hazardous substances. Our holding in

NEPACCO, when read in the context of the facts of the case,

certainly does not suggest such a broad interpretation. In

NEPACCQO, we concluded that a corporate employee construc-

tively possessed the hazardous substances at issue because he,

“actually knew about, had immediate supervision over, and was

A- 13

directly responsible for arranging for the transportation and

disposal of the NEPACCO plant’s hazardous substances.” 810

F.2d at 743. In the present case, by contrast, the United States

did not immediately supervise, or have direct responsibility for,

the transportation or disposal of any hazardous substances gen-

erated at the Jacksonville facility. Vertac, 841 F. Supp. at

887-88.

Appellants maintain, however, that they are not merely

relying on the United States’ regulatory powers as a basis for

asserting arranger liability under NEPACCO. They contend that

it is the additional contractual relationship between Hercules and

the United States, as governed by the DPA, that gives rise to the

latter’s liability as an arranger. We again disagree. As stated

by the district court, “there is no dispute that Hercules actively

sought Agent Orange contracts by participating in competitive

bidding and that it made a profit from each contract.” Vertac,

841 F. Supp. at 890. Moreover, “the relationship between the

United States and the contractor under the DPA is one of buyer

and seller, except that the buyer (i.c., the United States) has the

power to require the seller to perform the contract and to give it

priority over other contracts.” /d. Finally, Hercules was given

opportunities to negotiate some terms of the coniract specifica-

tions and, as a result, some of those terms were changed or

modified. /d. at 886. Thus, while NEPACCO certainly suggests

that circumstances may exist where a government contract

involves sufficient coercion or governmental regulation and

intervention to justify the United States’ liability as an arranger

under CERCLA,” the undisputed facts in the present case do

not support such a finding.

Appellants rely, in the alternative, on this court’s decision

in Aceto. In Aceto, the appellants, pesticide manufacturers,

9 Cf. FMC, 29 F.3d at 845-46 (affirming without discussion the district

court's ruling that the government was liable as an arranger under CERCLA).

A-14

argued that they could not be liable as arrangers of hazardous

waste disposal where the wastes were generated by an inde-

pendent contractor whom they had hired to formulate technical

grade pesticides into commercial grade pesticides. The com-

plaint alleged that the appellants owned the technical grade

pesticides used in the formulation, the work in process, and the

resulting commercial grade product. 872 F.2d at 1378. On

appeal, this court affirmed the district court's denial of the

appellants’ motion to dismiss, noting that the appellants actually

owned the hazardous substances, as well as the work in process.

Id. at 1381-82. In other words, the complaint alleged that,

throughout the production process, the appellants retained actual

ownership of the hazardous substances in question. Therefore,

a claim of arranger liability had been sufficiently alleged, even

though the appellants were never actually involved in the treat-

ment or disposal of the hazardous wastes. /d. at 1382.

Appellants in the present case argue that Aceto applies

because the United States (1) supplied the raw materials to

Hercules for the production of Agent Orange by issuing direc-

tives to Hooker requiring Hooker to supply TCB to Hercules,

giving Hercules authority to enter rated contracts with its sup-

pliers, and waiving import duties for some of Hercules’ foreign

suppliers, and (2) constructively possessed the hazardous sub-

stances and the work in process by having the authority to

control the supply of TCB, Hercules’ production process, and

the end product.

We agree with the district court’s determination under

Aceto that the United States did not supply the raw materials to

Hercules and did not own or possess the raw materials or the

work in process. See Vertac, 841 F. Supp. at 888-89. Although

the United States took steps to facilitate Hercules’ acquisition

of TCB, the United States was never actively involved in

supplying Hercules with any such raw materials. Nor did the

United States own or have any financial interest in any of

A- 15

Hercules’ suppliers. C/. EMC, 29 F.3d at 837 (government built

and retained ownership of sulfuric acid plant adjacent to facility

lo assure adequate supply of sulfuric acid). The facts simply do

not support the conclusion that the United States actually or

constructively supplied Hercules with its raw materials. It also

cannot reasonably be inferred that the United States construc

tively owned or possessed the raw materials or the work in

process that generated hazardous wastes at the Jacksonville

facility. As previously discussed, the undisputed facts establish

that the United States’ actual involvement in the operations of

the Jacksonville facility was sporadic and minimal.

Accordingly, we hold that, under the facts of the present

case, the United States cannot be held liable under CERCLA as

an arranger of hazardous waste disposal under § 9607(a)(3).!0

Hercules’ immunity and indemnity arguments

Hercules additionally argues on appeal that it is immune

from CERCLA liability arising out of its performance of the

Agent Orange contracts and that the United States has an implied

duty to indemnify Hercules. The district court rejected these

arguments in its summary judgment order without discussing its

reasons. Vertac, 841 F. Supp. at 891. Upon careful review of

the undisputed facts and the arguments presented on appeal. we

affirm the district court’s decision.

Hercules bases its immunity argument on § 707 of the

DPA, 50 U.S.C. app. § 2157, which provides:

No person shall be held liable for damages or

penalties for any act or failure to act resulting directly

or indirectly from compliance with a rule, regulation,

or order issued pursuant to this Act [sections 2061 to

2071 of this Appendix], notwithstanding that any

10 Our conclusions that the United States is neither an operator nor an

arranger under CERCLA obviates the need to address the United States

sovereign immunity arguments

A-16

such rule, regulation, or order shall thereafter be de-

clared by judicial or other competent authority to be

invalid. No person shall discriminate against orders

or contracts to which priority is assigned or for which

materials or facilities are allocated under title | of this

Act [sections 2071 to 2076 of this Appendix | or under

any rule, regulation, or order issued thereunder, by

charging higher prices or by imposing different terms

and conditions for such orders or contracts than for

other generally comparable orders or contracts, or in

any other manner.

Hercules argues that the language of § 707 is clear and unambi-

guous and that nothing in its language supports an interpretation

that would exclude Hercules’ CERCLA liability, or any other

liability, arising out of its performance of the Agent Orange

contracts. In response, the United States argues that the lan-

guage of § 707 is not clear and unambiguous and that the

interpretation advanced by Hercules would have the absurd

result of allowing a government contractor to violate the laws

with impunity, so long as it is performing a rated contract.

In Hercules, Inc. v. United States, 24 F.3d 188, 203-04

(Fed. Cir. 1994) (Hercules), the Federal Circuit was similarly

required to examine the scope of the immunity provided by

§ 707. The Federal Circuit considered the relationship between

§ 707 and § 101(a) of the DPA, 50 U.S.C. app. § 2071 (a), which

authorizes the President to designate certain government con-

tracts for priority over other contracts when necessary or appro-

priate to promote the national defense. Noting, as a general rule,

that statutory provisions enacted together must be read harmo-

niously, the Federal Circuit reasoned “[t]o hold that section 707

protects contractors against a risk which is greater than that

created by the statute with which it operates would violate this

rule.” 24 F.3d at 204. Accordingly, the Federal Circuit con-

cluded “the protection afforded by section 707 of the DPA

A-17

extends no further than the risk imposed by section 101 (a) of the

DPA.” Id. We agree. Accordingly, we hold in the present case

that § 707 does not shield Hercules from liability it may have

under CERCLA arising out of its performance of the Agent

Orange contracts because such immunity would exceed the risk

imposed by § 101(a).!! Accord United States v. General Dy-

namics Corp., 1988 U.S. Dist. LEXIS 17256 (N.D. Tex. June 9,

1988) (§ 707 immunity does not apply to liability under the

Clean Air Act).

Hercules separately argues that it is entitled to indemnity

from the United States arising out of Hercules’ immunity under

§ 707, the United States’ waiver of immunity, and the United

States” liability under CERCLA. Because Hercules is not enti

tled to immunity under § 707, its implied indemnity argument

must also fail. In light of our interpretation of § 707, it cannot

genuinely be disputed that the United States never implicitly

promised to indemnify Hercules for the type of liability at issue

in the present case. See Hercules, 24 F.3d at 204 (government's

use of DPA to issue rated orders for production of Agent Orange

did not create an implied-in-fact contractual obligation that

government must indemnify contractor for tort liability to third

parties).

Accordingly, we hold that Hercules is not entitled to im-

munity under § 707 of the DPA or implied indemnity from the

United States.

1] “We agree that § 707 “providfes| a defense for a DPA contractor

against a suit by a non-government customer in the event that the DPA

contractor is forced to breach another contract to fulfill the government's

requirements.” Hercules, Inc. v. United States, 24 F.3d 188. 203 (Fed. Cir

1994). However, we do not comment on the extent to which § 707 might

provide immunity under other circumstances not presented in this case

For the foregoing reasons, the order of the district court is

affirmed.

A true copy.

Attest:

CLERK,

U.S. COURT OF APPEALS,

EIGHTH CIRCUIT.

B- ]

IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

WESTERN DIVISION

Civil No. LR-C-80-109

UNITED STATES OF AMERICA

Plaintiff

Vv.

VERTAC CHEMICAL CORP., ET AL.

Defendants

Civil No. LR-C-80-110

ARKANSAS DEPARTMENT OF POLLUTION

CONTROL AND ECOLOGY

Plaintiff

VERTAC CHEMICAL CORP., ET AL.

Defendants

ORDER

As set forth in previous order, this case is set for trial

beginning November 1, 1993. A number of parties have re-

quested a jury trial. Other parties have objected, arguing that

the parties are not entitled to a jury trial on the issues pending.

The Court has reviewed the submissions and will grant the

request for a jury trial. A twelve-person jury will be empaneled,

and will decide those issues which are properly to be decided by

the jury and will act as an advisory jury with respect to the other

issues. F.R.Civ.P. 39(c).!

1 The Court need not decide now which issues should be resolved by

the jury.

B-2

The Court has also reviewed the various trial plans submit-

ted by the parties and will adopt the plan offered by the United

States, et al.- The Court is persuaded that this plan is best suited

to deal with the multiple claims and parties to this action. Thus,

the trial will begin with any claims the United States has against

Hercules.*

The Court has reviewed the motions for summary judg-

ment regarding the liability of the United States under CER-

CLA. The Court finds that the United States is not liable under

Sections 107(a)(2) or 107(a)(3) with regard to the production of

Agent Orange. Thus, the motions for partial summary judgment

of Vertac, ADPC&E and Hercules against the United States are

denied. The motion of the United States against Vertac, Arkan-

sas, Hercules, Dow, Uniroyal, Velsicol and BASF is granted. A

more detailed memorandum opinion setting forth the Court’s

reasoning will be forthcoming.

Several parties have inquired as to the necessity of Local

Rule 21 pretrial conterence information sheets. The parties are

directed to file a modified pretrial conference information sheet

which contains a summary of the claims of the parties and a brief

description of the facts and law that forms the basis for the

claims. The information sheet shall be filed by October 20,

1993.

Accordingly, Vertac’s and ADPC&E’s motion for partial

judgment against the United States on CERCLA liability (docu-

ment number 1170) is denied; Hercules’ motion for partial

2 The Court recognizes that the United States opposes a request for a

jury trial. Thus, the United States’ proposal is modified to the extent the

Court has determined that the case will be tried before a jury, sitting either

as the fact finder or in an advisory capacity.

3 The Court will be issuing a ruling on the United States’ motion for

partial summary judgment against Hercules regarding CERCLA liability

before the pretrial conference.

B-3

summary judgment as to the claims against the United States

(document number 1339) is denied; the United States’ motion

for summary judgment against Vertac, et al. (document number

1403) is granted; Hercules’ and Uniroyal’s motions for trial by

jury (document numbers 1650 and 1652) is granted; the trial

plan proposal submitted by the United States, et al. is adopted.

IT IS SO ORDERED this 7th day of October, 1993.

George Howard, Jr.

UNITED STATES DISTRICT JUDGE

C-1

IN THE UNITED STATES DISTRICT COURT

EASTERN DIVISION OF ARKANSAS

WESTERN DIVISION

Civil No. LR-C-80-109

UNITED STATES OF AMERICA

Plaintiff

VERTAC CHEMICAL CORP., ET AL.

Dejendants

Civil No. LR-C-80-110

ARKANSAS DEPARTMENT OF POLLUTION

CONTROL AND ECOLOGY

Plaintiff

VERTAC CHEMICAL CORP., ET AL.

Defendants

MEMORANDUM OPINION AND ORDER

In the present case, the State of Arkansas and Vertac along

with Hercules have filed motions for summary judgment asking

that the United States be held liable under the Comprehensive

Environmental Response, Compensation, and Liability Act of

1980 (““CERCLA"), 42 U.S.C. §9601 et seq. for its role in the

production of Agent Orange.! In response, the United States

has filed a motion for partial summary judgment asking that the

Court find that it is not liable.

1 The State of Arkansas and Vertac filed a Joint motion for summary

judgment against the United States. The State and Vertac will be referred to

collectively as Vertac.

c.3

Hercules and Vertac argue that the United States is liable

as an operator under section 107(a)(2) and an arranger under

section 107(a)(3) of CERCLA. They argue that the United

States’ liability arises from the government’s authority under the

Walsh-Healey Act, 41 U.S.C.§35 et seg. and the Defense Pro-

duction Act of 1950 (“DPA”), 50 U.S.C. app. §2061 ef seg.

during the time the United States purchased Agent Orange from

Hercules for use in the Vietnam war.? The facts are basically

not in dispute, and the relevant ones are set forth below.

SUMMARY OF UNDISPUTED FACTS

Hercules purchased the assets of Reasor-Hill corporation

in December, 1961. Reasor-Hill began producing 2,4-D esters

and amines in 1955, and 2,4-5-T in 1957. During the period

December 1961 through the fall of 1971, Hercules owned and

operated the herbicide production facility at Marshall Road in

Jacksonville, Arkansas (the “Jacksonville facility.”) Shortly

after taking over the Jacksonville plant in 1961 and prior to

entering into the rated contracts for the supply of Agent Orange,

Hercules began burying wastes generated from Reasor-Hill’s

operations.

From 1964 through 1968, Hercules produced Agent Or-

ange for the United States at the Jacksonville facility. Agent

Orange is a mixture of the buty] esters of 2,4,5-trichlorophenoxy

acetic acid (“2,4,5-T”)and 2,4-dichlorophenoxyacetic acid

(“2,4-D"). Hercules produced Agent Orange for the United

2 The United States used various herbicides for defoliation and crop

destruction spraying in Vietnam beginning in 1962. After 1964, Agent

Orange, a 50-50 mixture of the n-butyl esters of 2,4-D and 2,4,5-T was one

of the most widely used herbicides. “As the war in Vietnam escalated in the

mid-1960s, so too the use of herbicides expanded. In 1967, the peak year for

herbicide spraying in South Vietnam, 1,687,758 acres were sprayed—85%

for defoliation purposes and 15% for crop destruction.” In re Agent Orange

Product Liability Litigation, 597 F. Supp. 740, 777 (E.D.N.Y. 1984)

C-3

States pursuant to rated contracts and directives issued under the

DPA.

The DPA authorizes the President to require that perform-

ance under contracts or orders (other than contracts of emp'oy-

ment) which he deems necessary or appropriate to promote the

national defense shall take priority over the performance under

any other contract or order, and further authorizes the President

to require the acceptance and performance of such contracts or

orders in preference to other contracts or orders by any person

he finds capable of performing the contracts. The DPA allows

for a penalty to be levied against a private manufacturer in an

amount of up to $10,000.00 and imprisonment of up to one year

for willfu! failures to perform any act required by the DPA or

any regulation or order under the DPA. 50 U.S.C. §2073.

“Rated orders” are contracts or purchase orders that have

a priority rating. There are two levels of priority ratings. The

“DX” rating is the higher level of priority rating. The “DO”

rating is the lower level of priority rating. Where there is a

conflict between the performance of a rated order and an unrated

order, the rated order takes precedent.

“Directives” are official actions taken by the Department

of Commerce (“DOC”) under its regulations. A directive re-

quires a person to take an action or to refrain from taking an

action. A directive takes precedence over both rated orders and

unrated orders to the extent that such preference is stated in the

directive.

Hercules submitted competitive bids, including sales

prices, in response to the contract solicitation proposals publish-

ed by the United States pertaining to Agent Orange. Hercules

supplied Agent Orange to the Department of Defense (“DOD”)

pursuant to rated contracts and directive issued under the DPA.

These rated contracts and directives were subject to rules prom-

ulgated by the Business and Defense Services Administration

(“BDSA”), a primary organizational unit of DOC.

C-4

The rated contracts between DOD and Hercules contained

standardized government contract terms and conditions set forth

in standardized “DO Forms.” DOD provided opportunities to

Hercules to negotiate at least some of the terms of the contract

specifications pertaining to Agent Orange. As a result of these

negotiations, DOD changed or modified the terms of various

contract specifications.

Hercules made a profit for performing each rated contract

for the supply of Agent Orange. Under the Agent Orange

contracts, from June of 1964 to May of 1968, Hercules shipped

over 2.7 million gallons of Agent Orange to the United States

for use in the Vietnam War.

The specifications for Agent Orange were developed by

the United States Army. At times, the government received

input concerning some specifications from the other services

and manufacturers of Agent Orange, including Hercules. Some

of these specifications included information regarding physical

properties, packing, and quality control instructions. Under

several of the contracts for the supply of Agent Orange, Hercules

was required to produce Agent Orange under other military

specifications.

In March, 1967, the BDSA issued a directive under the

DPA to Hercules requiring Hercules to accelerate the delivery

of Agent Orange to the United States to a monthly rate of 65,900

gallons beginning April 3, 1967. This monthly rate constituted

all of the Jacksonville facility’s production capacity.

The directive told Hercules that the tetrachlorobenzene

(“TCB”) it needed to produce Agent Orange for the United

States could be obtained by placing DO rated orders on Hercu-

les’ TCB suppliers, including Hooker Chemical. In connection

with the March, 1967 directive, the BDSA told Hercules to

inform the BDSA immediately if Hercules had any difficulty

obtaining the raw material it needed to produce the Agent

Orange.

Hercules was unable to meet the production demands

placed upon it by the Directive and at the same time maintain

its share of the commercial 2,4-D market. Hercules contracted

for the import or 2,4,5-T and 2,4-D in order to comply with its

contracts with the government. The government facilitated

these imports of 2,4,5-T and 2,4-D by waiving, pursuant to 10

U.S.C. §2383 (providing for duty-free treatment of emergency

war materials purchased abroad), all import duties usually

charged on the shipment of goods from abroad. These imports

could be utilized on the Agent Orange contracts (but only on

those contracts), thereby frecing up some 2,4-D production.

The United States did not directly supply Hercules with

TCB or any other raw material. The United States did not own

or physically possess any TCB or any other raw material which

Hercules obtained, by the placement of rated orders, from

Hooker Chemical Corporation or any other supplier.

The United States, beginning in 1967, issued directives to

Hooker requiring Hooker to supply the necessary raw materials

for the production of Agent Orange to the suppliers, including

Hercules.

The United States held no financial ownership interest in

the land, buildings, tools, machinery or equipment used by

Hercules during the period of time in which Hercules produced

Agent Orange. Hercules considered parts of its process, includ-

ing the toluene extraction process, for the production of Agent

Orange as proprietary information.

The active ingredients for 2,4,5-T and 2,4-D sold to the

Department of Defense (““DOD”)were the same as those con-

tained in some commercial 2,4,5-T and 2,4-D products. How-

ever, the 2,4,5-T and 2,4-D products sold commercially by

Hercules were sold in a diluted form. The product sold tc the

government was sold in an undiluted form.

(-6

After termination of the contracts with DOD for the supply

of Agent Orange, Hercules manufactured and sold various for-

mulations of esters and salts of 2,4,5-T and 2,4-D to commercial

customers.

The United States admits that the production of Agent

Orange generates wastes and that it knew or should have known

that. The parties also agree that many of the wastes generated

by Hercules from the production of 2,4,5-T sold to DOD and to

commercial customers contained “hazardous substances”

within the meaning of CERCLA. Hercules buried wastes gen-

crated from the production of 2,4,5-T sold to DOD and to

commercial customers at the Jacksonville facility. These wastes

are still located at the facility.

There is no dispute that the contracts did not require

Hercules to bury the wastes or to handle them in any particular

manner. Hercules made the decision to bury the wastes at the

Jacksonville facility, without consulting with DOD or DOC

personnel. Furthermore, the DOD or DOC took no part in

designing, performing, or supervising activities relating to the

handling, treatment or disposal of wastes during the time Her-

cules owned and operated the Jacksonville facility.

In addition, during the time Hercules owned and operated

the Jacksonville facility, the United States did not hire. fire.

discipline, manage or train any Hercules personnel who worked

in the Agent Orange production process.

“OPERATOR” AND “ARRANGER”

LIABILITY UNDER CERCLA

Vertac and Hercules assert that the United States is liable

aS an Operator under section 107(ay2) of CERCLA. That

section imposes liability on “any person who at the time of

disposal of any hazardous substance owned or operated the

facility at which such hazardous substances were disposed of.”

42 U.S.C. § 9607(ay(2). Similarly, Vertac and Hercules assert

that the United States is liable as an arranger under section

107(a)(3) of CERCLA, which imposes liability on any person

who arranged for disposal of hazardous substances owned or

possessed by the person at any facility from which releases have

occurred. Their argument relies on the “authority to control”

they claim the United States had with regard to the disposal of

the wastes under the DPA and Walsh-Healey Act.

Under Section 107(a)(2), a non-owner of the property is

liable as an operator if the person either (1) actually participated

in the operations of the facility; or (2) actually exercised control

over, Or was otherwise intimately involved in the operations of

the corporation immediately responsible for the operation of the

facility. Levins Metals v. Parr-Richmond Terminal, 781

F. Supp. 1454, 1456 (N.D. Cal. 1991).

Two alternative bases exist for arranger liability in this

context. In United States v. Northeastern Pharmaceutical &

Chemical Co. (“NEPACCO”), 810 F.2d 726, 743 (8th Cir.

1986), cert. denied, 484 U.S. 948 (1987), the court imposed

arranger liability on persons who actually controlled or had

authority over the disposal of hazardous substances even though

they did not own or physically possess them. Thus, arranger

liability could be imposed where the defendant had actual

authority to control the disposal of hazardous substances.

In the absence of actual involvement in the disposal of the

hazardous substances, arranger liability has been found where

the defendant retained ownership or control or the hazardous

substances throughout the production process that generated the

hazardous waste. In United States v. Aceto Agricultural Chemi-

cals Corp., 872 F.2d 1373 (8th Cir. 1989), the court denied a

motion to dismiss where the defendants—pesticide manufactur-

ers—had owned and possessed the hazardous substances prior

to arranging for disposal. The manufacturers contracted with

Aidex Corporation—a formulator of chemicals to blend and

package their pesticides. It was during Aidex’s handling of the

———————————

(-%

raw materials owned by the manufacturers that there were spills

of the materials at the Aidex.

The Eighth Circuit held that arranger liability could be

inferred where (1) the person owned the hazardous substances

or supplied them to another person who processed them and,

thereafter, disposed of at least some of the hazardous substances:

and (2) the person owned or controlled the hazardous substances

during the work in process; and (3) the generation and disposal

of hazardous substances were inherent in the production proc-

ess.°- See Jones-Hamilton v. Beazer Materials & Services, 959

F.2d 126, 131 (9th Cir. 1992) (arranger liability could be found

where defendant retained ownership of the materials it provided,

the materials provided included hazardous substances, and the

contract contemplated a small amount of spillage of the hazard-

Ous materials).

Thus, to impose arranger liability on the United States

arising from its purchase of Agent Orange, Vertac and Hercules

must prove either (1) under NEPACCO, that the United States

had the actual authority over the disposal of hazardous sub-

stances at the Hercules plant, or (2) under Aceto that the United

States supplied the raw materials, and owned or controlled the

3 Dow, in its response to the cross motions for partial summary judg-

ment, argues that the United States has climinated a third element in its

analysis of Aceto. That is, the United States construes Aceto as requiring

ownership of raw materials, the work in process, and the final products.

without any authority, involvement, or direction over the process resulting

in the disposal of hazardous substances, to be sufficient to confer arranger

liability. Dow contends that arranger liability under Aceto requires a finding

that defendants directed and controlled the process under which the hazard-

Ous substances were gencrated.

The Court need not decide, at this time, whether the narrower standard

urged by Dow should be applicd in this instance. The uncontested facts

reveal that the United States neither owned nor controlled the work in

process, and therefore, it is not liable even under the broader standard sought

by the United States.

(-9

work in process, and that the generation of hazardous substances

was inherent in the production process.

The undisputed facts in the case reveal that the United

States cannot be held liable as either an operator or an arranger.

There is no evidence that the United States actually participated

in the actual management or daily operations of the facility. The

United States neither supplied the raw materials used to make

Agent Orange nor did it own or possess the raw materials. It did

not dictate the manner in which the wastes were to be disposed

or nor did it in any way control the disposal of those wastes.

There is no dispute that Hercules’ contracts with the United

States subjected it to the terms of the Walsh-Healey Act. The

Act provides for government regulation of worker safety and

health practices. It provides that no part of a government

contract subject to the Walsh-Healey Act will be performed nor

will any of the materials, supplies, articles, or equipment to be

manufactured or furnished under the contract be manufactured

or fabricated in any plants or under working conditions which

are unsanitary or hazardous or dangerous to the health and safety

of the employees performing the contract.

Walsh-Healey inspectors visited the plant for the limited

purpose of investigating occupational safety and health hazards

that could potentially harm Hercules employees. The inspectors

did not assume any management or control over Hercules waste

disposal activities.

The Walsh-Healey Act did not give the Department of

Labor (“DOL”) inspectors any authority over Hercules’ disposal

of hazardous waste. The DOL had the authority only to issue

citations for worker health and safety violations. Indeed, the

DOL issued two Notices of Violation to Hercules. In October

of 1968, a DOL safety engineer found a number of safety

violations upon the inspection of the plant. The DOL issued a

“Notice of Violation” outlining the deficiencies. One month

later, an industrial hygienist with the DOL conducted a follow-

C-10

up inspection. Following his inspection, the DOL served Her-

cules with another “Notice of Violation.” Hercules responded

to both notices and took appropriate corrective measures to

remedy the problems.

Of import is that DOL had no authority to control the

manner in which the contractor remedied the problem. Thus,

even assuming that the inspector found problems with Hercules’

disposal of wastes, he or she could only issue a citation. The

manner in which Hercules dealt with the problem, or how it

intended to treat or dispose of its wastes, was left to its discretion.

The Court cannot find, based on the undisputed facts, that

the authority of the United States to regulate the working con-

ditions of the employees at the plant under the Walsh-Healey

Act gave the United States the authority to control the waste

disposal activities required for liability under CERCLA.

Hercules and Vertac argue that the DPA gave the United

States pervasive control over virtually all aspects of Hercules’

Operations and business at the Jacksonville plant. Such an

attempt to inject the element of “substantial control” into per-

formance of contracts under the DPA must be rejected.

Section 101 of the DPA gives the President authority to

require companies to accept and perform any contracts and

orders that the President deems necessary or appropriate to

promote the national defense, and to require that companies give

priority to the performance of such contracts over the perform-

ance of other contracts or orders. 50 U.S.C. app. § 2071. The

DPA does not give the United States the authority to take over

the plant, or to control the contractor’s operations and activities.

Rather, the relationship between the United States and the

contractor under the DPA is one of buyer and seller, except that

the buyer (i.e., the United States) has the power to require the

seller to perform the contract and to give it priority over other

contracts.

C-11

Hercules also argues that it was compelled to perform the

Agent Orange contracts under the DPA. A similar argument

was rejected in Ryan v. Dow, 781 F. Supp. 934, 950 (E.D.N.Y.

1991). There, Agent Orange manufacturers (including Hercu-

les) sought removal to federal court of a tort action brought

against them by civilians in Vietnam during the war. While the

court recognized that the manufacturers of Agent Orange were

compelled to deliver the product to the United States, the court

stated, in relevant part:

They [the manufacturers] are being sued for formu-

lating and producing a product all of whose compo-

nents were developed without direct government

control and all of whose methods of manufacture were

determined by the defendants. ... The government

sought only to buy ready-to-order herbicides, not to

cause, control, or prevent the production of the un-

wanted byproduct, dioxin, which is the alleged cause

of plaintiffs’ injuries.

Furthermore, the Court cannot find under the circum-

stances that the degree of compulsion asserted by Hercules

existed. There is no dispute that Hercules actively sought Agent

Orange contracts by participating in competitive bidding and

that it made a profit from each contract. There is also no dispute

that Hercules sold herbicides similar to Agent Orange both prior

to and after the contracts with the government. See Ryan v. Dow

Chemical, 781 F. Supp. at 950 (“The government bought the

chemical components for Agent Orange and other defoliants as

existing products privately developed and used them in mixtures

which were derived from defendants’ standard recipes. Thus,

the ‘compulsion’ under which the defendants operated predomi-

nantly concerned marketing rather than design and manufac-

ture.”’)

control. However, their attempt to impose liability on the

Hercules and Vertac make much of the “authority” to

C-12

United States based merely on an “opportunity or ability to

control” Hercules’ waste disposal practices must be rejected. In

General Electric Co. v. Aamco Transmissions, Inc., 962 F.2d

281, 286 (2nd Cir. 1992), the court refused to accept a similar

argument. The court concluded “that it is the obligation to

exercise control over hazardous waste disposal, and not the mere

ability or opportunity to control the disposal of hazardous sub-

Stances that makes an entity an arranger under CERCLA’s

liability provision.” The court further noted that courts holding

defendants liable as arrangers have found that the defendant had

some actual involvement in the decision to dispose of the waste.

“The most commonly adopted yardstick for determining

whether a party is an owner-operator under CERCLA is the

degree of control that party is able to exert over the activity

causing the pollution.” CPC International, Inc. v. Aerojet-Gen-

eral Corp., 731 F. Supp. 783, 788 (W.D. Mich. 1989) (finding

that “mere regulatory activities will not subject a state agency

to liability as an owner-operator.”’)

The Court finds that the United States did not have author-

ity Over or involvement with Hercules’ operations and decisions

concerning the plant and the disposal of wastes. Such authority

or involvement cannot be conferred from either the Walsh-

Healey Act or the DPA. As such, the Court finds that the United

States is not liable as an arranger or operator under CERCLA

for its role in the production of Agent Orange.4

The Court has reviewed the remaining arguments asserted

by Hercules and Vertac and finds that they are without merit. In

particular, the Court finds that Hercules is not entitled to immu-

nity under section 707 of the DPA or to indemnity.

Accordingly, the motions for partial summary judgment of

Vertac and ADPC&E (document number 1170) and Hercules

4 The Court finds that questions of fact exist concerning the United

States liability as an “owner” tor the Arkansas Ordnance plant during the

World War II period.

("43

(document number 1339) are denied; the motion for summary

judgment against Vertac, et al. (document number 1403) is

granted.

IT 1S SO ORDERED this 12th day of October, 1993.

UNITED STATES DISTRICT JUDGE

D- |

IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

WESTERN DIVISION

Civil No. LR-C-80-109

UNITED STATES OF AMERICA

Plaintiff

Vv.

VERTAC CHEMICAL CORP.. ET AL.

Defendants

Civil No. LR-C-80-110

ARKANSAS DEPARTMENT OF POLLUTION

CONTROL AND ECOLOGY

Plaintff

VERTAC CHEMICAL CORP.., ET AL.

Defendants

JUDGMENT

Pursuant to the Order entered this date. final judgment is

entered pursuant to Rule 54(b) on the claims against the United

States regarding production of Agent Orange, in particular, the

Order granting the United States’ motion summary judgment

and denying the motions for partial Summary judgment of

Vertac, ADPC&E and Hercules.

IT IS SO ORDERED this Ist day of March, 1994.

s/ George We

UNITED STATES DISTRICT JUDGE

D-2

IN THE UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF ARKANSAS

WESTERN DIVISION

Civil No. LR-C-80- 109

UNITED STATES OF AMERICA

Plaintiff

VERTAC CHEMICAL CORP., ET AL.

Defendants

Civil No. LR-C-80-110

ARKANSAS DEPARTMENT OF POLLUTION

CONTROL AND ECOLOGY

Plaintiff

VERTAC CHEMICAL CORP., ET AL.

Defendants

ORDER

Pending before the Court is the motion of the Arkansas

Department of Pollution Control and Ecology (*“ADPC&E” )and

Vertac for entry of a final judgment pursuant to Rule 54(b) of

the Federal Rules of Civil Procedure on the Agent Orange claims

against the United States.

On October 12, 1993, the Court granted the United States’

summary judgment motion on the Agent Orange CERCLA

liability claims. With the settlement between the ADPC&E,

Vertac and the United States of the non-Agent Orange claims,

all claims brought under CERCLA against the United States will

have been resolved. !

| The settlement covers claims not related to the Agent Orange claims,

that is, the United States’ operation of an Army Ordnance Plant at the Vertac

D-3

No one disputes that all claims against the United States

have been resolved. Hercules opposes the entry of a Rule 54(b)

order. It contends that the request of Vertac and ADPC&E is

premature. It asserts that the Court should consider the issue of

appellate review at one time; that is, when all issues involving

the liability of all parties are resolved.

While Hercules’ argumerit ostensibly appears reasonable,

it must be rejected. Appellate review of the liability of various

parties may not be automatic. Review will need to be sought

under 28 U.S.C. §1292(b). Such review requires certification

by the Court, and acceptance by the appellate court. Thus,

appellate review of all liability issues at one time will not

necessarily be certain or assured.

The Court must determine whether certification of the

Agent Orange claims under Rule 54(b) is proper. In so doing,

the Court “must first determine that it is dealing with a ‘final

judgment.’ It must be a ‘judgment’ in the sense that it is a

decision upon a cognizable claim for relief, and it must be ‘final’

in the sense that it is ‘an ultimate disposition of an individual

claim entered in the course of a multiple claims action.”” Cur-

tiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 7 (1980).

Here, the order granting summary judgment on the Agent

Orange claims meets the definition of a final judgment with

respect to the claims against the United States. It resolves the

United States” liability under CERCLA for its role in the pro-

duction of Agent Orange.

Having found that the order pertaining to the production of

Agent Orange suffices as a final judgment, the Court must

determine whether there is any just reason for delay. In deciding

whether there are no just reasons to delay, the court “must take

into account judicial administrative interests as well as the

Site during World War II; the United States’ transactions with Vertac during

the early 1970s: and various claims involving the Littlke Rock Air Force Base.

D-4

equities involved.” The Court may consider “such factors as

whether the claims under review were separable from the others

remaining to be adjudicated and whether the nature of the claims

already determined was such that no appellate court would have

to decide the same issues more than once even if there were

subsequent appeals.” /d at 8. See also In re National Smelting

of New Jersey, Inc. Bondholders’ Litigation, 695 F. Supp. 796,

798 (D. N.J. 1988) (Curtiss-Wright suggests balancing of rela-

tive hardships. First, court must weigh relative prejudice that

nonmovant party would experience if certification granted

against hardship movant would fact if certification denied.

Second, court must determine whether certification would foster

the interest of sound judicial administration).

It appears that no hardship would result to the United States

or the other parties whose claims are yet to be resolved if

certification is granted. As stated above, all claims against the

United States as a responsible party under CERCLA have been

resolved. The Agent Orange claims are separate and inde-

pendent of other claims and will not require the appellate court

to consider the same legal or factual issues in a subsequent

appeal. Furthermore, the appellate court’s decision on the

Agent Orange claims could not be mooted by subsequent action

in the remaining phases of this litigation.

Vertac also argues that it will be prejudiced by a delay in

the appeal. While the court is of the opinion that its decision

was correct in granting the United States’ motion for summary

judgment, the Court recognizes that an early appellate review of

Vertac’s claim would be beneficial.

Accordingly, the motion for entry of final judgment under

Rule 54(b) on the Agent Orange claims against the United States

is granted. Judgment will be entered accordingly.

D -

IT 1S SO ORDERED this Ist day of March, 1994.

/s/ George Howard, Jr.

UNITED STATES DISTRICT JUDGE

E- 1]

STATUTES AND REGULATIONS

Statutes

CERCLA Section 101(20)(A), 42 U.S.C. § 9601(20)(A):

The term “owner or operator” means . . . (ii) in the case of

an onshore facility or a off-shore facility, any person own-

ing Or operating such facility... .

CERCLA Section 101(21), 42 U.S.C. § 9601(21):

The term “person” means an individual, firm, corporation,

association, partnership, consortium, joint venture, com-

mercial entity, United States Government, State, munici-

pality, commission, political subdivision of a State, or any

interstate body.

CERCLA Section 107(a), 42 U.S.C. § 9607(a):

Notwithstanding any other provision or rule of law, and

subject only to the defenses set forth in subsection (b) of

this section —

(2) any person who at the time of disposal of any hazardous

substance owned or operated any facility at which such

hazardous substances were disposed of,

(3) any person who by contract, agreement, or otherwise

arranged for disposal or treatment . . . of hazardous

substances owned or possessed by such person, by any

other party or entity, at any facility . . . owned or

operated by another party or entity and containing such

hazardous substances . . . shall be liable for —

(A) all costs of removal or remedial action incurred by

the United States Government or a State . . . not

inconsistent with the national contingency plan;

F-2

(B) any other necessary costs of response incurred by

any other person consistent with the national con-

tingency plan....

CERCLA Section 120(a)(1), 42 U.S.C § 9620(a)(1):

Each department, agency, and instrumentality of the

United States (including the executive, legislative, and

judicial branches of government) shall be subject to, and

comply with, this chapter in the same manner and to the

same extent, both procedurally and substantively, as any

nongovernmental entity, including liability under section

9607 of this title. Nothing in this section shall be construed

to affect the liability of any person or entity under sections

9606 and 9607 of this title.

Defense Production Act, Section 101(a), 50 U.S.C. app.

§ 207 1(a):

The President is hereby authorized (1) to require that

performance under contracts or orders (other than contracts

of employment) which he deems necessary or appropriate

to promote the national defense shall take priority over

performance under any other contract or order, and, for the

purpose of assuring such priority, to require acceptance and

performance of such contracts or orders in preference to

other contracts or orders by any person he finds to be

capable of their performance, and (2) to allocate materials

and facilities in such manner, upon such conditions, and to

such extent as he shall deem necessary or appropriate to

promote the national defense.

Defense Production Act, Section 103, 50 U.S.C. app. § 2073:

Any person who willfully performs any act prohibited, or

willfully fails to perform any act required, by the provisions

of this title [sections 2071 to 2076 of this Appendix] or any

rule, regulation, or order thereunder, shall, upon convic-

E-3

tion, be fined not more than $10,000 or imprisoned for not

more than one year, or both.

Section 35(e) of the Walsh-Healey Public Contracts Act,

41 U.S.C. § 35(e):

Contracts for materials, etc., exceeding $10,000;

representations and stipulations

In any contract made and entered into by anv

executive department, independent estab-

lishment, or other agency or instrumentality of

the United States, or by the District of Columbia,

or by any corporation all the stock of which is

beneficially owned by the United States (all the

foregoing being hereinafter designated as agen-

cies of the United States), for the manufacture or

furnishing of materials, supplies, articles, and

equipment in any amount exceeding $10,000,

there shall be included the following repre-

sentations and stipulations:

(e) That no part of such contract will be per-

formed nor will any of the materials, supplies,

articles, Or equipment to be manufactured or

furnished under said contract be manufactured

or fabricated in any plants, factories, buildings,

Or surroundings or under working conditions

which are unsanitary or hazardous or dangerous

to the health and safety of employees engaged in

the performance of said contract. Compliance

with the safety, sanitary, and factory inspection

laws of the State in which the work or part thereof

is to be performed shall be prima-facie evidence

of compliance with this subsection.

E-4

8. Section 36 of the Walsh-Healey Public Contracts Act, 41

U.S.C. § 36:

Liability for contract breach; cancellation; com-

pletion by Government agency; employee’s wages

Any breach or violation of any of the repre-

sentations and stipulations in any contract for the

purposes set forth in section 35 of this title shall

render the party responsible therefor liable to the

United States of America for liquidated dam-

ages, in addition to damages for any other breach

of such contract, the sum of $10 per day for each

male person under sixteen years of age or each

female person under eighteen years of age, or

each convict laborer knowingly employed in the

performance of such contract, and a sum equal

to the amount of any deductions, rebates, re-

funds, or underpayment of wages due to any

employee engaged in the performance of such

contract; and, in addition, the agency of the

United States entering into such contract shall

have the right to cancel same and to make open-

market purchases or enter into other contracts for

the completion of the original contract, charging

any additional cost to the original contractor . . . .

9. Section 37 of the Walsh-Healey Public Contracts Act, 41

U.S.C. § 37:

Distribution of list of persons breaching contract:

future contracts prohibited

The Comptroller General is authorized and di-

rected to distribute a list to all agencies of the

United States containing the names of persons or

firms found by the Secretary of Labor to have

breached any of the agreements or repre-

E-S

sentations required by sections 35 to 45 of this

title. Unless the Secretary of Labor otherwise

recommends no contracts shall be awarded to

such persons or firms or to any firm, corporation,

partnership, or association in which such persons

or firms have a controlling interest until three

years have elapsed from the date the Secretary of

Labor determines such breach to have occurred.

(June 30, 1936, c. 881, § 3, 49 Stat. 2037)

10. Section 43a(c) of the Walsh-Healey Public Contracts Act,

41 U.S.C. § 43a(c):

Notwithstanding the inclusion of any stipuia-

tions required by any provision of sections 35 to

45 of this title in any contract subject to said

sections, any interested person shall have the

right of judicial review of any legal question

which might otherwise be raised, including, but

not limited to, wage determinations and the in-

terpretation of the terms “locality,” “regular

dealer,” “manufacturer,” and “open market.”

Regulations (

1. The United States Department of Labor’s regulations im-

plementing the Walsh-Healey Public Contracts Act:

41 C.F.R. § 50-204.1. Scope and Application

(a) The Walsh-Healey Public Contracts Act

(40 Stat. 2036, 41 U.S.C. §§ 35 et seq. requires

that contracts entered into by any agency of the

United States for the manufacture or furnishing

of materials, supplies, articles, and equipment in

any amount exceeding $10,000 must contain,

among other provisions, a stipulation that “No

E-6

part of such contract will be performed nor will

any of the materials, supplies, articles, or equip-

ment to be manufactured or furnished under said

contract be manufactured or fabricated in any

plants, factories, buildings or surroundings or

under working conditions which are unsanitary

or hazardous or dangerous to the health and

safety of employees engaged in the performance

of the contract.” This Part 50-204 of this chapter

expresses certain minimum safety and health

standards which will be applied in the admini-

stration and enforcement of the Act, including

proceedings under its section 5 and 41 CFR Part

50-203, Subpart A, to determine whether par-

ticular contracts subject to the Act are being, or

have been, performed in compliance with its

safety and health requirements.

(b) In all administrative, enforcement. and in-

vestigative proceedings conducted by the United

States Department of Labor under the Act, offi-

cial notice will be taken of the fact that failure to

comply with the requirements expressed in this

Part 50-204 of this chapter results in working

conditions which are “unsanitary or hazardous to

employees” within the meaning of section I(e)

of the Act, and contracts incorporating the stipu-

lation it requires.

section 5 of the Act. respondents will be permit-

ted to demonstrate, by reliable, substantial, and

probative evidence, that their failure to comply

with the requirements expressed in Part 50-204

of this chapter did not result in working condi-

tions which were “unsanitary or hazardous or

E-7

dangerous to employees,” but only if the answer

| to the complaint, filed under 41 CFR 50-203.3,

| makes express allegation to that effect, identify-

ing the particular code unit challenged and set-

ting out the factual basis for the challenge. In the

event such issue 1s drawn, and reliable, substan-

tial, and probative evidence is introduced in sup-

port of the challenge, the pertinent portions of

the publications of the American Standards As-

sociation, Inc., American Society of Mechanical

Engineers, National Fire Protection Association,

National Board of Fire Underwriters, the Public

Health Service of the United States Department

of Health, Education, and Welfare, the Bureau

of Mines of the United States Department of the

Interior, and the Atomic Energy Commission

will be considered, together with any other evi-

dence that may be adduced in support of the

regulation, on the issue whether the preponder-

ance of the reliable, substantial, and probative

evidence supports a finding that the working

conditions prohibited in the regulation are un-

sanitary or hazardous or dangerous to the health

and safety of employees.

(d) The standards expressed in Part 50-204 of

this chapter are for application to ordinary em-

ployment situations, and do not preclude proof

or recognition of the necessity of higher stand-

ards for employment situations of extraordinary

hazard. Neither do the standards expressed in

this Part 50-204 of this chapter purport to de-

scribe all of the working conditions which are

unsanitary or hazardous or dangerous to the

health and safety of employees. Other working

conditions may be found to be unsanitary or

aaa caeaataeaeceiieiinsaiacitiaaiiaeaiataitnai

I -8&

hazardous or dangerous to the health and safety

of employees on evidence to that effect, or with-

out such evidence, where such unsanitary or

hazardous or dangerous characteristic should be

apparent to a rational and prudent person of

common experience.

(¢) Compliance with the standards expressed in

Part 50-204 of this chapter will not relieve any-

one from any obligation to comply with any

more strict standard stemming from any other

source whatsoever.

41 C.F.R. § 50-204.233. Receptacles for Waste

Disposal.

Any receptacle used for decaying solid or liquid

waste or refuse shall be so constructed that it does

not leak and may be conveniently and thor-

oughly cleaned, and it shall be maintained in a

sanitary condition. Such a receptacle shall be

equipped with a tight-fitting cover.

41 C.F.R. § 50-204.234. Sweeping and Refuse Re-

moval.

All sweepings, solid or liquid waste, refuse, and

garbage shall be removed in such a manner as to

avoid creating a nuisance or menace to health

and as often as necessary to maintain the place |

of employment in a sanitary condition.

2. The Business and Defense Services Administration’s reg-

ulations implementing the Defense Production Act: 32/

C.F.R., Chapter VI, BDSA Reg. 2, §§ 1, 3, 16, & 27.

Section 1. What This Regulation Does.

This regulation states the basic rules of the pri-

orities system to be administered by the Nationa!

E-9

Production Authority [NPA]. It states what kind

of orders are rated orders, how to place them, and

the preference status of such orders. These rules

apply to all business transactions within the ju-

risdiction of NPA unless more specific regula-

tions, orders, or directives of NPA state

otherwise.

Section 3. Ratings Authorized

(a) The following ratings are authorized:

(1) A DO rating. This rating will be indicated

by the prefix DO and an identification of the

program which must be furnished a supplier

by the person who is using the rating.

(2) A DX rating. This rating will be indicated

by the prefix DX and an identification of the

program. The DX rating will be authorized

for use only as an emergency rating, to obtain

products and materials in cases of extreme

urgency. Except where expressly provided to

the contrary in any NPA regulation or order,

any provision of any NPA regulation or order

applicable to any DO rating shall also be

applicable to any DX rating. For example,

in the case of an NPA order which provides

for limitation on the acceptance of DO-rated

orders by a supplier, a DX-rated order shall

be considered, only for the purpose of such

limitation, as though it were a DO-rated or-

der.

(b) Rated orders shall have the following preferen-

tial status:

E- 10

(1) All DX-rated orders will have equal prefer-

ential status. Any DX-rated order shall take

priority over any unrated order or DO-rated

order.

(2) All DO-rated orders will have equal prefer-

ential status. Any DO-rated order shall take

priority over any unrated order.

orders calling for delivery of “controlled materi-

als” as defined in CMP regulations or DMS regu-

lations.

Section 16. Mandatory Orders and Directives.

Every person shall comply with each mandatory

order and directive issued to him by NPA. Man-

datory orders and directives issued by NPA take

precedence over rated orders previously or sub-

sequently received, unless a contrary instruction

appears in the mandatory order or directive.

Section 27. Violations

Violation of any provision of this regulation may

subject any person committing or participating

in such violation to administrative action to sus-

pend his privilege of making or receiving further

deliveries of materials, or using materials or

facilities, under priority or allocation control and

to deprive him of further priority and allocation

assistance. In addition to such administrative

action, an injunction and order may be obtained

prohibiting any such violation and enforcing

E- 11

compliance with the provisions hereof. Any per-

son who willfully violates any provision of this

regulation or who willfully furnishes false infor-

mation or conceals any material fact in the course

of operation under this regulation is guilty of a

crime and upon conviction may be punished by

fine or imprisonment or both.

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.