Petition for Writ of Certiorari — Employers Insurance v. Browner

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(\) Supreme Court, U.S.

PILED

No, 95 4345EP 14 1995

OFFICc Ur jit ULicAn

IN THE

Supreme Court of the United States

OCTOBER TERM, 1995

EMPLOYERS INSURANCE OF WAUSAU,

A Mutual Company,

Petitioner,

CAROL M. BROWNER, Administrator of the United

States Environmental Protection Agency, et al.,

Respondents.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Seventh Circuit

PETITION FOR A WRIT OF CERTIORARI

WILLIAM J. ANAYA ROBERT M. WATTSON

Counsel of Record SANDRA WALLACE

DANIEL C. MURRAY Davip C. LINDER

FREDERICK S. MUELLER ZELLE & LARSON

JOHNSON & BELL, LTD. 33 South Sixth Street

222 North LaSalle Street Suite 4400 City Center

Suite 2200 Minneapolis, MN 55402

Chicago, IL 60601 (612) 339-2020

(312) 372-0770

Attorneys for Petitioner

Midwest Law Printing Co., Chicago 60611, (312) 321-0220

QUESTIONS PRESENTED

1. Does Section 106(b\(2A) of the Comprehensive En-

vironmental Response, Compensation and Liability Act

(CERCLA) provide federal jurisdiction and a limited, defer-

ential standard and scope of judicial review of agency

action?

2. Does Section 106 of CERCLA authorize the United

States Environmental Protection Agency to impose joint

and several liability administratively, without qualification,

through ex parte, unilateral cleanup orders?

3. Does the Due Process Clause of the Fifth Amendment

authorize the denial of a judicial hearing on a party’s statu-

tory liability following a coerced, administrative deprivation

of the party’s property?

LIST OF PARTIES

The parties to the proceeding below were the Petitioner,

Employers Insurance of Wausau, A Mutual Company, and

respondents: William J. Clinton, in his official capacity as

President of the United States; Carol M. Browner, as Ad-

ministrator of the United States Environmental Protection

Agency; the United States Environmental Protection Agen-

cy; and, the United States of America.’

Pursuant to Supreme Court Rules 14.1(b) and 29.1, Peti-

tioner states that Petitioner has neither a parent corpora-

tion nor any non-wholly-owned subsidiary.

1 In addition, the following individuals were named as parties be-

low in their official capacities: Valdas Adamkus, as Regional Ad-

ministrator of Region V of the United States Environmental Pro-

tection Agency; Bruce M. Diamond, as Director of the Office of

Waste Programs Enforcement of the Environmental Protection

Agency; and William E. Muno, as Acting Director of the Office of

Waste Programs Enforcement of the United States Environmen-

tal Protection Agency.

TABLE OF CONTENTS

QUESTIONS PRESENTED ...........---+-+-

LIST OF PARTIES ........---eeeeeeeeeeeees

TABLE OF CONTENTS ..........-+eeeeeeee:

TABLE OF AUTHORITIES ..............+--

OPINIONS BELOW ...........--eeeeeeeeeees

JURISDICTION ........ccccccccccceccccccces

STATUTES INVOLVED ..........--eeeeeeees

STATEMENT OF THE CASE ...........----

REASONS FOR GRANTING THE WRIT....

I. FEDERAL JURISDICTION AND THE SCOPE

AND STANDARDS OF JUDICIAL INVOLVE-

MENT IN CERCLA REIMBURSEMENT AC-

TIONS ARE SERIOUSLY UNSETTLED IN

THE DISTRICT AND CIRCUIT COURTS.

THIS COURT SHOULD CLARIFY THE BASIS

OF FEDERAL JURISDICTION AND THE

SCOPE AND STANDARDS OF REVIEW IN

REIMBURSEMENT ACTIONS BROUGHT

PURSUANT TO CERCLA § 106(bX2XB) .....

A. In The Agency’s View, Federal Jurisdic-

tion Is Provided By CERCLA § 106b)

(2XB), Yet, That Federal Jurisdiction Is

Limited By The Unilateral, Ex Parte

Determinations Made By The Agency,

Which Determinations Are Reviewable

By A Federal Court Only Pursuant To

A Deferential Standard And Scope Of

PAGE

@ereeu =— = S. B as:

In The District Court’s View, The Reim-

bursement Statute Failed To Provide

Federal Jurisdiction For A Limited

Review Of Issues Determined By The

Agency Pursuant To CERCLA § 106(b)

(2XA), But Some Limited Judicial Review

Is Available With Federal Jurisdiction

Therefor Under The Administrative Pro-

cedure Act Following A Deferential Stan-

dard And Scope Of Review ..........

In The Seventh Circuit’s View, The Re-

imbursement Statute Provides Federal

Jurisdiction At CERCLA § 106(bX2XA)

For A Limited Review Of Issues Deter-

mined Exclusively By The Agency Pur-

suant To CERCLA § 106(bX2XA), And

That Review Was Deferential To The

ROGUE cide eee ea Ce 4 daa ebeee ene

In The Eighth Circuit’s View, Congress

“Quite Consciously” Provided Federal

Jurisdiction Only At CERCLA § 106(bX2)

(B), Which Provides A Federal Court

With Full Jurisdiction To Hear All Issues

De Novo, Completely Unaffected By The

Issues Determined By The Agency In

The Administrative Proceedings De-

scribed at CERCLA § 106(bX2XA)....

II. THE CIRCUITS ARE SPLIT ON APPROPRI-

ATE POLICY CONCERNS AT ISSUE IN

REIMBURSEMENT ACTIONS.............

ITT.

THIS COURT SHOULD RESOLVE CON-

FLICTS AMONG THE CIRCUITS CONCERN-

ING THE SCOPE OF CERCLA LIABILITY

AND THE CONSTITUTIONALITY OF POST-

DEPRIVATION PROCEDURES AFFORDED

BY THE STATUTE 6. iiccccccccccdccvcces

A. The Seventh Circuit’s Conclusion That The

Agency Universally May Impose Joint

And Several Liability Under CERCLA

§ 106(a) Conflicts With Rulings Of The

Second, Third and Fifth Circuits Concern-

ing The Scope Of CERCLA Liability ..

B. The Seventh Circuit’s Deference To The

Agency’s Administrative Liability Deter-

mination Conflicts With The First Cir-

cuit’s Conclusion As To The Constitu-

tionality Of Post-Deprivation Procedures

Afforded By CERCLA ...........---

CONCLUSION ......cccccccccscccccccccccens

TABLE OF AUTHORITIES

CASES PAGE

Adams Fruit Co. v. Barrett, 494 U.S. 638, 110

S.Ct. 1884, 108 L.Ed.2d 585 (1990)........ passim

Barmet Aluminum Corp. v. Reilly, 927 F.2d 289

th GEe, TOE) acccecécncécvcnnteassases es 27, 29

Bethlehem Steel Corp. v. Bush, 918 F.2d 1323 (7th

Che. SIR ciewccccdste we sabateasesewesesac. 11

Camp v. Pitts, 411 U.S. 138 (1973)........... 10

Chevron U.S.A., Inc. v. Natural Resources Defense

Council, 467 U.S. 887 (1984) .............. passim

Connecticut v. Doehr, 501 U.S. 1 (1991) ....... 27, 30

Dickerson v. Environmental Protection Agency,

834 F.2d 974 (llth Cir. 1987) .............. 27

Dico v. Diamond, 821 F.Supp. 562 (S.D. Iowa

WOOD < conecccckecsusandbe teceseseuiabiens 15

Dico v. Diamond, 35 F.3d 348 (8th Cir. 1994) ..

occccchscdndesascReueeeneeenaeel 14, 15, 16, 19, 20

Fuentes v. Shevin, 407 U.S. 67 (1972) ......... 28

Gonzales v. United States, 348 U.S. 407 (1955) ... 29

Hodel v. Virginia Surface Mining & Reclam.

yp, @ pees > Pere 30

In Re Bell Petroleum Services, Inc., 3 F.3d 889

Gi Cie. “Se cicavcconaceksceuctasutan 21, 24, 25

Kelley v. EPA, 15 F.3d 1100 (D.C. Cir. 1994), reh’g.

denied, 25 F.3d 1088 (D.C. Cir. 1994), cert. de-

nied, sub nom. American Banker’s Association

v. Kelley, 115 S.Ct. 900 (1995) ............ passim

vii

Mathews v. Eldridge, 424 U.S. 319 (1976) ..... 27

Mitchell v. W.T. Grant Co., 416 U.S. 600 (1974). 28

O’Neil v. Picillo, 883 F.2d 176 (1st Cir. 1989), cert.

denied sub nom., American Cyanamid Co. v.

O’Neil, 498 U.S. 1071 (1990) .....-----++++> 24

Phillips v. Commissioner, 283 U.S. 589 (1931) ... 28

Solid State Circuits, Inc. v. EPA, 812 F.2d 383

(Sth Cir. 1987) ........ee cece cece cere eeeees 27, 29

South Macomb Disposal Auth. v. Environmental

Prot. Agency, 681 F.Supp. 1244 (E.D. Mich.

OU ci cncoceccuccvenbsncccsososerenesnes 29

United States v. Alcan Aluminum Corp., 964 F.2d

252 (8d Cir. 1992) ......-eeeeeeeeeeeeee 21, 24, 25

United States v. Alcan Aluminum Corp., 990 F.2d

T11 (2d Cir. 1998) ....... cece eee eeeeeeeees 21, 24

United States v. Chem-Dyne Corp., 572 F.Supp.

802 (S.D. Ohio 1983) .......-.eeeeeeeeeeees 25

United States v. Fleet Factors Corp., 901 F.2d 1550

(11th Cir. 1990), cert. denied, 111 S.Ct. 752

(1991) 2... cece cece cece ccc ececceceecescoees 17

United States v. Monsanto Co., 858 F.2d 160 (4th

Clr. WORE) ...ccccccccccccccccccccccccceeess 24

United States v. Reardon, 947 F.2d 1509 (1st Cir.

DOES go cccacdccccccessccoesescenceeeses 26, 27, 28

Wi Electric v. Thomas, 612 F.Supp. 736 (D

Mam, 19865) ....cccccccccccccccccccccccccces 9

Wagner Seed Co. v. Bush, 946 F.2d 918 (D.C. Cir.

1991), cert. denied, 112 S.Ct. 1584 (1992) . 10, 11, 17, 18

Wagner Seed Co. v. Daggett, 800 F.2d 310 (1986) . 27, 29

STATUTES

BD Cas ee Wi cnc bos divi cdvecblewecebadeubes 5

TB UBER |... cléccccicwdimeredascakionnnca 1

Comprehensive Environmental Response, Compen-

sation and Liability Act of 1980 (CERCLA) as

amended by the Superfund Amendments and

Reauthorization Act of 1986 (SARA), 42 U.S.C.

GI Oe GON a Sic cccsctedsudeccunsaneaanees 2

CURR EE hnn.ee ccs tdnndecnngneviaceee 18, 26, 28

CARMAN ED ccdvccecudedeccseauwtbageat passim

Ce I cis conc ucveaeeaseesteetadeny 1,18

CLG ED ocncccecesccaeenosesauuans 4, 29

Ce ID ooo nkccdpadseccuasenunben passim

CORMEUGR: HOURS oc ccccedcccscccececcnen passim

CRI GEO 6 bc be ve céciccsece deeees passim

ei Ph B+ ree 5, 15, 19

Ce EE oe a cacccnnvsnnseedacdaen 5, 19

Ge TE eke ca es vesdacantdashonsvecsnee 21

CE I ae 6s 3c pda ccsaueeciaeakates 1, 3, 21, 30

CED «3 5d sau endeen se aseeen cues 3

ED abs cic dawdes cxneedednean cas 29

A IED rniidb0 £4 didn cide td da cceuneeeeann 27

COPE HANNO Kcdacccdchdsnacnaaadneunae 12, 26, 30

LEGISLATIVE HISTORY

Superfund Amendments and Reauthorization Act

of 1986, Pub. L. No. 99-499, 100 Stat. 1613 et

GO. cccccccccccccvescccsersenqaccscscsess

126 Cong. Rec. at $14964, S15004, H11787, H11799,

126 Cong. Rec. H9465 (Sept. 23, 1980) (remarks

of Rep. Madigan), H9466 (Remarks of Rep.

Stockman) ........cccceecccceceeeeeeesees

Cong. Rec. S$14964, H11787, H11799 (Nov. 24,

Og ds, cicccnccdcessaucesacdesetesetasves

1 Senate Comm. of Environment & Public Works,

A Legislative History of the Comprehensive En-

vironmental Response, Compensation & Liabil-

ity Act of 1980, S. Doc. No. 97-14, 97th Cong.,

2d Sess. 320 (1983) ........eeeeeeeeeeeeeee

Reauthorization of Superfund: Hearings Before the

Subcomm. on Water Resources of House

Comm. on Pub. Works and Transp., 99th Cong.,

Ist Sess. 1985) ....cccccccccccccccccvcceess

OTHER AUTHORITIES

40 C.F.R. § 300.1100 et seg. .....-eeeeeeeeeees

Restatement (Second) of Torts .......-++-++++:

ee ee

x or ee ee RY §

IN THE

Supreme Court of the United States

OcTOBER TERM, 1995

2 oD al REE 8 BAN MBE SW 0H) BENE ts

EMPLOYERS INSURANCE OF WAUSAU,

A Mutual Company,

Petitioner,

Vv.

CAROL M. BROWNER, Administrator of the United

States Environmental Protection Agency, et al.,

Respondents.

On Petition for a Writ of Certiorari to the United

States Court of Appeals for the Seventh Circuit

PETITION FOR A WRIT OF CERTIORARI

OPINIONS BELOW

The opinion of the United States Circuit Court of Appeals

for the Seventh Circuit, dated April 12, 1995, is reported at

52 F.3d 656, and is reproduced at pages 1-18 of the Appen-

dix to this Petition (Pet. App.). The relevant opinions of the

United States District Court for the Northern District of

Illinois are reported at 848 F. Supp. 1359 and 848 F. Supp.

1369, and are reproduced at Pet. App. 19-38 and 39-60, re-

spectively.

The Order of the United States Court of Appeals for the

Seventh Circuit denying rehearing and denying rehearing

en banc, dated May 17, 1995, is not yet reported and is

reproduced at Pet. App. 74.

JURISDICTION

The judgment of the Court of Appeals was entered on

April 12, 1995. Pet. App. 18. The Court of Appeals denied

a timely Petition for Rehearing on May 17, 1995. Pet. App.

74. On August 2, 1995, Justice Stevens granted Petitioner

an enlargement of time to file this Petition for a Writ of

Certiorari until September 14, 1995. Pet. App. 75. This

Court has jurisdiction pursuant to 28 U.S.C. § 1254(1).

STATUTES INVOLVED

This Petition primarily involves Section 106(b) of the

Comprehensive Environmental Response, Compensation

and Liability Act of 1980, as amended (CERCLA), 42 U.S.C.

§ 9606(b).’

2 See CERCLA § 106, 42 U.S.C. § 9606, at Pet. App. 62-64.

CERCLA § 106(bX2), incorporating CERCLA § 106(a), and re-

ferring to liability provisions at CERCLA § 107(a), was amended

(continued...)

STATEMENT OF THE CASE

Petitioner seeks review of a decision by the United States

Court of Appeals for the Seventh Circuit in one of the most

significant cases involving CERCLA, 42 U.S.C. §§ 9601 et

seq., decided since the enactment of the Superfund Amend-

ments and Reauthorization Act of 1986 (SARA).’

Within a matter of months, the Seventh and Eighth

Circuits decided two remarkably similar cases involving

CERCLA § 106(b)\2), each finding federal jurisdiction in

two separate parts of the same provision. The Seventh Cir-

cuit found federal jurisdiction for “judicial review” of Agency

adjudicatory determinations under CERCLA § 106(b)(2)(A).

Then, applying newly-created standards of judicial review,

the Seventh Circuit held that Petitioner was not entitled to

any judicial relief.

On the other hand, the Eighth Circuit refused to read

“judicial review” into CERCLA § 106(b)(2), finding instead

that Congress provided potentially responsible parties with

an independent cause of action pursuant to CERCLA

§106(bX(2XB) to seek reimbursement and a determination

of their disputed liability and a resolution of any other

claims against the Agency based upon the Agency’s arbi-

trary and capricious selection or enforcement of the remedy.

The Eighth Circuit identified support for its interpretation

in the plain reading of the statute and in two recent opin-

ions decided by the D.C. Circuit.

2 (...continued)

in 1986 by the Superfund Amendments and Reauthorization Act

of 1986, Pub.L. No. 99-499, 100 Stat. 1613, et seq.

* Hereafter, Petitioner will cite to CERCLA’s internal numbering

system, CERCLA §§ 101 et seg., rather than the citation form of

the United States Code, 42 U.S.C. §§ 9601 et seq.

INT Ftc i at A tira ie Stat elm So

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£2

Finally, the Seventh and the Eighth Circuits cited en-

tirely different policy considerations. The Seventh Circuit

analyzed the reimbursement provision as part of a “clean-

up” statute, while the Eighth Circuit found that the reim-

bursement statute had a “remedial” purpose to protect

potentially responsible parties.‘

The facts of this case illustrate the significant legal issues

at stake.

Following a fire at its policyholder’s building in Wyan-

dotte, Michigan, Petitioner paid $4,189.25 on behalf of its

policyholder for the removal of PCB-free fluids from six,

fire-damaged transformers. However, the policyholder’s dis-

posal contractor co-mingled other fluids with the fluids from

the PCB-free, fire-damaged transformers, and delivered all

of the fluids to the CIW Site in Romulus, Michigan. One of

CIW’s customers discovered the presence of PCBs.

Thereafter, the United States Environmental Protection

Agency (USEPA or the Agency) became involved in the in-

vestigation at the CIW Site. The Agency unilaterally “deter-

mined” that various parties, including Petitioner, were

liable under CERCLA § 107(a), and issued the unilateral

administrative order (the UAO) at issue here. The Agency

unilaterally “determined” that Petitioner was liable under

CERCLA § 107(a\(3), as a party who “arranged” for the dis-

posal of PCBs, based upon the check to its policyholder.

Petitioner denied all liability and demanded a prompt

hearing. The Agency denied Petitioner’s request for a hear-

ing, and further refused to disclose its evidence of Petition-

4 The Seventh Circuit’s ruling further endorsed the administra-

tive imposition of joint and several liability in all cases under

CERCLA § 106(a), contrary to recent decisions of the Second,

Third and Fifth Circuits. The ruling, moreover, denied Petitioner

judicial review of its statutory liability, in violation of the due

process clause.

er’s alleged liability. Faced with the UAO and the penalties

associated therewith (see CERCLA § 106(b\(1)), Petitioner

proceeded to negotiate a work plan with the Agency to ad-

dress the “emergency removal action” described in the UAO.

No other recipient of the UAO responded.

The UAO was written broadly to encompass numerous

hazardous substances at the Site. Petitioner’s potential

liability, however, was not as broad as the order, and was

associated only with the alleged shipment of PCB-free

transformer fluids from fire-damaged transformers, which,

through no fault of Petitioner, had been contaminated by

others with PCBs.

In that context, Petitioner negotiated the “removal” action

work plan with the Agency primarily limited to PCBs (and

in good faith, following some compromise, to other activities

associated with PCB-free hazardous waste). As soon as the

Agency approved the work plan, Petitioner began imple-

menting it.

Almost immediately the Agency reneged on the work

plan, and sought to enforce the broadly written UAO as if

the owner/operator (with the broader scope of liability con-

nected to every substance at the entire site) had been in-

volved. Long after all of the work at the Site had been com-

pleted, the Agency’s chief complaint with Petitioner’s clean-

up activities rests not with the actions Petitioner per-

formed, but rather with the activities Petitioner did not per-

form solely involving PCB-free materials at the site. There

is no question that Petitioner completed the emergency re-

moval action associated with PCBs (and the hazardous

wastes), and there is no question that Petitioner abated any

“imminent and substantial endangerment” involving PCBs

which may have justified the UAO. In short, the Agency

simply claims that Petitioner is liable for more, and that it

has the authority to impose joint and several liability, for

all materials at a site—even when, as here, the alleged

harm at the Site is unquestionably divisible.*

Following completion, and within the time prescribed by

law, Petitioner filed an administrative petition seeking re-

imbursement from the Superfund alleging that it was not

liable, and that Petitioner was entitled to reimbursement

either under CERCLA §§ 106(bX(2)(C) or (D). Pursuant to

the reimbursement statute, the Agency reviewed Petition-

er’s claim in its pre-litigation opportunity to resolve the

issues. See CERCLA § 106(b)(2)(A). Following a tortured ad-

ministrative “process,” in which the Agency afforded Peti-

tioner no hearing (or other procedural protections) and fol-

lowed no timetable to ensure a prompt resolution of Peti-

tioner’s claims, the Agency denied the administrative peti-

tion on the grounds that Petitioner had not “completed” all

of the work specified in the UAO—specifically, certain work

directed solely at PCB-free materials. Accordingly, because

in the Agency’s view, Petitioner had not “complied” with the

UAO, it was not entitled to reimbursement—regardless of

whether Petitioner was innocent under CERCLA, or not.

Following the Agency’s “refusal to grant” Petitioner's ad-

ministrative claim, and within the time prescribed by law,

Petitioner filed the instant action in the District Court for

the Northern District of Illinois. Without allowing any dis-

covery (and thus limiting its ruling to the Agency’s adminis-

trative record), the District Court entered Summary Judg-

ment against Petitioner. The District Court was unable to

find federal jurisdiction for the limited judicial review sug-

gested by Agency, and, instead, “defaulted” to the “judicial

review” provisions found under the Administrative Proce-

dure Act (APA), 5 U.S.C. § 706. In a related decision, the

5 The Circuit Court and the District Court candidly acknowl-

that the Agency could not have enforced the order as such

in court. See Pet. App. 4, 54-55 n.13.

District Court also entered judgment on the pleadings on

Petitioner’s constitutional claims holding, that, even though

the UAO was clearly broader than Petitioner's potential lia-

bility (see Pet. App. 54-55 n. 13), Petitioner’s constitutional

alternatives were either complete defiance of the UAO or

complete compliance with the UAO.

Petitioner timely filed an appeal and, on April 12, 1995,

the Seventh Circuit affirmed the District Court’s rulings.

The Circuit Court held that, even though the UAO was

clearly unenforceable in court (Pet. App. 4), Petitioner’s

failure to complete the unenforceable activities precluded

any judicial relief. Pet. App. 17. Moreover, the Seventh Cir-

cuit held that the Agency’s interpretation of its own cleanup

orders—and “compliance” therewith—was entitled to defer-

ential “judicial review.” While affirming the District Court’s

ruling, the Seventh Circuit did not affirm the District

Court’s finding of federal jurisdiction under the APA, but

rather, interpreted federal jurisdiction within the statute at

CERCLA § 106(bX2\A)—contrary to the finding of the

District Court, the statutory reference pleaded by Petitioner

at CERCLA § 106(b\(2)(B), and the law in the Eighth Cir-

cuit.

REASONS FOR GRANTING THE WRIT

FEDERAL JURISDICTION AND THE SCOPE AND STAN-

DARDS OF JUDICIAL INVOLVEMENT IN CERCLA REIM-

TION AND THE SCOPE AND STANDARDS OF REVIEW IN

REIMBURSEMENT ACTIONS BROUGHT PURSUANT TO

CERCLA § 106(b)(2)(B).

It suffice to say that there are, at least, four fully devel-

oped interpretations of federal jurisdiction, and the closely

related questions involving the scope of judicial involvement

and the standard and scope of review, in the statutory

reimbursement statute provided at CERCLA § 106(b)(2): (1)

the Agency’s view; (2) the District Court’s view; (3) the Sev-

enth Circuit Court of Appeal’s view; and, (4) the Eighth Cir-

cuit Court of Appeal’s view.

Both the District Court and the Seventh Circuit Court of

Appeals responded to the Agency’s view while the Eighth

Circuit Court of Appeals flatly rejected it. Moreover, while

neither the District Court nor the Seventh Circuit fully

accepted the Agency’s statutory interpretation of the reim-

bursement statute, both Courts affirmed the Agency’s ad-

ministrative determinations. Therefore, it is necessary to

sketch the details of the Agency’s arguments in hopes of

persuading this Court to grant certiorari, and to allow the

parties an opportunity to fully brief their respective argu-

ments on federal jurisdiction.

A. In The Agency’s View, Federal Jurisdiction Is Provided

By CERCLA § 106(b)(2)(B), Yet, That Federal Jurisdic-

tion Is Limited By The Unilateral, Ex Parte Determina-

tions Made By The Agency, Which Determinations Are

Reviewable By A Federal Court Only Pursuant To A

Deferential Standard And Scope Of Review.

In essence, the Agency argued that Petitioner had failed

to “meet the statutory threshold requirement(s)” for filing

an administrative petition for reimbursement. By the so-

called “statutory threshold requirements,” the Agency

referred to its interpretation of CERCLA § 106(b)(2)(A), and

the Agency’s interpretation of the Agency’s administrative

role in reviewing a Petition for Reimbursement. The Agency

concluded that Congress had invested the Agency with

authority to thwart a potentially responsible party seeking

reimbursement, if that party had not “complied” with the

Agency’s interpretation of the law and the Agency’s inter-

pretation of its order, and, in the final analysis, had not

“completed” all of the activities ordered by the Agency

based upon the Agency's interpretation of the law and the

Agency’s interpretation of its order. According to the

Agency, the punishment for “failing” to meet the Agency's

interpretation of the “statutory threshold requirements”

could be meted out by the Agency in the form of denying

Petitioner access to the judiciary on Petitioner's claims

(that is, the “merits” of the petition for reimbursement),

whether those claims are in the nature of a claim alleging

non-liability or arbitrary and capricious Agency action.

The Agency conceded that it had “refused to grant” Peti-

tioner’s administrative petition for reimbursement, and that

the Agency’s action was final. Moreover, the Agency con-

ceded that some judicial review was in order because Peti-

tioner had timely filed an action in federal court seeking

judicial review under CERCLA § 106(bX2XB). But, accord-

ing to the Agency, the review provided by CERCLA

§ 106(b2)(B) was limited in three ways, none of which are

provided for in the reimbursement statute.

First, according to the Agency, the Agency’s substantive

administrative decision denying the administrative Petition

for Reimbursement based on the Agency’s determinations

of “non-compliance” was entitled to the “familiar” deferen-

tial standard of review, citing this Court’s opinion in Chev-

ron U.S.A., Inc. v. Natural Resources Defense Council, 467

US. 837 (1984) as authority. Neither the District Court

nor the Circuit Court agreed with this part of the Agency’s

interpretation of Chevron, although both courts applied a

deferential standard of review after finding significantly

different bases for federal jurisdiction, both of which run

® Of course, the principles announced in Chevron do net apply to

the Agency’s substantive adjudicatory determinations.

afoul of the principles articulated by this Court in Adams

Fruit Co. v. Barrett, 494 U.S. 638 (1990).

Second, without any statutory support, the Agency argued

that the scope of the judicial review was also deferential,

and was limited to the administrative record prepared ex-

clusively by the Agency because: (1) CERCLA administra-

tive orders are “complicated,” and the District Court should

defer to the Agency’s perceived expertise; and that, (2) “as

general rule” judicial review of agency action is confined to

the administrative record, citing cases with administrative

records prepared after formal (that is, adjudicatory adminis-

trative proceedings), or informal “rule making” cases which

obviously do not involve individual adjudicatory or liability

issues.’ However, in this case the record was “informal,”

and the proceedings involved substantive adjudications.

Both the District Court and the Circuit Court applied a

deferential standard and scope of review, but each was

based on entirely different jurisdictional grounds. The Dis-

trict Court found federal jurisdiction under the APA (and a

deferential standard and scope of review thereunder—with

no analysis of the scope of review). And, the Circuit Court,

troubled by both the Agency’s approach and the District

Court’s finding of jurisdiction under the APA, stubbornly

found federal jurisdiction under CERCLA § 106(bX2)(A)

(which, by its terms does not provide for final Agency

action), and then pedantically applied a deferential stan-

7 See Wagner Electric Co. v. Thomas, 612 F.Supp. 736, 747 (D.

Kan. 1985) (where the only District Court to review the very “in-

formal” administrative process severely criticized that process,

and held that judicial review would not be limited to the informal

administrative record prepared exclusively by the Agency). The

Agency too must concede that the administrative “process” was

lacking, inasmuch as the Agency recently delegated some of the

review function to the Environmental Appeals Board (EAB). In

this case, nothing was resolved—every fact is in dispute.

dard and scope of judicial review under its own, newly-

created cause of action.

Third, and contrary to this Court’s analysis in Adams

Fruit, the Agency argued that the District Court lacked jur-

isdiction to review any issue which the Agency had not re-

viewed in the administrative proceedings—which, in this

case meant, that the District Court could not review Peti-

tioner’s purported liability, because the Agency argued that

it had not done so administratively (suggesting that the

Agency had jurisdiction to decide liability in the “first

instance” and, citing the D.C. Circuit Court’s opinion in

Wagner Seed Co. v. Bush, 946 F.2d 918 (D.C. Cir. 1991),

cert. denied, 112 S.Ct. 1584 (1992) as supporting authority),

and suggesting also that the Agency, by its actions provided

the federal court with federal jurisdiction. And, contrary to

its concession of finality, the Agency argued, that should

the Court find in favor of Petitioner, the Agency should

have an opportunity to re-review Petitioner’s administrative

petition on the merits (that is, pass on Petitioner’s liability),

citing this Court’s opinion in Camp v. Pitts, 411 U.S. 138,

142-143 (1973) as authority. Both the District Court and

the Circuit Court agreed with the Agency on this point, and

limited their respective “review” to only the issue of com-

pliance the Agency admitted reviewing in the adminis-

trative process, and refused to review the Agency’s unilater-

al, ex parte determination of Petitioner’s purported and

denied liability, although neither court considered the prin-

ciples articulated by this Court in Adams Fruit.°

® After reviewing this Court’s opinion Adams Fruit, the D.C. Cir-

cuit Court of Appeals in Wagner Seed established the limits of its

holding as follows: “If the EPA had attempted to determine the

manner in which a person seeking reimbursement must ‘file an

action’, or which is ‘the appropriate United States District Court’,

under § 106(bX2)B), the rationale of Adams Fruit would seem to

(continued...)

B. In The District Court’s View, The Reimbursement

Statute Failed To Provide Federal Jurisdiction For A.

Limited Review Of Issues Determined By The Agency

Pursuant To CERCLA § 106(b)(2)(A), But Some Limited

Judicial Review Is Available With Federal Jurisdiction

Therefor Under The Administrative Procedure Act Fol-

lowing A Deferential Standard And Scope Of Review.

The District Court struggled first with federal jurisdiction

under the Agency’s construction of the statute, candidly

recognizing that:

[TJhere is no explicit provision for review of the EPA’s

determination that a party did not “comply” with the

relevant Order, and is thus not entitled to consideration

of its petition on the merits. Indeed, there is nothing in

the statute to indicate that the drafters of CERCLA

even contemplated that this may be an issue; rather,

their sole focus was providing for review of the EPA’s

ruling on the merits of a reimbursement petition.

Pet. App. 29.

Exactly. And in the context of federal jurisdiction, the

District Court had no trouble correctly distinguishing the

cases cited by the Agency in support of the Agency’s claim

of Chevron deference for its substantive determinations, and

found that both Wagner Seed and Bethlehem Steel Corp. v.

Bush, 918 F.2d 1323 (7th Cir. 1990) “provide us with little

guidance.” Pet. App. 29-30 n.9. Nonetheless, even after find-

ing that the reimbursement statute did not provide for

“judicial review” of the Agency’s determinations under

® (...continued)

apply.” Wagner Seed, 946 F.2d at 923. Moreover, in Kelley v. EPA,

15 F.3d 1100, 1107-1108 (D.C. Cir. 1994) reh’g denied, 25 F.3d

1088, 1090-92 (D.C. Cir. 1994), cert. denied, sub nom. American

Banker’s Association v. Kelley, 115 S.Ct. 900 (1995), the D.C. Cir-

cuit Court amplified its previous holding in Wagner Seed, holding,

inter alia, that the Agency did not have jurisdiction to determine

liability in any event.

CERCLA § 106(b)(2)(A) (in this case, the Agency’s limited

determination of “compliance’—as that term was inter-

preted by the Agency), with no explanation, the District

Court simply concluded that some judicial review must be

available on the limited issue “determined” by the Agency,

but, apparently, not in the context of the CERCLA

§ 106(b)(2)(B) cause of action pleaded by Petitioner.

The District Court tried to fashion federal jurisdiction for

the limited “judicial review” of CERCLA § 106(b\(2)(A)

issues out of the reimbursement statute, but concluded that

because the reimbursement statute offered “competing

standards of review,” the court could not “infer the authori-

ty for judicial review” from the statute. Pet. App. 30. But,

because the District Court had concluded that some review

must be available (but again, with no explanation or auth-

ority to review the essentially unreviewable), the District

Court simply “defaulted” to the APA. Pet. App. 31.

Also, without analyzing Adams Fruit or its Chevron defer-

ence, the District Court agreed with the Agency's construc-

tion of the statute, and limited the APA judicial review to

only the issues purportedly reviewed by the Agency—rather

than to the obviously broader issues raised by Petitioner in

the CERCLA § 106(b)(2)B) action then pending before the

Court. In essence, the District Court created a new cause of

action under the reimbursement statue, using the APA for

federal jurisdiction, and, then simply applied a deferential

standard and scope of review after he had candidly admit-

ted that neither had been provided by Congress. The Dis-

trict Court’s finding of federal jurisdiction under the APA

is contrary to CERCLA § 113(h). See Pet. App. 70.

C. In The Seventh Circuit’s View, The Reimbursement

Statute Provides Federal Jurisdiction At CERCLA

§ 106(b)(2)(A) For A Limited Review Of Issues Deter-

mined Exclusively By The Agency Pursuant To

CERCLA § 106(b)(2)(A), And That Review Was Deferen-

tial To The Agency.

On appeal, the Seventh Circuit Court of Appeals also

struggled with the question of federal jurisdiction in re-

viewing the Agency’s ostensibly unreviewable determina-

tions made pursuant to CERCLA § 106(b\(2)(A). But, con-

trary to the District Court, the Circuit Court construed the

statute and found independent federal jurisdiction for “judi-

cial review” under CERCLA § 106(b\(2)(A):

The right of reimbursement extends to “any person who

receives and complies with the terms of [any order],”

and ripens into a right to petition and to sue “after com-

pletion of the required action.” § 9606(b)(2)(A).

Pet. App. 8 (emphasis added).

And, like the District Court, the Circuit Court also

limited the “judicial review” to only the issue “determined”

by the Agency in the administrative proceedings, and re-

fused to hear the broader issues (e.g., liability and the

issues involving the arbitrary and capricious remedy selec-

tion and enforcement issues) raised by Petitioner in the

reimbursement action under CERCLA § 106(b)(2)(B), again,

with no analysis of the principles announced by this Court

in Adams Fruit. Pet. App. 7.

In any event, the Circuit Court found federal jurisdiction

for “judicial review” (limited to the Agency determinations)

within the statute, while the District Court specifically held

otherwise. Moreover, the Circuit Court rejected the District

Court’s finding of federal jurisdiction under the APA.

D. In The Eighth Circuit’s View, Congress “Quite Con-

sciously” Provided Federal Jurisdiction Only At

CERCLA § 106(b)(2)(B), Which Provides A Federal

Court With Full Jurisdiction To Hear All Issues De

Novo, Completely Unaffected By The Issues Deter-

mined By The Agency In The Administrative Pro-

ceedings Described at CERCLA § 106(b)(2)(A).

Also, two other federal Circuit Courts have confirmed the

District Court’s conclusion that Congress did not intend for

the judiciary to review the Agency’s actions under CERCLA

§ 106(bX2)A), except in the context of the de novo cause of

action provided at CERCLA § 106(bX2)B).

1. In Dico v. Diamond, 35 F.3d 348 (8th Cir. 1994), the

Eighth Circuit reversed the District Court’s entry of sum-

mary judgment in favor of the Agency on the limited issues

determined administratively by the Agency under CERCLA

§ 106(b)(2)(A). In that case, Dico, the potentially responsible

party, was seeking reimbursement for the costs it reason-

ably incurred in abating an alleged “imminent and substan-

tial endangerment” associated with a release of trichloro-

ethylene (TCE). Based upon its administrative determina-

tions, the Agency had denied Dico’s administrative claim,

and again, like here, and the Agency “did not reach the

question” of the “merits” of the Petitioner’s claim (a/k/a

Dico’s purported, and unreviewed liability), as if the Agency

had jurisdiction to “determine” liability—which is obviously

not a “technical” question entitled to deference. Jd. at 350.

The District Court in Iowa, like the District Court here,

construed the statute as argued by the Agency, and limited

its review to the issue the Agency purported to “determine”

administratively, and entered summary judgment in favor

of the Agency, holding that Dico was not entitled to judicial

relief. Also, like here, the potentially liable party contended

that there was no genuine dispute that Dico could not have

been held liable in court for the TCE associated with the

“northern plume,” because it was not even physically con-

nected to Dico’s property and was physically up-gradient.

(See Judge Posner’s “Cherynobl” example. Pet. App. 11-12.)

Nonetheless, the Dico District Court held:

Whether a factual dispute exists in this case over who

is liable for the northern plume of contamination is not

material to disposition of the motions for summary

judgment. The court agrees with [the Agency’s] position

that this case does not call for judicial review of the

substance of Dico’s reimbursement claim under the

standard set forth in section 9606(b2XC), but rather

for judicial review of the statutory prerequisites for

bringing such a claim; i.e., whether Dico is a “person

who receive[d] and complie{d]” with an order under

section 9606(b)\(2)(A).

Dico v. Diamond, 821 F.Supp. 562, 568 (S.D. Iowa 1993)

(emphasis added) (citing Wagner Seed, 946 F.2d at 921).

Like the Seventh Circuit, the District Court in Iowa had

found federal jurisdiction for judicial review under CERCLA

§ 106(bX(2\A).

On appeal, however, the Eighth Circuit reversed the Dico

District Court, finding first that the Agency’s statutory con-

struction was not entitled to Chevron deference, and finding

instead that the principles of Adams Fruit were appropri-

ate.’ Moreover, the Eighth Circuit confirmed that there is

no federal jurisdiction for “judicial review” at CERCLA

§ 106(bX2)A):

The statute nowhere uses the word “arbitrary” or “ca-

pricious” or any other words implying that “review” of

® See also Kelley, 25 F.3d at 1092 (“The structure of the [reim-

bursement statute] is flatly inconsistent with Chevron”). It is cur-

ious that any court would seriously consider deference to the

Agency under the reimbursement statute. The burden of proof is

on the potentially responsible party to prove non-liability (rather

than on the Agency to prove liability). How could anyone infer de-

ference to the party who has no burden?

an agency action “on the record” or “on the adminis-

trative record” was intended by Congress. We decline to

read language of judicial review into the section, partic-

ularly in light of the fact that Congress is accustomed

to including provisions for judicial review in statutes

when that is what it intends.

35 F.3d at 351 (emphasis added).

Moreover, in the context of analyzing the deference prin-

ciples under Chevron and Adams Fruit, the Eighth Circuit

recognized that:

(The Agency] must construe the reimbursement provi-

sion as a predicate to its action under § 106(b)(2)(A).

However, that the EPA is given an opportunity to

resolve the matter prior to litigation does not alter the

language of § 106(b(2)(B) which “has expressly estab-

lished the Judiciary . . . as the adjudicator of private

rights of action arising under the [section][citing Adams

Fruit, 494 U.S. at 649], and also does not provide a

means by which the EPA may “bootstrap itself into an

area in which it has no jurisdiction”.

Id. at 352 (citing Adams Fruit, 494 U.S. at 650) (internal

citations omitted).

In other words, according to the Eighth Circuit: (1) there

is no federal jurisdiction for “judicial review” under

CERCLA § 106(bX(2A); and, (2) CERCLA § 106(b\(2)(A) is

only a basic description of the Agency's purely administra-

tive role, which is only part of the overall reimbursement

statute (a pre-litigation, administrative opportunity to

resolve the matter before it goes to the Judiciary); and, (3)

the only federal jurisdiction available under the reimburse-

ment statute is provided at CERCLA § 106(b2)(B); and, (4)

that federal jurisdiction, consistent with Adams Fruit, is

completely unaffected by anything the Agency does in the

administrative proceedings, which provides an alleged

potentially responsible party with an unfettered opportunity

to be heard de novo in federal court on its claims asserting

non-liability, or seeking reimbursement based on the Agen-

cy’s arbitrary, capricious or unlawful selection or enforce-

ment of the remedy.

Clearly, the Eighth Circuit and the Seventh Circuit con-

flict on every point. Only this Court is available to resolve

these issues.

2. In addition to its analysis of Chevron factors and the

principles of Adams Fruit on the issues involving the Agen-

cy’s attempt to deny access to the judiciary, the Eighth Cir-

cuit also relied on the D.C. Circuit’s recent analysis in

Kelley. In the Kelley opinions, the D.C. Circuit was asked to

review a challenge to the Agency’s so-called “Lender Lia-

bility Rule,” (40 C.F.R. § 300.1100) ostensibly prepared by

the Agency in response to some public pandering following

the Eleventh Circuit Court of Appeals’ decision in United

States v. Fleet Factors Corp., 901 F.2d 1550 (11th Cir.

1990), cert. denied, 111 S.Ct. 752 (1991). In the legislative

regulation at issue in Kelley, the Agency purported to pro-

vide some relief to the lending community, and established,

by administrative regulation, “lender liability standards”

and “safe harbors” from CERCLA liability. The Agency's

legislative regulation was challenged by the State of Mich-

igan and the Chemical Manufactures Association in the

D.C. Circuit Court, wherein those petitioners alleged that

the Agency had acted outside of the Agency’s administrative

authority in purporting to establish liability principles

when Congress had not chosen to do so, and when Congress

had not authorized the Agency to do so. Central to the

Agency’s argument in support of the “Lender Liability

Rule,” was the Agency’s interpretation of its perceived auth-

ority under Wagner Seed.

In Kelley, the D.C. Circuit explained its previous holding

in Wagner Seed, and criticized the Agency for overreading

it. 15 F.3d at 1105. According to the D.C. Circuit, Wagner

Seed held that the Agency “had authority to interpret cer-

tain language of § 106. . . that applied to EPA’s adminis-

trative responsibilities.” Id. (some emphasis added). But, the

Court emphasized, the language which the Agency had in-

terpreted in Wagner Seed did not bear on liability issues,

and, the Court suggested that since Congress provided de

novo review of the Agency’s “particularized decision respect-

ing liability”, deference as to those issues would be inappro-

priate. Kelley, 15 F.3d at 1105. In the instant reimburse-

ment action, there are no other “merits” to review, except

Petitioner’s liability and the Petitioner’s claim against the

Agency’s arbitrary and capricious selection and enforcement

of the remedy—based on Petitioner’s putative liability. That

is, there are no other technical questions for the Agency to

review. Moreover, as in this case, because the Agency

“attempted to define the manner in which a party sought

judicial redress” the rationale of Adams Fruit clearly

applies. Id. at 1105.

Also, according to the D.C. Circuit, the strongest argu-

ment made by the Agency was the same argument faced by

Petitioner in this case and by Dico in the Eighth Circuit:

“(The Agency’s] role in implementing the reimbursement

provisions of section 106(b)(2) implies authority to define

liability.” Id. at 1106.

In response, the D.C. Circuit carefully analyzed CERCLA

§ 106(b) and disagreed. Jd. at 1106-1107. According to the

D.C. Circuit, the reimbursement statute has two parts, one

describing the administrative role of the Agency, and the

second describing the proper role of the judiciary.

Although a party must first petition EPA for reimburse-

ment under subparagraph 106(bX2)A), that provision

is completely silent as to what criteria EPA uses to grant

reimbursement. If EPA denies reimbursement because

the Agency contends the party is liable, the party has

a right to bring an action in federal court under sub-

ph 106(b\2XB); if the party establishes that it

is not liable by a preponderance of the evidence, under

subparagraph 106(bX2XC), it prevails. EPA is, under

that scenario, only a defendant; its preliminary conclu-

sion that the party is liable is entitled to no consider-

ation, let alone the deference afforded to the typical ad-

ministrative agency adjudication.

Id. at 1107 (some emphasis added). Moreover, according to

the D.C. Circuit, Congress “quite consciously” distinguished

the Agency’s role under the reimbursement statute, and

while Congress obviously intended to allow deference to the

Agency’s selection of the remedy pursuant to CERCLA

§ 106(b2XD), “it does not seem that Congress intended the

same authority with respect to subparagraphs 106(b)(2)(B)

and (C)”. Id. (emphasis added).

Therefore, according to the Eighth Circuit in Dico, the

D.C. Circuit supported the Eighth Circuit’s conclusion that

CERCLA § 106(bX2)B) creates a “private right of action

against EPA for reimbursement of response costs and expli-

citly establishes the judiciary as the adjudicator of the

rights of the parties”, making deference to the Agency on

any issue inappropriate. Dico, 35 F.3d at 352 (citing Adams

Fruit, 494 U.S. at 650).

Il.

THE CIRCUITS ARE SPLIT ON THE APPROPRIATE

POLICY CONCERNS AT ISSUE IN REIMBURSEMENT

ACTIONS.

The difference between the Seventh and Eighth Circuits’

decisions is obviously the way each Court viewed the reim-

bursement provision. The Seventh Circuit considered the

“objective” of the reimbursement provision as “encouraging”

prompt cleanups, although it is difficult to reconcile how a

rule which encourages complete defiance of “broad” Agency

orders could ever be considered as encouraging prompt,

privately-funded cleanup activity unless each order is

tailored to each potentially liable party’s putative liabili-

ty—just as Petitioner had requested.’

The Eighth circuit, on the other hand, considered the

reimbursement provision as “remedial legislation” to be

read “broadly to accomplish its goals” of protecting the

potentially liable parties affected by unilateral, ex parte,

arbitrary, capricious and unlawful Agency action. Dico, 35

F 3d at 353. The difference in perspective is monumental,

and the policy question posed by these two perspectives can

only be resolved by this Court. Clearly, Congress focused its

concerns on the issues facing potentially responsible parties,

while balancing concerns over “compliance with orders” and

“expeditious cleanups.” If this Court grants certiorari, the

parties will be free to brief this Court on Congress’ “inten-

tions” in drafting the reimbursement provision.

Il.

THIS COURT SHOULD RESOLVE CONFLICTS AMONG

THE CIRCUITS CONCERNING THE SCOPE OF CERCLA

LIABILITY AND THE CONSTITUTIONALITY OF POST-

DEPRIVATION PROCEDURES AFFORDED BY THE STAT-

UTE.

In evaluating this case under CERCLA § 106(b\(2)A) and

deferring to the Agency, the Seventh Circuit approved the

universal, administrative imposition of joint and several lia-

10 Moreover, based on its interpretation of the policy, the Seventh

Circuit labeled as “absurd” Petitioner's argument that a non-

liable party should always be reimbursed by a constitutional gov-

ernment. Pet. App. 10-11. Rather, it is an absurd construction of

the statute that would deny judicial access to a party who had in-

curred only one cent in response costs. |

ieee

bility pursuant to CERCLA § 106(a)"" and further rendered

such Agency liability determinations effectively unreview-

able.

A. The Seventh Circuit’s Conclusion That The Agency

Universally May Impose Joint And Several Liability

Under CERCLA § 106(a) Conflicts With Rulings Of The

Second, Third and Fifth Circuits Concerning The

Scope Of CERCLA Liability.

The Seventh Circuit’s determination that the Agency ad-

ministratively may impose joint and several liability, with-

out qualification, through a CERCLA § 106(a) unilateral

order conflicts with recent decisions of the Second, Third

and Fifth Circuits which hold that, where there are distinct

harms at a site or where there is a reasonable basis for ap-

portioning a single harm, a party’s CERCLA liability can

extend only to that particular harm or portion of the harm

that it caused. See In re Bell Petroleum Servs., Inc., 3 F.3d

889, 901-02 (5th Cir. 1993); United States v. Alcan Alumi-

num Corp., 990 F.2d 711, 722-23 (2d Cir. 1993) (“Alcan-

PAS”); United States v. Alcan Aluminum Corp., 964 F.2d

252, 268-70 (3d Cir. 1992) (“Alcan-Butler”). The Seventh

Circuit’s rule, unlike that of its sister circuits, is inconsis-

tent with both the legislative history and the policies of

CERCLA.

The Agency never has disputed that Petitioner's potential

CERCLA liability with respect to the CIW Site extends, at

most, to PCB contamination. See Pet. App. 4, 54-55 n.13.

The Agency’s decision to order Petitioner to remove materi-

als at the Site other than PCBs thus amounted to an ad-

1 CERCLA § 107(a) defines which parties may be liable under

the statute. See Kelley, 25 F.3d at 1090 (noting that “the drafters

always came back to the liability provisions of section 107, which

calls for a judicial determination”); Kelley, 15 F.3d at 1106-07.

ministrative determination that Petitioner is jointly and

severally liable for all alleged contamination at the Site by

virtue of just being there—without any nexus to liability.

The Agency’s subsequent conclusion that Petitioner did not

“comply” with certain portions of the unilateral order that

purportedly addressed non-PCB materials accordingly was

not a “technical” decision but rather constituted a further

embodiment of the Agency’s administrative determination

of Petitioner’s joint and several CERCLA liability.

Having held that “compliance” with a CERCLA § 106(a)

order, as measured by “completion” of all work mandated by

the Agency, is an “express statutory condition” to obtaining

reimbursement under § 106(b)\2) (even for an entirely inno-

cent party), see Pet. App. 6, the Seventh Circuit acknowl-

edged that “compliance need not be a matter of all or noth-

ing” but instead stated that “substantial compliance” would

satisfy its statutory threshold. Jd. 10. The Court went on to

indicate that the outer limits of “compliance” the Agency

can demand are defined by the Agency’s “powers,” i.e., auth-

ority. Id. 12. Specifically, where a

clean-up order is so grotesquely broad as plainly to ex-

ceed the agency’s powers, the party against whom it is

directed can comply with the valid part of the order and

disregard the rest as void, a nullity, and having com-

plied with the valid part seek reimbursement for the

costs of that compliance. An order so completely ultra

vires is no order for purposes of deciding whether com-

pliance and completion have been achieved; the valid

and the void commands in the order can be separated,

and the void discarded.”

2 Applying an economic analysis to the law, the Circuit Court

identified two apparent limits on the Agency's authority under

CERCLA § 106(a): where “impossibility,” “impracticability,” or

“frustration,” based on a party’s financial resources, precludes

(continued...)

Id. (citations omitted).

In applying this standard to the present case, the Seventh

Circuit, ignoring decisions from other Circuit Courts, held

that the Agency in fact possesses authority under the

statute to order a single potentially responsible party to

conduct all cleanup deemed necessary at a site, even where

the harm is unquestionably divisible. The Court reasoned

as follows:

The agency takes the position, which may or may not be

correct but is not irrational, that a polluter who wants

to take advantage of the reimbursement provision may

be required to clean up not only his own mess, as it

were, but other messes at the same site. . . . The re-

quirement that the reimbursement-seeker clean up the

entire site could rationally be believed to contribute to

the Act’s central objective of promoting the clean-up of

contaminated land. . . . EPA’s desire to have one pol-

luter clean up the entire site is not so flagrantly unrea-

sonable as to entitle the polluter to disregard an order

embodying that desire on the ground that the order is

so plainly beyond the agency’s power that it should be

treated as a nullity.”

2 (continued)

strict compliance; and where an order is “unreasonably, oppres-

sively broad.” Pet. App. 10-11. Although the Court did not specify

the source of these limitations (i.e., the statute or the Constitu-

tion), it took pains to emphasize that neither was available to

Petitioner. Jd. 10.

13 ‘The Circuit Court did note that “there would be problem of the

tail wagging the dog if the polluter responsible for only a tiny

fraction of the contamination of the site were ordered to clean up

the whole thing, perhaps because he had the deepest pocket of all

the responsible parties.” Pet. . 13. Even given the undisputed

divisibility of the harm at the IW Site, the Court distinguished

the an circumstance from the case at hand simply by stat-

ing

t “[i]t is not the situation here.” Id.

‘Pet. App. 12-13. Because, in the Agency’s view (to which the

Seventh Circuit deferred), Petitioner did not complete all

work within the scope of the unilateral order directed at

divisible, PCB-free materials, the Circuit Court found that

Petitioner had no right to a hearing on its CERCLA liability

as to any of the materials at the Site. See id. 14-17.

However, in Alcan-Butler, the Third Circuit concluded

that CERCLA neither mandates nor authorizes the uniform

imposition of joint and several liability. See 964 F.2d at 268.

To the contrary, that Court held that a responsible party

only can be liable for the specific harm it caused either

where there are distinct harms at a site or where there is

a reasonable basis for determining the party’s contribution

to (i.e., apportioning) a single harm. See id. at 268-69. In

adopting this analysis, the Court relied on the approach of

the RESTATEMENT (SECOND) OF TORTS to ensure a uniform

federal common law under CERCLA. See id. at 268 n.26.

Perhaps most importantly, however, the Third Circuit ruled

that a responsible party is entitled to a judicial hearing to

establish the divisibility of harm at a site, and thus the

limits of its CERCLA liability. See id. at 269-70. In deci-

sions rendered shortly after Alcan-Butler, the Fifth and

Second Circuits adopted virtually identical analyses.'* See

Bell Petroleum, 3 F.3d at 894-904; Alcan-PAS, 990 F.2d at

721-23.

Both the legislative history of and policies underlying

CERCLA reflect “Congress(’] inten(t] that the federal courts

impose joint and several liability only in appropriate cases,

4 Two other Circuit Courts likewise have held that CERCLA lia-

bility cannot be joint and several where the harm at a site is

divisible. See O’Neil v. Picillo, 883 F.2d 176, 178-79, 183 (1st Cir.

1989), cert. denied sub nom. American Cyanamid Co. v. O'Neil,

493 U.S. 1071 (1990); United States v. Monsanto Co., 858 F.2d

160, 172-73 (4th Cir. 1988), cert. denied, 490 U.S. 1106 (1989).

applying common law principles.” Bell Petroleum, 3 F.3d at

901. The House and Senate each deleted, from its respec-

tive version of the bill enacted as CERCLA, a provision that

would have mandated imposition of joint and several lia-

bility. As the Third Circuit explained:

[T]he scope of liability and term joint and several lia-

bility were deleted to avoid a mandatory legislative

standard applicable in all situations which might pro-

duce inequitable results in some cases. 126 Cong. Rec.

at $14964, $15004, H11787, H11799, 126 Cong. Rec.

H9465 (Sept. 23, 1980) (remarks of Rep. Madigan),

H9466 (Remarks of Rep. Stockman). The deletion was

not intended as a rejection of joint and several liability.

126 Cong. Rec. $14964, H11787, H11799 (Nov. 24,

1980). Rather, the term was omitted in order to have

the scope of liability determined under common law

principles, where a court performing a case by case

evaluation of the complex factual scenarios associated

with multi-generator waste sites will assess the propri-

ety of applying joint and several liability on an individ-

ual basis.

Alcan-Butler, 964 F.2d at 268 (quoting United States v.

Chem-Dyne Corp., 572 F. Supp. 802, 808 (S.D. Ohio 1983)).

This flexible approach, accordingly, represents the balance

between two competing goals of CERCLA: ensuring that

those who cause environmental harm bear the costs of the

harm; and protecting against harshness and unfairness to

an individual defendant. See 1 Comm. on Envt & Pub.

Works, A Legislative History of the Comprehensive Environ-

mental Response, Compensation & Liability Act of 1980, S.

Doc. No. 97-14, 97th Cong., 2d Sess. 320 (1983); Bell Petro-

leum, 3 F.3d at 902 n.13.

The Second, Third and Fifth Circuits all have recognized

that the Agency has no authority to impose joint and

several liability under CERCLA in a case, such as the

present, where the harm at a site is divisible. The Seventh

Circuit’s decision, which allows the Agency universally to

impose joint and several administrative liability in issuing

CERCLA § 106(a) unilateral orders, thus conflicts with the

reasoning of these other Circuit Courts as well as the legis-

lative history and policies of CERCLA.

B. The Seventh Circuit’s Deference To The Agency’s Ad-

ministrative Liability Determination Conflicts With

The First Circuit’s Conclusion As To The Constitution-

ality Of Post-Deprivation Procedures Afforded By

CERCLA.

By deferring to the Agency’s “compliance” decision, the

Seventh Circuit insulated the Agency’s administrative im-

position of joint and several liability from judicial review,

thus denying Petitioner the right to any hearing on its

alleged CERCLA liability (as it relates to either PCBs or

PCB-free materials). In this respect, the Seventh Circuit's

ruling conflicts with the First Circuit’s conclusion that

CERCLA’s administrative procedures cannot deny a party

a timely judicial hearing on its alleged liability. See United

States v. Reardon, 947 F.2d 1509, 1523-24 (1st Cir. 1991).

As the First Circuit recognized, CERCLA must be inter-

preted to ensure this fundamental due process right.

The Agency concedes that Petitioner never has been

afforded a hearing, in any forum, on its alleged CERCLA

liability. See Pet. App. 25 n.6. The Seventh Circuit dis-

missed Petitioner’s due process challenges to the Agency’s

administrative liability determination, without analysis,

simply by referring to one case in a line of decisions holding

that, on their face, that CERCLA §§ 106 and 113(h) (the

latter of which precludes pre-enforcement judicial review of

certain aspects of § 106(a) orders) are constitutional.'* See

id. 11 (citing Solid State Circuits, Inc. v. United States

Envtl. Prot. Agency, 812 F.2d 383, 389-92 (8th Cir. 1987)).

The Circuit Court did not acknowledge the due process

ramifications of denying, as it did, Petitioner any hearing

on its liability after a coerced deprivation of its property.

However, the First Circuit has held that a potentially re-

sponsible party, administratively deprived of its property by

the Agency, must be afforded a timely judicial hearing to

address its CERCLA liability. In Reardon, the First Circuit

found unconstitutional the CERCLA provision allowing the

Agency to impose a lien on a potentially responsible party’s

property without prior notice and without any hearing on

the party’s liability under the statute until the Agency

elects, in its discretion, to bring an enforcement action.

Those principles are indistinguishable from this case. See

947 F.2d at 1523-24; CERCLA § 107(1).

Applying Mathews v. Eldridge, 424 U.S. 319, 335 (1976),

and relying significantly on Connecticut v. Doehr, 501 U.S.

1 (1991), the First Circuit began its analysis by noting that

a CERCLA lien constitutes a deprivation of a significant

property interest.’ See 947 F.2d at 1518-19. The First Cir-

cuit then concluded that, although the “mere postponement

of judicial enquiry is not a denial of due process if the op-

15 See also Barmet Aluminum Corp. v. Reilly, 927 F.2d 289, 294-

96 (6th Cir. 1991); Dickerson v. Administrator, Envtl. Prot.

Agency, 834 F.2d 974, 977-78 (11th Cir. 1987); Wagner Seed Co.

v. Daggett, 800 F.2d 310, 314-17 (2d Cir. 1986). These Courts

reached this result, however, under the assumption that a poten-

tially responsible party in fact would receive a judicial hearing on

its alleged liability at an appropriate time.

16 The First Circuit indicated that “even [a] temporary or partial

impairment{ ] to property rights . . . [is] sufficient to merit due

process protection.” 947 F.2d at 1518 (quoting Doehr, 501 U.S. at

12).

portunity given for ultimate judicial determination of lia-

bility is adequate,” id. at 1519 (quoting Phillips v. Commis-

sioner, 283 U.S. 589, 596 (1931)), CERCLA’s lien provision

“throws the ‘ultimate judicial determination’ so far into the

future as to render it inadequate.” Id. at 1519. The First

Circuit thus equated the lien provision with the replevin

statutes at issue in Fuentes v. Shevin, 407 U.S. 67 (1972),

where this Court held that a party may not be “left in limbo

to await a hearing that might or might not ‘eventually’

occur.” 947 F.2d at 1520 (quoting Mitchell v. W.T. Grant

Co., 416 U.S. 600, 618 (1974) (discussing Fuentes)). Finally,

the First Circuit found that, because the property owners

subject to the lien disputed their CERCLA liability, the gov-

ernment had no “present, recognized interest in the proper-

ty.” Id. at 1521. While conceding that “additional procedural

requirements are likely to place significant . . . administra-

tive burdens on the government,” the First Circuit held that

“EPA has [no] legitimate interest in exceeding the limits of

its authority under CERCLA” and that there is “nothing

wrong with requiring EPA to delay filing notice of a lien

until it can show that the statutory prerequisites for filing

the notice [including establishing a party’s liability] have

been satisfied.” Jd. at 1523. The First Circuit, accordingly,

concluded that the CERCLA lien provision, by not provid-

ing, at the very least, notice and a pre-deprivation hearing,

violated the due process clause. See id. at 1523-24.

That the First Circuit’s reasoning applies equally to a

coerced, administrative deprivation of property pursuant to

CERCLA § 106(a) is confirmed by the government’s state-

ments during congressional hearings preceding the enact-

ment of § 106(b)(2). Although the Seventh Circuit construed

CERCLA § 106 in a manner that denies an innocent party

a judicial hearing on its alleged liability, it goes without

saying that,

if Congress completely proscribe[s] the federal courts

from hearing a particular type of action, and no other

relief [is] available, the action . . . violate[s] the Due

Process Clause of the Fifth Amendment.

Parmet Aluminum, 927 F.2d at 295 (quoting South Macomb

Disposal Auth. v. Environmental Prot. Agency, 681 F. Supp.

1244, 1251 (E.D. Mich. 1988)). The government, indeed,

never intended that § 106(b)\(2) be interpreted in this man-

ner. To “protect against any due process violation,” the gov-

ernment has acknowledged that § 106 must “provide for a

full and fair day in court .. . before any party's monetary

liability becomes fixed.” Reauthorization of Superfund:

Hearings Before the Subcomm. on Water Resources of the

House Comm. on Pub. Works and Transp., 99th Cong., 1st

Sess. (1985) (comments of the Department of Justice) (em-

phasis added). Consistent with the First Circuit’s ruling in

Reardon, and as the government expressly has recognized,

due process thus requires, at a minimum,” that a potential-

‘7 Two Circuit Courts have upheld the denial of a pre-deprivation

hearing to the recipient of a CERCLA § 106(a) order given that

such a party can refuse to comply with the order, challenge its

liability in an ensuing enforcement action, and avoid statutory

penalties by establishing in the enforcement action that it had

“sufficient cause” justifying its refusal to comply. See Solid State

Circuits, 812 F.2d at 390-92; Wagner Seed, 800 F.2d at 315-17;

see also CERCLA §§ 106(bX1), 107(cX3). Neither Court, however,

considered a case, such as the present, where the Agency delib-

erately refused to disclose the evidence allegedly supporting its

administrative liability determination during the limited time

period the Agency allowed a recipient to evaluate whether that

party in fact had “sufficient cause” to ignore an order. See Gon-

zales v. United States, 348 U.S. 407, 415 (1955). In addition to a

full ivation judicial hearing, due process also must re-

quire that the Agency disclose its liability evidence to an order re-

cipient and consider any rebuttal evidence prior to the time the

order takes effect. See Solid State Circuits, 812 F.2d at 391; cf.

Pet. App. 14 (misstating Petitioner’s position as seeking “to inval-

(continued...)

ly responsible party who brings a reimbursement action be

afforded a judicial hearing with respect to its alleged lia-

bility under CERCLA § 107(a).”*

CONCLUSION

The writ of certiorari should be granted.

Respectfully submitted,

WILLIAM J. ANAYA RoBertT M. WATTSON

Counsel of Record SANDRA WALLACE

DANIEL C. MURRAY Davip C. LINDER

FREDERICK S. MUELLER ZELLE & LARSON

JOHNSON & BELL, LTD. 33 South Sixth Street

222 North LaSalle Street Suite 4400 City Center

Suite 2200 Minneapolis, MN 55402

Chicago, IL 60601 (612) 339-2020

(312) 372-0770

Attorneys for Petitioner

7 (...continued)

idate the limitations that section [113(h)] places” on pre-enforce-

ment judicial review of § 106(a) orders).

18 Due process also mandates that a post-deprivation hearing be

“prompt.” See Doehr, 501 U.S. at 22 (plurality), Hodel v. Virginia

Surface Mining & Reclam. Ass’n, 452 U.S. 264, 303 (1981). At

least in this case, there was nothing prompt about the procedures

available to Petitioner for pursuing a reimbursement action.

APPENDIX

INDEX TO APPENDIX

APP.

PAGE

Seventh Circuit Opinion .........-.+eseeeeeees 1

Clinton Opinion—District Court ............++-- 19

Browner Opinion—District Court ...........+-- 39

U.S. Constitution; Amendment V ............-. 61

MT aa cca gnaeaecse ses 62

42 U.S.C. § 107(a), (b) and (C) .....-. ee eeeeeeeees 65

42 U.S.C. § 113(h), (j) and (k) ........- eee ee eees 70

Order denying Rehearing ...........-++++++++: 74

Letter confirming: extension of time to file Petition

for Writ of Certiorari ............eeeeeeees 75

a eter ss

App. 1

IN THE

UNITED STATES COURT OF APPEALS

FOR THE SEVENTH CIRCUIT

Nos. 94-2005, 94-2006, 94-2081

EMPLOYERS INSURANCE OF WAUSAU, a mutual company,

Plaintiff-Appellant,

Caro. M. Browner, Administrator of the United States

Environmental Protection Agency, et al.,

Defendants-Appellees.

Appeals from the United States District Court for the

Northern District of Illinois, Eastern Division.

Nos. 91 C 4254, 98 C 1366—Marvin E. Aspen, Judge.

ARGUED JANUARY 4, 1995—Dectpep Aprit 12, 1995

Before Posner, Chief Judge, CuDAHY, Circuit Judge,

and GRANT, District Judge.*

PosNER, Chief Judge. We have consolidated the ap

in two intimately related cases that arise under the m-

Prremag Environmental Response, Compensation, and

iability Act of 1980, as amended, 42 U.S.C. $§ 9601 et

seq. The Act, also known (in its current, amended form)

as the Superfund law, requires that sites contaminated

by toxic wastes be cleaned up by or at the expense of

* Hon. Robert A. Grant of the Northern District of Indiana.

App. 2

the persons responsible for the contamination. In one of

the cases, Employers Insurance of Wausau, an insurance

company that the EPA had ordered to clean up a contam-

inated site, sued the President of the United States, in-

voking a 1986 amendment to the Superfund law that pro-

vides that “any person who receives and complies with

the terms of any order” issued by the EPA to clean up

a contaminated site may “after completion of the required

action” petition the President for reimbursement of “the

reasonable costs of such action”—“response costs,” as they

are called—and if the — is turned down may, within

sixty days, sue the sident in federal district court.

8§ 9606(bX2XA), (B). The petitioner can obtain judicial

relief either by proving by a preponderance of the evi-

dence that it is not liable for response costs (and that the

costs it incurred for which it seeks reimbursement were

not excessive), § 9606(bX2XC), or that the particular re-

sponse action ordered was arbitrary and capricious, or

otherwise unlawful. § 9606(bX2XD). The district judge

dismissed the suit on the ground that Employers Insur-

ance had failed to complete the clean-up ordered by the

EPA. Employers Ins. of Wausau v. Clinton, 848 F. Supp.

1359 (N.D. Ill. 1994).

In the other suit, Employers Insurance sued the Admin-

istrator of the EPA, to whom the President has delegated

the task of responding to petitions for reimbursement,

contending primarily that the statutory procedures for

challenging clean-up orders are constitutionally inadequate.

This suit was filed under 28 U.S.C. § 1331 as a “nonstat-

utory” review proceeding (of which more later), an ac-

cepted method of challenging the procedures used by an

agency. Marozsan v. Un States, 852 F.2d 1469, 1474

(7th Cir. 1988) (en banc). The district judge thought the

statutory procedures adequate, rejected the plaintiff's

other contentions, and dismissed the suit. Em Ins.

of Wausau v. Browner, 848 F. Supp. 1369 (N.D. Ill. 1994).

e constitutional challenge is baseless; as we shall see,

the remedies that the Superfund law creates against in-

valid clean-up orders fully satisfy the requirements of due

————————————e

ee eee ee eS”

App. 3

process. Between them, the two suits (and a third, whose

dismissal we affirmed in Employers Ins. of Wausau v.

United States, 27 F.2d 245 (7th Cir. 1994)) fire what we

are constrained to describe as a noisy and largely incom-

large broadside of charges the majority of which

, at least so far as we are able to understand them,

sufficient merit to warrant discussion.

How did it come about that an insurance company was

ordered to clean up contaminated land? Employers Insur-

ance had issued a fire insurance policy to the occupant

of a building in a The building caught fire and

several electrical ormers were damaged. In a settle-

ment with its insured, Employers Insurance agreed to

have certain oils and other fluids drained from the trans-

formers and removed from the insured’s premises. Accord-

ing to the EPA—Employers Insurance denies this—the in-

surance company arranged for the transportation of some

seven hundred gallons of these fluids to an oil recycling

facility elsewhere in Michigan. Shortly afterward, the facil-

ity was found to be contaminated with PCBs (polychlori-

nated biphenyls) and VOCs (volatile organic compounds),

and the PCB contamination was traced to the fluids that

had come from the transformers. The EPA designated

Employers Insurance as a potentially responsible party

within the meaning of the Act—responsible, that is, for

the contamination and hence for cleaning it up—and it

ordered the insurance company, along with several other

alleged contributors to the contamination of the recycl-

ing facility, to participate in the clean-up. After initial

resistance, Employers Insurance to participate, and

it submitted a plan, which the EPA approved, detailing

its participation. Neither the order that the EPA issued,

nor the plan of compliance that Employers Insurance sub-

mitted, is limited in so many words to the elimination of

the PCB contamination. But after Employers Insurance

finished that part of the clean-up, it stopped work, claim-

ing that it was not responsible for, and therefore would

not clean up, any contamination not caused by PCBs. It

petitioned the EPA (nominally the President) for reimburse-

cai

App. 4

ment of the costs that it had incurred in the clean-up—an

amount in excess of $2 million. The EPA turned the in-

surance company down (precipitating these two suits) on

the ground that the company had not completed the job.

Employers Insurance claims that it is not responsible

for any of the contamination at the recycling facility, not

even the PCB contamination, because it had not, as the

EPA thought it had, arranged for the transportation of

the noxious fluids, which would have made it a —

ble party. § 9607(aX3); Amcast Industrial Corp. v.

Corp., 2 F.3d 746, 751 (7th Cir. 1993). It also denies that

its petition for reimbursement was premature; it had, it

contends, completed the clean-up that it was ordered to

do; and it argues that it is entitled to the independent

judgment of the district court on whether or not this is

30. The EPA concedes that if the insurance company did

not arrange for the transportation of the fluids, the com-

pany is entitled to full reimbursement—but not until it

complies fully with the clean-up order. And, the agency

argues further, its determination that the company did

not comply fully with the order may be set aside by a

court only if that determination is found to be unreason-

able (“arbitrary and capricious”) in a separate judicial

proceeding—not in a reimbursement p ing, which the

agency insists is premature.

After Employers Insurance abandoned the clean-up,

the EPA stepped in and arranged for the completion of

the job at a cost of several hundred thousand dollars.

The agency has not yet tried to recover this expense or

any part of it from Employers Insurance. Indeed, there

is no reason to think the company was responsible for

any of the contamination that it re to clean up. And

it is only responsible parties who are required by the

Superfund law to pay the costs of cleaning up con-

taminated sites. The concern of Employers Insurance is

not with the money that the EPA spent to complete the

clean-up and might conceivably though improbably seek

to recover from the company, but with the million that

the meget spent and is unable to get reimbursed be-

cause it did not complete the job.

i i ak a oe a Al al alll .

Oty re Pe TI hale Pe ee re en es

©)

ie -

App. 5

Without the provision authorizing suits for reimburse-

ment of response costs, a param potentially responsible

for toxic-waste pollution who was served with a clean-up

order would have just two choices: omy with the order,

or refuse to comply, in which event the EPA could either

seek a mandatory injunction against the refuser, § 9606(a), or

hire someone to clean up the polluted site at the EPA’s ex-

pense and then seek to recover that expense by a suit against

the person it had ordered to do the clean-up. § 9613(hX1).

The defendant would have an opportunity in that suit to

put the EPA to its proof that the Superfund law really

did require the defendant to clean up the site. United

States v. Princeton Gammea-Tech, Inc., 31 F.3d 138, 141-43

(3d Cir. 1994). But it could not challenge the order in ad-

vance of having to comply; that route is, as we shall see,

closed. Its choice would be to comply or to run the risk

of being found to have violated a valid order. This would

be a hard choice because there are heavy sanctions for

disobeying a valid clean-up order, ec large civil fines

and treble damages. $§ 9606(bX1), 9607(cX3). We stress

“valid”; it is of course a good defense to a suit to collect

these amercements that the order is invalid. Even if it

is valid, the district court in which sanctions are sought

can abate them in whole or in part if persuaded that the

party had a reasonable though erroneous basis for believ-

ing that the clean-up order was invalid. So at least Solid

State Circuits, Inc. v. EPA, 812 F.2d 383, 391-92 (8th Cir.

1987), eicgad ubyox the defense to treble-damages liability

for those who have “sufficient cause” to disobey such an

order. § 9607(cX3). Still, there is a risk that the court will

not find that the party acted reasonably, and this risk

places pressure on the party to comply even if it has

serious doubts whether the order is valid. Solid State Cir-

cuits, Inc. v. EPA, supra, 812 F.2d at 388-89. For if it

loses it may end up bearing much more than just the re-

sponse costs for which the EPA sued.

The provision for reimbursement trims the horns of this

dilemma by offering a party served with a clean-up order

a third way. Id. at 389 n. 9; Dico, Inc. v. Diamond, 35

cia iia a,

App. 6

F.3d 348, 349 (8th Cir. 1994). It need not disobey the

order and risk heavy sanctions. It need not obey and

swallow the heavy costs of compliance. It can obey and

then when it has completed the clean-up required by the

order sue for the return of its expenses on the ground

that it was not a responsible party within the meaning

of the statute after all.

But what happens when, as in the present case, a party

takes what we are calling the third way but does not com-

plete the clean-up? Completion of the action required by

the EPA is an express statutory condition for seeking re-

imbursement. Does this mean that if for reasons utterly

beyond a party’s control it fails to complete the clean-up

ordered by the agency it forfeits all right to seek reim-

bursement for expenses that it incurred, even if it turns

out that it was never liable under the Superfund law? And

even if it turns out, as here, that the clean-up has been

completed, albeit by someone else? Cf. North Shore Gas

Co. v. EPA, 930 F.2d 1239, 1244-45 (7th Cir. 1991). That

is the EPA’s position. Its lawyer told us at argument that,

should the agency unreasonably refuse to acknowledge the

completion of the clean-up, this would be final agency ac-

tion which, because it harms the party by (in the EPA’s

view) blocking the party’s right to seek reimbursement

yet is not subject to a special statutory procedure pre-

scribing the method of judicial review, is judicially

reviewable by means of a suit for declaratory judgment

brought in federal district court. Reviewable, that is, b

the so-called “nonstatutory review” route, the catch-

remedy for persons ieved by final agency action for

which no statute aeales a path of judicial review. Ab-

hott Laboratories v. Gardner, 387 U.S. 136 (1967); Maz-

on Marine, Inc. v. Director, Office of Workers’ Compen-

sation Programs, 39 F.3d 144, 146 (7th Cir. 1994). But

it would not be reviewable, in the EPA’s view, by means

of a suit for reimbursement.

We may assume without having to decide that the agen-

cy’s refusal to acknowledge the completion of the clean-

up is reviewable by the nonstatutory-review route; for

App. 7

while the Superfund law prescribes and explicitly makes

exclusive the routes for obtaining judicial review of clean-

up orders, § 9613(h), the agency action that we are dis-

ing—a refusal to acknowledge compliance with such

an order—is not itself a clean-up order, not quite anyway.

Even so, we do not see why such an action could not

also be reviewed in a suit for reimbursement. If the

party ordered to clean up a contaminated site claims to

have completed the work, he has a claim for reimburse-

ment, the reimbursement provision being available to “any

person who receives and complies with the terms of

any” Superfund clean-up order. if 9606(bX2XA). If the EPA

turns down the claim on the ground that the clean-up has

not been completed (or if completed, not completed by

the party ordered to complete it, and therefore the agen-

cy’s order was not complied with), the party has a night

to sue and the agency can defend by showing that the

clean-up has not been completed and thus that a condi-

tion of maintaining such a suit has not been fulfilled. The

district court will adjudicate this ground for dismissal ex-

actly as it would do in a separate proceeding to challenge

the agency’s refusal to acknowledge the completion of the

clean-up. The only difference—because in a suit for reim-

bursement, as in the ordi nonstatutory-review pro-

ceeding, judicial review is confined to the record compiled

in the administrative dpa, 4 § 9613(jX1); First Na-

tional Bank v. Comptroller of Currency, 956 F.2d 1360,

1362 (7th Cir. 1992)—will be the “pape the suit will be

against the Administrator of the EPA rather than against

the President—a distinction without a difference, because

the President has delegated his authority under the reim-

bursement provision to the EPA. Ordinarily the refusal

to acknowledge completion of the clean-up and the denial

of the petition for reimbursement (the denial that the

party has sixty days to challenge by bringing a suit for

en will be contained in the same order; they

were here.

A more troublesome case is where the agency takes

steps to postpone completion, making it impossible for the

App. 8

party to argue that it has completed the action required

of it by the agency. Employers Insurance argues that it

complied fully with the clean-up order, which it interprets

as os limited to PCB contamination, but that when it

finished the EPA told it to do more. Like the miller’s

daughter in “Rumpelstiltskin,” the company worries that

if it did the more the EPA would find something else for

it to do, thus postponing indefinitely the time when it

could obtain reimbursement. The EPA’s response (at oral

argument, so possibly ill-considered) is that the party can

challenge each of the successive orders in a nonstatutory

review p ing. We are surprised by this response.

The successive orders would be clean-up orders, and, with

exceptions not material to this case, the Superfund law

allows these to be challe only in p ings by the

agency to enforce the order (either by injunction or by

a suit to recover the expense of the clean-up or to im-

pose penalties for noncompliance with the clean-up order)

or proceedings by the allegedly responsible person to seek

reimbursement of the costs incurred in complying with

the order. $§ 9613(hX1)3).

Even if a nonstatutory review proceeding were possible,

the party’s right to reimbursement could (in principle any-

way) still be delayed indefinitely, each successfully chal-

lenged order being succeeded b another order. That can-

not have been the intention of the statute’s draftsmen,

as we can show by pe ge carefully to the statutory

language. The right of reimbursement extends to “any

person who receives and com lies with the terms of [any

order],” and ripens into a right to petition and to sue

“after completion of the required action.” § 9606(b 2A).

Obviously “required” means “required by the order.”

Once a party completes whatever action is required by

the terms of any order, it can seek reimbursement for

the costs of that action. The fact that the agency issues

another order (which the party is free to ignore if it is

— to run the risk of being made the defendant in

an enforcement action) does not diminish inish the party’s rights

to challenge the previous order.

‘

‘g

‘

oh AAS CER LLORES

App. 9

The EPA does not acknowledge having issued a second

order, an order that a Insurance clean up con-

tamination unrelated to . It claims that the broader

scope was implicit in the original order. The dispute is

thus over the interpretation of the order rather than over

the agency’s right to issue successive orders and deny re-

imbursement until the last one (if there is a last one) is

complied with fully. If the EPA is wrong about the mean-

ing of the original order, this means that the order has

been complied with fully—the action required by it com-

pleted—and Employers Insurance is entitled to proceed

with its suit for reimbursement. The interpretive ques-

tion, like the question whether a party has completed

whatever action the agency wanted him to take, is one

that the district court can decide in the reimbursement

suit—with what weight given to the agency’s view of the

matter we shall consider shortly.

The most difficult case is where the party cannot com-

seca the required action for reasons beyond its control.

uppose it simply runs out of money and cannot borrow

more. United States v. Parsons, 723 F. Supp. 757, 764

(N.D. Ga. 1989), aff'd on other grounds, 936 F.2d 526 (11th

Cir. 1991), thought this irrelevant, at least in the i

circumstances presented there. We are not sure it s ould

never be relevant. Or mig the cost of the clean-up

turns out to be so much higher than anyone reasonably

anticipated that the party—who by hypothesis believes him-

self not to be liable at all, which is why he wants to pre-

serve his right to seek reimbursement for the expenses

that he incurs in the clean-up—abandons it half way through.

Is he, in either case, forced to write off the costs that

he has incurred even though they have reduced the level

of contamination and so the costs to the taxpayer of com-

— the clean-up, and even though he could prove that

e was not a responsible party after all? (We set to one

side, as inessenti to our point, the statutory right of con-

tribution from other sources, if any, of the contamination.

§ 9613(f).) An affirmative answer would be harsh. It

would also retard the cleaning up of contaminated sites—

App. 10

one of the objectives of the reimbursement provision.

Bethlehem Steel Corp. v. Bush, 918 F.2d 1323, 1324 (7th

Cir. 1990); Dico, Inc. v. Diamond, supra, 35 F.3d at 349.

It would have this effect by inducing more firms to defy

clean-up orders and thus put the agency to its proof of

statutory responsibility. And it is not compelled in the

teeth of reason by the of the statute. The statute

requires compliance with the clean-up order, but com-

pliance need not be a matter of all or nothing. In con-

tract law, substantial compliance with contractual duties

is often compliance enough. Hardin, Rodriguez & Boivin

Anesthesiologists, Ltd. v. Paradigm Ins. Co., 962 F.2d 628,

636 (7th Cir. 1992); Jacob & Young’s, Inc. v. Kent, 129 N.E.

889 (N.Y. 1921) (Cardozo, J.). The doctrines of impossibil-

ity, impracticability, and frustration, which operate as im-

plied terms in contracts, sometimes excuse noncompliance

with contractual duty altogether. These familiar defenses,

along with a concept of substantial compliance as suffi-

cient when to require more would be unreasonable, could

be considered—we need not decide whether they are—

implied terms in EPA orders as well. The notion of sub-

stantial compliance is not wholly foreign to environmental

law. See, e.g., Louisiana-Pacific Corp. v. ASARCO Inc.,

94 F.3d 1565, 1575-76 (9th Cir. 1994). And remember that

one ground for reimbursement is that “the President’s de-

cision in selecting the response action ordered was arbitrary

and capricious.” § 9606(bX2XD). If the term “selecting” is

allowed to extend forward in time from the initial order,

unreasonable insistence on full compliance might be thought

a ground for invoking the provision.

Employers Insurance does not e, however, that it

would have been infeasible or unduly burdensome for it

to shell out another couple of hundred thousand dollars

to complete the clean-up project on which it had

nt in excess of $2 million. It is a company wi

thousands of employees, and its annual revenues from

premiums exceed $1 billion. It does argue, absurdly as

it seems to us, that if it spent $1, or indeed 1¢, on clean-

ing up the contaminated site, it would be entitled to sue

App. 11

for reimbursement of that expense and use the suit as

a vehicle for obtaining an adjudication of its claim not to

be a responsible party. The terms “compliance” and “com-

pleted” in the statute cannot be tortured long or hard

enough to yield authorization for such a procedure, which

is inspired not by anything in the Superfund law but by

the provision for refund suits in the Internal Revenue

Code—which anyway requires (with immaterial exce tions)

yment in full before the suit is filed. Flora v. United

States, 357 U.S. 68, 75-76 (1958), aff'd on rehearing, 362

U.S. 145 (1960); Thomas v. United States, 755 F.2d 728,

729 (9th Cir. 1985). If a party ordered to clean ¢ bgsomly

want to spend any money, it can refuse to obey order,

wait to be sued, and use that suit as the vehicle for ob-

taining a determination of its liability. The risk of losing

and being made to pay heavy sanctions, a risk mitigated

by the defense of sufficient cause as glossed in Solid State

ircuits, would not violate the Constitution even if there

were no reimbursement provision, 812 F.2d at 389-92; it

certainly does not violate it given the additional if im-

perfect remedy which that provision grants. The energy

that Employers Insurance devoted in its briefs to attempt-

ing to create constitutional qualms about the remedial

structure of the Superfund law was misdirected.

The most difficult question presented by this case is

whether the EPA is authorized to gut the provision for

reimbursement by issuing unreasonably, ry vse shibal

broad orders. Suppose the order had ame gern bag

Insurance to clean up the recycling facility and, w ile it

was at it, also to clean up the residual contamination in

Chernobyl from the nuclear disaster there in 1986. If the

insurance company cleaned up just the recycling facility

it would not be complying with the order and if the EPA

is right it would never be able to seek reimbursement.

Our actual case is less extreme. But according to Em-

ployers Insurance, the EPA was completely unreasonable

in ordering it (if that is what the agency actually did in

the original order—this is the interpretive question that

we mentioned) to clean up not only PCB contamination

App. 12

for which it would be responsible if it did for the

transportation of the fluids from its ins ’s trans-

formers, but also unrelated contamination at the site, for

which it could not possibly bear any responsibility.

We imagine that in a case, illustrated by our Chernobyl

hypothetical, in which the clean-up order is so grotesquely

broad as plainly to exceed the agency’s powers, the par-

ty against whom it is directed can comply with the vali

art of the order and disregard the rest as void, a null-

ity, and having complied with the valid part seek reim-

bursement for the costs of that compliance. An order so

completely ultra vires is no order for purposes of decidi

whether compliance and completion have been achieved;

International, Inc. v. General Fire Extinguisher Corp., 14

F.3d 1163, 1166 (7th Cir. 1994); United States v. oard

of Education, 11 F.3d 668, 672 (7th Cir. 1993); Kowale-

viocz v. Local 333, 942 F.2d 285, 289 (4th Cir. 1991). (We

have emphasized the need for flexible interpretation of

the reimbursement B pssens: before. North Shore Gas Co.

v. EPA, supra, 930 F.2d at 1244-45.)

But that is not our case. The agency takes the posi-

tion, which may or may not be correct but is not irra-

tional, that a polluter who wants to take advantage of

the reimbursement provision may be required to clean up

not only his own mess, as it were, but 0 messes at the

same site. The agency’s position is at least consistent with

the design of the reimbursement provision, which is to defer

liability issues until after the clean-up is completed—that

is, until the reimbursement proceeding. Kelley v. EPA,

15 F.3d 1100, 1106 (D.C. Cir. 1994). The requirement that

the reimbursement-seeker clean up the entire site could

rationally be believed to contribute to the Act’s central

objective ot promoting the clean-up of contaminated land.

And the burden on the party targeted by the order will

in most cases be bearable, since he can certainly get reim-

bursement for the costs that he is asked to incur not as

a responsible party. The alternative—each polluter at a

App. 13

site just removing the contaminants for which he is re-

sponsible—may be inefficient, for the polluters may stumble

over each other to remove separate pollutants. The

pollutants may hay mat ty the same spot by

the pect ge make two separate trips for the two sets

of keys? This is just an analogy, and analo ies can lead

ju astray. But our only point is that the PA’s desire

to have one polluter clean up the entire site is not so

flagrantly unreasonable as to entitle the polluter to dis-

regard an order embodying that desire on the ground that

the order is so plainly beyond the agency’s power that

it should be treated as a nullity.

This is not to deny that there would be a problem of

the tail wagging the dog if the polluter responsible for

only a tiny ion of the contamination of the site were

ordered to clean up the whole thing, perhaps because he

had the deepest pocket of all the responsible parties. That

might begin to approach our Chernobyl hypothetical. It

is not the situation here. Employers Insurance was be-

ing asked to = pes only about 10 percent more to clean

up the non-PCB contamination than it had spent to clean

up the PCB contamination for which (if it was the ar-

ranger) it was indeed a responsible party.

In the suit that names the Administrator of the EPA

as the defendant rather than the President, the insurance

company argued in the district court that the agency lacks

statutory authority to condition reimbursement on the

cleaning up of pollution for which the party ordered is

not responsible. Employers Ins. of Wausau v. Clinton,

supra, 848 F. Supp. at 1367. Insofar as the company

sought merely to vacate or narrow the order as inconsis-

tent with the authorizing statute, it ran afoul c7 section

App. 14

9613(h), the provision that provides the exclusive methods

of challenging clean-up orders—and they do not include

a suit for injunctive or declaratory relief by the person

ordered to perform a clean-up. In any event, the company

abandoned its attempt to invalidate the order as over-

broad in its opening brief in this court. Its attempt to

revive the attempt in its reply brief came too late; the

argument had been waived. v. Greer, 896 F.2d 252,

254 (7th Cir. 1990); United States v. Rodriguez, 888 F.2d

519, 524 (7th Cir. 1989).

In any event, the main thrust of the suit against the

Administrator was not that the order was overbroad; it

was that the Superfund law does not give a party ordered

to clean up a toxic-waste site an adequate opportunity to

challenge the order. The relief sought was to invalidate

the limitations that section 961 places on the pos-

sible routes for challenging such orders. Such relief could

be obtained only in a suit against the Administrator and

therefore the suit is not precluded by those limitations;

it is, as we suggested at the outset of this opinion, a

proper invocation of nonstatutory review. As such it mere-

ly had no merit, while insofar as it sought a declaration

that the clean-up order was too broad it strayed outside

the permissible bounds of such a suit and was barred by

the exclusive-remedies provision.

The company is left to argue that it did comply with

the order and that the agency is mistaken to think other-

wise—the agency has misinterpreted its own order. We

must consider first what our standard of review is. The

relevant section, § 9606(bX2XA) (“any n. who receives

and complies. . .”), does not say. two other provi-

sions potentially involved in this case, (C) and (D), imply

different standards of review—plenary in (C) (the “pre-

ponderance of evidence” provision), deferential in (D) (the

“arbitrary and capricious” provision). Dico, Inc. v. Dia-

mond, supra, 35 F.3d at 351-52; Kelley v. EPA, supra,

15 F.3d at 1107. Ordinarily the interpretation of a docu-

ment (the clean-up order) is considered a question of law,

App. 15

and appellate review is plenary. United States v. Ad-

ministrative Enterprises, Inc., 46 F.3d 670, 674 (7th Cir.

1995). But when the document is an order, the court

or agency that issued it is, sensibly enough, considered

to have He gee insight into its meaning, so review is

deferential. Martin v. Occupational Safety & Health

Review Comm’n, 499 U.S. 144, 150-51 (199); Udall v.

Tallman, 380 U.S. 1, 16-17 (1965); In re Weber, 25 F.3d

413, 416 (7th Cir. 1994); In re Chicago, Rock Island &

Pacific R.R., 865 F.2d 807, 810-11 (7th Cir. 1988). An ad-

ditional consideration in this case is that the question of

compliance with the EPA’s order depends not only on

what the order says and means but also on what the

target of the order, the insurance company, did. The agen-

cy’s opinion turning down the petition for reimbursement

is based not only on a purely interpretive determination

that the clean-up order was not limited to PCBs but also

on a factual determination that the measures which Em-

ployers Insurance took to comply with the order did not

succeed in eliminating the other contaminants. This raises

issues of a purely technical nature on which the agency’s

determination is entitled to the usual deference that is

‘ven to administrative determinations. Cf. Wagner Seed

Co. v. Bush, 946 F.2d 918, 921 (D.C. Cir. 1991). And the

order itself is full of technical terms, and we think the

EPA is entitled to some scope in interpreting their mean-

ing as well. It is, to repeat, its own order.

Which makes the case for deference stronger than in

Wagner Seed, where the majority’s conclusion that the

EPA’s interpretation of the meaning of the statutory lan-

“receives and complies” is entitled to deference

w a spirited dissent from Judge Williams. Jd. at 925.

Stro too than in Kelley and Dico, which held that

no deference is to be given to the EPA’s judgment on

whether the person seeking reimbursement is actually

liable for response costs. The Superfund law does not give

the EPA responsibility for administering the reimburse-

ment provision; it has that 3 9 only by virtue

of delegation by the President. So it is by no means clear

App. 16

that it was to have authority to interpret the provision—

authority to which Chevron U. S.A. Inc. v. Natural Re-

sources Defense Council, Inc., 467 U.S. 887 (1984), would

require the courts to defer. But the agency does have

statutory authority to issue clean-up orders, and that

authority carries with it, we should think, the authority

to interpret those orders, and specifically to determine

in this case whether its order required the cleaning up

of contaminants for which the party ordered had no re-

sponsibility.

Employers Insurance points out that the procedure by

which the EPA made this determination was not hedged

about with the usual safeguards of the adjudicative proc-

ess, and it argues that the absence of those saf

justifies a more searching judicial review. The petition for

reimbursement was in handled informally, by officials

who have none of the trappings or protections of judicial

officers, cf. Fishgold v. Sullivan Drydock & ir Corp.,

154 F.2d 785, 789 (2d Cir.) (L. Hand, J.), , 328 U.S.

275 (1946), and the petitioner, while given ample oppor-

tunity (which it took) to submit documents in support of

its position, did not have most of the rights of parties

to an adjudication, such as the right of cross-examination.

The compan — that findings made in so maimed a

proceeding should not receive any deference from a court.

But the principles that require judicial deference to ad-

ministrative findings are not limited to findings made in

adjudications. Indeed the broadest deference is given to

the findings made in rulemaking proceedings, most of

them “informal” in the same sense as the papery, in

this case. See, e.g., Morales v. Yeutter, 952 F.2d 954 (7th

Cir. 1991). The degree of deference is tied not to the for-

mality or elaborateness of the procedures used by the

ee but to the character of the issue in relation to

Ww er ) gear were employed ts resolve it. Packers

Trading Co. v. CFTC, 972 F.2« 144, 145 (7th Cir. 1992);

Central National Bank v. U.S. Dept. of Treasury, 912

F.2d 897, 904 (7th Cir. 1990). The issue of compliance with

the EPA’s clean-up order in this case was technical in

App. 17

character and was addressed in a proceeding that pro-

vided for a full exchange of evidence and argument before

the agency made its final decision, which it set forth at

length in a reasoned, and as it seems to us reasonable

(though not necessarily correct), opinion. There is no in-

dication that it is the kind of issue that would have been

illuminated by cross-examination.

We conclude that the EPA’s finding that Employers In-

surance failed to comply with the clean-up order must be

upheld unless it is arbitrary or capricious, or in the

equivalent terminology of civil suits unless it is clearly

erroneous. And it is not. The order by its terms embraces

all hazardous substances at the recycling facility, regard-

less of the icular type of hazardous substance. No

doubt the EPA could have given the order a narrower

reading, interpolating a limitation to hazardous substances

for whose presence at the site Employers Insurance was

responsible. But it chose not to do so and we cannot say

that it acted unreasonably in refusing. We have already

pointed to the reasons why the EPA might want to im-

pose on a source of one pollutant the responsibility for

cleaning up the entire site that had been contaminated

by that pollutant, even if the site had been contaminated

by other pollutants as well. So broad an order might or

might not be proper, but, Employers Insurance having

waived that issue, the only issue left is what the EPA

meant. We think it meant, or more precisely could reason-

ably be understood to have meant, that Employers Insur-

ance could not stop its clean-up efforts when the last of

the PCBs was removed. Employers Insurance is therefore

entitled to no judicial relief.

AFFIRMED.

A true Copy:

Teste:

Clerk of the United States Court of

Appeals for the Seventh Circuit

App. 18

UNITED STATES COURT OF APPEALS

For the Seventh Circuit

Chicago, Illinois 60604

JUDGMENT — WITH ORAL ARGUMENT

Date: April 12, 1995

BEFORE:

Honorable Richard A. Posner, Chief Judge

Honorable Richard D. Cudahy, Circuit Judge

Honorable Robert A. Grant, District Judge*

Nos. 94-2005, 94-2006 and 94-2081

EMPLOYERS INSURANCE OF WAUSAU A MUTUAL

CoMPANY, a mutual insurance corporation,

Plaintiff-Appellant

Vv.

CAROL M. BROWNER, as Administrator of the United States

Environmental Protection Agency, VALDAS V. ADAMKUS,

as Regional Administrator of Region V of the

United States Environmental Protection Agency,

WILLIAM E. Muno, as Acting Director of the

Office of Waste Programs Enforcement of the United

States Environmental Protection Agency, et al.,

Defendants-Appellees

Appeals from the United States District Court for the

Northern District of Illinois, Eastern Division

Nos. 91 C 4254, 93 C 1366—Marvin E. Aspen, Judge

The judgment of the District Court is AFFIRMED, with

costs, in accordance with the decision of this court entered

on this date.

* The Honorable Robert A. Grant, District Judge for the North-

ern District of Indiana, is sitting by designation.

App. 19

EMPLOYERS INSURANCE OF WAUSAU,

a Mutual Company,

a mutual insurance corporation,

Plaintiff,

WILLIAM J. CLINTON,

in his official capacity as President

of the United States, et al.,

Defendants.

No. 93 C 1366

United States District Court

N.D. Illinois, E.D.

March 4, 1994.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiff Employers Insurance of Wausau brings this

three count action to recover the funds that it expended

cleaning up a contaminated oil recycling facility in Rom-

ulus, Michigan. Presently before the court is defendants”

motions for summary judgment and a protective order.

For the reasons set forth below, defendants’ motion for

1 For the purposes of this opinion, “defendants” shall refer to

the United States Environmental Protection Agency and each

of the individual defendants (William J. Clinton, Carol Brown-

er, Valdas V. Adamkus, and Bruce M. Diamond) in their offi-

cial capacities.

eects

App. 20

summary judgment is granted and motion for a protec-

tive order is denied as moot.

L Factual Background’

On August 24, 1987, fire struck and destroyed a build-

ing located in Wyandotte, Michigan. The building’s occu-

pant held a policy with plaintiff Employers Insurance of

Wausau (“Wausau”), which covered certain perils, in-

cluding fire, as well as the expense of debris removal re-

sulting from such perils. At the Wyandotte property, this

debris included several electrical transformers. In a set-

tlement with the policyholder, Wausau agreed to have

certain fluids and oils drained from the transformers and

removed from the site. In April, 1989, seven hundred gal-

lons of fluids were removed from the transformers and

transported to an oil recycling facility in Romulus, Mich-

2 We set forth the facts only as relevant to the issues raised

in the present motions. For a more detailed recitation of the

facts underlying this action, see this Court’s opinion in the

related case Employers Insurance of Wausau v. Bush, 791

F.Supp. 1314 (N.D.IIl. 1992). We also note at this juncture

that defendants failed to submit a statement of material facts

as required by Rule 12(m) of the General Rules of the United

States District Court for the Northern District of Illinois,

which alone would justify our denial of the motion. We will

nonetheless consider defendants’ motion for several reasons.

First, both parties have included extensive factual information

in the briefs submitted to this court, ing a 12(m) state-

ment essentially duplicative. Second, defe ts have indi-

cated that if we were to deny their motion on this ground, they

would resubmit the motion with the statement of facts. Our

action would therefore simply delay consideration of an other-

wise fully briefed and annotated motion. Finally, and perhaps

most importantly, Wausau has not objected to defendants’ fail-

ing in this regard. While we do not condone defendants’ failure

to comply with the rules of this district, we choose to exercise

our discretion and consider this motion.

App. 21

igan, where the fluids were placed in process tanks for

recycling.

The following month, it was discovered that the

Romulus facility was contaminated with polychlorinated

biphenyls (“PCBs”) and volatile organic compounds

(“VOCs”). The source of the PCB contamination was

traced to the oil which had been used in the transformers

at the Wyandotte building. On September 11, 1989, the

Environmental Protection Agency (“EPA”) designated

Wausau as a potentially responsible party under the

Comprehensive Environmental Response, Compensation

and Liability Act of 1980 (“CERCLA”), as amended by

the Superfund Amendments and Reauthorization Act of

1986 (“SARA”), 42 U.S.C. § 9601 et seq.,° and demanded

Wausau’s participation in the cleanup. Wausau did not

respond, and in November, 1989, the EPA issued a uni-

lateral administrative order directing Wausau and the

other involved parties to begin emergency cleanup mea-

sures. Wausau strenuously objected, claiming that the

EPA’s characterization of Wausau’s role in the transpor-

3 PCBs are a group of chemicals used primarily as coolants in

electrical equipment. They are “among the most hazardous

man-made chemical substances.” Environmental Transp. Sys-

tems, Inc. v. Ensco, Inc., 969 F.2d 503, 505 n. 1 (7th Cir. 1992).

‘ VOCs are “vapors emitted from substances such as gasoline

and solvents.” Motor Vehicle Mfrs. Ass’n v. New York State

Dep’t of Envtl. Conservation, 810 F.Supp. 1331, 1337 (N.D.N.Y.

1993). They include benzene and methylene chloride, and

cause adverse human health effects such as cancer. See Natu-

ral Resources Defense Council, Inc. v. EPA, 824 F.2d 1211

(D.C.Cir. 1987).

5 We shall refer to the relevant sections of CERCLA as

“CERCLA § __”, using the section employed in the United

States Code rather than those used in CERCLA’s internal

number system.

App. 22

tation and disposal of the fluids was “materially incor-

rect,” “erroneous, arbitrary and wrongful.” After some

further wrangling, the EPA filed an administrative

action against Wausau under the Toxic Substance Con-

trol Act, 15 U.S.C. § 2601 et seq., in an effort to force

Wausau to comply with the order. Without admitting any

responsibility, Wausau relented and submitted and

Emergency Response Action Plan (“ERAP”), setting forth

the manner in which it would comply with the order. The

EPA approved Wausau’s ERAP on February 26, 1990.

The Order itself listed thirty-three findings which

detailed the various parties’ involvement in the PCB con-

tamination at the Romulus facility. It further specified

that “hazardous substances” were present at the site,

both due to the PCB contamination and because there

existed waste in drums which contained high levels of

VOCs. Accordingly, the Order required the potentially re-

sponsible parties to:

a. Provide site security and develop and implement a

site safety plan.

b. Pump, treat, test, and discharge contaminated

water as necessary.

c. Pump and consolidate all contaminated oils and in-

cinerate them off site.

d. Pump out sludges and dispose of them properly.

e. Excavate contaminated soils and dispose of them

properly.

f. Pump and treat liquids in the dikes on site.

. Treat lagoon water and discharge.

h. Sample, characterize, and dispose of drums of waste

on site.

i. Conduct post cleanup sampling.

App. 23

In addition, the order specified requirements for the dis-

posal and treatment of “{aJll materials containing haz-

ardous substance, pollutants or contaminants removed

pursuant to this Order.” These requirements of the Order

were not limited to PCB-contaminated areas.

The ERAP, drafted by Wausau and approved by the

EPA, was expressly designed to “comply with the Order

to the extent technically feasible under climatic condi-

tions existing at the Site ... .” The ERAP is somewhat

more PCB specific, setting forth particular requirements

with respect to PCB contamination. However, it also con-

tains several broad statements about Wausau’s obliga-

tions at the Site. These statements include:

Forty-eight drums are reportedly located at the

Site. Immediately following or concurrent with tank

sampling, samples will be collected from each drum

_... The objective of drum sampling and analysis is

to ascertain the compatibility of the drum contents

and to characterize compatible waste streams to the

extent necessary for ultimate treatment and/or dis-

posal. Once compatible waste groups have been

identified, representative composite samples will be

generated in the laboratory for waste characteriza-

tion testing.

Surface water bodies on Site will be sampled, in

accordance with the Sampling and Analysis Plan.

Each discrete surface water body will be sampled im-

mediately following completion of tank and drum

waste sample collection.

Sediment samples will be collected from on and off-

Site lagoons, drainage wales and other surface water

bodies that are potential receptors of contaminated

materials.

App. 24

Immediately following, or concurrent with, sample

collection, laboratory chemicals potentially present in

the former laboratory building will be inventoried for

disposal. When necessary, containers will be sampled

for characterization.

The Contractor will transfer contaminated oils from

the storage tanks to approved hazardous waste liquid

tankers. Liquids will be removed from the tanks util-

izing a vacuum truck, portable or in-line pumps.

Following identification of unique waste streams,

compatible drummed wastes will be blended and re-

moved off Site for treatment or disposal in strict

accordance with State and Federal regulations. The

final disposal mode selected for each waste stream

will be based on an assessment of the characteriza-

tion data and acceptance by approved treatment or

disposal facilities. Empty drums will be crushed and

disposed of as RCRA hazardous waste bulk solids.

Finally, the ERAP expressly amended the Order to

allow Wausau 180 days to complete its cleanup activities.

Following the EPA’s approval of the ERAP, Wausau

began its cleanup. However, in several telephone calls

and letters to the EPA, Wausau indicated that it did not

believe that it would be responsible for cleaning up any

non-PCB contamination under the Order and the ERAP.

In response, the EPA consistently maintained that both

the Order and the ERAP were worded broadly and were

not limited to PCB contamination, and that Wausau was

required to clean up all hazardous substances located at

the Site. However, Wausau persisted in its interpretation

of the Order and ERAP, and claimed that it completed

App. 25

the prescribed cleanup on January 24, 1991, some 331

days after approval of the ERAP, or 151 days late. At no

time did Wausau submit a written request for an exten-

sion of time, as required by the Order.

[1] On March 22, 1991, Wausau submitted a petition

for reimbursement of its response costs, which exceeded

$2,000,000, pursuant to CERCLA § 9606(b\(2)(A). The

EPA, however, informed Wausau that it had not com-

pleted the cleanup required, and detailed those tasks

which remained undone. Wausau submitted a supple-

mental report in support of its claim that it had fulfilled

its obligation at the Site. Disagreeing, the EPA finished

the cleanup on October 25, 1991. On June 2, 1992, the

EPA issued a preliminary decision denying Wausau’s

petition for reimbursement based upon Wausau’s failure

to complete the required cleanup, and invited Wausau to

respond. Wausau submitted forty-five pages of comments

and hundreds of pages of exhibits on September 14. After

reviewing these comments and documents, the EPA, on

January 28, 1993, issued its final decision denying Wau-

sau’s petition for reimbursement. Wausau then filed the

present case, seeking review of the EPA’s decision deny-

ing its petition for reimbursement, and requesting reim-

bursement of its cleanup costs.°

6 Wausau would also have us consider its reimbursement peti-

tion on the merits, determining whether Wausau is a liable

party, and if so, to what extent. Even if we concluded that the

EPA had erred in refusing to consider Wausau’s petition, how-

ever, we would remand the case to the EPA for consideration

of the petition on the merits, as the EPA has not previously

considered the merits of Wausau’s reimbursement claim, and

that determination is initially the province of the EPA. See,

e.g., Camp v. Pitts, 411 U.S. 138, 142-43, 93 S.Ct. 1241, 1244,

36 L.Ed.2d 106 (1973).

App. 26

Il. Statutory Background

[2] Enacted in 1980, “CERCLA was designed ‘to bring

order to the array of partly redundant, partly inadequate

federal hazardous substances clean up and compensation

laws.’ ” Voluntary Purchasing Groups, Inc. v. Reilly, 889

F.2d 1380, 1386 (5th Cir. 1989) (quoting New York v.

Shore Realty Corp., 759 F.2d 1032, 1040 (2d Cir. 1985)).

The primary purpose of CERCLA is “the prompt cleanup

of hazardous waste sites.” J.V. Peters & Co. v. EPA,

767 F.2d 263, 264 (6th Cir. 1985). To this end, upon a

determination that there is an actual or threatened

release of a hazardous substance,’ CERCLA gives the

EPA the authority (1) to take direct response action to

clean up a site and later seek reimbursement from re-

sponsible parties, 42 U.S.C. § 9604(a) (1988), or (2) to

require those responsible parties to conduct the cleanup

themselves.® Jd. § 9606(a); see also Bethlehem Steel Corp.

v. Bush, 918 F.2d 1323, 1324 (7th Cir. 1990). In order to

“encourage potentially responsible parties to conduct a

cleanup expeditiously and postpone litigation about

responsibility to a late time,” Bethlehem Steel, 918 F.2d

at 1324, Congress amended CERCLA to give those par-

ties that “receive and comply” with a cleanup order the

right to petition the EPA for reimbursement. 42 U.S.C.

7 CERCLA’s definition of “hazardous substances” is broad,

and includes hazardous wastes listed under five other federal

environmental statutes, including the Resource Conservation

ono Recovery Act, 42 U.S.C. § 6901 et seq. See CERCLA

1(14).

8 We note that most of the authority granted under CERCLA

is explicitly imparted to the President. However, the President

has delegated administration of CERCLA to the Administrator

of the EPA. See Exec. Order No. 12580, 50 Fed.Reg. 2923

(1987), reprinted in 42 U.S.C. § 9615 (Supp.1991).

Le Ne

App. 27

§ 9606(b2)(A) (Supp. 1991). To obtain reimbursement,

a petitioner must establish (1) “by a preponderance of the

evidence that it is not liable for response costs under sec-

tion 9607(a) of [CERCLA] and that the costs for which it

seeks reimbursement are reasonable in light of the action

required by the relevant order,” id. § 9606(b)(2)(C), or (2)

“on the administrative record, that the [EPA’s] decision

in selecting the response action ordered was arbitrary

and capricious or was otherwise not in accordance with

law.” Id. § 9606(bX(2XD). If the EPA refuses to grant all

or part of a § 9606(b)(2) petition for reimbursement, “the

petitioner may within 30 days of receipt of such refusal

file an action . . . in the appropriate United States dis-

trict court seeking reimbursement.” Id. § 9606(b)(2)(B).

Ill. Discussion

_ [8] The first issue we must consider is whether the

EPA’s determination that Wausau failed to comply with

the Order is properly subject to review by this court, and

if so, what the appropriate standard of review is. As

noted above, CERCLA § 9606(b)(2) provides the authority

for reimbursement actions. That section reads, in rele-

vant part:

(A) Any person who receives and complies with the

terms of any order issued under subsection (a) of this

section may, within 60 days after completion of the

required action, petition the President for reimburse-

ment from the Fund for the reasonable costs of such

action, plus interest...

(B) Ifthe President refuses to grant all or part of a

petition made under this paragraph, the petitioner

may within 30 days of receipt of such refusal file an

action against the President in the appropriate

App. 28

United States district court seeking reimbursement .

from the Fund.

obtain reimbursement, the petitioner shall establish

by a preponderance of the evidence that it is not

liable for response costs under section 9607(a) of this

title and that costs for which it seeks reimbursement

are reasonable in light of the action required by the

relevant order.

(D) A petitioner who is liable for response costs

under section 9607(a) of this title may also recover its

reasonable costs of response to the extent that it can

demonstrate, on the administrative record, that the

President’s decision is selecting the response action

ordered was arbitrary and capricious or was other-

wise not in accordance with the law. Reimbursement

awarded under this subparagraph shall include all

reasonable response costs incurred by the petitioner

pursuant to the portions of the order found to be

arbitrary and capricious or otherwise not in accor-

dance with law.

In addition, CERCLA § 9613(j), entitled “Judicial re-

view,” provides:

(1) Limitation

In any judicial action under this chapter, judicial

review of any issues concerning the adequacy of any

response action taken or ordered by the President

shall be limited to the administrative record. Other-

wise applicable principles of administrative law shall

govern whether any supplemental materials may be

considered by the court.

(2) Standard

In considering objections raised in any judicial

action under this chapter, the court shall uphold the

President’s decision in selecting the response action

App. 29

unless the objecting party can demonstrate, on the

administrative record, that the decision was arbitrary

and capricious or otherwise not in accordance with

law.

It is thus apparent that CERCLA provides for judicial

review under certain circumstances. That is, a party may

obtain review of the EPA’s determination regarding its

liability pursuant to CERCLA § 9606(b)(2)(C), as well as

the proper scope of that liability pursuant to CERCLA

$§ 9606(bX2)(D) and 9613(j). However, there is no explicit

provision for review of the EPA’s determination that a

party did not “comply” with the relevant Order, and is

thus not entitled to consideration of its petition on the

merits. Indeed, there is nothing in the statute to indicate

that the drafters of CERCLA even contemplated that this

may be an issue; rather, their sole focus was providing -

for review of the EPA’s ruling on the merits of a reim-

bursement petition.’

® We are equally unable to look to other courts for guidance,

as this is apparently a case of first impression. Indeed, the

only issue regarding the “receives and complies” language

which has arisen to date is its impact on the retroactivity of

the reimbursement provision as a whole, which was added in

1986. The EPA has consistently ruled that a party must have

both received and complied with the Order after the effective

date of the amendments allowing for reimbursement in order

to qualify for reimbursement, a position which has been up-

held in the federal courts. See, e.g., Wagner Seed Co. v. Bush,

946 F.2d 918 (D.C.Cir.1991), cert. denied, _. US. __,

112 S.Ct. 1584, 118 L.Ed.2d 304 (1992); Bethlehem Steel Corp.

v. Bush, 918 F.2d 1323 (7th Cir. 1990). In the present action,

the EPA relies heavily upon the D.C. Circuit’s ruling in Wag-

ner that the “interpretation of the ‘receives and complies’ re-

quirement of [CERCLA § 9606(bX2XA)] is the agency's respon-

sibility in the first instance.” Wagner, 946 F.2d at 923. How-

(continued...)

Peer “Ly See ee et ee

it” ‘> ia adetne eS

App. 30

Of course, the determination that a petitioner has “re-

ceive[d] and complied{d]” with an Order is a necessary

precursor to the EPA’s consideration of a petitioner's lia-

bility and the scope of the response action. It is therefore

possible to argue that the provisions allowing for review

of these issues necessarily encompass the EPA’s ruling

on whether the petitioner has “complie[d]” with the

Order in the first instance. This argument, however, is

unconvincing, because though it would provide the auth-

ority for judicial review of the compliance issue, it would

also offer competing standards of review. That is, in con-

sidering whether a petitioner is properly liable for re-

sponse costs, a reviewing court is to make its decision

based upon a preponderance of the evidence standard.

CERCLA § 9606(bX2XC). See also Kelley v. EPA, 15 F.3d

1100, 1106 (D.C.Cir. 1994). On the other hand, a court re-

views the scope and reasonableness of the ordered

response merely to determine whether the EPA’s actions

were “arbitrary and capricious.” CERCLA §§ 9606(b)

(2XD) & 9613(j). As a result, even if we were to infer the

authority for judicial review of the compliance issue, we

would be left with no direction as to the appropriate

standard of review. Indeed, this quandary is exemplified

® (...continued)

ever, that statement arose in the context of the retroactivity

of the provision, a question of statutory interpretation. Under

Chevron U.S.A., Inc. v. Natural Resources Defense Council,

Inc., 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), an

agency's interpretation of a statute it administers is entitled

to considerable deference. We, however, are not faced with a

question of statutory interpretation, but rather with the scope

of the Order and Wausau’s compliance, or lack thereof, with

that Order. Accordingly, Wagner and Bethlehem Steel provide

us with little guidance.

App. 31

by the parties’ assertions in the present case. While the

EPA maintains that it is entitled to the highly deferen-

tial “arbitrary and capricious” standard, Wausau claims

we should review the EPA’s decision de novo. We are un-

willing to adopt either approach, at least based upon the

provisions of CERCLA. Because we conclude that the

statute fails to provide for judicial review in this circum-

stance, we instead default to the provisions of the Ad-

ministrative Procedure Act.

[4] The Administrative Procedure Act (“APA”) provides

for judicial review of agency actions. See 5 U.S.C. § 701

et seq. Specifically, APA § 704 states that “final agency

action for which there is no other adequate remedy in a

court [is] subject to judicial review.””° The statute also

sets out the proper scope of review:

The reviewing court shall—

vant statute ‘preclude['s)’ judicial review.” Black v. Community

Nutrition Inst., 467 1.S. 340, 345, 104S.Ct. 2450, 2453,

81 L.Ed.2d 270 (1984) (quoting APA § 701(aX1)). Admittedly,

CERCLA does place restrictions on the availability of judicial

review. CERCLA § 9613(h) states that “[n]o Federal court

shall have jurisdiction . . . to review any challenges to removal

or remedial action selected under section 9604 of this title, or

to review any order issued under section 9606(a) of this title,

in any action except one of the following . . . .” The section

goes on to list five exceptions. This preclusion of judicial re-

view does not preempt the APA in the present circumstance,

since we are passing on neither an action selected under APA

§ 9604 nor an order under § 9606(a). Rather, the limited issue

we consider in this action was whether Wausau complied with

the relevant order, thus entitling it to consideration of its

reimbursement petition. Because CERCLA does not preclude

review of this issue, and because it doe snot expressly provide

for it, consideration under the APA is appropriate.

App. 32

(2) hold unlawful and set aside agency action, find-

ings, and conclusions found to be—

(A) arbitrary, capricious, an abuse of discretion,

or otherwise not in accordance with law;

(B) contrary to constitutional right, power, privi-

lege, or immunity;

or limitations, or short of statutory right;

(D) without observance of procedure required by

law; [or]

(F) unwarranted by the facts to the extent that

the facts are subject to trial de novo by the

reviewing court.

APA § 706. With respect to the issue of whether Wausau

complied with the Order, and was thus entitled to con-

sideration of its reimbursement petition on the merits,

we conclude that the appropriate standard of our review

is whether the EPA’s ruling was “arbitrary, capricious,

an abuse of discretion, or otherwise not in accordance

with law,” the familiar APA standard of review, or that

it failed to meet some statutory, constitutional or proce-

dural requirement. Wausau would apparently prefer we

apply the standard set forth in subparagraph (F)."' How-

ever, as the D.C. Circuit has noted:

11 We note that, although the EPA challenged Wausau’s APA-

based claim in its motion for summary judgment, Wausau

failed to respond to the EPA’s arguments. Indeed, Wausau

provides no analysis of the appropriate APA standard of re-

view. Instead, it notes that the issue of liability is subject to

de novo review, and apparently by extension, concludes that

the initial determination of compliance with the Order is like-

wise subject to de novo review. As discussed further below, we

reject Wausau’s attempted extension.

App. 33

[DJe novo review is only allowed under this rule in

two limited instances: \ ' ere the agency action is ad-

judicatory in nature ana the fact finding procedures

are inadequate; or where issues that were not before

.the agency are raised in a proceeding to enforce non-

adjudicatory agency action.

Environmental Defense Fund, Inc. v. Costle, 657 F.2d

275, 285 (D.C.Cir. 1981) (citations omitted); see also Citi-

zens of Overton Park, Inc. v. Volpe, 401 U.S. 402, 415, 91

S. Ct. 814, 823, 28 L.Ed.2d 136 (1971). Wausau can not

fit itself into either exception. The only potential argu-

ment is that the EPA’s fact finding procedures are inade-

quate. However, in making its decision, the EPA com-

piled a voluminous administrative record regarding the

cleanup activities at the Site. In addition, Wausau was

invited to and did respond to the EPA’s preliminary deci-

sion denying its petition. Indeed, it submitted a forty-five

page written response to the decision, accompanied by

hundreds of pages of exhibits, all of which were placed in

the administrative record. Accordingly, any argument

that the fact finding procedures are inadequate is un-

availing, and it is therefore clear that this highly intru-

sive standard of review does not apply. We will therefore

apply the more common standard, and consider whether

the EPA’s conclusion that Wausau failed to comply with

the Order was “arbitrary, capricious, an abuse of discre-

tion, or otherwise not in accordance with law.”

12 Our conclusion that the “arbitrary and capricious” standard

applies is further supported by language in Wagner Seed Co.

v. Bush, 946 F.2d 918 (D.C. Cir. 1991), cert. denied, __ U.S.

__, 112 S.ct. 1584, 118 L.Ed.2d 304 (1992). There the court

stated, albeit in dicta, that it “would be truly bizarre . . . for a

court to determine de novo [the issue of “whether a party has

(continued...)

App. 34

[5,6] To determine whether the EPA’s decision fails

under this standard, we must consider

whether the decision was based on a consideration of

the relevant factors and whether there has been a

clear error of judgment. Although this inquiry into

the facts is to be searching and careful, the ultimate

standard of review is a narrow one. The court is not

empowered to substitute its judgment for that of the

agency.

Overton Park, 401 U.S. at 416, 91 S.Ct. at 824 (citations

omitted). The basis for this review is the “whole record or

those parts of it cited by a party,” i.e., the administrative

record compiled and relied upon by the agency. APA

§ 706. See also Overton Park, 401 U.S. at 419-20, 91 S.Ct.

at 825-26. In the present case, we can not say that the

EPA made a “clear error in judgment” in concluding that

Wausau failed to comply with the Order. We are forced

to confront essentially two issues in this analysis. First,

we must determine whether the EPA properly character-

ized the scope of the Order and the ERAP, and second,

we must determine whether Wausau fully complied with

the Order and ERAP so characterized. With respect to

the first issue, we find entirely supportable the EPA’s

conclusion that the Order and ERAP applied to all haz-

ardous wastes, and not just those which evidenced high

levels of PCB contamination. As noted above, the Order

is worded very broadly, as is the CERCLA definition of

hazardous waste. And although the implementing ERAP

2 (. continued)

‘complied’ with the agency’s clean-up order”), which may in-

volve both technical and policy questions within the expertise

of the agency.” Id. at 921. Accordingly, we reject Wausau’s

claim that it is entitled to de novo of this issue.

App. 35

does prescribe several actions which relate directly and

exclusively to PCB contamination, it also includes broad

remedial directives in other areas. Furthermore, in ex-

tensive post-ERAP approval correspondence with Wau-

sau, the EPA repeatedly articulated that the scope of the

Order and ERAP included all hazardous wastes, and not

merely those contaminated by PCBs. Accordingly, we

conclude that the EPA’s interpretation of the breadth of

the Order and ERAP was not clear error.

[7] Wausau maintains, however, that the EPA lacks

the authority to draft an Order which demands that a

party clean up waste for which that party is not even

potentially responsible. Specifically, Wausau argues that

(t]he Order can not be interpreted to have included

uncontaminated oils, soils, materials and structures,

or to have required Plaintiff to perform activities not

identified in the Order or not associated with Plain-

tiffs purported liability at the Site. To the extent

that the Agency is interpreting contamination beyond

the contaminants of concern specifically identified in

the Order, or contaminants not associated with Plain-

tiff’s purported liability, that interpretation is arbi-

trary and capricious and not otherwise in accordance

with the law.

Plaintiff's Response to Defendant’s Motion for Summary

Judgment at 5-6 (emphasis in original). We disagree. Of

course, only a party who is actually liable for contamina-

tion can ultimately be made to pay for the clean up of

that contamination. However, CERCLA evidences Con-

gress’ decision to have hazardous waste sites cleaned as

quickly and thoroughly as possible, and defer issues of

liability until after the remedial actions have been com-

pleted. See J.V. Peters & Co. v. EPA, 767 F.2d 263, 264

(6th Cir. 1985) (purpose of CERCLA is “prompt cleanup

App. 36

of hazardous waste sites”). As a result, it is not inconsis-

tent with the broad goals of the statute to require a

party who is potentially responsible for some contam-

ination at a particular site to clean up the entire site,

and then petition the government for reimbursement of

those costs attributable to any portion of the contamina-

tion for which the party was not actually responsible.

Indeed, as discussed above, the reimbursement pro-

visions of CERCLA clearly contemplate the very situa-

tion we face here. A party is entitled to reimbursement

if that party is not liable, or, even if the party is liabie,

if the response action ordered was arbitrary and capri-

cious or otherwise not in accordance with law. CERCLA

§§ 9606(b)(2)(C) and (D). These provisions provide clear

support for the EPA’s contention that it may require a

party to submit to an Order that goes beyond that

party’s potential responsibility, since that party, if it

completes the required cleanup, will be reimbursed to the

extent the Order required cleanup beyond the scope of

the party’s actual legal obligations.” Wausau may not

like the remedial scheme set up by CERCLA, but we are

bound by the decision that Congress has made." We

13 See, e.g., North Shore Gas Co. v. EPA, 930 F.2d 1239, 1244

(7th Cir. 1991) (“If the court found that the order was arbi-

trary and capricious, it could require the EPA to reimburse

[the petitioner] for the added expenses caused by the order, or

by the order’s arbitrary and capricious component if the order

was not arbitrary and capricious as a whole.”) (citing CERCLA

§ 9606(bX2XD)).

4 Congress’ authority is, of course, limited by the Constitu-

tion. However, Wausau has challenged the constitutionality of

the relevant provisions of CERCLA in the related action Em-

ployers Insurance of Wausau v. Browner, 848 F.Supp. 1369

(N.D. Ill. 1994), and we shall therefore consider Wausau’s con-

stitutional objections in the context of that case.

App. 37

therefore conclude that the EPA’s interpretation of

CERCLA and the scope of the Order and ERAP was

legitimate.

We now turn to consideration of Wausau’s actual

activities at the Site. The EPA concluded that Wausau

failed to complete a number of activities which were

required by the Order and ERAP. Although Wausau dis-

putes some of the EPA’s claims in this regard, it is clear

from Wausau’s own Response Action Report (“RAR”),

filed after its putative completion of the cleanup, that

certain hazardous substances and wastes remained on

the Site. For example, Table 5 of the RAR, entitled

“SUMMARY OF NON-PCB CONTAMINATED TANKED

MATERIALS CURRENTLY REMAINING ON SITE,” lists

over 10,000 gallons of used oil, water, and sludge which

Wausau left in tanks at the Site. Although these materi-

als did not contain high levels of PCBs, such materials

contain other CERCLA-listed hazardous substances. See,

e.g. United States v. Western Processing Co., 761 F.Supp.

713, 721 (W.D. Wash. 1991); Washington v. Time Oil Co.,

687 F.Supp. 529, 532 (W.D. Wash. 1988). See also Cose

v. Getty Oil Co., 4 F.3d 700, 706 (9th Cir. 1993). Both the

Order, at page 8, and the ERAP, at pages 19-20, require

removal of contaminated oils. Likewise, Wausau does not

dispute that it left fourteen drums of sulfuric acid at the

Site, although the Order, at page 8, and the ERAP, at

page 20, require removal of drummed wastes. Because of

its corrosive properties, sulfuric acid qualifies as a haz-

ardous waste under CERCLA. See CERCLA § 9601(14).

Based upon these undisputed facts, it is apparent that

App. 38

Wausau failed to comply with the Order and ERAP.”

Because compliance with the Order is, under CERCLA,

a prerequisite to entitlement to reimbursement, Wausau

is precluded from seeking reimbursement from the Fund.

Accordingly, defendants’ motion for summary judgment

is granted.”®

IV. Conclusion

For the reasons set forth above, defendants’ motion for

summary judgment is granted and defendants’ motion for

a protective order is denied as moot. It is so ordered.

15 We also note that Wausau did not timely complete its acti-

vities at the Site. Al the Order was amended to allow

Wausau to complete the cleanup 180 days after a of the

ERAP, Wausau did not finish its activities until 331 days after

approval. In addition, it never filed a written request for an

extension, in violation of the Order. This ae provides addi-

tional support for the EPA’s conclusion that Wausau failed to

“comply” with the Order.

16 Defendants have also moved for a protective order preclud-

ing discovery in the present action, claiming that our review

should be based solely u the administrative record. As

noted above, we agree, based upon that review grant sum-

mary judgment to defendants. Accordingly, the motion for a

protective order is now moot.

App. 39

EMPLOYERS INSURANCE OF WAUSAU,

a mutual company,

a mutual insurance corporation,

Plaintiff,

Vv.

CAROL M. BROWNER, as Administrator

of the United States Environmental Protection

Agency; Valdas V. Adamkus, as Regional

Administrator of Region V of the United States

Environmental Protection Agency;

William E. Muno, as Acting Director

or the Office of Waste Programs Enforcement

of the United States Environmental Protection

Agency; and The United States Environmental

Protection Agency, and United States of America,

Defendants.

No. 91 C 4254.

United States District Court,

N.D. Illinois, E.D.

April 27, 1994.

MEMORANDUM OPINION

AND ORDER

ASPEN, District Judge:

Plaintiff Employers Insurance of Wausau brings this

four count action against the United States of America,

the United States Environmental Protection Agency, and

App. 40

various Environmental Protection Agency officials.’ Pres-

ently before the court is defendants’ motion of judgment

on the pleadings. For the reasons set forth below, the

federal defendants’ motion is granted.

I. Judgment on the Pleadings Standard’

A party is entitled to judgment on the pleadings only

if that party “clearly establishes that no material issue

of fact remains to be resolved and that he or she is en-

titled to judgment as a matter of law.” National Fidelity

Life Ins. Co. v. Karaganis, 811 F.2d 357, 358 (7th Cir.

1987) (citing Flora v. Home Fed. Savings & Loan Ass'n,

685 F.2d 209, 211 (7th Cir. 1982)). We will consider only

matters presented in the pleadings, and will view the

facts in the light most favorable to the non-moving party.

National Fidelity, 811 F.2d at 358 (citing Republic Steel

Corp. v. Pa. Eng’g Corp., 785 F.2d 174, 177 n. 2 (7th Cir.

1986)).

' Specifically, the suit names Carol M. Browner, as Adminis-

trator of the EPA, Valdas V. Adamkus, as Regional Adminis-

trator of Region V of the EPA, and William E. Muno, as Acting

raga of the Office of Waste Programs Enforcement of the

2 Wausau has asked that we convert defendants’ motion for

judgment on the pleadings to a motion for summary judgment

_ pursuant to Fed. R. Civ. P. 12(c). See, e.g. Republic Steel Corp.

v. Pa. a7 Corp., 785 F.2d 174, 177-78 (7th Cir. 1986). How-

ever, the additional materials submitted by Wausau serve only

to substantiate allegations made in Wausau’s third amended

complaint, which we view in the light most favorable to

Wausau in any event. Furthermore, we are faced with pri-

marily legal, rather than factual, issues in the present action.

Accordingly, we decline to exercise our discretion to convert

this motion to one for summary judgment.

App. 41

Il. Factual Background®

On August 24, 1987, fire struck and destroyed a build-

ing located in Wyandotte, Michigan. The building’s occu-

pant held a policy with plaintiff Employers Insurance of

Wausau (“Wausau”), which covered certain perils, in-

cluding fire, as well as the expense of debris removal re-

sulting from such perils. At the Wyandotte property, this

debris included several electrical transformers. In a set-

tlement with the policyholder, Wausau agreed to have

certain fluids and oils drained from the transformers and

removed from the site. In April, 1989, seven hundred gal-

lons of fluids were removed from the transformers and

transported to an oil recycling facility in Romulus, Michi-

gan, where the fluids were placed in process tanks for re-

cycling.

The following month, it was discovered that the

Romulus facility was contaminated with polychlorinated

biphenyls (“PCBs”)* and volatile organic compounds

(“VOCs”).= The source of the PCB contamination was

3 The factual background is more fully set forth in our recent

opinion in the related case Employers Ins. of Wausau v.

Clinton, 848 F.Supp. 1359 (N.D. Ill. 1994), as well as in our

earlier opinion in the present action. See Employers Ins. of

Wausau v. Bush, 791 F.Supp. 1314 (N.D. Ill. 1992). We shall

therefore limit our recitation of the facts to those relevant to

the current motion.

* PCBs are a group of chemicals used primarily as coolants in

electrical equipment. They are “among the most hazardous

man-made chemical substances.” Environmental Transp. Sys-

— Inc. v. ENSCO, Inc., 969 F.2d 503, 505 n.1 (7th Cir.

1992).

5 VOCs are “vapors emitted from substances such as gasoline

and solvents.” Motor Vehicle Mfrs. Ass’n. v. New York State

(continued...)

App. 42

traced to the oil which had been used in the transformers

at the Wyandotte building. On September 11, 1989, the

Environmental Protection Agency (“EPA”) designated

Wausau as a potentially responsible party under the

Comprehensive Environmental Response, Compensation,

and Liability Act of 1980 (“CERCLA”), as amended by

the Superfund Amendments and Reauthorization Act of

1986 (“SARA”), 42 U.S.C. § 9601 et seq.,° and demanded

Wausau’s participation in the cleanup. Wausau did not

respond, and in November, 1989, the EPA issued a uni-

lateral administrative order directing Wausau and the

other involved parties to begin emergency cleanup mea-

sures. Wausau strenuously objected, claiming that the

EPA’s characterization of Wausau’s role in the transpor-

tation and disposal of the fluids was “materially incor-

rect,” “erroneous, arbitrary and wrongful.” After some

further wrangling, the EPA filed an administrative

action against Wausau under the Toxic Substance Con-

trol Act, 15 U.S.C. § 2601 et seq., in an effort to force

Wausau to comply with the order. Without admitting any

responsibility, Wausau relented and submitted an Emer-

gency Response Action Plan (“ERAP”), setting forth the

manner in which it would comply with the order. The

EPA approved Wausau’s ERAP on February 26, 1990.

5 (...continued) :

Dep't of Envtl. Conservation, 810 F. Supp. 1331, 1337

(N.D.N.Y. 1993). They include benzene and methylene chlo-

rice, and cause adverse human health effects such as cancer.

See Natural Resources Defense Council v. EPA, 824 F.2d 1211

(DC. Cir. 1987).

6 We shall refer to the relevant sections of CERCLA as

“CERCLA § __,” using the section numbers a

United States Code rather than those used in ,

ternal numbering system.

s in-

App. 43

The Order itself listed thirty-three findings which

detailed the various parties’ involvement in the PCB con-

tamination at the Romulus facility. It further specified

that “hazardous substances” were present at the site,

both due to the PCB contamination and because there

existed waste in drums which contained high levels of

VOCs. The order therefore called for the disposal and

treatment of “{aJll materials containing hazardous sub-

stance, pollutants or contaminants removed pursuant to

this Order.” These requirements of the Order were not

limited to PCB-contaminated areas.

The ERAP, drafted by Wausau and approved by the

EPA, was expressly designed to “comply with the Order

to the extent technically feasible under climatic condi-

tions existing at the Site. . . .” The ERAP is somewhat

more PCB specific, setting forth particular requirements

with respect to PCB contamination. However, it also con-

tains several broad statements about Wausau’s obliga-

tions at the Site. Finally, the ERAP expressly amended

the Order to allow Wausau 180 days to complete its

cleanup activities.

Foliowing the EPA’s approval of the ERAP, Wausau

began its cleanup. However, in several telephone calls

and letters to the EPA, Wausau indicated that it did not

believe that it would be responsible for cleaning up any

non-PCB contamination under the Order and the ERAP.

In response, the EPA consistently maintained that both

the Order and the ERAP were worded broadly and were

not limited to PCB contamination, and that Wausau was

required to clean up all hazardous substances located at

the Site. However, Wausau persisted in its interpretation

of the Order and ERAP, and claimed that it completed

the prescribed cleanup on January 24, 1991, some 331

App. 44

days after approval of the ERAP, or 151 days late. At no

time did Wausau submit a written request for an exten-

sion of time, as required by the Order.

On March 22, 1991, Wausau filed a petition for re-

imbursement of reasonable response costs pursuant to

§ 9606(bX2) of CERCLA. The EPA responded to Wau-

sau’s request by letter dated June 10, 1991, refusing to

grant relief on the grounds that Wausau had not fully

complied with the requirements of the § 9606 order and

the ERAP. Wausau disputed the EPA’s assessment of the

work performed, claiming that the cleanup measures

listed by the EPA were either complied with or not

required by the order or the ERAP. To support its posi-

tion, Wausau inspected the CIW site on June 24, 1991,

and submitted “Post Response Action Compliance Com-

ments” to the EPA on July 9, 1991. Nonetheless, the

EPA hired an additional contractor to conduct further

cleanup measures at the CIW site. The contractor com-

pleted the actions required by the administrative order

on October 25, 1991.

Wausau brought the instant action on July 9, 1991.

Following a motion to dismiss, which we granted in part

and denied in part, see Employers Ins. of Wausau v.

Bush, 791 F.Supp. 1314 (N.D. Ill. 1992), four counts re-

mained, asserting violations of procedural due process,

substantive due process, and equal protection, along with

a claim under the Administrative Procedure Act.’ The de-

fendants have now moved for judgment on the pleadings

on these remaining claims.

7 In a related action, Wausau challenged the EPA’s denial of

its petition for reimbursement. See Employers Ins. of Wausau

v. Clinton, 848 F.Supp. 1359 (N.D. Ill. 1994) (granting defen-

dants’ motion for summary judgment).

App. 45

Ill. Statutory Background

Enacted in 1980, “CERCLA was designed ‘to bring

order to the array of partly redundant, partly inadequate

federal hazardous substances clean up and compensation

laws.’ ” Voluntary Purchasing Groups, Inc. v. Reilly, 889

F.2d 1380, 1386 (5th Cir. 1989) (quoting New York v.

Shore Realty Corp., 759 F.2d 1032, 1040 (2d Cir. 1985)).

The primary purpose of CERCLA is “the prompt cleanup

of hazardous waste sites.” J.V. Peters & Co. v. Adminis-

trator, Environmental Protection Agency, 767 F.2d 263,

264 (6th Cir. 1985). To this end, upon a determination

that there is an actual or threatened release of a hazard-

ous substance,® CERCLA gives the EPA the authority (1)

to take direct response action to clean up a site and later

seek reimbursement from responsible parties, CERCLA

§ 9604(a), or (2) to require those responsible parties to

conduct the cleanup themselves.? CERCLA § 9606(a); see

also Bethlehem Steel Corp. v. Bush, 918 F.2d 1323, 1324

(7th Cir. 1990). In the event the EPA chooses the latter

course, it first identifies potentially responsible parties

(“PRPs”), and requests voluntary help in the clean-up

process. If the EPA receives no response, it issues an ad-

ministrative order naming all of the PRPs and demand-

ing their immediate assistance. At this point, a PRP has

8 CERCLA’s definition of “hazardous substances” is broad, and

includes hazardous wastes listed under five other federal en-

vironmental statutes, including the Resource Conservation and

Recovery Act, 42 U.S.C. § 6901 et seq. See CERCLA § 9601(14).

® We note that most of the authority granted under CERCLA

is explicitly imparted to the President. However, the President

has delegated the administration of CERCLA to the Adminis-

trator of the EPA. See Exec. Order No. 12,580, 50 Fed. Reg.

2923 (1987), reprinted in 42 U.S.C. § 9615 note (Supp. 1991).

App. 46

two alternatives. It may ignore the administrative order

and wait for the EPA to bring an enforcement action

against it. In the event the EPA brings such an action,

the PRP is entitled to a judicial hearing prior to its

forced involvement in the clean-up. CERCLA § 9613(h).

However, the PRP is subject to significant, albeit discre-

tionary, fines in the event it is determined that its

failure to comply with the order was without “sufficient

cause.” CERCLA § 9606(b)(1).

On the other hand, the PRP may proceed with the

clean-up, and subsequently petition the EPA for reim-

bursement of the funds it expended. CERCLA § 9606(b)

This alternative was added as part of the SARA amend-

ments of 1986 in order to “encourage potentially respon-

sible parties to conduct a clean-up expeditiously and

postpone litigation about responsibility to a later time.”

Bethlehem Steel, 918 F.2d at 1324. Specifically, CERCLA

provides that those parties that “receive and comply”

with a cleanup order are entitled to petition the EPA for

reimbursement. CERCLA § 9606(b)(2)(A). To obtain reim-

bursement, a petitioner must establish (1) “by a prepon-

derance of the evidence that it is not liable for response

costs under section 9607(a) of [CERCLA} and that the

costs for which it seeks reimbursement are reasonable in

light of the action required by the relevant order,”

CERCLA § 9606 (bX(2)(C), or (2) “on the administrative

record, that the [EPA’s] decision in selecting the response

action ordered was arbitrary and capricious or was

otherwise not in accordance with law.” CERCLA

§ 9606(b)(2\D). If the EPA refuses to grant all or part of

a § 9606(b)(2) petition for reimbursement, “the petitioner

may within 30 days of receipt of such refusal file an

action .. . in the appropriate United States district court

seeking reimbursement.” CERCLA § 9606(b)(2)B).

App. 47

oe IV. Discussion

A. Procedural Due Process

Wausau maintains that CERCLA is constitutionally in-

firm, both as applied and on its face. Specifically, Wau-

sau claims that the remedial scheme set up by CERCLA

§ 9606(b) deprived it of procedural due process, at both

the pre-enforcement and post-enforcement states. We

shall consider each of Wausau’s contentions in turn.

1. Pre-Enforcement Review

[1] Wausau claims that it did not have the opportunity

for a meaningful hearing prior to being compelled to par-

ticipate in the clean-up. As the Supreme Court noted in

Matthews v. Eldridge, 424 U.S. 319, 333, 96 S. Ct. 893,

902, 47 L.Ed.2d 18 (1976), due process entitles an in-

dividual to be heard “at a meaningful time and in a

meaningful manner.” Three factors are generally to be

considered in determining whether this due process

standard has been satisfied: (1) the significance of the

private interest that is to be affected; (2) the risk of

erroneous deprivation of such interest, and the likely

value of any additional procedural safeguards; and (3)

the government’s interest in the existing procedural

framework, including assessment of the burdens which

would accompany further procedural safeguards. Id. at

335, 96 S. Ct. at 903.

[2] As defendants point out, the provision for pre-

enforcement review under CERCLA has been repeatedly

challenged, and courts have uniformly upheld its consti-

tutionality. See e.g., Barmet Aluminum Corp. v. Reilly,

927 F.2d 289, 295-96 (6th Cir. 1991); Dickerson v. EPA,

834 F.2d 974, 978 n. 7 (11th Cir. 1987); Solid State Cir-

App. 48

cuits, Inc. v. EPA, 812 F.2d 383, 390 (8th Cir. 1987);

Wagner Seed Co. v. Daggett, 800 F.2d 310, 315-16 (2d

Cir. 1986). We see no reason to disagree with the well-

reasoned conclusions of those courts. An assessment of

the factors listed in Eldridge clearly supports our hold-

ing. We first consider the private interest at stake, as the

process due in a given circumstance depends largely

upon the significance of the interest involved. Here, the

only possible deprivation under CERCLA is purely eco-

nomic. That is, CERCLA orders generally require that a

PRP expend the funds necessary to prevent or clean-up

the release of hazardous wastes. It is well established

that, unlike deprivations of life or liberty, monetary de-

privations do not demand the strictest level of due pro-

cess. See Eldridge, 424 U.S. at 333, 96 S. Ct. at 902;

Dickerson, 834 F.2d at 978 n. 7. Accordingly, this factor

cuts in favor of CERCLA’s constitutionality.

The same is true of the second factor listed above. As

noted, a PRP which believes that an order issued by the

EPA is erroneous can refuse to comply with that order.

In order to compel compliance with the order and to

collect penalties for failure to comply, the EPA is re-

quired to bring an enforcement action pursuant to

CERCLA § 9606(b)(1). At this stage, the PRP is entitled

to judicial review of the order, including the question of

liability. See CERCLA § 9613(h\(2); Gary Steel Supply

Co. v. Reagan, 711 F.Supp. 471, 475 (N.D. Ill. 1989).

Accordingly, a PRP is fully entitled to obtain judicial

review of the EPA’s order prior to being deprived of its

App. 49

property.” We also observe that this opportunity for

review is not compromised by the potential imposition of

penalties at the pre-enforcement stage. First, as defen-

dants note, a good faith defense to the administrative

order precludes the application of the penalty provision

under CERCLA § 9606(b\(1). Furthermore, CERCLA

§ 9606(b\(1) expressly makes the imposition of penalties

discretionary with the court. As a result, the presence of

the penalty provision does not affect the constitutionality

of the procedures offered in CERCLA for pre-enforcement

review. See Wagner Seed Co., 800 F.2d at 316 (“(I]t is

plain that there is no constitutional violation if the im-

position of penalties is subject to judicial discretion and

the enforcement provisions contain a good faith excep-

tion.”).

In addition, further procedures would provide limited

additional safeguards. The “sufficient cause” basis for

non-compliance provides PRPs who believe an order

erroneous with sufficient incentive to refuse to comply

10 Wausau’s convoluted argument to the contrary is uncon-

vincing. Wausau notes that the EPA is vested with the auth-

ority to bring an enforcement action under CERCLA

§§ 9606(bX1) and 9613(hX2). Because the decision to bring

such an action is solely within the discretion of the EPA,

Wausau argues, a PRP would not be able to obtain review of

an order if the EPA refused to bring an enforcement action.

While this is certainly true, it is also irrelevant. That is, the

only means that the EPA has of forcing a PRP to comply with

an order, or of collecting penalties for failure to comply, is

through an enforcement action. As a result, no deprivation can

possibly occur until the EPA brings such an action, at which

time the PRP is also entitled to judicial review. Accordingly,

the lack of a hearing prior the bringing of an enforcement

action is irrelevant, since there is also no deprivation at that

time.

App. 50

and take advantage of the opportunity for judicial re-

view. Furthermore, the addition of the reimbursement

provisions of CERCLA § 9606(b)\(2) in 1986 clearly miti-

gates any concern that further procedural safeguards are

needed. See Solid State Circuits, 812 F.2d at 398 n. 9 (in-

clusion of reimbursement “ameliorated significantly” pre-

enforcement concerns of PRPs). Where, as here, a PRP

can be made whole through post-deprivation procedures,

pre-enforcement due process requirements are less strict.

See Brown v. Brienen, 722 F.2d 360, 365 (7th Cir. 1983).

On the other hand, additional procedural requirements

at the pre-enforcement stage would seriously compromise

the government’s interest. The primary purpose of

CERCLA is the prompt cleanup of hazardous waste sites.

J.V. Peters & Co. v. EPA, 767 F.2d 263, 264 (6th Cir.

1985). This goal would be thwarted if every PRP were

allowed and encouraged to pursue judicial review of an

order prior to the enforcement of that order. Such a

scenario runs directly counter to “the purpose of

[CERCLA § 9613(h), which] is to prevent litigation from

delaying remediation.” North Shore Gas Co. v. EPA, 930

F.2d 1239, 1244 (7th Cir. 1991). Clearly, the addition of

procedural safeguards at the pre-enforcement stage

would place significant burdens on the government, ser-

iously compromising its interest in maintaining the en-

vironment and preventing the release of hazardous

wastes.

[3] However, Wausau also maintains that the proce-

dures offered are inadequate because the EPA failed to

provide it with the documents which supported its con-

clusion that Wausau was properly named as a PRP.

Wausau therefore contends that it was not in a positi

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