February 11, 2016 Articles

Eighth Circuit Divided on Scope of Arranger Liability

Why it is important that companies create a record clarifying the commercial value of the material being sold.

By Irvin M. Freilich and Shawn M. LaTourette – February 11, 2016

On December 10, 2015, Judge Kermit E. Bye, writing for a divided Eighth Circuit panel, reversed an Iowa district court’s decision on arranger liability in the case of United States v. Dico, Inc., No. 14-2762, 2015 U.S. App. LEXIS 21345 (8th Cir. Dec. 10, 2015). In ruling on a motion for summary judgment, the trial court concluded that the defendant, Dico, Inc., arranged for the disposal of hazardous substances by selling buildings with insulation contaminated by polychlorinated biphenyls (PCBs). Relying on the holding in Burlington Northern & Santa Fe Railway Co. v. United States, 556 U.S. 599 (2009), and cases that preceded it, the Eighth Circuit reversed this conclusion, reasoning that issues of fact concerning Dico’s intent to dispose of hazardous substances could not be resolved on summary judgment. Because the court could not conclude that Dico possessed an intent to dispose that led to the incurrence of response costs, the trial court’s punitive damages award of $1.4 million was also reversed. However, the appellate court affirmed the finding below that that Dico violated a preexisting Environmental Protection Agency (EPA) order requiring it to ensure that the PCBs remained encapsulated. Thus, a civil penalty assessment of $1.6 million was upheld.

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