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Employers Insurance of WAUSAU v. Browner

April 12, 1995




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.

Before POSNER, Chief Judge, CUDAHY, Circuit Judge, and GRANT, District Judge. *fn*

POSNER, Chief Judge.



We have consolidated the appeals in two intimately related cases that arise under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended, 42 U.S.C. secs. 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 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 contaminated site, sued the President of the United States, invoking a 1986 amendment to the Superfund law that provides 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 petition is turned down may, within sixty days, sue the President in federal district court. secs. 9606(b)(2)(A), (B). The petitioner can obtain judicial relief either by proving by a preponderance of the evidence that it is not liable for response costs (and that the costs it incurred for which it seeks reimbursement were not excessive), sec. 9606(b)(2)(C), or that the particular response action ordered was arbitrary and capricious, or otherwise unlawful. sec. 9606(b)(2)(D). The district judge dismissed the suit on the ground that Employers Insurance 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 Administrator 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. sec. 1331 as a "nonstatutory" review proceeding (of which more later), an accepted method of challenging the procedures used by an agency. Marozsan v. United 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. Employers Ins. of Wausau v. Browner, 848 F. Supp. 1369 (N.D. Ill. 1994). The constitutional challenge is baseless; as we shall see, the remedies that the Superfund law creates against invalid clean-up orders fully satisfy the requirements of due 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 incomprehensible broadside of charges the majority of which lack, 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 Insurance had issued a fire insurance policy to the occupant of a building in Michigan. The building caught fire and several electrical transformers were damaged. In a settlement with its insured, Employers Insurance agreed to have certain oils and other fluids drained from the transformers and removed from the insured's premises. According to the EPA--Employers Insurance denies this--the insurance company arranged for the transportation of some seven hundred gallons of these fluids to an oil recycling facility elsewhere in Michigan. Shortly afterward, the facility was found to be contaminated with PCBs (polychlorinated 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 recycling facility, to participate in the clean-up. After initial resistance, Employers Insurance agreed 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 submitted, 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, claiming 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 reimbursement of the costs that it had incurred in the clean-up--an amount in excess of $2 million. The EPA turned the insurance 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 responsible party. sec. 9607(a)(3); Amcast Industrial Corp. v. Detrex 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 so. The EPA concedes that if the insurance company did not arrange for the transportation of the fluids, the company 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 unreasonable ("arbitrary and capricious") in a separate judicial proceeding--not in a reimbursement proceeding, 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 refused to clean up. And it is only responsible parties who are required by the Superfund law to pay the costs of cleaning up contaminated 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 $2 million that the company spent and is unable to get reimbursed because it did not complete the job.

Without the provision authorizing suits for reimbursement of response costs, a person potentially responsible for toxic-waste pollution who was served with a clean-up order would have just two choices: comply with the order, or refuse to comply, in which event the EPA could either seek a mandatory injunction against the refuser, sec. 9606(a), or hire someone to clean up the polluted site at the EPA's expense and then seek to recover that expense by a suit against the person it had ordered to do the clean-up. sec. 9613(h)(1). 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 Gamma-Tech, Inc., 31 F.3d 138, 141-43 (3d Cir. 1994). But it could not challenge the order in advance 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, including large civil fines and treble damages. secs. 9606(b)(1), 9607(c)(3). 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 believing 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), interpreted the defense to treble-damages liability for those who have "sufficient cause" to disobey such an order. sec. 9607(c)(3). 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 Circuits, Inc. v. EPA, supra, 812 F.2d at 388-89. For if it loses it may end up bearing much more than just the response 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 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 complete the clean-up? Completion of the action required by the EPA is an express statutory condition for seeking reimbursement. 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 reimbursement 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 action 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 prescribing the method of judicial review, is judicially reviewable by means of a suit for declaratory judgment brought in federal district court. Reviewable, that is, by the so-called "nonstatutory review" route, the catch-all remedy for persons aggrieved by final agency action for which no statute specifies a path of judicial review. Abbott Laboratories v. Gardner, 387 U.S. 136 (1967); Maxon Marine, Inc. v. Director, Office of Workers' Compensation 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 agency's refusal to acknowledge the completion of the cleanup is reviewable by the nonstatutory-review route; for while the Superfund law prescribes and explicitly makes exclusive the routes for obtaining judicial review of cleanup orders, sec. 9613(h), the agency action that we are discussing--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 reimbursement, the reimbursement provision being available to "any person who receives and complies with the terms of any" Superfund clean-up order. sec. 9606(b)(2)(A). 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 agency's order was not complied with), the party has a right to sue and the agency can defend by showing that the clean-up has not been completed and thus that a condition of maintaining such a suit has not been fulfilled. The district court will adjudicate this ground for dismissal exactly 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 reimbursement, as in the ordinary nonstatutory-review proceeding, judicial review is confined to the record compiled in the administrative proceeding, sec. 9613(j)(1); First National Bank v. Comptroller of Currency, 956 F.2d 1360, 1362 (7th Cir. 1992)--will be the caption: 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 reimbursement 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 reimbursement) 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 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 being 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 non-statutory review proceeding. 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 challenged only in proceedings by the agency to enforce the order (either by injunction or by a ...

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