Case Summary: Superfund Penalties and Punitive Damages Awarded for Noncompliance with Response Order for the Dico, Inc. Site in Iowa
On February 24, 2014, the U.S. District Court for the Southern District of Iowa awarded the U.S. Environmental Protection Agency (EPA) more than $1.6 million in penalties and more than $1.4 million in punitive damages for noncompliance with a cleanup order associated with the Dico, Inc. facility in Des Moines, Iowa. The award follows the first trial ever on the amount of section 106 penalties and section 107(c)(3) punitive damages under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, commonly referred to as Superfund).
In 1994, Region 7 issued a unilateral administrative order (UAO) obligating Dico, Inc. to conduct a Superfund response action for its facility in Des Moines, Iowa. Dico initially complied with the UAO (e.g., encapsulating polychlorinated biphenyls (PCBs) attached to the buildings’ steel beams), and in 1997 the Region issued a “notice of completion” for the cleanup. The Region’s notice stated, however, that the “continuing obligations” provisions of the UAO remained in effect. These obligations included a requirement that Dico take actions to prevent, abate, or minimize any additional releases of hazardous substances. They also included a requirement that Dico implement an “operations and maintenance” plan for the cleanup that included preserving the encapsulation of PCB-contaminated materials.
In 2007, Dico’s agent signed contracts with Southern Iowa Mechanical, LLC (“SIM”) for demolition or disassembly of buildings at the Dico site and removal of building materials. Dico failed to warn SIM that some of the building materials (e.g., insulation, steel beams) were contaminated with PCBs. In September 2007, EPA discovered that the buildings were being dismantled. However, it wasn’t until January 2008 that Dico informed EPA that the materials had been taken to SIM’s property elsewhere in Iowa, where their PCB encapsulation had been breached even further. EPA subsequently ordered Dico and its agent to clean up the SIM property, and they complied.
In 2010, the United States filed a complaint seeking penalties for the UAO noncompliance, recovery of its past and future CERCLA response costs, and punitive damages. The complaint alleged that Dico and its agent had “arranged” for the disposal of hazardous substances given its contract with SIM.
In 2012, the district court granted the United States’ motion for summary judgment on cost-recovery liability, finding the Defendants liable as “arrangers” under CERCLA § 107(a)(3).
In March 2013, the court granted the United States’ motion for summary judgment on Dico’s liability for civil penalties and punitive damages. The lone remaining issues were the amounts of penalties and damages, respectively.
Judge Pratt held a bench trial from December 2-5, 2013. During the trial, the government’s case was helped by evidence showing Dico’s efforts to keep EPA’s Superfund inspector in the dark as to the disposal of the PCB-contaminated materials (e.g., an email stating that Dico should provide relevant information to the Agency inspector “only if she asks for” it).
In an effort to show reasonableness, the United States did not seek the maximum penalties ($32,500/day) for the maximum number of days of noncompliance (hundreds of days). Instead, the case team sought a penalty of more than $2.1 million ($18,000/day for the initial 92 days and $8,000/day for a subsequent 70 days).
February 24, 2014 decision
In a 31-page opinion, the district court made numerous Findings of Fact and Conclusions of Law and found that Dico’s conduct was “reprehensible.” As to penalties, the court set the amount at $1,620,000 ($10,000/day for 162 days) and awarded damages in the amount of $1,447,787.73.
For more information contact
U.S. Environmental Protection Agency
Mail code CNSLSPFD
11201 Renner Boulevard
Lexena, Kansas 66219