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United States v. Dico, Inc.

United States District Court, S.D. Iowa, Central Division

February 24, 2014


Page 1048

For United States of America, Plaintiff: Eric C. Albert, U S DEPT OF JUSTICE, WASHINGTON, DC; Sara C Colangelo, U S DEPT OF JUSTICE - Environment & Natural Resources, WASHINGTON, DC; Steven D. Shermer, U.S. DEPARTMENT OF JUSTICE-Environment & Natural Resources, Environmental Enforcement Section, Washington, DC.

For Dico, Inc., Titan Tire Corporation, Defendants: Michael F Iasparro, LEAD ATTORNEY, PRO HAC VICE, HINSHAW & CULBERTSON LLP, ROCKFORD, IL; Sergio Enrique Acosta, Thomas D Lupo, LEAD ATTORNEYS, PRO HAC VICE, HINSHAW & CULBERTSON LLP, CHICAGO, IL; Mark McCormick, Stephen H. Locher, BELIN MCCORMICK, P.C., DES MOINES, IA.



Page 1049


This lawsuit arose out of the United States of America's (" Plaintiff" ) claims against Dico, Inc. (" Dico" or " Defendant" ) and Titan Tire Corporation (" Titan Tire" ) (collectively " Defendants" ), under " Sections 106, 107 and 113(g) of the Comprehensive Environmental Response, Compensation, and Liability Act [" CERCLA" ] of 1980." Compl. (Clerk's No. 1) ¶ 2. Plaintiff sought to recover unreimbursed response costs from Defendants, and civil penalties and punitive damages from Dico, in connection with the release and/or the threat of release of polychlorinated biphenyls (" PCBs" )[1] at Southern Iowa Mechanical's (" SIM" ) site in Ottumwa, Iowa. See id. Plaintiff also requested that the Court enter a declaratory judgment holding Defendants liable for all future response costs that Plaintiff would incur as a result of the release and/or threat of release of PCBs at the SIM site. See id.

The Court resolved all but one of the issues presented by the parties during the summary judgment phase of the litigation. In particular, the Court held that: (1) Defendants arranged for the disposal of PCBs by selling some of its PCB-contaminated buildings to SIM, see Order (Clerk's No. 119) at 16-40; (2) Defendants were liable for all response costs that Plaintiff had already incurred or would incur as a result of the SIM site removal action, see Order (Clerk's No. 128) at 43; and (3) Dico was liable for both civil penalties and punitive damages for violating the 1994 Unilateral Administrative Order (the " 1994 Building UAO" ), see id. The sole issue reserved for trial was the amount, if any, of civil penalties and/or punitive damages to be assessed against Dico. See id. The Court held a bench trial on this issue from December 2-5, 2013. See Clerk's Nos. 186-89. On January 15, 2014, the parties submitted their proposed findings of fact and conclusions of law. See Clerk's Nos. 196-97. The matter is fully submitted.


Federal Rule of Civil Procedure 52(a) requires that in all cases tried without a jury or with an advisory jury, " the court

Page 1050

must find the facts specially and state its conclusions of law separately." In determining the credibility of the witnesses and the weight to be accorded their testimony, the Court has taken into consideration: the character of the witnesses, their demeanor and manner of testifying on the stand, their interest, if any, in the result of the trial, their relation to or feeling toward the parties to the trial, the probability or improbability of their statements, and all other facts and circumstances given in evidence. See United States v. Phillips, 522 F.2d 388, 391 (8th Cir. 1975); Clark v. United States, 391 F.2d 57, 60 (8th Cir. 1968); United States v. Earles, 983 F.Supp. 1236, 1254 (N.D. Iowa 1997); Manual of Model Civil Jury Instructions for the District Courts of the Eighth Circuit, Instruction 3.03 (2013) . With these considerations in mind, the Court finds facts and makes conclusions of law as articulated herein.


A. Stipulated Facts

The parties have stipulated to many of the facts in this case. See Am. Proposed Order on Final Pretrial Conference (Clerk's No. 181) at 2-6. Pursuant to this stipulation, the Court finds the following facts:

o Dico is a corporation organized and existing pursuant to the laws of the State of Delaware.

o Dico owns property located at 200 Southwest 16th Street in Des Moines, Iowa, which is part of the Des Moines TCE Superfund Site.

o The Des Moines TCE [2] Superfund Site is divided into four Operable Units (" OU" ).

o OU1 involves a groundwater extraction, treatment, and monitoring system designed to address historical volatile organic compound contamination in the groundwater on the Dico property.

o OU3 involves groundwater in the area north of the Dico property. Dico does not own the land at issue in OU3.

o OU2 and OU4 include several buildings on the Dico property where, among other things, formulation of pesticides and herbicides once occurred. OU4 also includes soil and sediment associated with an aldrin tank that once existed on the property; the South Pond area; and a drainage channel south and east of the Dico property. As part of the remedial work associated with OU4, Dico installed an asphalt cap over a substantial portion of the Site. To this day, Dico is responsible for maintaining the asphalt cap.

o In 1992, PCBs were discovered in the insulation of five buildings (Buildings 2-5 and the Maintenance Building, collectively the " Dico Buildings" ) on Dico's property within what is now OU4.

o [The Environmental Protection Agency] [(" the] EPA[" or the " Agency" )] issued . . . the 1994 Building UAO to Dico to address contamination within the Dico Buildings. The 1994 Building UAO did not cover certain other buildings on the Dico property, including the Weld Shop and [the] Production Building.

o Dico performed the work set forth in the approved Removal Action Work Plan required by the 1994 Building UAO and submitted a final report to

Page 1051

[the] EPA on April 11, 1997 (" the 1997 Report" ). . . .

o Mary Peterson [(" Peterson" )], [the] EPA's project manager for the Dico Site, reviewed and approved the 1997 Report.

o On May 8, 1997, [the] EPA issued a notice of completion approving the 1997 Report and noting that " the continuing obligations" of the . . . [1994 Building UAO] remained in effect. . . .

o Dico prepared and revised the [Operations and Maintenance Plan] [(" ]O& M Plan[" )] pursuant to [the] EPA's directions in accordance with Paragraph 31 of the 1994 Building UAO, and submitted the revised O& M Plan to [the] EPA for approval on June 10, 1994.

o [The] EPA approved the June 10, 1994 O& M Plan on February 5, 1997.

o In December 2002, Dico wrote a letter to . . . Peterson regarding proposed modifications to the OU1 groundwater treatment and monitoring system, and raised the possibility of modifying the O& M Plan applicable to the Dico Buildings. Dico and [the] EPA exchanged additional communications, including a draft work plan, regarding these modifications in subsequent months.

o On July 2, 2003, Dan Buttars, on behalf of Dico, sent a letter to . . . Peterson providing a revised " Work Plan for Proposed Modification of Des Moines TCE Site." The July 2, 2003 revised Work Plan included a statement that Dico " has intentions of possible future demolition or dismantling of these buildings. No date of certainty can be given for this however." [The] EPA and Dico exchanged additional letters in subsequent months.

o On September 3, 2003, [the] EPA wrote a letter to Dico in which it approved the modifications to the O& M Plan applicable to the Dico Buildings. The letter also acknowledged that " [t]he Work Plan mentions that Dico may demolish the buildings which are associated with previous response actions and subject to certain requirements for operation and maintenance." The letter further stated that [the] EPA " does not necessarily object to demolition of the buildings, but urges Dico to coordinate any plans for demolition of the buildings with [the] EPA." The letter further stated that " certain disposal requirements may apply for building debris, and the EPA or state would want to oversee the demolition." (emphasis added).

o On September 23, 2003, Dico sent a letter responding to [the] EPA's September 3, 2003 letter, in which it stated that " Dico will notify EPA by phone and writing at least one week prior to any future site activity regarding building dismantling or demolition, improvements, and/or re-use."

o Beginning in May 2007, Titan Tire, on behalf of Dico, entered into three transactions with SIM concerning the Dico Buildings: two contracts for the Maintenance Building and the western annex of Building 3, and one contract for Buildings 4 and 5 and the north end of the Production Building. SIM paid $1.00 per square foot for these buildings.

o Buildings 1 and 2 and the remainder of Building 3 were not part of the transactions in 2007 and remain on the Dico property.

o The Dico Buildings that were the subject of Titan Tire's transactions with SIM were steel-beamed, Butler-style buildings.

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o SIM began dismantling the first of the Dico Buildings it purchased (the Maintenance Building) no earlier than June 19, 2007.

o [The] EPA discovered that the buildings were being dismantled during the five-year review site inspection on September 19, 2007. . . . The dismantling was not complete on that date.

o SIM finished removing all remaining building materials and debris from the Dico site no later than November 27, 2007.

o SIM took the steel beams from the buildings to its property in Ottumwa, Iowa.

o In May 2008, [the] EPA tested samples from the steel beams, from soil near the beams, and from a large piece of insulation that was found between several beams, and confirmed that PCBs were present on some of the beams, in the soil, and in the sampled insulation.

o [The] EPA issued a Unilateral Administrative Order [(" UAO" )] to Dico and Titan Tire requiring them to perform a removal action at the SIM [s]ite, which became effective on January 23, 2009 (the " SIM Site [UAO]" ).

o Dico and Titan Tire performed the work required by [the] EPA at the SIM [s]ite in accordance with the SIM Site UAO.

o On June 1, 2010, [the] EPA issued a " Notice of Completion" letter to Dico and Titan Tire for the work required under the SIM Site UAO.

o Dico is subject to two Administrative Orders in addition to the 1994 Building UAO . . . . They pertain to groundwater for OU1 (issued in 1991) and soil remediation for OU4 (issued in 1994). Dico has performed the groundwater treatment and monitoring required of it by the Administrative Order and associated . . . [O& M] Plan for OU1. Dico has maintained the asphalt cap pursuant to the Administrative Order and associated . . . [O& M] Plan for the asphalt cap for OU4. SIM's removal of the [Dico] [B]uildings did not affect the integrity of the asphalt cap.

Id. ¶ ¶ 1-29.

B. Additional Findings of Fact

Although the parties did not stipulate to the facts that follow, the Court finds that they have been amply proven or established by testimony and other evidence at trial.

1. Nature of Dico's conduct.[3]

o James Fechter (" Fechter" ) was employed as corporate environmental engineer by Titan International from 1993 to 1998. Ex. 1149 (Fechter Dep.) at 8:18-20, 10:15-18. In that capacity, he was responsible for, among other things, Dico's environmental compliance at its Des Moines, Iowa facility.[4] Id. at 11:12-23.

Page 1053

o Fechter understood that the 1994 Building UAO sought to remedy PCB contamination. Id. at 28:23-29:2. He testified that PCBs were present in the ceiling and wall insulation inside the Dico Buildings. Id. at 29:13-30:3.

o Fechter oversaw the removal action undertaken pursuant to the 1994 Building UAO, and was regularly communicating with Cheri Holley (" Holley" )[5] to update her on the status of this removal action. Id. at 42:3-13, 43:21-44:14, 49:18-50:3.

o Fechter understood that PCBs remained inside the Dico Buildings even following the completion of the removal action. Id. at 86:17-87:2.[6] In fact, the overarching purpose of the O& M Plan, which was required by the 1994 Building UAO, was to ensure the integrity of the paint encapsulating the remaining PCBs inside the Dico Buildings. Id. at 87:18-88:11, 97:12-98:12.[7]

o Fechter testified that the " Notice of Completion" issued by the EPA on May 8, 1997 did not terminate the 1994 Building UAO or the O& M Plan. Id. at 123:23-125:10.[8]

o Holley is Dico's general counsel and the Dico officer in charge of managing all environmental matters related to Dico. See Ex. 1151 (Dico Dep.) at 61:17-62:3, 71:13-21, 74:1-10, 79:12-80:4. In this capacity, she assigned responsibilities and oversaw the work of the various employees or consultants with respect to Dico's environmental matters. See id.

o Prior to the sale of the Dico Buildings to SIM, Holley received and reviewed a copy of a March 2007 Reuse Planning Report, see id. at 179:2-180:6, 180:25-181:6, which clearly stated that the buildings in question still contained PCBs, see Ex. 178 at 3, 21. Brian Mills (" Mills" ), an environmental consultant [9] for the Dico site, also received a copy of this report.[10] See Ex. 1151 (Dico Dep.) at 179:2-19.

o Titan Tire, acting on behalf of Dico through its President William Campbell (" Campbell" ), see Trial Tr. at 360:8-13, sold the Dico Buildings to

Page 1054

SIM in 2007, see, e.g., id. at 377:14-379:12 (explaining that Campbell and Don Brown (" Brown" )[11] were acting on behalf of Dico in selling the 12,000-square-foot truck garage because Dico did not have any employees at the time); see also Exs. 1026-29.

o Campbell testified that prior to selling the buildings to SIM, he asked Brown to inquire of Mills whether those buildings were subject to any environmental restrictions. Trial Tr. at 386:8-21.

o Mills testified he assured Brown that he did not know of any environmental restrictions, and also told Brown that he wanted to contact Louis Barrentine (" Barrentine" )[12] to see if he was aware of any. Id. at 436:2-5, 436:12-19, 437:16-438:7. According to Mills's testimony, Barrentine told him that he did not know of " any environmental issues with selling the buildings." [13] Id. at 440:20-25.

o Campbell regularly assigned Titan employees and consultants to complete various environmental work at the Dico site, as instructed by Holley or Morry Taylor, Dico's President. Ex. 1151 (Dico Dep.) at 37:4-13, 37:25-40:9, 48:20-54:14. In carrying out his duties, Campbell assigned personnel to assist in completing the annual building inspections for the Dico Buildings and was, thus, familiar with these buildings' environmental history. See id. at 52:11-20.

o Even assuming that Campbell had no prior knowledge of the 1994 PCB removal action inside the Dico Buildings, on September 5, 2007--after SIM had already bought the Dico Buildings but before it had completed their demolition/dismantling--he received an email [14] from Dr. Gazi George (" Dr. George" ) listing areas of concern that Dico should try to address before the EPA's five-year review inspection of the Dico site scheduled for September 19, 2007.[15] See Ex. 1000. Among other things, Dr. George explained that, because of " the presence of PCB[s] . . . in some building walls," Dico should be prepared to provide Peterson with the contact information of the purchaser of the buildings but " only if she asks for [this information]." Id. at 42:12-24.

o Even after receiving this email, Campbell did not inform SIM of the presence of PCBs inside the buildings that SIM had purchased from Dico earlier that year. Trial Tr. at 315:14-316:12, 401:18-403:15. Nor did he communicate, or direct someone to communicate,

Page 1055

the identity of the purchaser of these buildings to the EPA either before, during, or after the EPA's September 19, 2007 Dico site visit. Id. at 76:5-77:12.

o Quintin MacDonald (" MacDonald" ) is the President of Environmental Management and Engineering, Inc. (" EME" ) and also an environmental consultant to Holley. Ex. 1151 (Dico Dep.) at 81:13-18. Additionally, MacDonald and EME have been continually providing consulting services to Dico since 2005.[16] Id. ; Trial Tr. at 542:5-11.

o On August 7, 2006, Dico and EME had a meeting in Quincy, Illinois. See Exs. 1007-08. MacDonald attended the meeting on behalf of EME and Holley was present on behalf of Dico. Trial Tr. at 560:18-20. Among the topics discussed was the contamination inside the Dico Buildings. See Ex. 1008 at 2. In fact, the notes from the meeting reflect that EME and Dico discussed that the contaminants are " located in floors, walls and insulation." Id.

o MacDonald also received and read the March 2007 Reuse Planning Report shortly after it was issued. Trial Tr. at 563:23-564:11.

o MacDonald testified that he understood the Dico Buildings to be contaminated even after the EPA issued the " Notice of Completion" on May 8, 1997. Id. at 555:1-17.

2. Injury to the public.

o PCBs are probable carcinogens, and are listed as hazardous substances at any concentration. Ex. 1122 at 2; Trial Tr. at 88:9-14.

o " [A] couple of [SIM's] employees" took insulation for personal use from some of the buildings that Dico sold to SIM in 2007. Id. at 314:23-315:7.

o SIM had stored the contaminated steel beams on its property in Ottumwa, Iowa. Access to the property was not restricted by a fence or other means. Id. at 88:18-89:3.

o Some PCBs had already migrated into the environment prior to the SIM site removal action. Id. at 89:9-16.

o There is a juvenile home approximately 750 feet from the SIM property. Id. at 317:11-12.

o There have been trespassers on the SIM property " [m]any times." Id. at 332:12-14.

o There has been no evidence of actual harm to people and/or animals as a result of the dismantling/demolition of the Dico Buildings. Id. at 170:8-24.

3. Dico's financial abilities.

o Dico generates no revenue, has only a few assets and liabilities, and " [t]he only real activity that is run through it is relating to the remediation and cleanup of the EPA site here in Des Moines." Trial Tr. at 662:22-663:7.

o On July 17, 2003, Titan International and Dico entered into a contract, whereby Titan International agreed to make " loan advances" [17] to Dico, which " shall not at any time exceed $11,000,000.00." Ex. 1010 at 2 (Recital " B" ). As of December 31, 2012, Dico

Page 1056

had at least $4,868,000.00 of these loan advances still available. Ex. 2062 (showing an inter-company liability in the amount of $6,132,000.00, which leaves $4,868,000.00 in available funds).

o As collateral for this financing, Dico gave a mortgage and a security interest on its land and all rights related to it, its buildings, and " all other assets" to Titan International. Ex. 1010 at 2-4 (Recital " C" ).

4. Economic benefit of violating the 1994 Building UAO.

o In 2007, SIM acquired some of Dico's buildings for a total purchase price of $160,200.00. Dico received $31,320.00 of that amount in cash and $128,880.00 in the form of in-kind services. Trial Tr. at 685:4-7.

o Only $117,000.00 of the total purchase price paid by SIM was directly attributable to buildings regulated by the 1994 Building UAO. Id. at 320:23-25, 505:7-12, Exs. 1026-27.

o Plaintiff's real estate appraisal expert, Patrick Schulte (" Schulte" ) testified that as a result of SIM's removal of these regulated buildings,[18] Dico's property increased in value by $720,000.00. Id. at 253:14-19.

5. Vindicating EPA's authority.

o When addressing contaminations at Superfund sites, the EPA follows the so-called polluters pay principle, " which basically means that the person who has liability under CERCLA for that contamination should be responsible for funding the investigation and cleanup." Trial Tr. at 44:13-19. Thus, the EPA relies on these responsible parties to conduct the long-term operation and maintenance activities at Superfund sites where some contaminants remain even after the completion of the removal action. Id. at 46:2-23.

o Over the past ten to fifteen years " the [hazardous response] fund has dwindled." Id. at 44:2-10. Accordingly, the " EPA is more and more reliant on potentially responsible parties" to conduct the investigations and cleanup actions at Superfund sites. Id. at 44:10-12.

o The Dico site remains subject to three separate EPA UAOs. Id. at 47:47:1-22. All of them contain a long-term operation and maintenance requirement and a notification requirement that are identical to those contained in paragraphs 31 and 59 [19] of the 1994 Building UAO. Id.

o The EPA includes such long-term operation and maintenance and notification requirements in all of its UAOs, " where the . . . removal action calls for contaminants to remain on-site." Id. at 47:23-48:4.


A. Civil Penalty

Plaintiff argues that a civil penalty of at least $2,216,000.00 is appropriate in light of

Page 1057

the seriousness of Dico's violations of the 1994 Building UAO. See Pl.'s Post-Trial Br. (" Pl.'s Br." ) (Clerk's No. 196) at 44-51. Dico counters, claiming that such an unprecedented civil penalty is not warranted under the facts of this case and that the Court should impose " no, or minimal, civil penalties." See Def.'s Post-Trial Br. (" Def.'s Br." ) (Clerk's No. 197) at 5.

1. Duration of Dico's violation.

The parties have a fundamental disagreement as to the duration of Dico's violations of the 1994 Building UAO. Plaintiff contends that Dico's violations lasted 162 days [21] while Dico claims that they were a " one-time event for which only one day of per diem civil penalties may be imposed." Compare Pl.'s Br. at 44 with Def.'s Br. at 26. The premise of Dico's claim is that it violated the 1994 Building UAO not by having some of the regulated buildings removed, but by failing to give the EPA notice of the removal.[22] See Def.'s Br. at 26. This claim, however, misinterprets prior rulings of this Court.

On March 6, 2013, the Court concluded as a matter of law that Dico violated paragraphs 31 and 59 of the 1994 Building

Page 1058

UAO. See Clerk's No. 128 at 33-40. Paragraph 31 [23] requires Dico to submit to the EPA for approval an O& M Plan " present[ing] the actions necessary to ensure the protectiveness and integrity of the removal action, including long[-]term maintenance of all interior surface sealing, encapsulation of all building insulation and appropriate reporting, including, at a minimum, submittal of a written report on an annual basis." Ex. 7 ¶ 31. Once the EPA approves the O& M Plan, Dico must implement the measures necessary to " ensure the protectiveness and integrity of the removal action." Id. It is axiomatic that the demolition or the dismantling of some of the regulated buildings in 2007 necessarily breached " all interior surface sealing [and] encapsulation of all building insulation" containing PCBs. Therefore, Dico was in violation of paragraph 31 of the 1994 Building UAO for a period of at least 162 days because it failed " to ensure the protectiveness and integrity of the removal action" during the time when SIM was demolishing the buildings in question.

Paragraph 59 [24] imposes a duty on Dico " to prevent, abate or minimize" any additional release of PCBs on its property and the resulting dangers of such release caused by a " change in site conditions." Ex. 7 ¶ 59. Since the Court has already concluded as a matter of law that the Dico Buildings contained PCBs even after the completion of the removal action pursuant to the 1994 Building UAO, SIM's demolition activities necessarily breached the encapsulation, thus causing an additional release of PCBs at the Dico site. See Order (Clerk's No. 128) at 38-39. Not only did Dico not prevent such additional release, it also did nothing to minimize it or its associated dangers. Because this additional release of PCBs and its associated dangers lasted for the entire duration of the building demolition, Dico was in violation of paragraph 59 for 162 days.

2. Legal standard.[25]

CERCLA authorizes civil penalties for " [a]ny person who, without sufficient cause, . . . fails . . . to comply with any [EPA order] . . . [up to] $25,000 [26] for each day in which such violation occurs or such failure to comply continues." See 42 U.S.C. § 9606(b)(1). " Trial courts have considerable discretion in fashioning appropriate civil penalties." United States v. Gurley, 235 F.Supp.2d 797, 805 (W.D. Tenn. 2002) (citing United States v.

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ITT Cont'l Baking Co., 420 U.S. 223, 230 n. 6, 95 S.Ct. 926, 43 L.Ed.2d 148 (1975)); accord United States v. Barkman, No. 96-6395, at *52-53 (E.D. Pa. Dec. 17, 1998) (noting that trial courts have " discretion whether to [even] impose a fine under the permissive language of § [96]06(b)" ). " [Discretion, however, must] take[] account of the law and the particular circumstances of the case and . . . [must be] directed by the reason and conscience of the judge to a just result." Burns v. United States, 287 U.S. 216, 223, 53 S.Ct. 154, 77 L.Ed. 266 (1932) (internal citation and quotation marks omitted). Thus, when assessing CERCLA civil penalties, district courts " should give effect to the major purpose of a civil penalty: deterrence." United States v. M. Genzale Plating, Inc., 807 F.Supp. 937, 938 (quoting United States v. Crown Roll Leaf, Inc., 29 E.R.C. 2025, 2031 (D.N.J. 1989)). The imposition of civil penalties in this case will " serve both a specific and [a] general deterrent purpose, deterring future violations by . . . [Dico] and similar violations by others." See United States v. Lecarreaux, No. 90-1672, at *41 (D.N.J. Feb. 18, 1992) (internal citations and quotation marks omitted). To accomplish this dual deterrence purpose, the penalty amount " should be large enough to hurt, and to deter anyone in the future from showing as little concern as . . . [Dico] did for the need to [comply with the 1994 Building UAO]." See [WL] at *42 (internal citations and quotation marks omitted).

3. The five-factor test.

In arriving at the appropriate penalty amount in this case, the Court looks to the following five factors for guidance: " '(1) the good or bad faith of [Dico], (2) the injury to the public, (3) [Dico's] ability to pay, (4) the desire to eliminate the benefits derived by [the] violation, and (5) the necessity of vindicating the authority of the enforcing party.'" Order (Clerk's No. 128) at 40 (quoting M. Genzale Plating, Inc., 807 F.Supp. at 939).

a. Bad faith.

Dico contends that the evidence at trial " clearly established" that the people acting on behalf of Dico in selling the buildings to SIM acted in good faith and without actual knowledge of the residual PCB contamination inside the Dico Buildings.[27] Def.'s Br. at 33. Even assuming

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that this contention were true,[28] whether the individuals acting on behalf of Dico had personal knowledge of the PCBs is largely irrelevant because it is Dico--not its agents in their individual capacities--that is liable for civil penalties.[29] Therefore, all that matters is that the evidence presented at trial conclusively established that Dico had knowledge of the residual PCB contamination.[30] See supra pp. 6-9 (recounting

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testimony of Fechter, Campbell, Dico, and MacDonald, as well as other evidence,[31] proving that, at the time it sold the regulated buildings to SIM, Dico knew that they contained PCBs and were, thus, subject to ongoing testing and maintenance to ensure the protectiveness of the PCB encapsulation inside).[32] Yet, Dico

Page 1062

sold some of the very buildings still contaminated with PCBs to SIM fully understanding that SIM intended to demolish them, see, e.g., Exs. 1026-27 (representing SIM's intentions to " demo[lish] and remove" the buildings at issue), thus breaching the PCB encapsulation and causing a release or a threat of release of PCBs into the environment and, of course, violating paragraphs 31 and 59 of the 1994 Building UAO in the process.[33] Motivated by a desire for a financial gain,[34] Dico did not even make an effort to determine whether any state or federal environmental requirements applied to the disposal of the building debris resulting from this demolition. Ex. 1151 (Dico Dep.) at 176:15-177:9. Dico's conduct with regard to the underlying events in this litigation [35] is reprehensible and warrants a substantial penalty.

b. Injury to the public.

Dico claims that this factor weighs in favor of assessing no, or minimal, penalty because Plaintiff adduced no evidence at trial of any actual physical harm to people, animals, or the environment.[36] Def.'s Br.

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at 34-37. The mere absence of actual harm does not mean, however, that Dico's violations of the 1994 Building UAO are not serious.[37] Indeed, in the CERCLA context, at least two courts have found an injury to the public based on the mere potential for such an injury.[38] See United States v. Crown Roll Leaf, Inc., No. 88-831, at *28-29 (D.N.J. Apr. 28, 1989) (" In assessing a civil penalty, a court need not find that an actual injury to the public has occurred; rather, the court need only assess the potential injury to the public." (internal citation omitted)); United States v. Martin, No. 99 C 1130, at *27 (N.D.Ill. July 26, 2000) (concluding that the defendant's delay in responding to the EPA's request for information " injured or had the potential to injure the public" ). Additionally, some courts have found an injury to the public even where the defendants' actions did not even cause a release or a threat of release of hazardous substances. See Gurley, 235 F.Supp.2d at 807 (finding injury to the public, where the defendant failed to comply with the EPA's CERCLA information request because such non-compliance caused the EPA to expend Superfund money, thus precluding the Agency from allocating those funds to other Superfund sites); United States v. Taylor, No. 90-cv-851, at *10-11 (W.D. Mich. May 18, 1994)[39] (" The delay itself does not appear to have caused injury to the public, and it is unlikely that Michigan thought that a delay would be harmful to the public. However, there is a more general injury to the public caused by private landowners who deny access or

Page 1064

delay access to contaminated sites, such that the agency's ability to remedy problem sites is impeded. To allow an unreasonable denial to go unpunished entirely would encourage others to deny lawful access." ).

It is true that unlike the defendants in Gurley and Taylor, Dico did not fail to respond to an EPA information request or to allow the EPA access to its site. By selling the buildings to SIM without disclosing the fact that they still contained PCBs, however, Dico created another Superfund site (the SIM site in Ottumwa, Iowa), thus causing the EPA to spend Superfund money in investigating the PCB release at the SIM site and overseeing the PCB removal action and, at the same time, preventing the Agency from allocating that money to other Superfund sites. Furthermore, Dico's delay in disclosing to the EPA the identity of the purchaser of the regulated buildings led to expending additional Superfund dollars, see Trial Tr. at 76:18-77:12 (detailing the actions that the EPA undertook in an effort to identify the purchaser of the buildings and the location of the building debris), and impeded the Agency's ability to institute a timely clean-up of the SIM site. For these reasons, the Court concludes that Dico's violations of the 1994 Building UAO injured the public [40] despite the lack of evidence of actual harm.[41]

c. Dico's ability to pay.

It is undisputed that Dico is not currently generating any revenues from operations and has no assets that it can liquidate to pay a civil penalty. Trial Tr. at 662:22-663:11. Plaintiff argues that this inability to satisfy any adverse judgment " should not be a mitigating factor in the penalty analysis." Pl.'s Br. at 34. Dico disagrees, urging the contrary position. See Def.'s

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Br. at 40-47. Specifically, Dico claims that the evidence in this case clearly shows that " Dico has no ability to pay civil penalties," and that, therefore, any penalties imposed should be commensurate with its financial condition. See id. at 40. The Court agrees that Dico's ability to pay is something of a mitigating factor. Indeed, in light of all the evidence presented at trial, the Court is doubtful that Dico would be able to satisfy any adverse judgment even if it sold its real property and all other assets because virtually all of Dico's assets have already been encumbered by the mortgage and the security interest in favor of Titan International. See Ex. 1010 at 2-4. Considering that Dico's inter-company liability to Titan International as of December 31, 2012 was greater than the appraisal value of Dico's real property,[42] all the proceeds of a potential sale of the Dico site and its assets will likely be exhausted by this inter-company obligation, and no money will be left to satisfy any adverse judgments. Additionally, the Court is doubtful that Dico could use the approximately $4,868,000.00, see supra p. 10, in available loan advances that Titan International has agreed to make pursuant to the July 17, 2003 agreement between the two companies because paying civil penalties does not appear to be one of the purposes for which the loan advances could be used. See Ex. 1010 at 2 (Recital " B" ). Accordingly, this factor weighs in favor of imposing a lesser civil penalty.[43]

d. Dico's economic benefit.

By selling the regulated buildings to SIM, Dico realized an economic benefit at

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least equal to $837,000.00 ($720,000.00 in the form of property value appreciation [44] and $117,000.00 in the form of the purchase price that SIM paid for the buildings at issue). Trial Tr. at 253:14-19, 320:23-25, 505:7-12, 507:20-508:7, Exs. 1026-28. Accordingly, to accomplish the CERCLA civil penalty's general and specific deterrent purposes, the penalty amount imposed in this case must be sufficient to eliminate this economic benefit resulting from Dico's violations of the 1994 Building UAO.[45] See Mac's Muffler Shop, Inc., at * 27 (holding, in the context of civil penalties under the CAA, that " [e]limination of the benefits of noncompliance is an essential element of the penalty" and that these benefits are " not necessarily limited to [the] defendant[']s monetary profit from the violation, but must encompass every benefit that defendant[] received from violation of the law" ). Therefore, this factor suggests that a penalty of at least $837,000.00 is appropriate.

e. Necessity of vindicating the EPA's authority.

Having assessed the evidence presented at trial, the Court finds that there is a need to vindicate the EPA's authority in this case. Dico was unquestionably aware that some of the buildings it sold to SIM in 2007 were still contaminated with PCBs and, thus, remained subject to the ongoing maintenance and testing obligations of the 1994 Building UAO. See supra pp. 6-9. Despite such knowledge, however, Dico proceeded to sell those buildings, understanding that SIM intended to tear them down and that such demolition activities would violate the 1994 Building UAO. See Exs. 1026-28. The EPA relies almost exclusively on potentially responsible parties (" PRPs" ), such as Dico, to conduct the long-term operation and maintenance activities at various Superfund sites and to report and immediately address any releases or threats of release of hazardous substances. See Trial Tr. at 46:2-23, 47:23-48:4. In light of this reliance and the " dwindl[ing]" Superfund dollars, it is more important than ever that PRPs recognize the authority of the EPA and comply with its orders. See id. at 44:2-12. Unfortunately, Dico's conduct in this case fell far short of this standard, and, therefore, this factor weighs in favor of assessing a substantial penalty.

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4. Amount of assessed penalty.

Plaintiff proposes a civil penalty of $2,216,000.00 calculated pursuant to " a tiered penalty structure that takes into account periods of Dico's more and less egregious conduct." Pl.'s Br. at 50. Specifically, Plaintiff claims that the appropriate daily penalty amount should be $18,000.00 per day from June 19, 2007 to September 18, 2007 and $8,000.00 per day from September 19, 2007 to November 27, 2007. Id. Dico maintains that this proposed penalty amount is " unprecedented" in light of " the dissimilarities between Dico's conduct and the egregious conduct exhibited by the defendants" in cases such as Lecarreaux, M. Genzale Plating, Gurley, and Barkman. Def.'s Br. at 33-34.

The Court disagrees that a two-tier penalty structure [46] is necessary in this case. Thus, having determined that the duration of Dico's violations was 162 days, the Court now turns to deciding the proper daily penalty amount. After applying the five-factor test above to the facts of this case, the Court concludes that the appropriate daily penalty is $10,000.00,[47] which amounts to a total penalty of $1,620,000.00.[48] The Court finds that this penalty amount is both warranted by Dico's reprehensible conduct and also sufficient to carry out the main purpose of CERCLA civil penalties--deterrence.

B. Punitive Damages

In its March 6, 2013 summary judgment ruling, the Court concluded that Dico was liable for punitive damages. Order (Clerk's No. 128) at 41-42. Therefore, Dico may face " punitive damages in an amount at least equal to, and not more than three times, the amount of any costs incurred by the Fund." 42 U.S.C. § 9607(c)(3). Although the Court has discretion

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whether to award any punitive damages, if it decides to do so, its discretion is somewhat limited as to the amount of such damages, i.e., the award must be at least equal to but no more than three times the amount of funds that the Superfund incurred as a result of Dico's violations of the 1994 Building UAO. See id. ; see also United States v. Capital Tax Corp. et al., No. 04 C 4138, at *37-38 (N.D.Ill. Aug. 1, 2007). " The discretionary element contained in the statute (i.e., the discretion to award between one and three times the response costs) suggests that the nature of a defendant's conduct [49] may be relevant in assessing punitive damages." Lecarreaux, at *36-37. At the very least, Dico's conduct described above, see supra pp. 6-9, warrants a punitive damages award that is equal to one time the amount of Plaintiff's response costs, or $1,477,787.73.[50]


For the foregoing reasons, the Court imposes $1,620,000.00 in civil penalties and $1,477,787.73 in punitive damages against Dico.

The Clerk of Court is hereby directed to enter judgment: (1) holding Dico and Titan Tire jointly and severally liable as arrangers ( see Clerk's No. 119); (2) holding Dico and Titan Tire liable for $1,477,787.73 in response costs incurred in connection with the SIM site, which figure represents response costs already incurred and reported by Plaintiff ( see Clerk's No. 128; see also supra n.50); (3) holding Dico liable for civil penalties and punitive damages ( see Clerk's No. 128); and (4) against Dico in the amount of $3,097,787.73 representing the civil penalties and punitive damages imposed in this case. Furthermore, Plaintiff shall be allowed to recover its costs incurred in this action. See Compl. (Clerk's No. 1) at 14.

Additionally, Plaintiff is entitled to a declaratory judgment against Dico and Titan Tire holding them liable for all response costs already incurred but not reported by Plaintiff, as well as all future response costs that Plaintiff may incur, in connection with the SIM site removal action. See Compl. at 14; Clerk's No. 128 at 43. Therefore, the Court retains jurisdiction over the issue of these additional response costs. Once Plaintiff's involvement with the SIM site is complete, Plaintiff shall file a motion with the Court seeking to recover these additional response costs.


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