Cadillac Fairview/California, Inc. (Cadillac) brought suit against Dow Chemical, Inc. (Dow), the United States, and several rubber manufacturers under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) for expenses related to the cleanup of wartime rubber-manufacturing soil pollution. The district court held that the one hundred percent allocation of costs to the federal government was warranted, and the United States appealed. The Ninth Circuit affirmed that the district court acted within its discretion by allocating all of the cleanup costs to the United States.
During World War II, a critical shortage in rubber prompted the United States to create synthetic rubber manufacturing facilities. One of these facilities was operated as an agent plant by Dow, who agreed to operate the plant while the government retained ownership of the plant, the product, and the byproduct. The United States's agreement with Dow included a "hold harmless" agreement which protected Dow from liability for personal injury and property damage. Dow disposed of toxic waste resulting from the manufacturing process in evaporation ponds or pits approved by the government, knowingly polluting the soil and water. After the war, the plant was sold and eventually Cadillac became the owner. Cadillac brought suit against Dow, the United States, and other rubber companies under CERCLA, a statute enacted thirty-five years after the war ended. Under CERCLA, any responsible party can seek contribution for cleanup costs from anyone potentially liable for the pollution. In response to Cadillac's charge against the government, the United States made four arguments that at least part of the costs should be allocated to Dow.
First, the government argued that Dow created and transported waste to the ponds and pits and thus should be held responsible in part. The Ninth Circuit disagreed, finding that because the United States owned the entire facility and materials, retained complete control over the site, inspected and approved it, and considered Dow an agent, the United States had a relationship with Dow that required indemnity. Therefore, the district court properly allocated costs to the United States.
Second, the government argued that the district court failed to consider the benefits Dow received from operating the plant such as reimbursement of expenses, acquisition of knowledge, and expansion in the market. However, because the evidence offered by the government was speculative and the benefits to the government grossly outweighed the benefit to Dow, the Ninth Circuit determined that the district court did not abuse its discretion in disregarding the benefit to Dow.
Third, the government challenged the district court's factual findings, arguing that it had only indirect control of the facility. On careful examination, the Ninth Circuit found no error in the district court's factual findings about the United States's knowledge and control.
Finally, the United States argued that its promise to hold Dow harmless should have been disregarded by the district court in determining the allocation of costs because, under the Tucker Act, it did not have jurisdiction to enforce that contract against the United States. The Ninth Circuit held that although the district court did not have jurisdiction to enforce the contract, it could consider the clause as an equitable factor in allocating costs under section 113(f) of CERCLA. Because the contract was not at issue, contract issues bore no weight in the case.