Gen. Elec. Co. v. Jackson, et al., Civil Action No. 00-2855 ( JDB ), 2009 U.S. Dist. LEXIS 5379 (D.D.C. Jan. 27, 2009).
 
Under CERCLA, EPA has the power to issue a “unilateral administrative order” (UAO) requiring the clean up of hazardous waste to any party it deems potentially responsible for the discharge. (Under CERCLA, these parties are known as PRPs – “potentially responsible parties”.) If a party receiving a UAO fails to comply, and this non-compliance is later determined to have been without “sufficient cause”, the party is subject not only to the eventual response and removal costs – which alone can be devastatingly massive – but also to statutory fines of up to $32,500 per day of noncompliance.

In Gen. Elec. Co. v. Jackson, General Electric challenged EPA’s authority to issue UAOs by arguing that the huge potential fine leaves a PRP no viable alternative but to comply with the UAO and incur potentially huge costs without the opportunity for a hearing before such costs are incurred (costs which may never be recovered, even if the party is later determined not to be responsible for the discharge). General Electric argued that this system violates the due process protections of the U.S. Constitution. (Due process protections generally require the opportunity for a pre-deprivation hearing.)

The U.S. District Court for the District of Columbia, however, found that EPA’s historical use of UAOs demonstrates that the risk of deprivation to a non-responsible party is exceedingly low (out of thousands of UAOs that have been issued, GE could point to only 5 that had been improperly issued), and found that the fact that 3.5% of PRPs who are issued UAOs do refuse to obey and challenge them in court show that the possible fines are not completely and utterly coercive. In addition, the Court found that the broad discretion under CERCLA § 106 that district courts have in the actual imposition and amount of any fine provides sufficient post-deprivation protections. The District Court therefore found no violation of due process rights in the EPA’s use of UAOs.

The reality is, however, that any company faced with the issuance of a UAO has to make a judgment call on whether to comply with the UAO, and then seek reimbursement from other PRPs, or to reject the UAO and directly challenge its responsibility in a district court (while the fine meter rings up at about $975,000 per month!). Obviously, such a choice involves weighing the potential for recovery from others, the strength of any challenge to the party’s responsibility, and the very practical matter of “what’s in your wallet?”

The better choice is to engage the EPA as early as possible. UAOs are rarely issued without some indication that a party’s responsibility for a hazardous waste discharge is being investigated. A party who ignores evidence of such an investigation and does not quickly and directly address possible investigations does so at its own peril.