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Improper Disposal of Consumer Products by Retailer Leads to $82 Million Criminal and Civil Penalty for RCRA, FIFRA, CWA Violations

On May 28, 2013, EPA announced that “Wal-Mart Stores Inc. pleaded guilty today in cases filed by federal prosecutors in Los Angeles and San Francisco to six counts of violating the Clean Water Act by illegally handling and disposing of hazardous materials at its retail stores across the United States. The Bentonville, Ark.-based company also pleaded guilty today in Kansas City, Mo., to violating the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA) by failing to properly handle pesticides that had been returned by customers at its stores across the country.”

According to Walmart’s press release, “the plea agreements and administrative resolution call for Walmart to pay an aggregate amount of approximately $82 million consisting of the following payments: $60 million for misdemeanor Clean Water Act Violations in California ($40 million fine and $20 million community service payments); $14 million in Missouri for a misdemeanor Federal Insecticide, Fungicide, and Rodenticide Act violation (FIFRA) ($11 million fine and $3 million in community service payments); and a $7.6 million civil penalty to EPA to settle charges for FIFRA ($1.5 million) and Resource Conservation and Recovery Act (RCRA) violations ($6.1 million). The payments will not impact the company’s results of operations for the second quarter of 2013 and will not be material to the company’s financial position.”

Environmental regulators have increased their focus on businesses that handle household, consumer, and personal care products, particularly returned, damaged, off-spec, and obsolete products. A variety of household and consumer chemical and personal care products, such as kitchen and bathroom cleaners, nail polish, hand sanitizer, aerosol disinfectants, medicines/pharmaceuticals and the like may actually be regulated “hazardous wastes” after a decision is made to discard them. And although these products seem relatively benign – in the sense that we encounter them in our daily lives and they are routinely used in our homes and businesses – EPA’s most recent action represents a growing trend of companies that have faced significant civil, and in some cases criminal, penalties for improper management and disposal of such products.

In addition to product management, warehouses and retail stores may have other environmental, safety, and health issues that are easy to overlook: refrigerant and cooling system leaks, used oil/fluids and batteries from forklifts, spent fluorescent bulbs, and stormwater and wastewater discharges to sanitary sewers.

Combine this mix of factors with the fact that companies frequently rely upon offsite locations, contractors, third-party vendors, and temporary staff to manage these operations – where the lines of responsibility and authority may not always be clear – and this creates a scenario ripe for EPA enforcement.

Spencer Fane’s Environmental Practice Group hosted a national webinar, EPA’s Warehouse and Consumer Products Enforcement Initiative, in June 2012, and addressed the increased enforcement activity by federal and state regulators focused on the retail and warehousing industries and the disposal of consumer and retail products. A copy of the slides and an audio recording may be downloaded here.