In this appeal, appellants challenge the district court's finding that the punitive damages provision of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), 42 U.S.C. Sec. 9607(c)(3), does not violate their due process rights. We affirm.

On March 6, 1985, after two months of negotiations, the United States Environmental Protection Agency (EPA) issued a clean-up order to Solid State Circuits, Inc. (Solid State) and Paradyne Corporation (Paradyne) pursuant to section 106(a) of CERCLA, 42 U.S.C. Sec. 9606(a). The order contained factual findings including: (1) from April, 1968, to October, 1973, Solid State conducted manufacturing operations in a leased building in Republic, Missouri; (2) Solid State used trichloroethylene (TCE) and a copper based plating solution in its operation, and stored the used chemicals in an unlined pit in the basement of a building at the site; (3) TCE and copper are harmful to humans; (4) in 1982, corporate ownership of Solid State was transferred to Paradyne; (5) recent soil and groundwater samples from the vicinity of the site show TCE and copper contamination; (6) the contamination poses a threat to the drinking water of Republic, Missouri, the aquifers underlying the site, and the health of humans and animals in the vicinity. The order concluded that Solid State's handling of the TCE and copper was the cause of the contamination and the chemicals posed an "imminent and substantial endangerment to the public health, welfare, or the environment." The order directed Solid State and Paradyne, as responsible parties, to obtain access to contaminated areas, to provide security at the facility, to submit a detailed clean-up plan to the EPA, and to notify the EPA within two days of their intent to comply with the order. No party contends that either applicable EPA regulations or CERCLA provided for an administrative hearing at which the findings of fact or conclusions of law in the order could have been challenged.

On March 14, 1985, Solid State and Paradyne filed suit in federal district court to enjoin the EPA from enforcing the order, from assessing daily penalties for failure to comply with the order, and from assessing treble damages for failing to comply with the order. As part of the suit, Paradyne attempted to raise, as defenses to the EPA's order, that it was not a responsible party under CERCLA and that even if it were, it could not gain access to the contaminated site under reasonable terms to perform required clean-up operations because it has no property interest whatsoever in the site. Paradyne and Solid State also challenged the constitutionality of the treble damage and fine provisions of CERCLA, 42 U.S.C. Sec. 9606(b) and Sec. 9607(c)(3), on the ground that the provisions deprived them of their due process rights to challenge the validity and applicability of the EPA's order without facing ruinous fines and penalties. See Ex Parte Young, 209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 714 (1908).

On April 18, 1985, the EPA, pursuant to section 104 of CERCLA, 42 U.S.C. Sec. 9604, began the clean-up it had ordered Paradyne and Solid State to perform. The clean-up was completed by November of 1985.

On May 20, 1985, the EPA moved to dismiss the suit by Paradyne and Solid State. The EPA argued that the court had no jurisdiction to review the merits of an order issued pursuant to section 106 of CERCLA because the statute does not provide for pre-enforcement review of such orders. In addition, the EPA argued that since it had begun its own clean-up of the site, it would not seek to enforce its order or to collect daily penalties for noncompliance. Thus, the EPA argued that the court should dismiss the case because the issues whether to enjoin enforcement of the order or collection of daily penalties were moot, and because the issue whether to enjoin assessment of treble damages was not yet ripe inasmuch as the EPA can only assess such damages as part of a separate action in federal district court under CERCLA Sec. 107, and no such action had yet been brought.

The district court agreed it lacked subject matter jurisdiction to engage in pre-enforcement review of the merits of an order issued by the EPA pursuant to section 106 of CERCLA. Thus, the court refused to address the merits of Paradyne's and Solid State's defenses to the order. The court also agreed that the EPA's commencement of the clean-up rendered Paradyne's and Solid State's request for an injunction prohibiting the EPA from seeking to enforce its order or to collect penalties for non-compliance moot.1 The court, however, found it had jurisdiction to consider the claim by Paradyne and Solid State relating to the constitutionality of that portion of CERCLA's statutory scheme subjecting them to treble damages for failing to comply with the EPA's order.

The court then proceeded to consider whether the constitutional claim was ripe for review, insofar as the decision to bring an action for treble damages lies within the discretion of the EPA, and the EPA had not yet decided whether to pursue such an action against Paradyne and Solid State. Applying Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S. Ct. 1507, 18 L. Ed. 2d 681 (1967), the court found the issue "purely legal" and fit for determination. The court also found that the statutory scheme challenged by Paradyne and Solid State posed significant hardship due to the necessity of reporting the potential treble liability on public financial filings required by the SEC. Thus, the court found the constitutional claim ripe for review.2

Proceeding to the merits of the constitutional claim, the court held that there is no violation of due process in the application of the CERCLA statutory scheme, adopting the conclusions of recent opinions in Wagner Electric Corp. v. Thomas, 612 F. Supp. 736 (D.Kan.1985), and United States v. Reilly Tar & Chemical Corp., 606 F. Supp. 412 (D.Minn.1985) (holding that a party's reasonable belief in a valid defense to the merits of an EPA order precludes imposition of treble damages pursuant to CERCLA Sec. 107(c)(3)). Thus, the court refused to enjoin the EPA from seeking to assess treble damages against Paradyne and Solid State pursuant to section 107(c)(3) of CERCLA. Paradyne and Solid State appeal the district court's ruling only with respect to the due process issue.

Recognizing the grave consequences arising from delays in cleaning up hazardous waste sites, Congress gave the EPA authority to direct clean-up operations prior to a final judicial determination of the rights and liabilities of the parties affected. Thus, if the EPA has determined that a hazardous substance has been or is likely to be released at a facility, and has issued an order to the responsible party directing clean-up operations, it has several enforcement options available.

First, the EPA may bring an action in federal district court seeking an order directing compliance with its order using the contempt powers of the court as a sanction for non-compliance. See CERCLA Sec. 106(a), 42 U.S.C. Sec. 9606(a).3 Second, it may bring an action in federal district court seeking to impose fines of up to $5,000 a day for non-compliance. See CERCLA Sec. 106(b), 42 U.S.C. Sec. 9606(b).4 Finally, if the EPA determines that a release of a hazardous substance may pose an imminent and substantial danger to the public health or welfare and that the responsible parties will not properly respond, it may arrange for the required clean-up itself and pay for it using funds from the Hazardous Substance Response Trust Fund (Superfund) created as part of CERCLA. See CERCLA Sec. 104(a), 42 U.S.C. Sec. 9604(a) (authorizing the EPA to conduct clean-up); CERCLA Sec. 221, 42 U.S.C. Sec. 9631 (creating Superfund); CERCLA Sec. 111(a), 42 U.S.C. Sec. 9611(a) (authorizing the EPA to pay clean-up costs from the Superfund).5

Since Superfund money is limited, Congress clearly intended private parties to assume clean-up responsibility. In addition, it sought to ensure that responsible parties would not delay clean-up activities until the EPA felt it necessary to perform the required work itself. Thus, in addition to allowing the EPA to bring an action for actual costs incurred by the Superfund in conducting the clean-up, see CERCLA Sec. 107(a), 42 U.S.C. Sec. 9607(a),6 Congress established a cause of action allowing the EPA, in its discretion, to bring a claim in federal district court to recover up to three times the amount of any costs incurred by the Superfund from any person who is liable for a release or threatened release of a hazardous substance and who fails without sufficient cause to properly comply with the EPA's order. See CERCLA Sec. 107(c)(3), 42 U.S.C. Sec. 9607(c)(3).7

Because neither CERCLA nor applicable EPA regulations or practice provides for a pre-enforcement hearing at which the merits of the EPA's order could be tested, see e.g., Wagner Seed Co. v. Daggett, 800 F.2d 310, 314-15 (2d Cir.1986) (finding district court without jurisdiction to conduct pre-enforcement review of merits of the EPA order), Paradyne and Solid State argue that the statutory scheme of CERCLA violates their right to due process by depriving them of any meaningful opportunity to test the validity of the EPA's order "without incurring the prospect of debilitating or confiscatory penalties." Brown & Williamson Tobacco Corp. v. Engman, 527 F.2d 1115, 1119 (2d Cir.1975), cert. denied, 426 U.S. 911, 96 S. Ct. 2237, 48 L. Ed. 2d 837 (1976).

In essence, Paradyne and Solid State argue that upon receiving the EPA order they found themselves stuck between a rock and a hard place. They assert that, under the statutory scheme, if they had chosen to comply with the EPA's order and were later found to have a valid defense to liability, they would have been forced to bring an action against the responsible party in order to obtain reimbursement for the clean-up. If the responsible party could not have been located or determined or had turned out to be judgment proof, they would have been forced to bear the cost of a clean-up for which they were not liable.8 On the other hand, if Paradyne and Solid State had refused to comply, they would have been exposed to the possiblity of treble liability under CERCLA Sec. 107(c)(3).9 In addition, Paradyne and Solid State contend that even if the EPA did not bring an action for treble damages, they would still have had to carry the potential treble liability on all public financing disclosures for an indefinite period because, at the time the EPA issued its order, there was no statute of limitations on EPA cost recovery actions.10 Paradyne and Solid State contend this "Hobson's choice" between compliance and potential treble liability effectively prevents a challenge to an EPA order.

The due process argument has its origins in Ex Parte Young, 209 U.S. 123, 28 S. Ct. 441, 52 L. Ed. 714 (1908). That case establishes that a statutory scheme violates due process if "the penalties for disobedience are by fines so enormous and imprisonment so severe as to intimidate [an affected party] from resorting to the courts to test the validity of the legislation." Id. at 209 U.S. 147, 28 S. Ct. at 448, 52 L. Ed. 724. It concludes that in such a situation "the result is the same as if the law in terms prohibited the [affected party] from seeking judicial construction of laws which deeply affect its rights." Id.

Paradyne and Solid State, however, acknowledge that the constitutional requirements of Ex Parte Young are met if the challenged statutory scheme may be interpreted so that no penalty is imposed if the challenging party has reasonable grounds to contest the validity or applicability of an administrative order. See Oklahoma Operating Co. v. Love, 252 U.S. 331, 338, 40 S. Ct. 338, 340, 64 L. Ed. 596, 599 (1920) (issuing permanent injunction restraining enforcement of penalties accruing during litigation "provided that it also be found that the plaintiff had reasonable gound to contest them" (emphasis added)); see also Reisman v. Caplin, 375 U.S. 440, 446-47, 84 S. Ct. 508, 512, 11 L. Ed. 2d 459 (1964).

Expansion of the Ex Parte Young doctrine to preclude imposition of statutory penalties if the plaintiff has reasonable grounds to contest the validity or applicability of an administrative order is important in this case because the challenged treble damage provision of CERCLA provides:

If any person who is liable for a release or threat of release of a hazardous substance fails without sufficient cause to properly provide removal or remedial action upon order of the President pursuant to section 9604 or 9606 of this title, such person may be liable to the United States for punitive damages in an amount at least equal to, and not more than three times, the amount of any costs incurred by the Fund as a result of such failure to take proper action.

CERCLA Sec. 107(c)(3), 42 U.S.C. Sec. 9607(c)(3) (emphasis added).

Thus, this case presents the question whether the sufficient cause defense provided in CERCLA Sec. 107(c)(3) affords adequate protection against imposition of the treble damage penalty to allow a challenge to an EPA clean-up order as required by Ex Parte Young and its progeny.

Paradyne and Solid State argue that the sufficient cause defense provides adequate protection only if it is interpreted to encompass a subjective good faith belief in the invalidity or inapplicability of an EPA clean-up order. In support of their position, they point to Aminoil, Inc. v. United States, 646 F. Supp. 294 (C.D.Cal.1986) (Aminoil II ). In that case, the court stated:

[T]he phrase "sufficient cause" should be interpreted to mean a "good faith" defense. Under such an interpretation, plaintiffs are sufficiently protected against the threat of punitive damages under Sec. 9607(c)(3). Punitive damages may only be assessed where the Government proves that plaintiffs have refused to comply with the order in bad faith. For example, if the Government can prove that plaintiffs have challenged the merits of the order simply for the purpose of delay, punitive damages should be assessed. Consequently, the risk that plaintiffs would forego a valid challenge to the order would not offend Due Process principles.

Id. at 299.

Thus, Paradyne and Solid State contend that only by adopting an interpretation similar to that enunciated in Aminoil II can this Court find the treble damage provision constitutional.

The EPA, on the other hand, urges us to interpret sufficient cause as encompassing an objective standard arguing that:

As a federal agency, EPA must be presumed to act correctly, and ultimately review of the administrative order must be on an arbitrary and capricious standard. Thus, only a reasonable belief that the agency acted arbitrarily and capriciously in issuing the order would be sufficient cause for non-compliance.

Brief of Appellee at 31 n. 15.

The EPA cites Wagner Electric Corp. v. Thomas, 612 F. Supp. 736 (D.Kan.1985), as supporting an objective good faith standard. Wagner Electric construes the "reasonable grounds" language of Oklahoma Operating Co. v. Love, 252 U.S. at 338, 40 S.Ct. at 340, as requiring that "one must assert an objectively good faith challenge to [an] administrative action before one may invoke the protections of Ex Parte Young." Wagner Electric, 612 F. Supp. at 745.

As a matter of constitutional law, we believe that the label "objective" or "subjective" is not as important as the functional significance of the standard. To put it another way, to pass constitutional requirements, the standard must provide parties served with EPA clean-up orders a real and meaningful opportunity to test the validity of the order. See Ex Parte Young, 209 U.S. at 147, 28 S. Ct. at 448. At the same time, the standard must protect the government's interest in encouraging parties to conduct clean-ups promptly and in promoting settlements once the EPA has performed clean-ups itself so as to avoid using resources necessary to respond to threats posed by hazardous waste on litigation to replenish the Superfund. We are, therefore, convinced that "sufficient cause" as used in CERCLA Sec. 107(c)(3) may be constitutionally interpreted to mean that treble damages may not be assessed if the party opposing such damages had an objectively reasonable basis for believing that the EPA's order was either invalid or inapplicable to it.11

Under this standard, a court assessing the objective reasonableness of a party's challenge to a clean-up order must keep in mind that the EPA is presumed to have acted correctly, and its decision to issue such an order may be found erroneous only if it acted arbitrarily or capriciously. Thus, in order to establish the objective reasonableness of a challenge to an EPA clean-up order, a party must show that the applicable provisions of CERCLA, EPA regulations and policy statements, and any formal or informal hearings or guidance the EPA may provide, give rise to an objectively reasonable belief in the invalidity or inapplicability of the clean-up order. We note, however, that in some instances, CERCLA itself is silent or ambiguous, and the EPA has failed to promulgate regulations or to issue position statements that could allow a party to weigh in advance the probability that the clean-up order is valid or applicable.12 Absent such guidance, it will also be difficult for a court to determine the reasonableness of a challenge to the order notwithstanding the presumption of validity an agency order enjoys.

In such instances, therefore, it would be patently unreasonable and inequitable for a court to require a challenging party to prove the reasonableness of its challenge to avoid imposition of treble damages. Thus, we hold that if neither CERCLA nor applicable EPA regulations or policy statements provides the challenging party with meaningful guidance as to the validity or applicability of the EPA order, Ex Parte Young and its progeny require that the burden rest with the EPA to show that the challenging party lacked an objectionably reasonable belief in the validity or applicability of a clean-up order.

Although shifting the burden may seem onerous, we agree with the Wagner Electric court that the EPA could greatly limit sufficient cause defenses by issuing regulations and policy statements and by providing for informal hearings that would enable a party to better determine the validity and applicability of an EPA order prior to the time it must decide whether to comply with a clean-up order or risk treble damages. By providing such guidance at an early stage, the EPA will best protect the interests of all concerned and promote faster more efficient clean-ups while making certain liability for clean-ups remains with those responsible. Accordingly, we affirm.