Nilesh Dattani linked to this site in a comment:
specifically this page:
From the above-linked page, on handling damaged batteries:
Call2Recycle offers a recycling service that meets the U.S. DOT packaging, handling and transportation requirements under a special permit granted by the federal government. The service provides the appropriate solution based on the battery type and applicable shipping requirements. We also provide services for defective and recalled batteries when, for example, a manufacturer or the Consumer Product Safety Commission have identified a performance or safety issue and the battery needs to be safely transported.
If you think you have a damaged, defective or recalled battery, visit the store or for more information or help, contact Customer Service, who will discuss the appropriate solution. You can read more about our battery recycling services below.
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Consumers: Place the battery or device in a non-flammable material such as sand or kitty litter as soon as possible. Check the Consumer Product Safety Commission or manufacturer web site or visit the retailer you purchased it from to see if the battery or device has been recalled. If it has, follow the instructions.
As an alternative, place the battery or device (one per bag) in a clear plastic bag and take it to your municipal household hazardous waste (HHW) recycling center. You can also contact a local Call2Recycle drop-off site to see if it accepts damaged batteries. Do not place them in the trash for any reason.
On the Call2Recycle store page are listed small and large "Damaged, Defective or Recalled Lithium Battery Kit[s]":
Unfortunately, the kits are somewhat expensive, $75 and $100 respectively. Fortunately, the site seems like it offers a very reasonable, and hopefully very safe, way to dispose of a damaged lithium ion battery.