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Court Rules RCRA Injunction Cannot be Discharged In Bankruptcy

02.01.2010

Apex Oil Company (“Apex”) was ordered by a United States District Court to abate a hydrocarbon plume that was contaminating groundwater and emitting fumes into nearby homes in a town in Illinois. The District Court found that millions of gallons of oil trapped underground created hazards to health and the environment. The plume resulted from an oil refinery owned by a corporate predecessor of Apex, and therefore the Court ordered Apex to abate the plume. Apex estimated that the clean up costs would be $150 million.

After having found Apex’s challenges to the District Court’s findings about the plume to have no possible merit, the U.S. Seventh Circuit Court of Appeals addressed the principal question involved in the appeal: Whether the United States Environmental Protection Agency’s claim to an injunction under the Resource Conservation and Recovery Act (“RCRA”) was discharged in a prior bankruptcy reorganization and could not be asserted in this lawsuit. U.S. v. Apex Oil Co., 579 F.3d 734 (7th Cir. 2009).

The Judge’s approval of a claim in a Chapter 11 proceeding discharges the debtor from “any debt that arose before the date of” confirmation, with certain exceptions not relevant to this case. The Bankruptcy Code defines “debt” as “liability on a claim” and defines “claim” as either a “right to payment” (11 U.S.C. § 101(5)(A)), or a “right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.” 11 U.S.C. § 101(5)(B). The Seventh Circuit Court of Appeals interpreted 11 U.S.C. § 101(5)(B) to mean that if the holder of an equitable claim can obtain a money judgment if the equitable remedy is not obtainable, then the claim is dischargeable in bankruptcy.

Applying that principle to the U.S. EPA’s claim against Apex, the Seventh Circuit Court of Appeals found that a plaintiff’s equitable claim under Section 6973 of RCRA does not entitle the plaintiff to demand, in lieu of injunctive relief, payment of clean-up costs. As the Court of Appeals stated: “[Section 6973] does not authorize form of monetary relief.” 579 F.3d at 737. In so holding, the Court noted that the U.S. Supreme Court had previously ruled that RCRA’s private suit provision codified at 42 U.S.C. § 6972, which contains identical language to 42 U.S.C. § 6973, also did not authorize monetary relief.

Therefore, the Seventh Circuit Court of Appeals held that U.S. EPA’s claim for an injunction ordering Apex Oil to abate the hydrocarbon plume and vapors emitting therefrom was not dischargeable in the prior bankruptcy proceeding and upheld the District Court’s injunction ordering Apex to abate the plume of contamination and vapors emitted into homes of nearby residents.

Because RCRA injunction remedies cannot be discharged in bankruptcy, the U.S. EPA may choose to employ RCRA injunction remedies as a tool to compel abatement of environmental contamination when a potentially responsible party is in bankruptcy or previously received a discharge in bankruptcy.

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