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September 1, 2009 |
Discharge of RCRA Cleanup Obligation in Bankruptcy Less Certain Following Recent Seventh Circuit Decision in A recent Seventh Circuit Court of Appeals decision has held that governmental claims for injunctive relief under the Resource Conservation and Recovery Act ("RCRA") are not dischargeable under the U.S. Bankruptcy Code. U.S. v. Apex Oil Co., Inc., No. 08-3433, 2009 WL 2591545 (7th Cir. Aug. 25, 2009). Companies subject to potential liability to an injunction requiring remediation of contaminated properties under RCRA will need to carefully assess this decision to determine whether Chapter 11 bankruptcy will discharge their liability. In Apex Oil, the district court entered an order under RCRA, requiring Apex Oil to remediate property contaminated by its corporate predecessor. Compliance with the injunction was estimated at about $150 million. On appeal, Apex Oil argued that the government's claim to the injunction was, in fact, a monetary claim because of the cost associated with complying with the injunction. Thus, according to Apex Oil, the claim should have been discharged as a result of Apex Oil's earlier Chapter 11 bankruptcy. The Seventh Circuit disagreed. The court held that only claims that give rise to a right to payment because the injunction cannot be executed are dischargeable under the Bankruptcy Code, rather than injunction claims that would merely result in a cost being imposed on a defendant. Accordingly, the government's claim to Apex Oil's injunction under RCRA was not dischargeable under the Bankruptcy Code. The Seventh Circuit's decision highlights the significance of the federal law under which a remedial action is required. For example, unlike the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA" and commonly known as Superfund), which allows the government to recover remediation costs in the event a responsible party does not perform a clean-up action, RCRA does not provide for cost recovery in lieu of specific performance of the equitable remedy. The Seventh Circuit may have ruled differently had Apex Oil's injunction to clean up property been issued under the authority of CERCLA. For questions regarding this Environmental Update, please contact any of the attorneys in Schiff Hardin's Environmental Group. RECENT ENVIRONMENTAL PUBLICATIONS
"Over $100 Million in Federal Recovery Funding Available for Renewable Energy and Energy Efficiency Projects in Illinois," Environmental Update (August 27, 2009) ABOUT SCHIFF HARDIN LLP Schiff Hardin's diverse environmental practice advises clients engaged in a wide variety of industries and commercial endeavors such as electric generation, natural gas distribution and production, chemical manufacturing, auto and auto parts manufacturing, consumer goods manufacturing, real estate development and investments by financial institutions and equity investors. For more information, contact us. ABOUT THE ENVIRONMENTAL GROUP HEADER The owl, a symbol of wisdom, acuity, far-sightedness and perspective, embodies the skills that Sheldon Zabel, our group's founder, instilled in us. The owl was special to Sheldon, and, by using this majestic bird as our group's symbol, it reminds us to keep our practice true to the lessons we were taught — to value the rule of law in all our dealings, to be practical and elegant in the counsel we provide, and to strive for wisdom and far-sightedness as we help our clients navigate the evolving precepts of environmental law.
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