420 Mass. 115 | Mass. | 1995
The significant issue raised in this appeal is when does a cause of action for environmental cleanup costs under G. L. c. 21E (1992 ed.) constitute a “claim” subject to discharge under the United States Bankruptcy Code. The plaintiff, Reynolds Brothers, Inc. (Reynolds), is the beneficial owner of a parcel of land located at 91-99 Jackson Street in Canton (site). The site had been previously owned or occupied by the defendants, Texaco, Inc. (Texaco), and Prevett Oil Co., Inc. (Prevett). Following the discovery of oil contamination at the site, the plaintiff commenced this action pursuant to G. L. c. 21E, § 5 (a) (1) and (5), seeking damages and a declaration of liability for future costs from the defendants whom the plaintiff alleges contributed to the contamination.
We begin by setting out the relevant facts. The site at issue has a long history of use as an oil storage facility. In the 1930s, a previous owner, Deane Coal Company, Inc. (Deane Coal), installed four oil storage tanks on the site. During the
In August, 1982, the Canton board of health discovered oil contamination in a drainage ditch located near the site. On November 9, 1982, after investigations by the Canton board of health and the Department of Environmental Quality Engineering (DEQE),
In 1985, the plaintiff retained Gale Engineering Company (Gale) to evaluate the site. Following its investigation, Gale recommended that the plaintiff either remove and dispose of all contaminated soils, or contain the area. Gale also noted in its report that soil contamination had increased significantly since 1982, and attributed this condition to the site’s “contin
In June, 1987, the plaintiff retained Costello Dismantling Company to clean, remove, and dispose of two of the site’s oil tanks. Approximately one year later, the remaining two tanks were removed. According to the plaintiff, between September and November, 1988, it removed 440 tons of contaminated soil, incurring over $94,500 in cleanup costs. In additian, the plaintiff alleges that it will continue to incur significant response costs in connection with the remediation of the contaminated site.
On April 12, 1987, Texaco filed a Chapter 11 petition for bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York. The court set a March 15, 1988, deadline for the filing of claims against Texaco (bar date). Texaco notified potential claimants of this bar date by publication in the Wall Street Journal and New York Times newspapers. On March 23, 1988, the Bankruptcy Court confirmed Texaco’s plan of reorganization, and discharged all prepetition claims.
1. "Claims” under the Bankruptcy Code. The plaintiff argues that its cause of action for environmental cleanup costs under c. 21E did not constitute a “claim” within the meaning of the Bankruptcy Code at the time of Texaco’s bankruptcy proceedings. The Bankruptcy Code broadly defines a “claim” as a “right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured.” 11 U.S.C. § 101 (5) (1988). Under Chapter 11 of the Bankruptcy Code, a debtor filing for reor
Although we have not before been faced with the issue of when a c. 21E cause of action constitutes a “claim” under the Bankruptcy Code, other courts have confronted a similar issue involving claims under CERCLA,
The “fair contemplation” test provides that “all future response and natural resource damages cost based on prepetition conduct that can be fairly contemplated by the parties at the time of [d]ebtors’ bankruptcy are claims under the [Bankruptcy] Code.” In re Jensen, supra at 930, quoting In re Nat’l Gypsum Co., supra at 409. Factors relevant to whether the claims are fairly contemplated include: “knowledge by the parties of a site in which a PRP [potentially responsible party] may be liable, NPL [National Priorities List] listing, notification by EPA [the Environmental Protection Agency] of PRP liability, commencement of investigation and cleanup activities, and incurrence of response costs.” In re Nat’l Gypsum Co., supra at 408.
The United States Court of Appeals for the Seventh Circuit employed a similar approach in In re Chicago, Milwaukee, St. Paul & Pac. R.R., supra at 787. In that case, the United States Court of Appeals for the Seventh Circuit an
The record clearly establishes that the plaintiff “fairly contemplated” its claim under c. 21E prior to Texaco’s bankruptcy proceedings. Texaco filed for bankruptcy protection in April, 1987. The plaintiff, however, was aware of Texaco’s potential liability for the environmental cleanup of the oil tank facility long before that date. As early as November 9, 1982, the DEQE issued a Notice of Responsibility to the plaintiff regarding the oil contamination at the site. On January 19, 1983, the DEQE cited the plaintiff for noncompliance with cleanup and containment requirements. During 1982 through 1984, the Canton board of health repeatedly informed the plaintiff and its lessee, Prevett, of the need to clean the contaminated site. In 1985, the plaintiff retained an engineering firm which confirmed the soil contamination and identified the oil storage tanks as the source of contamination. In its report to the plaintiff, the engineering firm recommended either removal and disposal of the contaminated soil, or containment of the area. In addition, the report stated that “soil contamination had increased significantly since the initial [DEQE] investigation in August and September 1982.”
To support its argument that its c. 21E claim is not a “claim” for purposes of bankruptcy, the plaintiff relies on the right to payment approach adopted in United States v. Union Scrap Iron & Metal, 123 B.R. 831 (Bankr. D. Minn. 1990). In Union Scrap, the Environmental Protection Agency (EPA) sought to recover CERCLA response costs from Taracorp Industries, Inc. (Taracorp). Id. at 832. Taracorp moved to dismiss the suit claiming that its Chapter 11 reorganization barred the EPA’s claims. Id. Taracorp argued that the release or threatened release of any hazardous substance which occurred prior to the filing of its bankruptcy petition was sufficient to create a legal obligation constituting a claim in bankruptcy. Id. at 835-836. The court rejected this approach, holding instead that the EPA did not have a CERCLA claim for purposes of bankruptcy until it actually incurred the response costs. Id. at 838. The court based its decision, not only on the fact that the EPA had not yet incurred response costs, but also on the fact that the EPA had no actual or presumed knowledge that Taracorp had any connection with the contaminated site until four years after the close of Taracorp’s bankruptcy.
3. Waiver. We further reject the plaintiff’s argument that Texaco waived the affirmative defense of discharge in bankruptcy by failing to include this defense in its original answer. The plaintiff initially named Texaco Overseas Holdings, Inc., as defendant in this case. After discovering that the plaintiff sued the wrong party, the parties agreed to substitute Texaco, Inc., as the proper defendant, and entered into a stipulation of substitution which anticipated the possibility that Texaco would raise additional affirmative de
4. Continuing releases. The plaintiff further contends that Texaco’s reorganization plan does not bar its claims because there are continuing releases
Accordingly, we affirm the summary judgment.
So ordered.
The plaintiff also asserted claims of negligence, nuisance, and trespass.
The denial of the plaintiff’s motion is not the subject of this appeal.
The judge also granted Texaco’s summary judgment against Prevett on its cross claim for contribution on the same basis. Prevett did not appeal from this ruling.
The Department of Environmental Quality Engineering (DEQE) is the predecessor agency of the present Department of Environmental Protection (DEP).
During 1982 to 1984, health authorities from the Canton board of health advised the plaintiff and its lessee, Prevett, of the need to clean the contaminated site.
Prepetition claims are those claims which arose prior to April 12, 1987, the date Texaco filed its petition for bankruptcy protection.
CERCLA refers to the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601-9675 (1988 & Supp. 1990).
The plaintiffs contention that it did not learn of the extent of its potential liability until after the close of Texaco’s bankruptcy proceedings is not supported by the record. In its 1985 report, the engineering firm estimated the cost for removal and proper disposal of all contaminated soils to be between $150,000 and $200,000.
The plaintiff also argues that its claim did not arise until 1988 or 1989 when the DEP imposed obligations on the plaintiff to clean the site. The record clearly establishes that the DEQE, DEP’s predecessor, imposed obligations on the plaintiff as early as 1982. Further, G. L. c. 21E, § 4 (1992 ed.), provides a private right of action in favor of any person who undertakes the removal of oil or hazardous materials, and who seeks to recover its response costs from the person liable for the contamination. Griffith v. New England Tel. & Tel. Co., 414 Mass. 824, 826 (1993). This private right of action exists regardless of any DEP involvement.
Taracorp did not own the hazardous site at issue in United States v. Union Scrap Iron & Metal, 123 B.R. 831, 833 (Bankr. D. Minn. 1990). Rather Union Scrap owned the site, and processed used batteries for Taracorp.
The relationship test set out In re Chateaugay Corp., 944 F.2d 997, 1005 (2d Cir. 1991), and relied on by the motion judge below, also compels the conclusion that the plaintiff had a claim dischargeable in bankruptcy. Under this approach, unincurred response costs are “claims” dis-chargeable in bankruptcy, so long as a release or threatened release of hazardous wastes occurs prepetition, and the relationship between the parties provides sufficient contemplation” of the “ultimately maturing payment obligations.” Id. The Chateaugay court found that the regulatory relationship between the debtor and the EPA was sufficient to bring into contemplation the nature of response costs that would be incurred, and to
Under the relationship test, the plaintiff clearly had a “claim” dis-chargeable in bankruptcy. Texaco and its predecessor, White Fuel, owned or operated the site from 1962 to 1979. Texaco did not file for bankruptcy until April, 1987. Thus, any contamination attributable to Texaco occurred prepetition. Further, like the regulatory agency relationship in Chateaugay, the relationship between the plaintiff and Texaco was such that the plaintiff was aware of Texaco’s potential liability prior to the bankruptcy proceedings. The plaintiff knew of the contamination at the site, knew that Texaco had been a previous owner, and knew that Texaco had used the site as an oil storage facility.
The reorganization plan provided: “The Claims of the [Department of Energy] and any Environmental Claims that are not Allowed Claims will not be discharged, will survive the Reorganization Cases, will be resolved in the judicial or administrative tribunals in which such Claims would have been determined as if the Reorganization Cases had not been commenced, and the amount of such Claims and the respective holder’s rights related thereto will be determined as if the Reorganization Cases had not been commenced, whether or not a proof of claim in respect thereto is filed.” The plan defined “Environmental Claims” as “any Claims which have been or may be asserted by any governmental unit arising under varipus federal or similar statutes regarding environmental protection and related legislation, rules and regulations.”
The plaintiff’s argument that Texaco is estopped from raising the defense of discharge in bankruptcy because of its conduct throughout the litigation is also without merit.
General Laws c. 21E, § 2 (1992 ed.), defines a “release” as “any spilling, leaking, pumping, pouring, emitting, emptying, discharging, injecting, escaping, leaching, dumping or disposing into the environment . . . .”
The plaintiff argues for the first time on appeal that its claims could not have been discharged because it did not receive proper notice of Texaco’s bankruptcy proceedings. Since there is no evidence in the record that the plaintiff raised this argument below, we do not reach this issue. See Commissioner of Correction v. McCabe, 410 Mass. 847, 850 n.7 (1991); Edgar v. Edgar, 406 Mass. 628, 629 (1990); Petition for Revocation of a Judgment for Adoption of a Minor, 393 Mass. 556, 563 n.12 (1984).
Because we affirm the summary judgment, we need not address Texaco’s arguments relating to the indemnification agreement and loches.