When a Discharge Isn't

Posted on March 8, 2010 by Brian Rosenthal

For all environmental lawyers and especially for business advisors and bankruptcy lawyers, a very important case was decided by the 7th Circuit Court of Appeals in fall 2009. The case concerns the effect of a bankruptcy discharge from a 1986 bankruptcy filing versus an affirmative Resource Conservation and Recovery Act (“RCRA”) clean-up injunction. The question is whether the injunction is a discharged claim in bankruptcy. The Court of Appeals concludes a mandatory injunction to perform clean-up does not equate to an equitable remedy giving rise upon breach to a right to payment, which is the covered equitable remedy subject to discharge.

 

Here, the formerly bankrupt company’s reorganization left it no choice but to have this particular clean-up conducted by a third party at an estimated cost of $150,000,000. The Court found, however, the clean-up order did not result in a right to payment because RCRA does not allow either a demand for clean-up costs or any monetary relief. 

 

Finding that all equitable orders will inevitably require the ordered party to spend money to comply, the Court concludes discharges are limited to matters where the claim gives rise to a right to payment.  Such situations arise where an equitable decree can not be executed and results in a right to seek money damages and not merely those that impose a cost on the defendant.  

 

This case reaches a conclusion contrary to a 6th Circuit case and is distinguishable from the landmark Supreme Court ruling in Ohio v. Kovacs.  In Kovacs a receiver was appointed to take possession of the debtor’s assets so it could obtain money to pay for an ordered clean-up, and the Supreme Court found the receiver, therefore, was seeking money rather than an order that the debtor clean up the contaminated site. 

 

The holding in this 7th Circuit case is certainly one that will likely reverberate around the country for years to come. United States v. Apex Oil Co., Inc., 579 F.3d 734 (7th Cir. 2009).

UPDATE ON THE POULTRY LITIGATION IN OKLAHOMA Poultry litter is not a solid waste under RCRA

Posted on February 26, 2010 by Linda C. Martin

The Oklahoma State Attorney General sued several poultry companies for polluting the Illinois River and its watershed in Eastern Oklahoma as a result of the application and disposal of poultry litter in the watershed. State of Oklahoma v. Tyson Foods, Inc. et. al. Case No. 05-CV-329-GFK(PJC). The suit alleged claims under CERCLA, RCRA, and nuisance among other things. You are referred to the articles posted March 9, 2009 an September 3, 2009 for particulars regarding the claims. 

 

Two weeks before trial, the Cherokee Nation moved to intervene in the case as a necessary party, but the Judge wouldn’t allow it. The Court decided that the damages claims would not be tried, but that the injunctive claims as well as the state penalty claims could be tried with the absence of the Cherokee Nation in the suit. The reasoning was, among other things, that the Cherokee Nation would be potentially prejudiced if the remaining damage claims went forward without it, but that would not be the case if the remaining injunctive claims and state law penalty claims were tried. Although the Cherokee Nation filed an immediate appeal with the Tenth Circuit, it did not ask that the case be stayed pending the outcome of the appeal.

 

The case has now been tried to the Court. It began on September 24, 2009 and only this month concluded with closing arguments. However, during the trial the Court ruled, in response to a Rule 52(c) motion, among other things, that:

  • Poultry litter is an agricultural commodity for which there is both a market and a market value in the watershed.
  • Poultry litter has market value because it can be beneficially used as a fertilizer and soil amendment.
  • The State did not produce sufficient evidence to convince the Court that farmers, ranchers or other applicators of poultry litter in the Illinois River Watershed land-applied poultry litter within the watershed solely to discard it.
  • Under the applicable law and the evidence produced at trial, poultry litter is not a “solid waste” under RCRA, and therefore the State’s RCRA claim was dismissed. 

This ruling is very important because of the focus on nutrient issues under the Clean Water Act Nonpoint Source Pollution. EPA states on its website that “States report that nonpoint source pollution is the leading remaining cause of water quality problems.”  Indeed, EPA has a “National Nutrient Strategy” and is focusing more on these issues than ever before. 

UPDATE ON THE POULTRY LITIGATION IN OKLAHOMA Poultry litter is not a solid waste under RCRA

Posted on February 26, 2010 by Linda C. Martin

The Oklahoma State Attorney General sued several poultry companies for polluting the Illinois River and its watershed in Eastern Oklahoma as a result of the application and disposal of poultry litter in the watershed. State of Oklahoma v. Tyson Foods, Inc. et. al. Case No. 05-CV-329-GFK(PJC). The suit alleged claims under CERCLA, RCRA, and nuisance among other things. You are referred to the articles posted March 9, 2009 an September 3, 2009 for particulars regarding the claims. 

 

Two weeks before trial, the Cherokee Nation moved to intervene in the case as a necessary party, but the Judge wouldn’t allow it. The Court decided that the damages claims would not be tried, but that the injunctive claims as well as the state penalty claims could be tried with the absence of the Cherokee Nation in the suit. The reasoning was, among other things, that the Cherokee Nation would be potentially prejudiced if the remaining damage claims went forward without it, but that would not be the case if the remaining injunctive claims and state law penalty claims were tried. Although the Cherokee Nation filed an immediate appeal with the Tenth Circuit, it did not ask that the case be stayed pending the outcome of the appeal.

 

The case has now been tried to the Court. It began on September 24, 2009 and only this month concluded with closing arguments. However, during the trial the Court ruled, in response to a Rule 52(c) motion, among other things, that:

  • Poultry litter is an agricultural commodity for which there is both a market and a market value in the watershed.
  • Poultry litter has market value because it can be beneficially used as a fertilizer and soil amendment.
  • The State did not produce sufficient evidence to convince the Court that farmers, ranchers or other applicators of poultry litter in the Illinois River Watershed land-applied poultry litter within the watershed solely to discard it.
  • Under the applicable law and the evidence produced at trial, poultry litter is not a “solid waste” under RCRA, and therefore the State’s RCRA claim was dismissed. 

This ruling is very important because of the focus on nutrient issues under the Clean Water Act Nonpoint Source Pollution. EPA states on its website that “States report that nonpoint source pollution is the leading remaining cause of water quality problems.”  Indeed, EPA has a “National Nutrient Strategy” and is focusing more on these issues than ever before.