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United States v. Apex Oil Co.

IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ILLINOIS


July 6, 2006

UNITED STATES OF AMERICA, PLAINTIFF,
v.
APEX OIL COMPANY, INC. DEFENDANT.

The opinion of the court was delivered by: Herndon, District Judge:

MEMORANDUM AND ORDER

I. Introduction

Before the Court is a motion submitted by the government seeking partial summary judgment on its second cause of action. (Doc. 18.) Specifically, the government moves for a declaration pursuant to 28 U.S.C. § 2201 that the injunctive relief it seeks in its first cause of action does not constitute a dischargeable "claim" under the Bankruptcy Code. (Id.) Defendant Apex Oil Company ("Defendant") disagrees. (Doc. 32.) It maintains that the injunction the government requests does amount to a claim under the Code, and further that this claim was discharged in earlier bankruptcy proceedings. (Id.) For the reasons below, the Court grants the government's motion.

II. Background

Defendant is an successor company to corporate entities - both named Clark Oil and Refining Corporation - that owned and operated a refinery and associated pipelines in Hartford, Illinois (the "refinery"). In December 1987, these and other affiliated entities filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code.*fn1 On August 16, 1990, the U.S. Bankruptcy Court for the Eastern District of Missouri entered an Order of Confirmation discharging the consolidated debtors and their estates from any and all claims, debts, and liens arising before the confirmation date.

Nearly fifteen years later, this suit followed. On April 5, 2005, the government sued Defendant, alleging that releases from the refinery pose an "imminent and substantial endangerment" to health or the environment. (Doc. 1.) The government seeks two things: injunctive relief pursuant to theResource Conservation and Recovery Act ("RCRA"), 42 U.S.C. § 6973(a) to abate the alleged endangerment, and a declaration under 28 U.S.C. § 2201 affirming that such relief was not discharged.*fn2 (Id.) The instant motion for partial summary judgment relates only to the second, or declaratory-relief, cause of action.*fn3

III. Analysis

A. Summary Judgment Standard

Summary judgment is proper where the pleadings and affidavits, if any, "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c);Oats v. Discovery Zone, 116 F.3d 1161, 1165 (7th Cir. 1997) (citingCelotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)). The movant bears the burden of establishing the absence of fact issues and entitlement to judgment. Santaella v. Metropolitan Life Ins. Co., 123 F.3d 456, 461 (7th Cir. 1997) (citing Celotex, 477 U.S. at 323). In reviewing a summary judgment motion, a court does not determine the truth of asserted matters, but rather decides whether there is a genuine factual issue for trial. Celex Group, Inc. v. Executive Gallery, Inc., 877 F. Supp. 1114, 1124 (N.D. Ill. 1995). The Court must consider the entire record, drawing reasonable inferences and resolving factual disputes in favor of the non-movant. Regensburger v. China Adoption Consultants, Ltd., 138 F.3d 1201, 1205 (7th Cir. 1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986)).

B. A "Claim" Under the Bankruptcy Code

With respect to the government's second cause of action, the issue is whether the injunctive relief sought by the government would amount to a "claim" discharged in the Chapter 11 proceedings participated in by Defendant's predecessors. Backing up a step, under the Bankruptcy Code, and to enable debtors to start fresh after a bankruptcy, "debts" are discharged in Chapter 11 proceedings.

11 U.S.C. § 727. The Code defines a "debt" as "liability on a claim." 11 U.S.C. § 101(12). A "claim," in turn, is defined as a

(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, legal, equitable, secured, or unsecured; or

(B) 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).

C. Right to Payment

Relevant to the instant motion is the language in 11 U.S.C. § 101(5)(B) above that a right to an equitable remedy for breach of performance constitutes a claim dischargeable in bankruptcy "if such breach gives rise to a right to payment." The government here seeks an equitable remedy for Defendant's alleged breach of a statute.*fn4 (Doc. 1.) Under 11 U.S.C. § 101(5)(B), then, in order to ascertain whether this equitable relief was in fact discharged, it must be determined whether the relief would give rise to a right to payment. Before this can be decided, however, it must first be determined whose "right to payment" matters, the government's or the breaching party's. If 11 U.S.C. § 101(5)(B) refers to the government's right to payment, then the discharge question hinges on whether 42 U.S.C. § 6973(a) allows the government to seek some form of monetary damages. If 11 U.S.C. § 101(5)(B) refers to the breaching party's right to payment, in contrast, then the discharge question depends on whether section 6973(a) allows Defendant to pay in lieu of compliance with an injunction.

The cases strongly support the position that the "right to payment" in U.S.C. § 101(5)(B) is the government's. In Ohio v. Kovacs, 469 U.S. 274 (1985), for example, it was the state of Ohio - not the party alleged to be in breach - whose ability to convert an injunction into a monetary sum was deemed relevant by the Supreme Court. Kovacs, 469 U.S. at 278-79.Likewise in AM Int'l v. Datacard Corp., 106 F.3d 1342, 1348 (7th Cir. 1997), the Seventh Circuit found that the discharge question turned squarely on whether the non-breaching party could convert the district court's order into a right to payment. Id. The same can be said about the In re Chateagay Corp., 944 F.2d 977 (2d Cir. 1991) and In re Torwico Electronics, Inc., 8 F.3d 146 (3d Cir. 1993) decisions. In those cases, it was the government, not the breaching party, whose ability to obtain monetary damages courts deemed significant. See In re Torwico, 8 F.3d at 151(finding, in determining whether an injunction was dischargable, that the relevant issue was whether the state has a right to payment); In re Chateagay, 944 F.2d at 1008 n.2 ("[A]n order to clean up a site, to the extent that it imposes obligations distinct from any obligation to stop or ameliorate ongoing pollution, is a 'claim' if the creditor obtaining the order had the option . . . to do the cleanup work itself and sue for response costs, thereby converting the injunction into a monetary obligation." (emphasis added)); see also In re Industrial Salvage, Inc., 196 B.R. 784, 787 (Bankr. S.D. Ill. September 29, 1994) (noting that a claim cannot be discharged under 11 U.S.C. § 101(5)(B) if "the government has the option of cleaning up the pollution itself and seeking reimbursement from the debtor" (emphasis added)); 2 Alan N. Nesnick & Henry J. Sommer, Collier on Bankruptcy §101.05 (15th ed. rev. 2004) ("[W]hen the state neither seeks money nor has a right to payment, but only exercises its right to force a debtor to comply with the debtor's continuing obligation under state law to dispose of hazardous waste, the state's demand that the debtor remedy the hazard is not a claim of the state." (emphasis added)).

In opposing this position, the government relies on a lone case, In re Udell, 18 F.3d 403 (7th Cir. 1994), which it argues supports the claim that it is exclusively the breaching party's ability to pay that is relevant under 11 U.S.C. § 101(5)(B). That is not quite right. While the court there did cite an Indiana appellate decision in which a breaching party's right to pay was considered, id. at 408-09, and further noted, in analogizing to the holding in the state case, that "Udell [the breaching party] cannot escape the restrictive covenant by paying $25,000 in liquidated damages," id. at 409, the Udell court did not hold, as the government urges, that a non-breaching party's ability to convert an injunction into a monetary remedy is irrelevant in considering whether that injunction gives rise to a claim under 11 U.S.C. § 101(5)(B). To the contrary; in addition to citing approvingly to several decisions in which it was the non-breaching party's ability to convert the injunction that was key, id. at 407-08, the Udell court repeatedly framed its analysis in terms of the non-breaching, not the breaching, party's rights. See id. at 408, 409, 410 ("The former 'is a "claim" if the creditor obtaining the order had the option, which CERCLA confers, to do the cleanup work itself and sue for response costs, thereby converting the injunction into a monetary obligation.' The latter is not a claim because the creditor has 'no option to accept payment in lieu of continued pollution' - i.e., the injunction does not give rise to a right to payment. . . . We further find that Carpetland's [the non-breaching party's] right to an injunction does not give rise in any other sense to the payment of liquidated damages." (citations omitted) (emphasis added)). At the very most, then, Udell stands for the proposition that either a breaching party's right to pay or a non-breaching party's right to payment can give rise to a claim under 11 U.S.C. § 101(5)(B). The Court finds the government's argument that only the breaching party's right to pay may be considered to be unfounded.

D. Whether the Injunction That Would Issue Here Is Dischargeable

That issue decided, the question then becomes whether the government can convert an injunction issued pursuant to 42 U.S.C. § 6973(a) into a right to payment.*fn5 On its face, that statute offers no explicit suggestion that a right to payment might be available. Rather, the only location within the statute where such a right could potentially be situated (and the place Defendant urges the Court to situate that right) is in italicized portion of the following sentence:

Notwithstanding any other provision of this Act, upon receipt of evidence that the past or present handling, storage, treatment, transportation or disposal of any solid waste or hazardous waste may present an imminent and substantial endangerment to the health of the environment, the Administrator may bring suit on behalf of the United States in the appropriate district court against any person (including any past or present generator, past or present transporter, or past or present owner or operator of a treatment, storage, or disposal facility) who has contributed or who is contributing to such handling, storage, treatment, transportation or disposal, to restrain such person from such handling, storage, treatment, transportation, or disposal, to order such person to take such other action as may be necessary, or both. 42 U.S.C. § 6973(a).

In determining whether this language allows the government to obtain monetary relief, the Supreme Court's decision in Meghrig v. KFC Western, Inc., 516 U.S. 479, 483 (1996) is key. There, the Court considered a very similar issue, namely whether 42 U.S.C. § 6972(a) - RCRA's citizen-suit provision and 42 U.S.C. § 6973(a)'s close statutory cousin - allows a private party to obtain a monetary remedy. In finding to the contrary, the Court held that section 6972(a)'s "as may be necessary" language (which mirrors section 6973(a)'s wording) fails to contemplate the award of past cleanup costs or other monetary damages. Meghrig, 516 U.S. at 488. In its words, given that section 6972(a) authorizes district courts "to restrain any person who has contributed or who is contributing to the past or present handling, storage, treatment, transportation, or disposal of any solid or hazardous waste . . . , to order such person to take such other action as may be necessary, or both,"

It is apparent . . . that RCRA's citizen suit provision is not directed at providing compensation for past cleanup efforts. Under a plain reading of this remedial scheme, a private citizen suing under § 6972(a)(1)(B) could seek a mandatory injunction, i.e., one that orders a responsible party to "take action" by attending to the cleanup and proper disposal of toxic waste, or a prohibitory injunction, i.e., one that "restrains" a responsible party from further violating RCRA. Neither remedy, however, is susceptible of the interpretation adopted by the Ninth Circuit, as neither contemplates the award of past cleanup costs, whether these are denominated "damages" or "equitable restitution." Meghrig, 516 U.S. at 484; see also Avondale Fed. Sav. Bank v. Amoco Oil Co., 170 F.3d 698 (7th Cir. 1999) (following Meghrig in denying an award of cleanup costs under 42 U.S.C. § 6972).

The Meghrig decision is particularly important here because of the similarities between U.S.C. § 6972(a) and 42 U.S.C. § 6973(a). In pertinent part, in fact, these statutes are "nearly identical." Connecticut Coastal Fisherman's Ass'n v. Remington Arms Co., 989 F.2d 1305, 1315 (2d Cir. 1993). The differences are slight; while the former permits a private citizen to sue and the latter authorizes suits by the EPA Administrator, with respect to the language in which Defendant hopes to locate a right to payment - the "as may be necessary" wording - they are the same. See 42 U.S.C. §§ 6972(a), 6973(a). Each provides district courts with only two powers: the power to restrain a party from acting and the power to order a party to "take such other action as may be necessary." Id. Neither grants a court any other relevant authority. Id.

Defendant, for its part, attempts to distinguish Meghrig by arguing that "a court's equitable powers are broader and more flexible when the public interest is at stake in a governmental enforcement action than when a private party sues." (Doc. 32, pp. 14-15 (citing United States v. Lane-Labs USA, Inc., 427 F.3d 219 (3d Cir. 2005))). Setting aside the fact that the sole case Defendant cites on this point deals with two distinctly worded Federal Food, Drug and Cosmetic Act (FDCA), 21 U.S.C. § 301 et seq., statutes, the Court finds this argument foreclosed by the identical operative language in 42 U.S.C. §§ 6972(a) and 6973(a). An "elemental canon" of statutory construction is that "where a statute expressly provides a particular remedy or remedies, a court must be chary of reading others into it." TAMA v. Lewis, 444 U.S. 11, 19 (1979). By fashioning an otherwise-invisible distinction between 42 U.S.C. §§ 6972(a) and 6973(a) and reading a right to pursue monetary damages into the latter, but not the former, the Court would be in grave danger of violating that principle.*fn6

Therefore, for the reasons above the Court finds that Meghrig's logic should be extended to 42 U.S.C. § 6973(a). Consequently, the Court finds that section 6973(a) does not allow the government to seek pecuniary relief here, and thus that the injunction the government seeks could not have been discharged in earlier bankruptcy proceedings.*fn7

V. Conclusion

Thus the Court GRANTS the government's motion for partial summary judgment. (Doc. 18.) Pursuant to 28 U.S.C. § 2201, the Court hereby DECLARES that the injunction sought by the government in its first cause of action could not have been discharged in the bankruptcy proceedings entered into by Defendant's predecessors.

IT IS SO ORDERED.

David Rherndon United States District Judge


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