RCRA Clean-Up Injunction Is Not Dischargeable in Bankruptcy

By: Christopher J. Palmese
St. John’s Law Student
American Bankruptcy Institute Law Review Staff
 
The Federal Resource Conservation and Recovery Act (the “RCRA”) allows the government and private citizens to force parties responsible for the “handling, storage, treatment, transportation or disposal of any solid waste or hazardous waste” to take appropriate action to prevent the potential dangers posed by materials that may “present an imminent and substantial endangerment to health or the environment”.[1] In 2008, the district court for the Southern District of Illinois awarded the Environmental Protection Agency an injunction under section 6973 of the RCRA that ordered Apex Oil Corp. Inc. (“Apex”) to mitigate groundwater contamination at a site where Apex’s corporate predecessor had caused millions of gallons of oil to be trapped underground.
 
In United States v. Apex Oil Co.,[2] Apex appealed the granting of that injunction arguing that because the injunction required it to spend money to clean up the site, it was a debt and therefore was discharged in its corporate predecessor’s bankruptcy.[3]
 
In 1987, Apex Oil and most of its subsidiaries filed for chapter 11 protection.[4] In corporate chapter 11 proceedings debts that arose before the date of confirmation are discharged.[5] Rejecting Apex’s argument, the court concluded that the cleanup injunction did not grant the E.P.A. the right to receive money damages, and was therefore not a debt that arose before the date of confirmation. As such, the cleanup injunction was not discharged.[6] 
 
In deciding that the injunction was not discharged, the Seventh Circuit looked to the definitions of relevant terms provided in 11 U.S.C. §101.[7] Upon confirmation of a plan, a debtor is discharged from “any debt that arose before the date of such” confirmation.[8] Debt is defined as a “liability on a claim,”[9] and claim is defined as either a “right to payment”[10] or a “right to an equitable remedy for breach of performance if such breach gives rise to a right to payment”.[11] This decision implicates the phrase “gives rise to a right to payment”. Whether the injunction for specific performance entitled the government to a right to payment or only to specific performance depended on the form of relief sought and authorized under RCRA section 6973.[12] Because the government in Apex Oil Co. sought and was only entitled to receive specific performance, i.e. the cleanup of the site, the injunction did not give rise to a right to payment and was therefore not a debt that could have been discharged in Apex’s predecessor’s bankruptcy.[13] 
 
In its ruling, the Seventh Circuit distinguished the Supreme Court’s holding in Ohio v. Kovacs,[14] where an equitable obligation to clean up a contaminated site was deemed a right to payment and therefore, dischargeable in bankruptcy.[15] In Kovacs, because Ohio sought, and was entitled to receive, money to achieve the cleanup, the court held that the cleanup injunction had been converted in to an obligation to pay money. Thus, the injunction did give rise to a right to payment and was therefore dischargeable.[16]
 
However, Apex Oil Co. shows that where the plaintiff is seeking only specific performance and, more importantly, where the law does not authorize a money judgment, an injunction for specific performance will not be dischargeable in bankruptcy proceedings. 


[1] 42 U.S.C. § 6973 (2006).
[2] 579 F.3d 734 (7th Cir. 2009). 
[3] United States v. ApexOilCo., 579 F.3d 734,737 (7th Cir. 2009).
[4] United States v. Apex Oil Co., No. 05-CV- 242- DRH, 2008 WL 2945402, at *1 (S.D. Ill. July 28, 2008).
[5] 11 U.S.C. § 1141(d)(1)(A) (2006).
[6] United States v. ApexOilCo., 579 F.3d 734,737 (7th Cir. 2009).
[7] Id
[8] 11 U.S.C. § 1141(d)(1)(A) (2006).
[9] 11 U.S.C. § 101(12) (2006).
[10] 11 U.S.C. § 101(5)(A) (2006).
[11] 11 U.S.C. § 101(5)(B) (2006).
[12] See Ohio v. Kovacs, 469 U.S. 274, 283 (1985). 
[13] United States v. ApexOilCo., 579 F.3d 734, 737 (7th Cir. 2009). 
[14] 469 U.S. 274 (1985).
[15] Apex Oil Co.,579 F.3d at 738
[16] Kovacs, 469 U.S. at 282.