Opinion ID: 768674
Heading Depth: 2
Heading Rank: 2

Heading: The Oil Companies' CERCLA Claims Arose Post-Petition

Text: 23 The lower courts correctly found, and the parties do not appear to dispute, that if the Oil Companies' CERCLA claims arose before the filing of the petition on August 31, 1976, the claims were discharged in Duplan's bankruptcy proceeding. Appellants contend, however, that the lower courts incorrectly concluded that the claims arose post-petition. We disagree. 24 A claim arises for purposes of bankruptcy when the relationship between the debtor and the creditor contained all of the elements necessary to give rise to a legal obligation . . . under the relevant non-bankruptcy law. Chateaugay II, 53 F.3d at 497 (quoting In re Nat'l Gypsum Co., 139 B.R. 397, 405 (N.D. Tex. 1992)). 8 25 Both courts below correctly held that under Chateaugay II, CERCLA claims arise for purposes of bankruptcy at the earliest on the date that CERCLA became effective, December 11, 1980. In Chateaugay II, this Court held that claims against the bankrupt debtor under the Coal Act for contribution to a health and benefit fund for retired coal miners (the Fund), were not discharged as pre-petition claims because the claims arose upon the enactment of the Coal Act, which (like CERCLA in this case) was enacted after the petition was filed but before confirmation of the plan. The Court first noted that: 26 the existence of a valid bankruptcy claim depends on (1) whether the claimant possessed a right to payment, and (2) whether that right arose before the filing of the petition. 27 . . . 28 A claim will be deemed pre-petition when it arises out of a relationship recognized in, for example the law of contracts or torts. A claim exists only if before the filing of the bankruptcy petition, the relationship between the debtor and the creditor contained all of the elements necessary to give rise to a legal obligation ... under the relevant non-bankruptcy law. 29 Id. at 497 (internal quotations omitted). In determining whether the claim existed pre-petition, the Court analyzed the relationship of the parties and found that the obligations under the Coal Act were exclusively statutory in origin, newly imposed, and could not be considered payment for pre-petition labor or a revival of old contractual obligations. See id. After noting that the claims simply did not exist before the enactment of the Coal Act, the Court held: 30 [W]here there is no legal relationship defined at the time of petition, that is, where the statute imposing the liability has not been enacted, it would be impossible to find even the remotest 'right to payment.' Therefore, LTV's Coal Act obligations do not represent pre-petition claims that must be disallowed as untimely. 31 Id. (quoting In re Chateaugay Corp., 154 B.R. 416, 419 (S.D.N.Y. 1993)) (internal citations omitted). 32 As the District Court observed, [t]here is nothing in Chateaugay II that indicates that its principle should not be applied in the environmental context. In re Duplan, 229 B.R. 609, 610 (S.D.N.Y. 1999). In fact, the Chateaugay II court relied, in part, on Matter of Penn Central Transportation Co., 944 F.2d 164 (3d Cir. 1991), a case under the Act holding that a clean-up claim under CERCLA could [not] exist prior to the enactment of the statute, even though the claim admittedly was based on pre-petition activities. Chateaugay II, 53 F.3d at 497 (discussing Penn Central, 944 F.2d at 167-68). In Penn Central, the release or threatened release of hazardous substances by the debtor occurred before and during the bankruptcy proceeding, but CERCLA was not enacted until after the consummation date. The Penn Central court held that: 33 it was not until the passage of CERCLA that a legal relationship was created between the petitioners and [the debtor] relevant to the petitioners' potential causes of action such that an interest could flow. . . . 34 Here, because CERCLA had not yet been enacted, the petitioners lacked this cause of action against [the debtor] prior to the Consummation Date. 35 944 F.2d at 168. 36 Moreover, CERCLA, like the Coal Act, created new and unique obligations arising out of previous conduct. Just as the Coal Act did not codify existing obligations arising out of the pre-petition labor of former coal miners, see Chateaugay II, 53 F.3d at 497 ([T]he existence of a prior contractual liability for retiree health benefits . . . does not render pre-petition the later statutory imposition of retiree health care obligations by Congress.) (citation omitted), CERCLA did not codify existing liability for property damage, contribution and restitution, see Bedford Affiliates v. Sills, 156 F.3d 416, 427 (2d Cir. 1998) (In enacting . . . a statutory right of contribution[,] Congress created a statutory settlement scheme. The scheme was put in place to aid the expeditious resolution of environmental claims. . . . [I]nstituting common law restitution and indemnification actions in state court would bypass this carefully crafted settlement system.); Olin v. United States Dep't of the Interior, 880 F.2d 432, 459-61 (D.C. Cir. 1989) (concluding that CERCLA does not cover damages to private property). Rather, CERCLA created a new scheme of liability geared toward cleaning-up contaminated property as quickly as possible. See Bedford Affiliates, 156 F.3d at 423 (Potentially responsible persons are held strictly liable for, among others, necessary cleanup costs 'incurred by any other person consistent with the national contingency plan.') (quoting CERCLA § 107(a)(4)(B), 42 U.S.C. § 9607(a)(4)(B)); CMC Heartland Partners v. Union Pac. R.R. (Matter of Chicago, Milwaukee, St. Paul & Pac. R.R.), 3 F.3d 200, 201 (7th Cir. 1993) ([CERCLA] . . . seek[s] to protect public health and the environment by facilitating the cleanup of environmental contamination and imposing costs on the parties responsible for the pollution.). Claims under CERCLA simply did not exist before CERCLA's enactment on December 11, 1980. See Chateaugay II, 53 F.3d at 497. 9 37 Duplan filed its petition on August 31, 1976, and the Oil Companies' CERCLA claims against Duplan arose at the earliest on December 11, 1980. The Oil Companies' CERCLA claims therefore arose post-petition. 38