Environmental Claims: Twenty Years Later

In re Solitron Devices, Inc., 510 B.R. 890 (Bankr. S.D. Fla. 2014) -

A Chapter 11 debtor moved to reopen its bankruptcy case more than 15 years after it was closed in order to enforce the plan confirmation order to prevent claims by a state environmental agency and other potentially responsible parties for clean-up costs at a landfill.

The threshold issue was whether the state environmental agency (NYSDEC) had a "claim" that could have been discharged. Section 101 of the Bankruptcy Code defines "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 ..." The court noted that the 11th Circuit held in the context of a products liability case that "claims" should be read broadly to include all legal obligations "no matter how remote or contingent."

The 2d Circuit addressed contingent claims for future clean-up costs in the frequently cited case of In re Chateaugay Corp, 944 F.2d 997 (2nd Cir. 1991). In that case the debtor gave notice to the EPA in all 50 states and the District of Columbia of contingent environmental claims. The EPA filed claims totaling $32 million for response costs under CERCLA at 14 sites. The EPA determined that this was a non-exhaustive list of sites, but did not file contingent claims with respect to potential sites for future clean-up costs.

The debtor's plan sought to discharge all claims for pre-petition conduct, whether the EPA knew about the existence of the claims or not. In concluding that response expenses incurred post-petition from pre-petition conduct could be discharged, the 2d Circuit found that there was sufficient contemplation of those claims. The gleaned from Chateaugay is that the "agencies need to be capable of fairly contemplating any unmatured contingent claims at the time of the bankruptcy." Generally courts have taken a very expansive view of what can be "fairly" contemplated.

The events leading up to this case were as follows:

1961 - 1987: The debtor operated a manufacturing plant facility in Tappan within five miles of a Clarkstown landfill. November 1979: NYSDEC sent the debtor a letter stating that it had been "cited on October 30, 1979 for delivering a 'dumpster with refuse' from its Tappan facility to the Clarkstown landfill on October 27, 1979." June 1989: The landfill was listed in the state registry of inactive hazardous waste disposal...