112 B.R. 513 (S.D.N.Y. 1990), 87 Civ. 8144 , In re Chateaugay Corp.

Docket Nº:87 Civ. 8144 (JES), 88 Civ. 0834 (JES).
Citation:112 B.R. 513
Party Name:In re CHATEAUGAY CORPORATION, Reomar, Inc., The LTV Corporation, et al., Debtors. UNITED STATES of America, Plaintiff, v. CHATEAUGAY CORPORATION, Reomar, Inc., The LTV Corporation, et al., Defendants. STATE OF NEW YORK, Plaintiff, v. LTV STEEL COMPANY, INC., Defendant.
Case Date:March 15, 1990
Court:United States District Courts, 2nd Circuit, Southern District of New York

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112 B.R. 513 (S.D.N.Y. 1990)

In re CHATEAUGAY CORPORATION, Reomar, Inc., The LTV Corporation, et al., Debtors.

UNITED STATES of America, Plaintiff,


CHATEAUGAY CORPORATION, Reomar, Inc., The LTV Corporation, et al., Defendants.




Nos. 87 Civ. 8144 (JES), 88 Civ. 0834 (JES).

United States District Court, S.D. New York.

March 15, 1990

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Rudolph W. Giuliani, U.S. Atty., S.D. N.Y., (Susan P. Johnston, James L. Garrity, Jr., Richard Schwartz, Asst. U.S. Attys., Roger J. Marzulla, Asst. Atty. Gen., Joel M. Gross, Peter Mounsey, Environmental Enforcement Section, Land and Natural Resources Div. U.S. Dept. of Justice, John Wheeler, Rich Robinson, U.S. E.P.A. Office of Compliance and Enforcement Monitoring, of counsel), Robert Abrams, Atty. Gen. of the State of N.Y. (Norman Spiegel, Nancy Stearns, Asst. Attys. Gen., Environmental Protection Bureau, of counsel), New York City, for plaintiff.

Pepper Hamilton & Scheetz, Philadelphia, Pa. (Michael H. Reed, Francis J. Lawall, James S. Lawlor, of counsel), Hughes Hubbard & Reed, (Sandor E. Schick, New York City, Keith Welks, Chief Counsel, Barbara H. Brandon, Director, Western Region, Office of Chief Counsel, Diana J. Stares, Asst. Counsel Dept. of Environmental Resources, Com. of Pa., Harrisburg, Pa., of counsel), for amicus curiae, Com. of Pa.

Davis Polk & Wardwell, (Lewis B. Kaden, Karen E. Wagner, Joan I. Greco, of counsel), Levin & Weintraub & Crames, (Michael J. Crames, Herbert S. Edelman, Edmund M. Emrich, of counsel), New York City, for defendants.

Stroock & Stroock & Lavan, (Lawrence M. Handelsman, Mark A. Speiser, Madelaine Berg, Robert Raskin, of counsel), New York City, for Committee of Unsecured Creditors of the LTV Corp., et al.

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Myerson & Kuhn, (Edgar H. Booth, Peter D. Wolfson, Mary S. Zitwer, Carole Neville, Edward Holtzman, of counsel), New York City, for Equity Sec. Holders Committee of LTV Corp., et al.


SPRIZZO, District Judge.

In these actions, the United States of America and the State of New York ("NYS") seek declaratory judgments as to the dischargeability of environmental claims in the bankruptcy proceeding of defendant LTV Corporation and affiliated corporations (collectively "LTV"). Specifically, the government seeks a judgment declaring that (1) response costs incurred post-confirmation pursuant to the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9601 et seq. (1984 & Supp. V 1987), are not dischargeable claims under the Bankruptcy Code, 11 U.S.C. § 101 et seq. (1988); 1 (2) environmental injunctive obligations are not dischargeable claims; and (3) certain environmental obligations are entitled to an administrative priority. NYS seeks a similar declaratory judgment under federal and state law. Defendants have also moved for summary judgment declaring that all of these contentions are legally incorrect.


LTV is a diversified company primarily involved in steel, aerospace/defense, and energy products. See Joint Statement of Undisputed Facts ("Undisputed Facts") at ¶ 1. The industries in which LTV's subsidiaries are engaged typically generate substantial amounts of hazardous industrial wastes which need to be treated or disposed of on the premises or at an off-site location. See id. at ¶ 3. On July 17, 1986 and thereafter, LTV and sixty-six affiliated corporations filed petitions for reorganization under Chapter 11 of the Bankruptcy Code. See id. at ¶ 1. Since that time over thirty-four thousand proofs of claims have been filed against the debtors, including those filed by the federal government and NYS which seek recovery of amounts owed by LTV and its affiliates for alleged violations of the environmental protection laws.

These motions involve the relationship between the bankruptcy laws and several federal and state statutes which address the environmental cleanup and regulation of hazardous substances, although the primary reliance is placed on CERCLA.


Congress enacted CERCLA in 1980 "to provide for liability, compensation, cleanup, and emergency response to hazardous substances released into the environment." United States v. Reilley Tar & Chemical Corp., 546 F.Supp. 1100, 1111 (D.Minn.1982); see In re The Charter Co., 862 F.2d 1500, 1503 (11th Cir.1989); Dedham Water Co. v. Cumberland Farms Dairy, Inc., 805 F.2d 1074, 1081 (1st Cir.1986). In order to ensure that hazardous materials are removed as promptly as possible, Congress established a multi-billion dollar federal Hazardous Substances Response Trust Fund ("Superfund") from which cleanups of hazardous substances could be made promptly, with the costs of that cleanup being subsequently assessed against the responsible parties. Congress provided for an assessment of liability after the cleanup procedures have been completed in order to avoid the delays that would result from the inevitable litigation over liability. See In re Combustion Equipment Assocs., Inc., 838 F.2d 35, 37 (2d Cir.1988); Wagner Seed Co. v. Daggett, 800 F.2d 310, 315 (2d Cir.1986). Thus, liability under CERCLA is not assessed until after the Environmental Protection Agency ("EPA") 2 investigates a site, decides the response actions which are necessary, and

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determines which potentially responsible parties ("PRPs") will bear the costs. See Combustion Equipment, supra, 838 F.2d at 37.

Under 42 U.S.C. § 9604(a), the EPA may effect removal or remedial action where there is a release or threatened release of a hazardous substance, 3 but may permit this action to be taken by the owner or operator of the facility or by a responsible party if it determines that such action will be taken promptly and properly. See 42 U.S.C. § 9604(a)(1). 4

Before the EPA undertakes a remedial action, it prepares a Remedial Investigation/Feasibility Study ("RI/FS"), selects a remedy, and issues a Record of Decision ("ROD"). See Combustion Equipment, supra, 838 F.2d at 36; 40 C.F.R. § 300.68 (1989). The final agency decision is based on an administrative record developed by the EPA. Once the ROD is issued, the EPA may undertake a remedial action using Superfund money as long as the site is on the National Priority List ("NPL"), although there is no such requirement for a removal action. 5 See State of New York v. Shore Realty Corp., 759 F.2d 1032, 1046-47 (2d Cir.1985).

The costs of any removal or remedial action undertaken by the federal or state government, other necessary costs, and damages for the injury to or loss of natural resources may then be assessed against (1) the owner or operator of a facility; (2) persons who owned or operated a facility at the time hazardous substances were disposed of; (3) persons who arranged for disposal of hazardous substances; and (4) persons who transported such substances. See 42 U.S.C. § 9607(a). Such liability may be imposed if the following elements are met:

(1) Each of the sites where the cleanup occurs is a "facility" as defined by 42 U.S.C. § 9601(9).

(2) A "release" or "a threatened release" of a "hazardous substance" has occurred at the site.

(3) The release or threatened release has caused the United States or another eligible party to incur response costs. 6

See Ascon Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1152-53 (9th Cir.1989); Shore Realty, supra, 759 F.2d at 1043; United States v. Conservation Chemical Co., 619 F.Supp. 162, 184 (W.D.Mo.1985). The statute imposes strict liability; if the above elements are met, a PRP will be liable without a showing that he actually caused the hazardous condition. See id. at 1044. 7

In addition to this remedy, if there is an "imminent and substantial endangerment to the public health or welfare or the environment" from a release or threatened release of a hazardous substance,

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the United States may bring an action to abate the danger or threat. 42 U.S.C.§ 9606(a); see Conservation Chemical, supra, 619 F.Supp. at 191-97. Failure to comply with an order under this section can subject a party to liability for civil penalties. See 42 U.S.C. § 9606(b)(1).

RCRA and Other Statutes

The government also may seek relief under the Resource Conservation and Recovery Act ("RCRA"), 42 U.S.C. § 6901 et seq. (1982 & Supp. V 1987), which governs hazardous wastes from generation through disposal. See Midlantic Nat'l Bank v. New Jersey Dep't of Envtl. Protection, 474 U.S. 494, 505-06, 106 S.Ct. 755, 761-62, 88 L.Ed.2d 859 (1986). Under the RCRA, the EPA may issue orders assessing civil penalties for past or present violations, require compliance with provisions of the act, or commence a civil action for injunctive relief. See 42 U.S.C. § 6928. In addition, the EPA may require an owner or operator or other responsible party to undertake corrective action for releases of hazardous waste. See 42 U.S.C. §§ 6924(v)-(w), 6973.

The government also asserts that it may be entitled to relief under the Toxic Substances Control Act, 15 U.S.C. § 2601 et seq. (1988), the Clean Air Act, 42 U.S.C. § 7401, et seq. (1982 & Supp. V 1987), and the Federal Water Pollution Act, 33 U.S.C. § 1251, et seq. (1982 & Supp. V 1987). These statutes, unlike CERCLA, are regulatory and do not have provisions for the government to remedy a hazardous situation and then seek to hold responsible parties liable.

New York State Law

In addition to the federal environmental laws, NYS may seek relief under state environmental statutes. Under N.Y.Envtl.Conserv.Law § 71-2705 (McKinney 1984 & Supp.1990), violators of the provisions of New York statutes on hazardous...

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