Boston and Maine v. Massachusetts Bay Transp., 09-1185.

• Citation: 587 F.3d 89
• Decision Date: 24 November 2009
• Docket Number: No. 09-1185.,09-1185.
• Parties: BOSTON AND MAINE CORPORATION, Plaintiff, Appellant, v. MASSACHUSETTS BAY TRANSPORTATION AUTHORITY, Defendant, Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

587 F.3d 89

BOSTON AND MAINE CORPORATION, Plaintiff, Appellant, v. MASSACHUSETTS BAY TRANSPORTATION AUTHORITY, Defendant, Appellee.

No. 09-1185.

United States Court of Appeals, First Circuit.

Heard October 8, 2009.

Decided November 24, 2009.

Gene C. Schaerr with whom Eric L. Hirschhorn, Andrew C. Nichols, Winston & Strawn LLP, and Robert B. Culliford were on brief for the appellant.

John M. Stevens with whom Douglas M. McGarrah, Cicely O. Parseghian, Foley Hoag LLP, and Thomas F. Scott Darling III were on brief for the appellee.

Before LYNCH, Chief Judge, TORRUELLA and HOWARD, Circuit Judges.

LYNCH, Chief Judge.

On June 30, 1983, the Boston and Maine Corporation ("B & M"), a railroad operator, was discharged from bankruptcy by a Consummation Order stating that it was "free and clear of all claims." The Order was pursuant to § 77 of the Bankruptcy Act of 1898, 11 U.S.C. § 205 (repealed 1978). B & M was the operator of what is now known as the MBTA Commuter Rail Maintenance Facility ("the Terminal"), a thirty-four-acre railroad terminal in the greater Boston area used for refueling diesel trains. In 1983, the Terminal was owned by the Massachusetts Bay Transportation Authority ("the MBTA"), having been purchased by the MBTA from B & M in 1976; B & M had operated the Terminal under bankruptcy protection from 1970 to June 1983 and had owned the Terminal since the late 1920s. B & M continued to operate the Terminal under an agreement with and for the benefit of the MBTA until December 31, 1986.

The MBTA asserted no claims against B & M regarding environmental matters before B & M's June 1983 discharge from bankruptcy, pursuant to the Consummation Order. The MBTA did, however, assert a claim on May 4, 2004, almost 21 years later, against B & M. The claim was for 95 percent of $15,340,810 for past costs and 95 percent of all future costs, as contribution, under state environmental law, the Massachusetts Oil and Hazardous Material Release Prevention and Response Act, Mass. Gen. Laws ch. 21E ("Chapter 21E"), for certain cleanup activities the MBTA had undertaken at the Terminal. The state's Department of Environmental Quality Engineering ("DEQE"), now known as the Department of Environmental Protection ("DEP"), had ordered the MBTA in 1989 to clean up oil contamination at the site under Chapter 21E. The MBTA sought contribution for that portion of cleanup it said was attributable to B & M for releases of oil and hazardous substances during B & M's operation and earlier ownership of the Terminal. The vast majority of these releases occurred prior to the 1983 Consummation Order.

In August 2005, B & M filed suit in federal district court, based on the Consummation Order, seeking to enjoin the MBTA from making its Chapter 21E contribution claims. It sought partial summary judgment on the ground that those claims had been discharged in 1983 and thus were barred by the operation of federal law, specifically § 77 of the Bankruptcy Act of 1898, 11 U.S.C. § 205 (repealed 1978). B & M also sought enforcement of the 1983 Consummation Order. B & M argues that the MBTA's claims are properly barred because, before June 30, 1983, the MBTA was well aware of oil contamination on the Terminal grounds; that the oil contamination, even then, violated environmental laws; that state and federal regulatory officials had required response actions to at least those releases that contaminated adjoining waters; and that Chapter 21E was enacted before the June 1983 bar date of the Consummation Order. It further asserts that the MBTA had maintained a presence at the Terminal before 1983 and had even funded some of B & M's efforts to stop contamination.

The MBTA argues that it should be excepted from the discharge in the Consummation Order primarily because Chapter 21E was enacted and became effective on March 24, 1983, only a short time before B & M was discharged from bankruptcy; that as of the June 1983 discharge the Commonwealth had not forced the MBTA to clean up the site and that the MBTA could not then have anticipated that the Commonwealth would force it to clean up the site or that the MBTA would need to seek contribution for its cleanup efforts; and that it would be inequitable for the MBTA to bear the full cost of the cleanup because B & M caused the contamination as both the operator and prior owner of the site.

We hold that the MBTA's contribution claims under Chapter 21E for contamination prior to the 1983 discharge from bankruptcy are barred as a matter of law by the Consummation Order. We reverse and direct entry of judgment on these claims for B & M.

I.

We take the facts largely as described by the district court and from the record of the district court proceedings. There are not material disputes of fact; only disputes as to the legal consequences of those facts.

The MBTA is a body politic as well as a corporate and political subdivision of the Commonwealth of Massachusetts. Mass. Gen. Laws ch. 161A, § 2. It provides mass transportation services throughout eastern Massachusetts by means of bus, subway, and light rail. It is the second largest property owner in Massachusetts.

B & M is a common carrier providing railroad freight services in the northeastern United States. It owned the Terminal from the late 1920s, when the engine house and power house were built, to 1976, when the MBTA purchased the property. B & M continued to operate the Terminal until December 31, 1986, under agreements between the MBTA and B & M's bankruptcy trustees. Under the final operating agreement, B & M operated the MBTA commuter railroad as an independent contractor for the benefit of the MBTA from January 1, 1982, to December 31, 1986.

In the 1700s, the property where the Terminal is now located mainly consisted of tidal marshland drained by the Millers River. Railroad operations on the property began in the late 1800s. Around 1928, B & M secured licenses to fill a portion of Boston Harbor; these licenses included the obligation to collect and transport to the river the drainage interrupted by the fill operations. As filling operations progressed, B & M constructed various yards and railroad facilities on the filled land. In the 1940s, B & M began transitioning from steam to diesel locomotives and built a storeroom and diesel house to maintain the diesel locomotives. A one million gallon diesel fuel tank and a one hundred thousand gallon diesel fuel tank were installed in 1949 and 1952, respectively.

As diesel locomotive use increased, contamination from oil and diesel leaks became increasingly common on the site. Sources of the leaks included oil dripping from trains during maintenance, leaks from above-ground tanks and pipes, and overflowing fuel during the refueling of the locomotives. Until 1984, the fuel hoses at the facility did not have automatic shutoff valves, and the only way technicians knew the locomotive fuel tanks were full was when they overflowed. The spills onto the ground became so extensive that the oil and fuel flowed into the drainage network and from there reached the nearby Millers River. Before the installation of a system in the early 1960s designed to prevent the fuel from reaching the river, the Millers River at times caught fire in the summer.

B & M acquired the rights to fill in the remaining portion of the Millers River in the early 1960s. B & M then installed a culvert along the length of the river in order to pick up drainage from the Terminal grounds and prevent it from reaching the open river. The culvert carried this oil to an oil separator near the Prison Point Bridge. This separated the oil caught from the culvert from the water. The water then continued to "the Miller[s] River and then out to the Charles."

Because a small amount of oil continued to leak out to the river, especially during storms, a system of absorbent booms was installed at the lower portion of the Millers River, apparently by the early 1960s. According to a 1986 report authored by longtime B & M employee Lawrence B. Boyd, both the Coast Guard and DEQE agreed that doing this was "irregular and probably illegal." Boyd noted in 1986 that "until the MBTA is willing to spend sufficient money to install a system capable of handling the storm flows encountered, [the boom system] does reduce the spill incidents."

In 1970, B & M filed for bankruptcy protection under the Bankruptcy Act of 1898. We describe the Act and its purposes later.

In December 1976, the MBTA purchased the Terminal from B & M out of bankruptcy. The Purchase and Sale Agreement provided the MBTA a right of entry on the property to inspect it, and both parties agreed to "bear the cost of, and be responsible for, any environmental impact study required of it by any governmental agency." The MBTA entered into two consecutive agreements with B & M's bankruptcy trustees, providing for B & M's continued operation of the Terminal. The first ran from the conveyance of ownership over the Terminal in 1976 until December 31, 1981, and the second agreement was in effect from January 1, 1982, until December 31, 1986. The two agreements contained similar terms, depicting B & M as an independent contractor with full authority over the conduct of its employees. The 1982 operating agreement included provisions indemnifying B & M against property damage. The agreement also listed among its reporting requirements that B & M notify the MBTA of any "oil spill or pollution problem" within thirty minutes of B & M's general manager learning of it.

After the December 1976 purchase by the MBTA and before the June 30, 1983, discharge, a number of oil spills took place at the Terminal. These spills received attention from both federal and state regulators. On March 4, 1977, the Coast Guard cited B & M and the Metropolitan District Commission ("MDC") for an oil spill into the Millers River. The MDC had an ongoing construction project at the Terminal at that time. In response to the spill,...