Hemingway Transport, Inc., In re

• Decision Date: 31 July 1992
• Docket Number: 92-1289 and 92-1290,92-1095,Nos. 92-1040,s. 92-1040
• Citation: 993 F.2d 915
• Parties: , 61 USLW 2678, 28 Collier Bankr.Cas.2d 1545, 24 Bankr.Ct.Dec. 369, Bankr. L. Rep. P 75,243, 23 Envtl. L. Rep. 20,953 In re HEMINGWAY TRANSPORT, INC., et al., Debtors. JUNIPER DEVELOPMENT GROUP, etc., et al., Appellants, v. Herbert C. KAHN, etc., Appellee. (Two Cases) In re HEMINGWAY TRANSPORT, INC., et al., Debtors. JUNIPER DEVELOPMENT GROUP, etc., et al., v. Herbert C. KAHN, etc., Appellant. In re HEMINGWAY TRANSPORT, INC., et al., Debtors. JUNIPER DEVELOPMENT GROUP, etc., et al., Appellees, v. Herbert C. KAHN, etc., Appellant. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 915

993 F.2d 915

36 ERC 1665, 61 USLW 2678, 28 Collier

Bankr.Cas.2d 1545,

24 Bankr.Ct.Dec. 369, Bankr. L. Rep. P 75,243,

23 Envtl. L. Rep. 20,953

In re HEMINGWAY TRANSPORT, INC., et al., Debtors.

JUNIPER DEVELOPMENT GROUP, etc., et al., Appellants, v. Herbert C. KAHN, etc., Appellee. (Two Cases)

In re HEMINGWAY TRANSPORT, INC., et al., Debtors.

JUNIPER DEVELOPMENT GROUP, etc., et al., v. Herbert C. KAHN, etc., Appellant.

In re HEMINGWAY TRANSPORT, INC., et al., Debtors.

JUNIPER DEVELOPMENT GROUP, etc., et al., Appellees, v. Herbert C. KAHN, etc., Appellant.

Nos. 92-1040, 92-1095, 92-1289 and 92-1290.

United States Court of Appeals First Circuit.

Heard July 31, 1992.

Decided May 4, 1993.

Roy P. Giarrusso with whom Louis N. Massery and Cooley, Manion, Moore & Jones, P.C., Boston, MA, were on brief, for appellants.

William F. Macauley with whom Martin P. Desmery and Craig and Macauley, Boston, MA, were on brief, for appellee.

Martin P. Desmery, Boston, MA, for trustee appellee in cross-appeal.

Before TORRUELLA, CYR and BOUDIN, Circuit Judges.

CYR, Circuit Judge.

The bankruptcy court disallowed the contingent claim Juniper Development Group ("Juniper") filed against the consolidated chapter 7 estate of Hemingway Transport, Inc. ("Hemingway") and Bristol Terminals, Inc. ("Bristol") for anticipated response costs for the removal and remediation of hazardous substances discovered on property previously purchased by Juniper from the Hemingway-Bristol chapter 11 estate. Juniper's companion claim for cleanup-related attorney fees was disallowed as well. The district court affirmed and Juniper appeals. The chapter 7 trustee ("trustee") cross-appeals the allowance of Juniper's priority claim for past cleanup costs as an administrative expense.

I BACKGROUND

Between 1963 and 1982, Hemingway and Bristol continuously owned or operated a trucking business conducted from a twenty-acre parcel of land located in Woburn, Massachusetts ("facility"). ¹ In May 1980, the Massachusetts Department of Environmental Quality Engineering (DEQE) discovered seventeen corroded drums leaching a semi-solid, tar-like substance onto a 13.8 acre "wetlands" area at the facility. DEQE informed Hemingway that the substance contained petroleum constituents. DEQE received assurances from Hemingway that the drums would be removed. The drums were still at the facility when DEQE conducted its last site inspection, in August 1982.

In July 1982, Hemingway and Bristol filed chapter 11 petitions. With the approval of the bankruptcy court, appellant Juniper, a local land developer, purchased the facility from debtor-in-possession Bristol for $1.6 million on April 29, 1983. Prior to the purchase, Juniper's representatives conducted an on-site inspection but did not walk the In April 1985, drums containing various solvents and pesticides classified as "hazardous substances" under the Comprehensive Environmental Response, Compensation, and Liability Act ("CERCLA"), 42 U.S.C. §§ 9601-9657, 9601(14) (1981), were discovered at the facility, in the same wetlands area, by the United States Environmental Protection Agency ("EPA"). The following December, Juniper, then the "owner" of the facility, received notice that the EPA considered Juniper a "potentially responsible party" ("PRP") under CERCLA, see id. § 9607(a). Shortly thereafter the EPA issued an administrative order requiring Juniper to remove the hazardous substances from the facility at its own expense. See id. § 9606. Juniper claims $92,088 in response costs incurred pursuant to the EPA administrative order. ²

                wetlands area where DEQE had discovered the drums;  Juniper contends that the area was submerged at the time.   Seven months after the sale, the Hemingway-Bristol chapter 11 reorganization proceeding was converted to a chapter 7 liquidation proceeding, and a chapter 7 trustee was appointed
                

Juniper initiated an adversary proceeding against the Hemingway-Bristol estate for CERCLA response costs already incurred under the EPA administrative order and for future response costs required to complete the anticipated cleanup and remediation. Initially, the bankruptcy court denied the trustee's motion for summary judgment on Juniper's CERCLA claim. The court determined that Juniper's CERCLA claim, if ultimately allowed, would be entitled to priority payment from the chapter 7 estate as an administrative expense of the chapter 11 estate, since Juniper's exposure to CERCLA liability had arisen from its postpetition agreement to purchase the facility from the chapter 11 estate. In re Hemingway Transp., Inc., 73 B.R. 494, 505 (Bankr.D.Mass.1987) (citing Reading Co. v. Brown, 391 U.S. 471, 88 S.Ct. 1759, 20 L.Ed.2d 751 (1968)). ³

The trustee renewed the motion for summary judgment on Juniper's claim for future response costs, and moved for reconsideration of the "administrative expense priority" ruling previously entered by the bankruptcy court. The bankruptcy court then disallowed Juniper's claim for future response costs, pursuant to Bankruptcy Code § 502(e)(1)(B), 11 U.S.C. § 502(e)(1)(B), on the ground that Juniper was the holder of a contingent CERCLA contribution claim based on a debt owed EPA for which Juniper, Hemingway, and Bristol were jointly and severally liable, in connection with which Juniper had yet to incur any liability by the time of the allowance of its claim. In re Hemingway Transp., Inc., 105 B.R. 171, 176-78 (Bankr.D.Mass.1989). The bankruptcy court reaffirmed its earlier ruling entitling Juniper to administrative expense priority on its claim for past response costs.

Following trial on Juniper's $92,088 claim for CERCLA response costs previously incurred, the bankruptcy court ruled that Hemingway and Bristol were responsible The bankruptcy court allowed Juniper's claim for past response costs in the amount of $38,763 as an administrative expense entitled to priority payment, id. at 382, but disallowed the $54,000 claim on the ground that attorney fees are not recoverable in a private action under 42 U.S.C. § 9607(a)(4)(B). Id. at 383. Juniper appealed the rulings disallowing its claim for future response costs and for attorney fees. The trustee cross-appealed the order allowing Juniper's $38,763 priority claim for administrative expense. The district court affirmed. In re Hemingway Transp., Inc., 126 B.R. 656 (D.Mass.1991).

                parties "liable" to the EPA, as they either owned or operated the facility at the time a passive "disposal" of hazardous substances occurred at the facility.  In re Hemingway Transp., Inc., 108 B.R. 378, 380 (Bankr.D.Mass.1989) (holding that CERCLA liability arising from "disposal" need not result from affirmative acts, but encompasses "leaking" of previously deposited waste during PRP's ownership) (citing United States v. Waste Indus., Inc., 734 F.2d 159, 164 (4th Cir.1984)).   Significantly, however, the bankruptcy court noted no evidence that Hemingway or Bristol, notwithstanding their continuous ownership or possession of the facility for a period of twenty years, either generated or deposited hazardous wastes at the facility.  Id. at 380
                

II DISCUSSION

A. Juniper's Appeal: Disallowance of Future Response Costs (11 U.S.C. § 502(e)(1)(B).

1. The Intersection of CERCLA and the Bankruptcy Code.

Juniper finds itself stranded at the increasingly crowded "intersection" between the discordant legislative approaches embodied in CERCLA and the Bankruptcy Code. See In re Chateaugay Corp., 944 F.2d 997, 1002 (2d Cir.1991). CERCLA's settled policy objectives, reemphasized in the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), prominently include the expeditious cleanup of sites contaminated or threatened by hazardous substance releases which jeopardize public health and safety, and the equitable allocation of cleanup costs among all potentially responsible persons ("PRPs"). See United States v. Cannons Eng'g Corp., 899 F.2d 79, 90-91 (1st Cir.1990); see also B.F. Goodrich Co. v. Murtha, 958 F.2d 1192, 1198 (2d Cir.1992). The PRP class broadly encompasses, inter alia, past and current owners or operators of a contaminated facility. See 42 U.S.C. § 9607(a). To foster CERCLA's primary objective--promotion of spontaneous private cleanup initiatives--all PRPs are deemed strictly liable for the total response costs required to remediate the contaminated facility. See United States v. Kayser-Roth Corp., 910 F.2d 24, 26 n. 3 (1st Cir.1990), cert. denied, 498 U.S. 1804, 111 S.Ct. 957, 112 L.Ed.2d 1045 (1991). Strict liability is normally both joint and several. See O'Neil v. Picilli, 883 F.2d 176, 178 (1st Cir.1989), cert. denied, 493 U.S. 1071, 110 S.Ct. 1115, 107 L.Ed.2d 1022 (1990); see also New York v. Shore Realty Corp., 759 F.2d 1032, 1042 (2d Cir.1985). ⁴ And the EPA is invested with broad administrative discretion to compel PRPs to undertake immediate cleanup measures, a prerogative largely insulated from judicial review at the pre-enforcement stage. See 42 U.S.C. § 9606; see also 42 U.S.C. § 9613(f) (PRPs who settle with EPA are immune from subsequent contribution claims); In re CMC Heartland Partners, 966 F.2d 1143, 1148 (7th Cir.1992).

At the same time, however, CERCLA section 9613(f) is aimed at promoting equitable allocations of financial responsibility by authorizing PRPs subjected to pending or completed EPA enforcement actions under 42 U.S.C. §§ 9606 and 9607(a)(4)(A) to initiate private actions for full or partial contribution from nonsettling PRPs by way of impleader or an independent action. See 42 U.S.C. § 9613(f). ⁵ Thus, targeted PRPs, relying on the ultimate financial accountability of more "culpable" PRPs, are encouraged to initiate prompt response efforts, at their own expense, in cooperation with the EPA. See H.R.Rep. No. 253, 99th Cong., 1st Sess. 80, reprinted in 1986 U.S.C.C.A.N. 2835 ("Private parties may be more willing to assume the financial responsibility for some or all of the cleanup if they are assured that...