In re Globe Bldg. v. Materials, Inc.

• Decision Date: 21 July 2006
• Docket Number: Adversary Nos. 05-6100.,Bankruptcy No. 01-60182.
• Citation: 345 B.R. 619
• Parties: In re GLOBE BUILDING MATERIALS, INC., Debtor. Minnesota Pollution Control Agency, Plaintiff, v. Gordon E. Gouveia, Chapter 7 Trustee of Globe Building Materials, Inc., Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Indiana

345 B.R. 619

In re GLOBE BUILDING MATERIALS, INC., Debtor Minnesota Pollution Control Agency, Plaintiff, v. Gordon E. Gouveia, Chapter 7 Trustee of Globe Building Materials, Inc., Defendant.

Bankruptcy No. 01-60182.

Adversary Nos. 05-6100.

United States Bankruptcy Court, N.D. Indiana, Hammond Division.

July 21, 2006.

COPYRIGHT MATERIAL OMITTED

J. Sebastian Stewart, Assistant Attorney General, St. Paul, MN, for Plaintiff.

Janice A. Aiwin, Shaw, Gussis, Fishman, Glantz, Wolfson & Towbin, L.L.C., Chicago, IL, for Defendant.

MEMORANDUM OF DECISION AND ORDER

J. PHILIP KLINGEBERGER, Bankruptcy Judge.

This adversary proceeding, which was initiated by the Minnesota Pollution Control Agency ("MPCA") by a complaint filed on June 27, 2005, seeks injunctive relief to require action by the Chapter 7 Trustee of the bankruptcy estate of Globe Industries, Inc. ("Trustee") to investigate and abate the alleged release of hazardous substances from storage tanks located on a parcel of realty which was once property of the bankruptcy estate. On August 3, 2005, the Trustee filed a motion to dismiss the complaint. The matter is before the Court with respect to that motion to dismiss and the parties' memoranda of law with respect to that motion. The unsettled nature of the law applicable to the issues presented has caused the Court to ponder this decision far longer than is customary.

I. Standard for a Motion to Dismiss Under Fed.R.Bankr.P. 7012(b)(6)1 Fed.R.Civ.P. 12(b)(6)

Fed.R.Bankr.P. 7012(b) makes applicable to adversary proceedings Rule 12 of the Federal Rules of Civil Procedure, which provides that a defendant may seek to challenge the complaint by asserting that it fails "to state a claim upon which relief can be granted." The applicable standard for considering a motion to dismiss under Fed.R.Civ.P. 12(b)(6) requires the Court to accept all well pleaded factual allegations in the complaint as true; Miree v. DeKalb County, 433 U.S. 25, 27 n. 2, 97 S.Ct. 2490, 53 L.Ed.2d 557 (1977). The pleadings and all reasonable inferences drawn from the pleadings must be construed in a light most favorable to the nonmoving party; In re Chinin U.S.A., Inc., 327 B.R. 325, 331 (Bankr.N.D.Ill.2005) (citing, Prince v. Rescorp Realty, 940 F.2d 1104 (7th Cir.1991); Janowsky v. United States, 913 F.2d 393 (7th Cir.1990); Rogers v. United States, 902 F.2d 1268 (7th Cir. 1990); Craigs, Inc. v. General Electric Capital Corp., 12 F.3d 686, 688 (7th Cir. 1993). However, this Court is neither bound by the plaintiffs legal characterization of the facts, nor required to ignore facts set forth in the complaint that undermine the plaintiffs claims. Scott v. O'Grady, 975 F.2d 366, 368 (7th Cir.1992). Dismissal with prejudice is only appropriate if it appears that no set of facts could entitle the plaintiff to relief. In re Chinin U.S.A., Inc., 327 B.R. at 331 (citing, Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101, 2 L.Ed.2d 80 (1957)).

II. Facts to be Considered by the Court

As pled by MPCA, the salient facts before this Court are as follows:

1. Plaintiff MPCA is a state agency pursuant to Minn.Stat. § 116.02, subd. 1 (2004). [Plaintiffs Complaint at ¶ 1].

2. Defendant Gordon E. Gouveia is Trustee in the Chapter 7 bankruptcy case of Debtor Globe Building Materials, Inc ("Globe") currently pending before this Court. Defendant is sued in his capacity as Chapter 7 Trustee for Globe's estate. [Plaintiffs Complaint at ¶ 2].

3. Globe filed a voluntary Chapter 11 bankruptcy petition in this Court on January 19, 2001 (the "Petition Date"). On April 4, 2001, Globe converted its Chapter 11 case to a case under Chapter 7. [Plaintiffs Complaint at ¶ 2].

4.. This action relates to on-going, postpetition releases into the environment of hazardous substances and storage tank violation for which Debtor's estate is responsible at its recently-sold property located at and around 1107, 1120, 1130, and 1147 East Seventh Street, St. Paul, Minnesota ("Globe Property"). [Plaintiff's Complaint at ¶ 2].

5. The Debtor purchased the Globe Property in or around 1986. [Plaintiffs Complaint at ¶ 7].

6. While operating its asphalt building materials business on the Globe Property, Globe owned and operated approximately 20 aboveground and underground storage tanks which housed asphalt, fuel oil, and liquid laminate. [Plaintiffs Complaint at ¶ 8].

7. As of the date of the complaint, only four or five of the approximately 20 tanks appear to have been properly taken out of service. The remaining tanks — including all parts of the tank systems — need to be cleaned; have products removed, analyzed, and disposed; valves, openings, and man ways sealed; and labeled as "out of service." Until all of these tasks are completed, approximately 16 tanks on the Globe Property violate state law. [Plaintiffs Complaint at ¶ 9].

8. The following tanks continue to hold product: (a) two 11,000 gallon fuel oil tanks each contain approximately two feet deep of fuel oil combinations; (b) a 45,000 gallon tank holds approximately three feet to four feet deep of what is believed to be asphalt cement oil; (c) a trio of 243,000 gallon, 112,000 gallon, and 64,000 gallon tanks collectively hold 60,000-80,000 gallons of asphalt concrete product. [Plaintiffs Complaint at ¶ 10]. These tanks present imminent threats to public safety due to the fire hazard they pose and the harm a fire or explosion could cause in the middle of a mixed residential and business community that surrounds the Globe Property. [Plaintiffs Complaint at ¶ 11].

9. In March 2001, the MPCA engaged a contractor to investigate a previously discovered petroleum release. Subsequently, the MPCA learned the Debtor had filed a bankruptcy petition. [Plaintiffs Complaint at ¶ 12]. On or around October 8, 2001, the State's contractor forwarded an access agreement to the Trustee's attorney to obtain access to investigate the petroleum release at the Globe Property. [Plaintiffs Complaint at ¶ 13]. After October 8, 2001, the MPCA and its contractor made several written and oral requests to the Trustee for access. The Trustee consented to providing access on or about April 23, 2002. The MPCA's petroleum release investigation at the Globe Property subsequently began. [Plaintiffs Complaint at ¶ 14].

10. The MPCA's petroleum investigation produced two reports. The first report, dated May 23, 2003, indicates that one monitoring well detected hazardous substances at the Globe Property at levels above health risk levels. The contractor's second report dated January 2004 provides conclusive and confirming evidence that hazardous substances are detected at the Globe Property at levels exceeding health risk levels. [Plaintiffs Complaint at ¶ 15].

11. In January 2004, the MPCA was served with the Trustee's Motion to Abandon the Globe Property. The MPCA subsequently responded with its Objection to Abandonment in early 2004. Later, the MPCA learned that the St. Paul, Minnesota Port Authority ("Port Authority"), a local governmental agency, had expressed interest to the Trustee in 2001 to purchase the Globe Property. [Plaintiff's Complaint at ¶ 16].

12. As part of its due diligence, the Port Authority had Phase I and Phase II environmental inspection reports ("Port Authority Reports") generated for the Globe Property. The Port Authority Reports were prepared in April 2003 and July 2003. Those reports document there are on-going, post-petition releases of hazardous substances in the soil and ground water at the Globe Property. [Plaintiff's Complaint at ¶ 17].

13. The Trustee has never reported the releases of hazardous substances at the Globe Property to the MPCA or taken actions to abate, remove, or control the releases. [Plaintiffs Complaint at ¶ 18].

14. In late May 2004, the MPCA received the Port Authority Reports after the Trustee consented to the Port Authority producing them to the MPCA. [Plaintiffs Complaint at ¶ 20].

15. All of the hazardous substances referenced in the Port Authority Reports, and the MPCA's previously filed Objection to Abandonment, have been detected in soil and ground water at the Globe Property. The hazardous substances are present at levels significantly higher than the Minnesota Department of Health's health risk levels ("HRLs") and federal maximum contaminant levels ("MCLs"). HRLs and MCLs represent the maximum concentration of a contaminant in drinking water that Minnesota and federal health departments consider to be safe for human consumption. [Plaintiff s Complaint at ¶ 21].

16. The hazardous substances detected at the Globe Property include Benzo(a)pyrene ("BaP") detected in the soil at 24.6 parts per million ("ppm"). The MPCA's BaP Tier I Soil Reference Value ("SRV") for residential areas is 2 ppm; for industrial sites the SRV is 4 ppm. SRVs provide risk based guidance for evaluating the human health risk caused by exposure to contaminated soil. BaP is a suspected human cancer-causing agent. It causes skin disorders in humans and animals, and it has harmful developmental and reproductive effects. Furthermore, it is bio-accumulative, does not break down easily in the environment, and is subject to long-range air transport. Derma] contact, inhalation, and ingestion are important pathways by which this hazardous substance can enter the body. [Plaintiff's Complaint at ¶ 22].

17. Naphthalene has been detected in the ground water at the Globe Property at between 16,000 parts per billion ("ppb") to 17,000 ppb. The HRL for naphthalene is 300 ppb. Benzene has been detected at between 120 ppb to 190 ppb. Benzene's HRL is ten ppb; its federal MCL is five ppb. Styrene has been detected at 220 ppb, while its MCL is 100 ppb. [Plaintiff's Complaint at ¶ 23].

18. The full extent and magnitude of the soil and ground water contamination at the Globe Property has not been determined by any of the environmental investigations that have occurred to-date. Additionally, the direction and speed of the ground water flow...