In re Hemingway Transport, Inc.
| Decision Date | 13 September 1989 |
| Docket Number | 82-1341-JNG,Adv. No. 86-1081.,Bankruptcy No. 82-1340-JNG |
| Citation | 105 BR 171 |
| Parties | In re HEMINGWAY TRANSPORT, INC., Bristol Terminals, Inc., Debtors. JUNIPER DEVELOPMENT GROUP, a Massachusetts Partnership and George D. Whitten, Amy Whitten and Charles Whitten as Trustees of 60 Olympia Nominee Trust, Plaintiffs, v. Herbert C. KAHN, Trustee for Hemingway Transport, Inc., and Bristol Terminals, Inc., Defendants. Herbert C. KAHN, Trustee for Hemingway Transport, Inc. and Bristol Terminals, Inc., Third-Party Plaintiffs, v. WOBURN ASSOCIATES, Third-Party Defendant. |
| Court | U.S. Bankruptcy Court — District of Massachusetts |
Louis N. Massery, Cooley, Manion, Moore & Jones, Boston, Mass., for plaintiffs.
William F. Macauley, Craig and Macauley, Boston, Mass., for trustee (defendant and third-party plaintiff).
Thomas V. Urmy, Jr., Shapiro, Grace & Haber, Boston, Mass., for third party defendant.
On June 6, 1989, the Trustee filed a single pleading captioned "Motion for Reconsideration or, in the Alternative, Clarification of Administrative Expense Ruling, and Motion for Summary Judgment on Scope of Claim for Future Response Costs." The plaintiffs in this protracted adversary proceeding, Juniper Development Group and the trustees of the 60 Olympia Avenue Nominee Trust (collectively "Juniper"), filed an opposition to the Trustee's motions. The Court conducted a hearing on July 26, 1989. At the conclusion of the hearing, the Court took the Trustee's motions under advisement. The Trustee's Motion for Summary Judgment which involves the application of section 502(e)(1)(B) of the Bankruptcy Code to Juniper's claim for future response costs, is the subject of this memorandum, the fourth memorandum generated by this complex case that perforce involves the conflicting policies embodied in the Bankruptcy Code and the Comprehensive Environmental Response, Compensation and Liability Act of 1980 ("CERCLA"), as amended by the Superfund Amendments and Reauthorization Act of 1986 ("SARA"), 42 U.S.C.A. §§ 9601-9615 (West 1983 & Supp. 1989).1
Although the facts of this case have been outlined in other opinions, recently completed discovery and recent developments in the case make a recitation of salient events advisable. No material facts are in dispute.
On July 28, 1982, the Debtors, Hemingway Transport, Inc. ("Hemingway") and Bristol Terminals, Inc. ("Bristol") filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code. The proceedings subsequently were converted to Chapter 7 on November 18, 1983. While in Chapter 11, however, the Debtors sought and obtained Court approval for the sale of real property, together with all structures and improvements, located at 60 Olympia Avenue, Woburn, Massachusetts to Juniper.2
In April 1985, almost two years after the consummation of the Court authorized sale, a representative of the Environmental Protection Agency ("EPA") discovered a number of barrels containing hazardous waste on the Olympia Avenue property. After performing tests on the contents of the drums and soil, the EPA, on February 7, 1986, issued an administrative order pursuant to section 106(a) of CERCLA. The order contained an administrative determination that the Olympia Avenue property was a "facility" as defined in section 101(9) of CERCLA, 42 U.S.C. § 9601(9); that the trustees of the 60 Olympia Avenue Nominee Trust were "persons" and "owners" as defined in sections 101(21) and (20), respectively, of CERCLA, 42 U.S.C. § 9601(21), (20); that substances found in the soil and drums on the property were "hazardous substances" as defined by section 101(14) of CERCLA, 42 U.S.C. § 9601(14); that the past, present and potential migration of such hazardous substances constituted an "actual or threatened release" as defined by section 101(22) of CERCLA, 42 U.S.C. § 9601(22); and that the trustees as present owners of the Olympia Avenue property were responsible parties pursuant to section 107(a) of CERCLA, 42 U.S.C. § 9607(a). The administrative order directed the trustees to remove the drums and surrounding soil. Juniper complied with the order and hired a contractor to remove the barrels and contaminated topsoil. Juniper alleges that it has expended over $60,000 in complying with the administrative order.
On May 7, 1986, Juniper commenced the instant adversary proceeding. Juniper sought indemnification or contribution for "response costs" incurred as a result of compliance with the administrative order, as well as any future costs associated with the cleanup. Juniper also sought relief under theories of fraud, equitable recision and breach of warranty. On September 8, 1986, the Trustee moved for summary judgment. The Court ruled in favor of the Trustee on all counts and causes of action directly related to the sale of the property. However, the Court denied the Trustee's motion with respect to Juniper's CERCLA claims and, indeed, allowed Juniper to amend its adversary complaint to include the statutory prerequisites set forth in section 107(a)(2)(B) of CERCLA. The Court also ruled that, if Juniper prevailed on its claim, response costs incurred by Juniper would be entitled to treatment as administrative expenses. Additionally, the Court indicated that it would schedule a hearing "for the purpose of establishing the exact amount of Juniper's response costs and estimating its future response costs. . . ." See In re Hemingway Transport, Inc., 73 B.R. 494 (Bankr.D.Mass.1987).
While the language utilized by the Court possibly may have suggested otherwise, the Court neither found that Hemingway was liable to Juniper nor precluded the Trustee from raising an objection to Juniper's claim for future response costs under section 502(e)(1)(B) of the Bankruptcy Code. A ruling in favor of the Trustee with respect to his pending section 502(e)(1)(B) summary judgment motion obviously would obviate the need for a hearing pursuant to section 502(c) to estimate Juniper's future response costs.
In May of 1987, Juniper filed its amended complaint. The amended complaint contains the following allegations: 1) that the Trustee knew or had reason to know that the Massachusetts Department of Environmental Quality Engineering ("DEQE") had issued an administrative order to the Debtors in 1982 or earlier requiring them to cleanup the Olympia Avenue property; 2) that the Debtors owned the property and/or operated a facility at the property at the time the barrels of hazardous waste were deposited; and 3) that the Debtors, as potentially responsible parties, are responsible for either all or part of the cleanup. Thus, through its complaint, Juniper requests the following:
. . . complete indemnification from the defendant for all past and future costs incurred or assessed for said cleanup, and exercises its right of subrogation to the E.P.A. or the D.E.Q.E., against the defendant for all past and future costs incurred or assessed for said cleanup or in the alternative, requests contribution from the defendant on a pro-rata basis for all past and future costs incurred or assessed for said cleanup, plus interests, costs, and attorneys fees.
Parenthetically, Juniper's amended complaint is troublesome in two respects. In the first place, Juniper fails to specify whether it is proceeding under section 107(a) of CERCLA or under section 113(f)(1) of CERCLA or under both sections. Secondly, Juniper fails to allege that its response expenditures were consistent with the national contingency plan.
With respect to Juniper's allegation that the DEQE had informed the Debtors of the presence of toxic waste on the property, Juniper learned through a Freedom of Information Act request to the EPA that the barrels containing toxic waste were first discovered on the Olympia Avenue property on or around May 15, 1980 by William Cashins, a representative of the DEQE. Hemingway was informed of the discovery and responded to the DEQE by letter in November of 1980. Hemingway, however, failed to cleanup the property, despite repeated inspections by William Cashins in February and April of 1981.
About one year after the Court's summary judgment ruling, the EPA, by letter dated April 20, 1988, notified Juniper of its status as a potentially responsible party in connection with the so-called Wells G & H Superfund Site (the "Site"). The EPA demanded from Juniper payment of approximately $2.1 million, plus interest pursuant to section 107(a)(4)(D) of CERCLA. The Wells G & H Site is a 330-acre parcel of land that includes the 21.4 acres that comprise the Olympia Avenue property now owned by Juniper. According to the Trustee, wells G & H are municipal wells that were developed in the 1960's to supplement the water supply for the City of Woburn. In 1979, the Woburn police discovered over 180, 55-gallon drums abandoned on the Site, which is now included in the Superfund National Priorities List of hazardous waste sites and the focus of much media attention due to litigation involving an alleged link between the incidence of childhood leukemia and contamination of Woburn's water supply.
By letter dated February 3, 1989, the EPA, pursuant to section 107(a)(2) of CERCLA, informed the Trustee of Hemingway's potential liability as a former owner or operator of the site "at the time of disposal of any hazardous substances." Notably, the EPA made no demand for payment on the Trustee.3
The Trustee, through his motion for summary judgment, seeks the disallowance of Juniper's claim for future response costs under section 502(e)(1)(B) of the Bankruptcy Code because 1) Juniper's claim is one for reimbursement or contribution; 2) Juniper is liable with the Debtor on the claim; and 3) the claim is contingent upon future events.
Section 502(e)(1)(B) of the Bankruptcy Code provides in relevant part:
. . . the court shall disallow any claim for...
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