MATTER OF CHICAGO, MILWAUKEE, ST. PAUL & PACIFIC
| Decision Date | 02 August 1991 |
| Docket Number | No. 77 B 8999.,77 B 8999. |
| Citation | 130 BR 521 |
| Parties | In the Matter of CHICAGO, MILWAUKEE, ST. PAUL AND PACIFIC RAILROAD COMPANY, Debtor. |
| Court | U.S. District Court — Northern District of Illinois |
Jerold S. Solovy, Daniel R. Murray, Robert L. Graham, Michael T. Brody and Diane I. Bonina of Jenner & Block, Chicago, Ill., for CMC Heartland Partners.
Arthur A. Vogel, Jr., William H. Harbeck and Roy L. Prange, Jr. of Quarles & Brady, Milwaukee, Wis., for General Motors Corp.
Richard B. Stewart, Asst. Atty. Gen., Environment & Natural Resources Div., U.S. Dept. of Justice, Joel M. Gross, Barbara A. Rogers and Thomas Giller of Environmental Enforcement Section of U.S. Dept. of Justice, Glen Freyer, Environmental Defense Section of U.S. Dept. of Justice, Washington, D.C., Fred Forman, U.S. Atty., N.D. Illinois, Joel R. Nathan, Asst. U.S. Atty. (Thomas Kenney, U.S.E.P.A. Region V, Office of Regional Counsel and Jon Averback, U.S.E.P.A., Office of Gen. Counsel, of counsel), for U.S.
On May 6, 1991, the United States, through its Environmental Protection Agency ("EPA") issued an order pursuant to section 106 of the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"), 42 U.S.C. § 9606 (1990), which required CMC Heartland Partners ("CMC") to perform certain remedial activities at the Wheeler Pit site. The site, presently owned by CMC, is a landfill in Wisconsin where General Motors Corporation ("GM") deposited paint sludge and other material from 1960 to 1974. The EPA estimates that the remedial activities will take thirty years to complete and the cost to exceed $2.9 million. The EPA order became effective May 13, 1991.
On May 9, 1991, CMC filed an emergency motion requesting the entry of an order directing the EPA to show cause why it should not be held in contempt of court for failing to obey Order No. 866. Order No. 866 protects CMC from all claims and obligations arising prior to or during the period of the reorganization proceedings which were not timely filed with the court. In its motion, CMC further requests that this court maintain the status quo and enjoin the EPA from pursing its CERCLA action against CMC.
On December 19, 1977, the Chicago, Milwaukee, St. Paul & Pacific Railroad Company ("Milwaukee Road") petitioned for reorganization pursuant to section 77 of the Bankruptcy Act of 1898, formerly 11 U.S.C. § 205. The reorganization court established bar dates for the filing of claims against Milwaukee Road, the bankruptcy estate and its trustee, Richard B. Ogilvie. See 11 U.S.C. § 205(c)(7) (1976); Bankruptcy Rule 8-401(b)(1) (1979). The reorganization court ordered that all post-petition claims arising against, or obligations incurred by Milwaukee Road during the period of the reorganization proceedings had to be filed by September 10, 1985. See Order No. 832, ¶ 19.
On November 12, 1985, the reorganization court entered Order No. 866, known as the "Consummation Order." The Consummation Order, which became effective on November 25, 1985, brought the Trustee's administration of Milwaukee Road's assets to a close and vested title to those assets in the Debtor, which was re-named CMC Real Estate Corporation. Order No. 866 provided:
All persons, firms, corporations and other entities, including without limitation the United States . . . are by this Order perpetually restrained and enjoined from instituting, prosecuting, or pursuing, or attempting to institute, prosecute, or pursue, any suit, action or proceeding ("Action") against the Reorganized Company (or its successors and assigns), or against any of the assets or property of the Reorganized Company (or of its successors and assigns), directly or indirectly, by reason of or on account of any obligation by the Trustee, except the obligations imposed upon or required to be assumed by the Reorganized Company by the Plan (including those claims filed pursuant to Section 11.1 of the plan which are ultimately determined to be Allowable Claims) or this Order.
Order No. 866, ¶ 13. Order No. 866 was affirmed by the Seventh Circuit and is now final. See In re Chicago, Milwaukee, St. Paul & Pacific Railroad, 827 F.2d 112 (7th Cir.1987).
The Wheeler Pit site is a thirty-five acre landfill in La Prairie Township, Rock County, Wisconsin. The Janesville and Southeastern Railway Company, a predecessor in interest of Milwaukee Road, acquired the site in 1900. In 1956, Milwaukee Road leased a 3.82 acre portion of the Wheeler Pit site to GM, who used the site to dispose of wastes from its Janesville, Wisconsin manufacturing plant. From 1960 to 1974, GM dumped paint spray sludge, residue from its part hanger striping system, clarifier sludge and powerhouse coal ashes from its automobile assembly plant located in Janesville, Wisconsin. In 1974, GM covered the disposal site and discontinued its use as a waste disposal area.
It appears that as early as 1972, the EPA was aware of the potential contamination of the Wheeler Pit site. The EPA incurred response costs in 1983 by performing a Hazard Ranking System evaluation of the site. On September 21, 1984, the EPA placed the site on the National Priorities List. On December 1, 1987, CMC and GM entered into an Administrative Order on Consent with the EPA, under which they conducted a Remedial Investigation and Feasibility Study ("RI/FS") at the facility and reimbursed the EPA for its costs in overseeing the RI/FS.
In September 1990, after completion of a study of the site and the potential impact of the waste disposal, the EPA issued a Record of Decision ("ROD") selecting a final remedy for the Wheeler Pit site. The selected remedy requires the consolidation of waste and soil from adjacent property onto the original disposal area, the construction of a compacted clay cover on the site and the monitoring and evaluation of groundwater to ensure the effectiveness of the remedial action. On May 6, 1991, the EPA issued an Administrative Order finding that releases or threatened releases of hazardous substances at the Wheeler Pit site could present an imminent and substantial endangerment to public health and the environment. The order, effective May 13, 1991, required GM and CMC to implement the remedial action selected by the EPA in its Record of Decision. CMC responded by asserting that Order No. 866 discharged CMC's obligations as current owner of the Wheeler Pit site.
At issue is whether Order No. 866 prevents the EPA from enforcing its section 106 order.
CMC contends that the permanent injunction set forth in Order No. 866 precludes the EPA from asserting its CERCLA claim. CMC asserts that the claim arose during, if not prior to, the reorganization such that the claim involves pre-confirmation activities. Since the EPA did not file a claim during the reorganization proceedings, CMC contends that the claim should be discharged. CMC further asserts that even as the present owner of the Wheeler Pit facility, Order No. 866 precludes liability. CMC notes that the EPA has not identified any post-consummation activity by CMC as the present owner that has created, triggered or exacerbated the environmental conditions. Without causation, CMC argues it cannot be liable.
In support of its position, CMC cites to various cases where Order No. 866 protected CMC from liability. The most recent decision was by this court granting CMC's petition for injunctive relief and thereby enjoining the Washington State Department of Transportation ("WSDOT") from pursuing a CERCLA claim based on 42 U.S.C. § 9607(a)(2)(A).
The EPA contends that its Administrative Order is based on post-confirmation ownership of the site by CMC, and not on pre-confirmation activities of the bankruptcy debtor. The EPA claims that its Administrative Order is directed to CMC in its capacity as the present owner of a facility from which there are ongoing releases or threatened releases of hazardous substances that may present an imminent and substantial endangerment to public health or the environment. The EPA asserts that the reorganization proceedings are irrelevant to this action because its claim only involves CMC as the present owner. Order 866 therefore does not...
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