U.S. v. Apex Oil Co., Inc.

• Decision Date: 06 July 2006
• Docket Number: No. 05-CV-242-DRH.,05-CV-242-DRH.
• Parties: UNITED STATES of America, Plaintiff, v. APEX OIL COMPANY, INC. Defendant.
• Court: U.S. District Court — Southern District of Illinois

Page 948

438 F.Supp.2d 948

UNITED STATES of America, Plaintiff, v. APEX OIL COMPANY, INC. Defendant.

No. 05-CV-242-DRH.

United States District Court, S.D. Illinois.

July 6, 2006.

Jeffrey A. Spector, Thomas L. Sansonetti, Environment & Natural Resources Division, U.S. Department Of Justice, Washington, DC, William E. Coonan, Assistant U.S. Attorney, Fairview Heights, IL, for Plaintiff.

James V. O'Brien, Richard A. Ahrens, Theodore H. Lucas, Lewis, Rice et al., St. Louis, MO, for Defendant.

MEMORANDUM AND ORDER

HERNDON, District Judge.

I. Introduction

Before the Court is a motion submitted by the government seeking partial summary judgment on its second cause of action. (Doc. 18.) Specifically, the government moves for a declaration pursuant to 28 U.S.C. § 2201 that the injunctive relief it seeks in its first cause of action does not constitute a dischargeable "claim" under the Bankruptcy Code. (Id.) Defendant Apex Oil Company ("Defendant") disagrees. (Doc. 32.) It maintains that the injunction the government requests does amount to a claim under the Code, and further that this claim was discharged in earlier bankruptcy proceedings. (Id.) For the reasons below, the Court grants the government's motion.

II. Background

Defendant is an successor company to corporate entities—both named Clark Oil and Refining Corporation—that owned and operated a refinery and associated pipelines in Hartford, Illinois (the "refinery"). In December 1987, these and other affiliated entities filed a voluntary petition for relief under Chapter 11 of the U.S. Bankruptcy Code.¹ On August 16, 1990, the U.S. Bankruptcy Court for the Eastern District of Missouri entered an Order of Confirmation discharging the consolidated debtors and their estates from any and all claims, debts, and liens arising before the confirmation date

Nearly fifteen years later, this suit followed. On April 5, 2005, the government sued Defendant, alleging that releases from the refinery pose an "imminent and substantial endangerment" to health or the environment. (Doc. 1.) The government seeks two things: injunctive relief pursuant to the Resource Conservation and. Recovery Act ("RCRA"), 42 U.S.C. § 6973(a) to abate the alleged endangerment, and a declaration under 28 U.S.C. § 2201 affirming that such relief was not discharged.² (Id.) The instant motion for partial summary judgment relates only to the second, or declaratory-relief, cause of action.³

III. Analysis

A. Summary Judgment Standard

Summary judgment is proper where the pleadings and affidavits, if any, "show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); Oates v. Discovery Zone, 116 F.3d 1161, 1165 (7th Cir.1997) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). The movant bears the burden of establishing the absence of fact issues and entitlement to judgment. Santaella v. Metropolitan Life Ins. Co., 123 F.3d 456, 461 (7th Cir.1997) (citing Celotex, 477 U.S. at 323, 106 S.Ct. 2548). In reviewing a summary judgment motion, a court does not determine the truth of asserted matters, but rather decides whether there is a genuine factual issue for trial. Celex Group, Inc. v. Executive Gallery, Inc., 877 F.Supp. 1114, 1124 (N.D.Ill.1995). The Court must consider the entire record, drawing reasonable inferences and resolving factual disputes in favor of the nonmovant. Regensburger v. China Adoption Consultants, Ltd., 138 F.3d 1201, 1205 (7th Cir.1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)).

B. A "Claim" Under the Bankruptcy Code

With respect to the government's second cause of action, the issue is whether the injunctive relief sought by the government would amount to a "claim" discharged in the Chapter 11 proceedings participated in by Defendant's predecessors. Backing up a step, under the Bankruptcy Code, and to enable debtors to start fresh after a bankruptcy, "debts" are discharged in Chapter 11 proceedings. 11 U.S.C. § 727. The Code defines a "debt" as "liability on a claim." 11 U.S.C. § 101(12). A "claim," in turn, is defined as a

(A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, legal, equitable, secured, or unsecured; or

(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment, whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed, undisputed, secured or unsecured.

11 U.S.C. § 101(5).

C. Right to Payment

Relevant to the instant motion is the language in 11 U.S.C. § 101(5)(B) above that a right to an equitable remedy for breach of performance constitutes a claim dischargeable in bankruptcy "if such breach gives rise to a right to payment." The government here seeks an equitable remedy for Defendant's alleged breach of a statute.⁴ (Doc. 1.) Under 11 U.S.C. § 101(5)(B), then, in order to ascertain whether this equitable relief was in fact discharged, it must be determined whether the relief would give rise to a right to payment. Before this can be decided, however, it must first be determined whose "right to payment" matters, the government's or the breaching party's. If 11 U.S.C. § 101(5)(B) refers to the government's right to payment, then the discharge question hinges on whether 42 U.S.C. § 6973(a) allows the government to seek some form of monetary damages. If 11 U.S.C. § 101(5)(B) refers to the breaching party's right to payment, in contrast, then the discharge question depends on whether section 6973(a) allows Defendant to pay in lieu of compliance with an injunction.

The cases strongly support the position that the "right to payment" in U.S.C. § 101(5)(B) is the government's. In Ohio v. Kovacs, 469 U.S. 274, 105 S.Ct. 705, 83 L.Ed.2d 649 (1985), for example, it was the state of Ohio—not the party alleged to be in breach—whose ability to convert an injunction into a monetary sum was deemed relevant by the Supreme Court. Kovacs, 469 U.S. at 278-79, 105 S.Ct. 705. Likewise in AM Intl v. Datacard Corp., 106 F.3d 1342, 1348 (7th Cir. 1997), the Seventh Circuit found that the discharge question turned squarely on whether the nonbreaching party could convert the district court's order into a right to payment. Id. The same can be said about the In re Chateaugay Corp., 944 F.2d 997 (2d Cir.1991) and In re Torwico Electronics, Inc., 8 F.3d 146 (3d Cir.1993) decisions. In those cases, it was the government, not the breaching party, whose ability to obtain monetary damages courts deemed significant. See In re Torwico, 8 F.3d at 151 (finding, in determining whether an injunction was dischargeable, that the relevant issue was whether the state has a right to payment); In re Chateaugay, 944 F.2d at 1008 n. 2 ("[A]n order to clean up a site, to the extent that it imposes obligations distinct from any obligation to stop or ameliorate ongoing pollution, is a `claim' if the creditor obtaining the order had the option ... to do the cleanup work itself and sue for response costs, thereby converting the injunction into a monetary obligation." (emphasis added)); see also In re Industrial Salvage, Inc., 196 B.R. 784, 787 (Bankr.S.D.Ill. September 29, 1994) (noting that a claim cannot be discharged under 11 U.S.C. § 101(5)(B) if "the government has the option of cleaning up the pollution itself and seeking reimbursement from the debtor" (emphasis added)); 2 Alan N. Nesnick & Henry J. Sommer, Collier on Bankruptcy § 101.05 (15th ed. rev.2004) ("[W]hen the state neither seeks money nor has a right to payment, but only exercises its right to force a debtor to comply with the debtor's continuing obligation under state law to dispose of hazardous waste, the state's demand that the debtor remedy the hazard is not a claim of the state." (emphasis added)).

In opposing this position, the government relies on a lone case, In re Udell, 18 F.3d 403 (7th Cir.1994), which it argues supports the claim that it is exclusively the breaching party's ability to pay that is relevant under 11 U.S.C. § 101(5)(B). That is not quite right. While the court there did cite an Indiana appellate decision in which a breaching party's right to pay was considered, id. at 408-09, and further noted, in analogizing to the holding in the state case, that "Udell [the breaching party] cannot escape the restrictive covenant by paying $25,000 in liquidated damages," id. at 409, the Udell court did not hold, as the government urges, that a nonbreaching party's ability to convert an injunction into a monetary remedy is irrelevant in considering whether that injunction gives rise to a claim under 11 U.S.C. § 101(5)(B). To the contrary; in addition to citing approvingly to several decisions in which it was the nonbreaching party's ability to convert the injunction that was key, id. at 407-08, the Udell court repeatedly framed its analysis in terms of the nonbreaching, not the breaching, party's rights. See id. at 408, 409, 410 ("The former `is a "claim" if the creditor obtaining the order had the option, which CERCLA confers, to do the cleanup work itself and sue for response costs, thereby converting" die injunction into a monetary obligation'"The latter is not a claim because the creditor has `no option to accept payment in lieu of continued pollution'— i.e., the injunction does not give rise to a right to payment . . .. We further find that Carpetland's [the nonbreaching party's] right to an injunction does not give rise in any other sense to the payment of liquidated damages." (citations omitted) (emphasis added)). At the very most, then, Udell stands for the proposition that either a breaching party's right to pay or a nonbreaching party's right to payment can give rise to a claim under 11 U.S.C. § 101(5)(B). The Court finds the...