Beveridge & Diamond
 
Related Practices
Related Practices
Related Industries
Related Industries

United States v. Apex Oil Company: Bankruptcy Does Not Discharge RCRA Injunctive Claims

Beveridge & Diamond, P.C., March 22, 2010

On August 25, 2009, the United States Court of Appeals for the Seventh Circuit issued a decision that may affect companies facing environmental clean-up responsibilities who file for bankruptcy protection.  United States v. Apex Oil, 579 F.3d 734 (7th Cir. 2009).  In Apex Oil, the United States brought a claim under section 7003 of the Resource Conservation and Recovery Act (“RCRA”) seeking injunctive relief that would require Apex Oil to, among other things, abate a petroleum plume at an oil refinery formerly owned by Apex’s predecessor.  See 42 U.S.C. § 6973.  The question brought before the Seventh Circuit was whether the government’s claim had been discharged in bankruptcy and therefore could not serve as the basis of a lawsuit.  The Seventh Circuit held that the government's claim to injunctive relief under RCRA section 7003 was not discharged by bankruptcy.  

Environmental and bankruptcy law often have competing objectives.  The Bankruptcy Code allows liability to be narrowed by enabling the discharge of debtors from liability for “pre-petition” claims that arise before the confirmation of the bankruptcy filing.  In contrast, environmental laws tend to disfavor any narrowing of liability, especially those laws that make responsible parties liable for cleaning up contamination.  As the Apex Oil court observed, courts have reconciled this conflict by allowing monetary claims and equitable claims that can be converted to money damages to be discharged in bankruptcy. The Seventh Circuit shifted the balance in favor of maintaining broad liability by construing RCRA section 7003 injunctive claims as surviving bankruptcy.  It determined that RCRA section 7003 claims are unique because they do not authorize any form of monetary relief and are purely injunctive.  The Seventh Circuit then concluded that a claim under RCRA section 7003 for injunctive relief is not dischargeable in bankruptcy.

The Seventh Circuit’s decision in Apex Oil adds to the uncertainty of the level of protection provided by a bankruptcy discharge.  In the Seventh Circuit, a debtor may remain liable under RCRA for remediating pre-petition environmental contamination even when the debtor no longer owns or operates the contaminated property.  Though the Apex Oil decision has not yet been relied upon in another reported environmental case, this decision could encourage the government to structure its causes of action as RCRA injunctive suits when seeking environmental clean-up from bankrupt or formerly bankrupt companies. 

For more information about the impact of this decision, please contact Pam Marks (pmarks@bdlaw.com, 410-230-1315) or Sarah Albert (salbert@bdlaw.com, 410-230-1375).   

Overview

News

Presentations

Media Contact





Attorney Contacts
Attorney Contacts