ELR Citation: ELR 21313
No(s). 91-3005 (7th Cir. Jul 2, 1992)

A panel of the Seventh Circuit holds that a bankrupt railroad company is not liable for cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) before reorganization because the U.S. Environmental Protection Agency (EPA) failed to file a claim during reorganization proceedings, but the company may be liable after conclusion of the bankruptcy reorganization when EPA issued a §106(a) cleanup order. The court holds that an injunction against the reorganized company's creditors extinguishes the company's CERCLA liability at the time of the dumping. EPA did not file a claim in bankruptcy even though it knew about the site and placed it on the CERCLA national priorities list while the reorganization was ongoing. However, the injunction does not bar a CERCLA §106(a) cleanup order issued after reorganization. By allowing EPA to direct the current owner to clean up a dump, CERCLA creates a claim running with the land. Bankruptcy is designed to sever the link between debts for bygones and current operations. The court observes that the company's appeal to the bankruptcy court is merely an effort to avoid the high priority that the CERCLA §113(h) bar against preenforcement review places on decontaminating the site before litigating liability claims. Further, to avoid the conclusion that it is repackaging a forfeited claim for damages, EPA must establish that harmful releases are threatened or ongoing and that the site poses an imminent and substantial endangerment to the public health or welfare.

Counsel for Plaintiff
Gregory Kulis
33 N. Lasalle St., Ste. 3300, Chicago IL 60602
(312) 435-5691

Counsel for Defendant
Yvonne Spradley
Office of Corporation Counsel
180 N. Lasalle St., Ste. 704, Chicago IL 60601
(312) 744-8573

Before EASTERBROOK and KANNE, Circuit Judges, and FAIRCHILD, Senior Circuit Judge.