ELR Citation: ELR 20239
No(s). s. 89-35422, -35449 (9th Cir. Dec 17, 1991)

The court holds that §502(e)(1)(B) of the Bankruptcy Code does not bar the owner of a contaminated industrial site in Oregon from bringing a Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) response action against a former lessee now in bankruptcy for response costs incurred, but that the bankruptcy court erred in awarding the owner a liquidated sum for future costs not yet incurred. The owner filed a proof of claim in the former tenant's bankruptcy case, requesting reimbursement of over $14 million, of which only $1 million was for cleanup costs incurred at the time of filing. The court first holds that even though the bankruptcy court allowed the owner's CERCLA claim because it was not contingent at the time of allowance or disallowance, the owner's claim survives because the owner's claim fails to satisfy the coliability requirement for disallowance. No third parties are competing over the bankrupt lessee's funds, which is the concern addressed in the Bankruptcy Code. CERCLA's private right-of-action permits a private party to recover from a responsible party response costs it incurs itself in conducting cleanup pursuant to CERCLA, even absent intervention by the state. Environmental Protection Agency arm-twisting is not a prerequisite for filing a §107(a)(4)(B) claim. The court next holds that the bankruptcy court properly determined the bankrupt lessee's proportionate liability for the total cleanup costs by converting to percentage the number of years the lessee operated the site out of the total number of years all the owner's tenants had operated the site. However, the court holds that the owner's potential future cleanup costs do not amount to CERCLA response costs "incurred," making the bankruptcy court's application of the above determined percentage to the amount sought by the owner improper. Under CERCLA's scheme for private action, response costs may not be recovered when there has been no commitment of resources for meeting these costs. The court notes that on remand, CERCLA §113(g)(2) does not preclude the bankruptcy court from entering a declaratory decree apportioning liability for costs when and if they are incurred.

[Previous decisions in this case are published at 16 ELR 20191 and 18 ELR 21312.]

Counsel for Appellant-Cross Appellee
Harry H. Schneider Jr.
Perkins Coie
1201 3rd Ave., 40th Fl., Seattle WA 98101
(206) 583-8888

Counsel for Appellee-Cross Appellant
Christopher R. Hermann
Stoel, Rives, Boley, Jones & Grey
900 SW 5th Ave., Portland OR 97204
(503) 224-3380