ELR Citation: ELR 20596
No(s). 4-88-692 (D. Minn. Nov 5, 1991)

The court holds that a debtor's liability under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) is not discharged in bankruptcy, where the debtor has not disclosed its potential CERCLA and state liabilities, and the state, while aware of its role as a creditor in the debtor's bankruptcy, has not had actual knowledge of the potential claim in sufficient time to file a claim in the bankruptcy proceedings. After a county landfill in Minnesota was placed on the CERCLA national priorities list, a third-party defendant in a contribution action related to the landfill filed for Chapter 11 reorganization in bankruptcy. The record shows that the debtor listed the Minnesota Pollution Control Agency (MPCA) as an unsecured creditor and that the defendant in the landfill recovery action notified the MPCA that debtor had been identified as a potentially responsible party at the landfill site. Moreover, while debtor also notified the U.S. Environmental Protection Agency (EPA) that it was being listed as an additional creditor in debtor's bankruptcy, no notice to the MPCA or EPA provided any information concerning debtor's potential liability for cleanup at the landfill site, and the record reveals that at the time the debtor was unaware of any possible link it had to the site. Subsequently, the MPCA requested information from the debtor related to debtor's potential liability at the landfill site, which was the first the debtor knew of its potential liability. However, the request was not received by the debtor until after the confirmation of its plan of reorganization in bankruptcy, and neither the MPCA nor EPA filed a claim in the bankruptcy proceeding.

The court holds that when a debtor has not disclosed its potential CERCLA and state liabilities in long-since closed bankruptcy proceedings, and the governmental agency has not had actual knowledge of the potential claim in sufficient time to file a claim in those proceedings, the potential CERCLA and state liability is not discharged. Moreover, the debtor should remain in this case under the CERCLA contribution provision because no express common liability to a governmental agency is required, as would be under common law contribution. Thus, CERCLA may be interpreted as providing a right to contribution separate from state common-law principles of contribution. This result supports the general purposes of CERCLA and state law for the prompt cleanup of hazardous waste sites, the protection of health and the environment, and making those who pollute pay for the cleanup of that pollution. Although these CERCLA goals conflict with the goal of the Bankruptcy Code to provide debtors with a fresh start, the problems posed for CERCLA enforcement by dismissing the debtor outweigh the debtor's hope for discharge where the bankruptcy proceedings are already complete and there was not adequate opportunity to include the debtor's potential CERCLA and state liability in those proceedings.

Counsel for Plaintiff
Gary M. Hansen, Dawn L. Gagne
Doherty Rumble & Butler
2800 Minnesota World Trade Ctr., 30 E. 7th St., St. Paul MN 55101
(612) 291-9333

Counsel for Defendant
Sarah Halvorson
Lindquist & Vennum
4200 IDS Ctr., 80 S. 8th St., Minneapolis MN 55402
(612) 371-3211

Scott Ammarell
McDermott, Will & Emery
227 W. Monroe St., Chicago IL 60606
(312) 372-2000