What Happened: The Seventh Circuit Court of Appeals, in an opinion by Judge Posner, recently ruled that the government’s claim to an injunction for clean up under the Resource Conservation and Recovery Act (RCRA) is not dischargeable in bankruptcy. Bankruptcy law allows the debtor to discharge “any debt before the date of … confirmation.” 11 U.S.C. § 1141(d)(1)(A). In analyzing the Bankruptcy Code’s definition of “debt,” the court determined that while a debt is a “right to payment,” an injunction under RCRA does not “give rise to a right to payment,” as is required by the Code for discharge of an equitable remedy in bankruptcy. 11 U.S.C. §§ 1141(d)(1)(A), 101(5)(A)-(B). Therefore, injunctions under RCRA are not dischargeable.
Rationale: In analyzing § 101(5)(B) of the Bankruptcy Code, the court stated that in situations where the equitable remedy is unobtainable, such an equitable claim can be reduced to a money judgment if the claim “gives rise to a right to payment.” Thereafter, the claim can be discharged in bankruptcy. Distinguishing between a mortgage, which gives rise to a right of payment in the event of default, and an injunction under RCRA, the court reasoned that because RCRA “does not authorize any form of monetary relief,” an injunction under RCRA does not give rise to a right to payment, and merely entitles the government to order clean up at the defendant’s expense. Defendant argued that the court should distinguish between types of injunctions, such as those that can be complied with internally versus those that require an independent contractor for compliance, in determining whether or not the claim is dischargeable. The court rejected this argument, holding that such distinctions are arbitrary and would encourage polluters to hire third parties to clean up, even if fully capable of doing so internally.
Case: United States v. Apex Oil Co., Inc., 579 F.3d 734 (7th Cir. 2009).
Posted on
Fri, October 9, 2009
by Ashley Streight