Eagle-Picher Industries, Inc. and Eagle-Picher Industries, Inc.

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This document has been electronically entered in the records of the United
States Bankruptcy Court for the Southem District of Ohio.

psd Ladnser—

: Apnil 27, 2 Burton Perlman
Dated P 7» 2005 United States Bankruptcy Judge

IT SS SO ORDERED.

UN TED STATES BANKRUPTCY COURT
SOUTHERN Di STRICr OF OFFO
VESTERN DIVISION

In Re

Fagl e- Picher Industries, Case No. 91- 10100

Inc., et al

Chapter 11

Fagl e- Picher Industries, Inc. Judge Burton Perl nan

Se a ae ae ae ee a a ee ea

Movant
VS.
Blue Tee Corp.
Quapaw Tri be
Respondent s

2
ORDER ON MOTION FOR ORDER ENFORCING PLAN
AND CONFIRMATION ORDER
Respondent Blue Tee is an operator now in possession of a
certain Newton County Site located in Newton County, Missouri.
Blue Tee filed a complaint in the United States District Court
for the Western District of Missouri in which defendants are
Asarco Inc. and reorganized debtor Eagle-Picher Industries Inc.,
Movant. The claim asserted in the complaint is for
reimbursement of response costs incurred by Blue Tee at the
Newton County Site. The first amended complaint in the Missouri
case was served June 23, 2003. On January 30, 2004, Movant
filed a motion in this court, the objective of which is to
prohibit further prosecution of the Missouri suit. The Missouri
complaint expressly states that it is based upon §107 and §113
of CERCLA, Comprehensive Environmental Response, Compensation,
Liability Act of 1980 as amended.
Respondent Quapaw Tribe asserts that it is a sovereign
Indian nation. On December 10, 2003, it filed suit in the
United States District Court for the Northern District of
Oklahoma seeking compensation for alleged environmental damage
caused by the mining operations of Movant. It seeks as well
compensation for personal injury to tribal and tribal member’s
resources. At the time that it appeared in this court, it had
not yet done so, but expressed its intention to bring claims
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under CERCLA against Movant.
Movant reacted to these initiatives by filing the present
motion, contending that the plan and order of confirmation in
the Chapter 11 bankruptcy case precluded the actions of both
Blue Tee and the Quapaw Tribe, Respondents here. Respondents
then filed fulsome responses to the motion.
In addition Gold Fields Mining Corporation, identified as
a co-defendant of Movant in the Oklahoma lawsuit filed an
objection to the motion filed by the Movant. NL Industries, a
co-defendant with Movant in the Oklahoma lawsuit, also filed an
opposition to the motion of Movant.
On February 27, 2004 Respondent, the Quapaw Tribe, filed a
motion to withdraw the reference, and on April 28, 2004, filed
a motion to stay proceedings in this court pending resolution of
the motion to withdraw. On May 17, 2004, Respondent Blue Tee
joined in the motion to stay.
On May 25, 2004 the District Court denied the motion for
withdrawal of reference.
Briefing on Movant’s original motion continued through June
of 2004. On August 6, 2004, this court issued a Pre-trial
Order. That order required preliminary pre-trial statements
from the parties, and stated that upon the receipt of such
statement, the court would convene a pre-trial conference.
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Such a conference was held on November 5, 2004. As a
consequence of that conference it was concluded that Blue Tee
and the Quapaw Tribe would be made the subjects of separate
motions. It was further concluded that the question of when a
claim arises for purposes of this litigation should be decided
and a hearing on that subject should be held. The hearing was
held January 11, 2005.
Just prior to the hearing, a motion was filed by the
Burlington Northern and Santa Fa Railway Company (BNSF) to
intervene and be heard on the matter before the court. BNSF
sought to intervene because it is named as a defendant in
various of the litigation involving the parties now before the
court, EPI, Blue Tee, and the Quapaw Tribe. The motion of BNSF
to intervene was denied.
As requested at the November 5, 2004 pre-trial conference
by counsel for Blue Tee, the question of when a claim arises was
the subject of memoranda and hearing. Respondent Quapaw Tribe
also participated and was heard, as was Gold Field. The
position of Movant is that the suits brought by Blue Tee and the
Quapaw Tribe are barred by the confirmed plan; Blue Tee and
Quapaw Tribe received either actual or constructive notice of
the bar date which was established in the Chapter 11 bankruptcy
case for the filing of
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1 Prior to confirmation, debtor in possession Eagle Picher
Inc. entered into a Settlement Agreement with U.S. Environmental
Protection Agency and certain states, which agreement was
incorporated into the confirmation order.
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all non-asbestos related proofs of claim; the pendency of the
Chapter 11 case; and confirmation of the plan. Blue Tee, for
its part, states that the motion should be denied because the
claims which it asserts were not “fairly contemplated” by the
parties prior to confirmation of the plan.
Quapaw Tribe joins Blue Tee in urging the “fairly
contemplated” standard. Quapaw Tribe argues further that it was
not adequately or fairly notified of the bankruptcy filing or of
any bar date. Additionally, Quapaw Tribe says that the
Environmental Settlement Agreement entered into between the U.S.
Environmental Protection Agency and the debtor did not include
the Quapaw Tribe as a party and is not binding upon the Quapaw
Tribe.1 Further, Quapaw Tribe says that the actions of the
Movant while in possession continue to cause the release of
hazardous substances for which Movant should be held liable
pursuant to the Resource Conservation and Recovery Act, and
Oklahoma law.
Our analysis begins with a statement of the parameters
within which we approach decision. The hearing which led to
the present decision was held at the behest of Respondent Blue
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Tee. The facts upon which the Blue Tee suit is based are that
Blue Tee is presently responsible for remediation of
environmental infractions, which remediation Blue Tee has
already carried out, and for which it has expended funds. The
Blue Tee claim being asserted arises under CERCLA. (While
respondent Quapaw Tribe and Gold Fields appeared at the hearing
and were heard, the present decision will impact directly only
Blue Tee.)
For present purposes the parties have limited the question
before the court to the naked one of when does a claim arise:
does it arise when the underlying act is committed, or does it
arise when “fairly contemplated” by the parties. In dealing
with this question there come into play considerations from
bankruptcy law, environmental law, and due process. It is a
balancing of these considerations which leads the court to its
conclusion. It needs no citation of authority to support the
statement that the fundamental objective of the bankruptcy law
is to provide a debtor with a fresh start. The rationale behind
the CERCLA legislation is that parties which have caused
environmental disruption should be held accountable for
remediating the problem they have caused. In re Chateaugay
Corp., 944 F.2d 997,1002 (2nd Cir. 1991). Due process enters
the picture because a claimant is entitled to due process
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before a liability can be imposed on it:
“An elementary and fundamental requirement of due
process in any proceeding which is to be accorded
finality is notice reasonably calculated, under all
the circumstances, to apprise interested parties of
the pendency of the action and afford them an
opportunity to present their objections.”
Mullane v. Central Hanover Trust Co., 339 U.S. 306, 314, 70
S.Ct.
652, 657, 94 L.Ed. 865 (1950).
Debtor argues that a claim arises at the time of the
“underlying act”, based upon the definition of the word “claim”
in the Bankruptcy Code. Debtor says that not only has this
court previously made a holding to that effect, but as well, the
District Court in declining to withdraw the reference held that
what is presented in this litigation is strictly a Bankruptcy
Code issue. Debtor urges in support of its position In re
Chateaugay Corp. supra. The Chateaugay case involved a suit by
the United States EPA to recover the cost of remediation from a
reorganized debtor. The Court of Appeals affirmed the District
Court’s holding that claims that might have been asserted by EPA
for pre-petition conduct by the debtor were dischargeable in
bankruptcy.
Respondent Blue Tee asserts that the “underlying act”
standard is flawed because “due process is knowing what your
rights are and having a reasonable opportunity to vindicate
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them.” (Transcript p.25.) Blue Tee argues that the “fairly
contemplated” standard is more appropriate because Blue Tee had
no knowledge about whether the government would pursue it for
cleanup, and until it knew that, it had no reason to believe
that it had a claim against the debtor under CERCLA. Indeed,
the major contention of Blue Tee is that it would be unfair to
bar it from asserting a claim of which it had no knowledge prior
to the time that EPA brought it to its attention. Counsel for
Blue Tee summarized its position by saying:
“... did Blue Tee and Eagle-Picher have reason to know
that those portions of Newton County that have been
cleaned up by Blue Tee and partly by Asarco were going
to be cases that required clean up that we would be
held responsible for.” (Transcript p. 32.)
Blue Tee places primary reliance upon Signature Combs Inc.
v. USA 253 F. Supp. 2d 1028 (D.C. W.D. Tenn. 2003.). In that
case the question was presented whether a CERCLA claim could be
asserted against a reorganized debtor or whether it had been
discharged upon confirmation of the debtor’s Chapter 11 plan.
On debtor’s motion for judgment on the pleadings, the court
denied the motion holding that in resolving the litigation
before it, the court would apply a “fair contemplation” standard
in determining whether the claim asserted against the debtor had
been discharged in its bankruptcy. In reaching the conclusion
that the “fair contemplation” standard was the proper one, the
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court said:
This “fair contemplation” or “foreseeability” standard
posits that a contingent CERCLA claim arises pre-
petition only if it is “based upon pre-petition
conduct that can fairly be contemplated by the parties
at the time of the debtors’ bankruptcy.” Jensen, 995
F. 2d at 930 (quoting In re Nat’l Gypsum Co., 139 B.R.
397, 404 (N.D. Tex.1992)). Thus, a claim accrues when
the potential CERCLA claimant, at the time of
bankruptcy, “could have ascertained through the
exercise of reasonable diligence that it had a claim”
against the debtor for a hazardous release. In re
Crystal Oil Co., 158 F. 3d 291, 296 (5th Cir. 1998).
Blue Tee then argued that as a matter of fairness, and since
this is a court of equity, it should not be held that its claim
is
barred.
We do not here address the matters raised at the hearing by
respondent Gold Field because those arguments do not bear on the
question presented to us for resolution here.
As we stated at the outset, resolution of the standard here
to be applied involves a consideration of bankruptcy law,
environmental law, and due process law. After considering the
arguments of the parties, and weighing the foregoing
considerations, we conclude that the “underlying act” standard
is the proper standard here to be applied. We see no reason
why, because a claim is an environmental claim, where a putative
claimant has had its due process rights observed, such a claim
should not be discharged in bankruptcy. This holding does not
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mean that under any and all circumstances a claim arising from
a pre-petition act will be discharged; it is only where the due
process rights of the claimant are protected, that this result
will occur. See §523(a)(3). Where a claimant has notice of a
bankruptcy, it is not unreasonable to expect that it will
perform appropriate due diligence, and uncover the possibility
of an environmental claim which it should assert against the
debtor. Those who are concerned that a party which has caused
environmental damage might not have to pay to remedy it, must
accept the fact that to effect the purposes of the bankruptcy
law the rights of some claimants are lost.
While Blue Tee contends that the “fair contemplation”
standard better accommodates the intersection of bankruptcy and
environmental concerns, we find this to be illusory. A s
stated by the court in Signature Combs, supra, this standard is
described:
This “fair contemplation” or “foreseeability” standard
posits that a contingent CERCLA claim arises pre-
petition only if it is “based upon pre-petition
conduct that can fairly be contemplated by the parties
at the time of the debtors’ bankruptcy.” (Citations
omitted)
Blue Tee in argument in the present case formulates the “fair
contemplation” standard as giving rise to a claim by Blue Tee
against movant only when EPA tells the occupant of premises that
it must remediate an environmental fault. If this formulation
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were to be adopted it would mean that a creditor with notice of
bankruptcy would have no obligation whatever to perform due
diligence. The duty to make inquiry is recognized by the court
in Signature Combs itself, for the court there (at p.1037)
requires that a claimant “exercise...reasonable diligence”
before it can assert a claim. The “fair contemplated”
formulation in addition
totally obviates the possibility of a fresh start, a bankruptcy
bed rock. Indeed, it would mean that a debtor could never
return to economic viability because there would be no end to
post- petition claims.
Further, a “fair contemplation” standard will encourage
claimants to defer claims until after reorganization in the
hopes that full payment can be obtained, rather than the partial
payment usually available under a reorganization plan. In
Chateaugay, the court dealt with the question of defining
“claim” in deciding when a claim arose. In support of its
thesis that EPI had a pre-petition claim, the court said (at
p.1005):
Accepting EPA’s argument in this Chapter 11
reorganization case would leave EPA without any
possibility of even partial recovery against a
dissolving corporation in a Chapter 7 liquidation
case. Indeed, while EPA obviously prefers in this
case to keep its CERCLA claim outside of bankruptcy so
that it may present it, without reduction, against the
reorganized company that it anticipates will emerge
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from bankruptcy, one may well speculate whether, if
unincurred CERCLA response costs are not claims, some
corporations facing substantial environmental claims
will be able to reorganize at all.
The same considerations apply here, and lead to the conclusion
that “underlying act” is the proper standard to apply in this
case.
For the forgoing reasons, this court adopts for purposes of
adjudicating the Blue Tee claim, the “underlying act” standard.
So Ordered.
Copies to:
Stephen D. Lerner, Esq
Squire, Sanders, Dempsey, L.L.P.
312 Walnut St.; Ste 3500
Cincinnati, OH 45202
Allan Kanner
Allan Kanner & Associates, P.L.L.C.
701 Camp Street
New Orleans, Louisiana 70130
John K. Sherk, III
Shook, Hardy & Bacon, LLP
2555 Grad Blvd.
Kansas City, Missouri 64108
Robert Joseph Joyce
Joyce Paul & McDaniel, PC
111 W. Fifth Street; Ste 500
Tulsa, Oklahoma 74103
L. J. Buckner Jr.
Lathrop & Gage L.C.
2345 Grand Blvd.; Ste 2700
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Kansas City, Mo. 64108
W. C. Blanton, Esq
Blackwell Sanders Peper Martin, L.L.P.
Two Pershing Square
2300 Main Street; Ste 1000
Kansas City, Mo.
John H. Tucker
Tucker & Gable
P.O. Box 21100
100 W. Fifth Street; Ste 400
Tulsa, Ok. 74121-1100
Terrence Lane Wilson
Gable Golden & Nelson
320 S. Boston Ave; Ste 400
Tulsa, OK 74103-3708
Paul D. Kinsolver
Albright Rusher & Hardcastle
15 W. Sixth Street; Ste 2600
Tulsa, OK 74119
Richard A. Ahrens
Lewis Rice & Fingersh, LC
500 N. Broadway; Ste 2000
St. Louis, MO 63102
U.S. Trustee
2030 CBLD Center
36 E. Seventh Street
Cincinnati, OH 45202
Jason B. Aamodt
The Beacon Bldg
406 S. Boulder; Ste 101
Tulsa, OK. 74103
George Michael Lewis
Doerner Sanders Daniel & Anderson
320 S. Boston Ave.; Ste 500
Tulsa, OK 74103
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