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On August 25, the Court of Appeals for the Seventh Circuit held that an injunction imposed pursuant to the Resource Conservation and Recovery Act (RCRA) against Apex Oil Inc. requiring Apex to remediate contamination at a former oil refinery in Hartford, Illinois was not discharged in Apex’s Chapter 11 bankruptcy.  United States v. Apex Oil Co., Inc., — F.3d —, 2009 WL 2591545 (7th Cir. 009).  Apex argued that the government’s remediation injunction, which was estimated to require expenditures of approximately $150 million, was a “right to payment” that had been properly discharged in bankruptcy proceedings.  The circuit court rejected this argument.

Writing for the court, Judge Richard A. Posner concluded that a RCRA injunction to remediate does not qualify as a claim that can be discharged in bankruptcy because it does not give rise to a “right to payment” as that phrase is defined by the Bankruptcy Code.  Unlike CERCLA, RCRA does not entitle the government to a monetary payment of cleanup costs by a responsible party; instead, it allows the government to secure equitable relief requiring a responsible party to abate an environmental hazard.

According to the Judge Posner, the fact that Apex did not have the ability to conduct the cleanup itself and would have to spend money to comply with the remediation injunction did not create a dischargeable claim.  He reasoned that whether the defendant conducts a cleanup or hires a third party to do so proves irrelevant to the question of whether a “right to payment” exists since “[a]lmost every equitable decree imposes a cost on the defendant. ”