Signature Combs INC v. US case brief

case analysis of Signature Combs INC v. US (WD Tenn. 2003)

 

Facts: MDL claims Plaintiffs’ claims were discharged in their Chapter 11 bankruptcy reorg. Court denies MDL’s motion for judgment on the pleadings. Comprehensive Environmental Response, Compensation, and Liability ACT (CERCLA), plaintiffs want to recover response costs incurred at a superfund site charged by the EPA and Arkansas. (contribution). 

 

Issue: Are the claims by plaintiff barred by MDL’s chapter 11 petition and discharge?

Holding: Court adopts the fair contemplation standard. Does not violate 5^th amendment and Bankruptcy notice requirements. MDL failed to show that the claims of the EPA were discharged!

Right to Payment Approach: 1. D falls w/in one of the 4 categories of responsible parties. 2. Hazardous substances are disposed at a facility. 3. There is a relase or threatened release of hazardous substances from the facility into the environment, and 4. The release causes the incurrence of response costs including removal activities and enforcement activities related thereto. Debtor’s CERCLA liability will be discharged only if all 4 exist prior to bankruptcy. 

 

Underlying Act Approach: Pre bankruptcy claim subject to the code’s discharge provisions exist so long as the underlying polluting act occurred prior to the debtor’s bankruptcy. Evades those who don’t know yet about the behavior. 

 

Debtor-Creditor Relationship Approach: Any CERCLA liability is discharged if the creditor and debtor began a relationship before the debtor filed for bankruptcy, so long as the underlying act occurred before the bankruptcy petition was filed. EPA ought to know, so they have a relationship.

Fair Contemplation Approach: 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.” Reasonable diligence that it had a claim against the debtor for a hazardous release. Claim accrues earlier than the right to payment standard b/c the potential claimant need not incure response costs for a contingent claim to arise under this standard.

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