On October 12, 2021, the United States District Court for the District of Maryland granted summary judgment to Defendant Schumacher & Seiler, Inc. (“S&S”) and dismissed Plaintiff 68^th Street Site Work Group’s claim for contribution under CERCLA. See 68^th Street Site Workers Group v. AIRGAS Inc., Slip Op. (October 12, 2021). The District Court, applying the “underlying acts” or “conduct” approach, held that the Defendant’s CERCLA liability arose prior to, and was therefore discharged by, its Chapter 11 bankruptcy.

The 68th Street Dump Superfund Alternative Site (the “Site”) is an aggregation of seven landfills in the Rosedale area of Baltimore County and the City of Baltimore. Between the 1950’s and 1970’s the Site hosted waste disposal activities of municipal, industrial, and commercial waste containing hazardous substances. In the 1980s the EPA and the State of Maryland commenced emergency response and removal actions at the Site, and beginning in 1999, EPA issued General Notice Letters to various potentially responsible parties (“PRPs”). In November 2017, EPA issued its Record of Decision and EPA and the State of Maryland on the one hand and a group of settling PRPs on the other entered into a Consent Decree for Remedial Action. The Plaintiff, composed of the settling PRPs, then brought an action under CERCLA seeking contribution from over 150 defendants, including S&S, for response costs incurred in connection with activities and payments required by the Consent Decree.

S&S “was engaged in the business of wholesale and service of plumbing, heating, ventilation and air conditioning equipment” and “arranged for disposal or treatment, or arranged with a transporter for transport for disposal or treatment of waste containing hazardous substances at the 68th Street Site.” S&S filed for Chapter 11 bankruptcy protection in June 1992, and an Order Confirming the Amended Chapter 11 Plan was entered on December 17, 1992. “Pursuant to the provisions of the Plan, § 1141(d) of the United States Bankruptcy Code, and the discharge and release incorporated into the Confirmation Order, S&S had been granted a discharge . . . and has been released from any obligations that arose before the Effective Date.” Slip Op. at 2.

At issue before the Maryland Court was whether the CERCLA claims serving as the basis for Plaintiff's contribution claim were discharged by S&S’ 1992 bankruptcy, that is whether they “arose” before 1992. In resolving the question, the Court recognized the competing objectives of the Bankruptcy Code and CERCLA—“the former seeking to provide debtors with a fresh start by limiting or discharging liability, and the latter casting a broad net of liability for cleanup of hazardous waste”—and weighed the vying approaches courts have applied to answer the question of when a CERCLA claim has arisen, and, thus, whether it has been discharged. Id. at 4.

The District Court rejected Plaintiff’s invitation to apply the “right to payment” approach used by the Third Circuit. The “Right to payment” analysis prioritizes the objectives of CERCLA and is less deferential to the Bankruptcy Code by adopting the narrowest interpretation of what constitutes a “claim.” Id. Under this approach, “a debtor's CERCLA liability will be discharged only if all four CERCLA elements exist prior to a bankruptcy” Id (citation omitted). As defined by the Court, the four elements include “1) the defendant falls within one of the four categories of responsible parties; 2) hazardous substances are disposed at a facility; 3) there is a release 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.” Id. (citing Signature Combs, Inc. v. United States, 253 F. Supp. 2d 1028, 1033 n.3 (W.D. Tenn. 2003); 42 U.S.C. § 9607(a)). Here, the Court opined that, using this standard, the claim would survive bankruptcy as S&S had not been identified as a responsible party until after the discharge.

However, the District Court went on to analyze liability using the “underlying acts” or “conduct” approach generally applied by the Fourth Circuit, which adopts the broadest interpretation of “claim.” Id. at 5. Under this method, a “claim exists so long as the underlying . . . act occurred prior to the debtor’s bankruptcy.” Id. at 5. The underlying acts giving rise to Plaintiff’s CERCLA claim against S&S’—hazardous waste pollution at the Site—occurred between the 1950’s and the 1970’s, which was undoubtedly prior to the Bankruptcy. Therefore, the claims were discharged in the bankruptcy. Id. at 6.

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