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'Fresh Start' Leads To Bankruptcy Discharge of Environmental Contamination Claims
One of the powerful benefits of bankruptcy is the ability to obtain a “fresh” start by obtaining a discharge of most, but not all claims that arose prior to the filing of the bankruptcy case. But when does a claim arise? This issue is especially complex when environmental contamination claims are involved. Environmental contamination can exist for years — even decades — before its effect ripens into damage or injury. Courts have developed different tests for determining when environmental claims arise for the purpose of determining whether they are discharged in bankruptcy. The dischargeability of environmental claims was recently addressed in a decision issued by Judge Kevin J. Carey of the U.S, Bankruptcy Court for the District of Delaware in In re Exide Technologies, Case No. 13-11482 (Adv. No. 17-51826) (Bankr. D. Del. March 28, 2019). The court held the claims at issue had been discharged in the Exide bankruptcy case.
The Lead Discharge and the Bankruptcy Discharge
According to the opinion, the plaintiff alleged Exide Technologies or its corporate predecessors owned property located in Salem, OR from 1983 to 2002. Exide was the world's largest manufacturer of automotive batteries at that time. In the early 1990s, the Oregon Department of Environmental Quality (DEQ) became aware of lead contamination in soil on the property that resulted from Exide's operations. In November 1999, the DEQ determined no further remedial action was required and directed that deeds transferring title to the property contain an easement of equitable servitude limiting site usage to industrial operations only.
Exide filed a Chapter 11 case in April 2002. The debtor sold the property to Faries Salem Properties on June 28, 2011, as authorized by an order of Bankruptcy Court. Exide's Chapter 11 plan of reorganization was confirmed in April 2004.
Nine years later, in June 2013, Exide filed a second Chapter 11 case. Faries Salem was listed as an unsecured creditor, and the debtor sent notices to Faries Salem. However, Exide was not aware that in 2011 Faries Salem sold the property to West Salem Storage. As such, Exide did not provide actual notice of its bankruptcy to West Salem. West Salem's complaint requesting that the Bankruptcy Court determine its claims were not discharged alleged that during Exide's 2013 bankruptcy case, “West Salem did not know that lead was present in the building on the property at levels that would require it to vacate its tenants and conduct substantial investigation, remediation and restoration work at the property.” The court approved Exide's Chapter 11 plan in 2015, which contained discharge, claim holder release and injunction provisions.
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