DMJ Associates, L.L. v. Capasso, et al
Filing
1628
ORDER granting 1571 Motion for Summary Judgment -- For the reasons set forth in the ATTACHED WRITTEN MEMORANDUM AND ORDER, RCPI's motion for summary judgment based on discharge in bankruptcy is denied. This case shall continue under the pretrial supervision of Magistrate Judge Robert M. Levy. SO ORDERED by Chief Judge Dora Lizette Irizarry on 9/22/2016. (Irizarry, Dora)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
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DMJ ASSOCIATES, L.L.C.,
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Plaintiff,
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-against:
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CARL A. CAPASSO, et al,
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Defendants,
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EXXON MOBIL CORPORATION and
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QUANTA RESOURCES CORPORATION,
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Defendants/Third-Party Plaintiffs,
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-against:
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ACE WASTE OIL, INC., et al,
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Third-Party Defendants.
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DORA L. IRIZARRY, Chief Judge:
MEMORANDUM AND ORDER
97-CV-7285 (DLI)(RML)
In the underlying first-party action, plaintiff DMJ Associates, L.L.C. (“DMJ”) brought an
environmental cleanup cost recovery claim against various defendants, including Exxon Mobil
Corporation (“Exxon Mobil”) and Quanta Resources Corporation (“Quanta”), under § 107 of the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(“CERCLA”), 42 U.S.C. § 9607, inter alia. Exxon Mobil and Quanta, collectively the thirdparty plaintiffs (“TPPs”), entered into a settlement agreement with DMJ in which the TPPs
agreed to pay certain monies to DMJ for its response costs and to remediate conditions at the
facility operated by Quanta (“Quanta Facility”). The TPPs then asserted claims in a third-party
action against Revere Copper Products, Inc. (“RCPI”) and other third-party defendants (“TPDs”)
in a third amended third-party complaint for response costs and contribution under CERCLA §§
107 and 113 alleging that RCPI and other TPDs transported hazardous materials for disposal or
treatment to the Quanta Facility during the period beginning in 1972 and extending through
1981. (Third Amended Third-Party Complaint (“TATPC”) at ¶¶ 2, 12, Dkt. Entry No. 1149.)
On October 27, 1982, RCPI’s corporate predecessors filed for bankruptcy in the U.S.
Bankruptcy Court for the Southern District of New York (“BCSDNY”). On May 19, 2014,
RCPI filed a motion for a pre-motion conference to seek permission to file the instant motion
and, alternatively, request that the matter be referred to the Bankruptcy Court. (See RCPI
Motion for Pre-Motion Conference, Dkt. Entry No. 1532.) On August 11, 2014, this Court
denied both RCPI’s motion for a pre-motion conference and its request to refer the case to
Bankruptcy Court. (See August 11, 2014 Order, Dkt. Entry No. 1543.) In that decision, this
Court held that “the TPPs’ CERCLA claims did not constitute valid bankruptcy claims, and,
thus, the Bankruptcy Court did not discharge these claims in its Confirmation Order.” (Id. at 3.)
RCPI filed the instant motion for summary judgment based on discharge in bankruptcy arguing
“that the CERCLA claims asserted by [the TPPs] arose out of contamination attributable to the
activities of” Quanta and its predecessors, which predated RCPI’s corporate predecessors filing
for bankruptcy. (See RCPI Motion for Pre-Motion Conference.)
For the reasons set forth below, RCPI’s motion for summary judgment based on
discharge in bankruptcy is denied.
BACKGROUND
Familiarity with the facts of the underlying first party action is presumed for purposes of
this decision.
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I.
Corporate History of RCPI
RCPI, in its first corporate iteration, “was formed in 1928 by the consolidation of six
copper and brass fabricating companies.” (Declaration of Allen G. Reiter 1 (“Reiter Decl.”),
Exhibit 11, Revere’s Disclosure Statement at 6, Dkt. Entry No. 1573-4.) The firm produced,
manufactured, and sold “nonferrous metals and metal products” in highly competitive national
markets. (Id)
Prior to the 1982 commencement of bankruptcy proceedings, RCPI’s predecessor, Revere
Copper Products, Inc., was a Maryland corporation, incorporated in 1980 as a subsidiary of
Revere Copper & Brass Incorporated. (Declaration of Kevin Cleary 2 (“Cleary Decl.”) at ¶ 2,
Dkt. Entry No. 1572-1.) RCPI is a Delaware corporation formed in 1987 that, through a series of
corporate reorganizations and other transactions, became the corporate successor by merger to
the old Revere Copper Products, Inc. (“Old RCPI”). (Cleary Decl. at ¶¶ 4-7.)
On October 27, 1982, Old RCPI and Revere Copper & Brass Incorporated (“Old
Revere”) filed for bankruptcy protection in the BDSDNY under Chapter 11 of the U.S.
Bankruptcy Code.
(Declaration of Thomas L. Kennedy 3 (“Kennedy Decl.”), Exhibit B,
Voluntary Petition for Relief Under Chapter 11, Title 11, United States Code (“Revere
Bankruptcy Petition”), Dkt. Entry No. 1572.) On July 29, 1985, the BDSDNY confirmed Old
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Allen G. Reiter is a member of Arent Fox LLP and serves as counsel for Quanta. (Reiter Decl. at ¶ 1.)
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Kevin Cleary was employed by Revere Copper & Brass Incorporated in various human resources capacities
from 1975 to 1987 and again from 1989 to 2011. (Cleary Decl. at ¶ 1.)
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Thomas L. Kennedy is an attorney for RCPI and a senior counsel at the law firm Bond, Schoeneck & King,
PLLC. (Kennedy Decl. at ¶ 1.)
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RCPI and Old Revere’s amended joint plan of reorganization.
(Response to Third-Party
Plaintiffs’ Statement of Additional Material Facts at ¶ 4, Dkt. Entry No. 1574.)
II.
Relationship Between Old RCPI and Old Revere with the TPPs
On July 29, 1980, Quanta purchased the assets of Portland Holding Corporation
(“Portland Holding”), which previously had operated under the name Newton Refining Company
(“Newton Refining”).
(Declaration of Thomas R. Smith4 (“Smith Decl.”), Exhibit 14,
Operations Analysis, Dkt. Entry No. 1571-4.) Newton Refining was founded by Russell W.
Mahler (“Mahler”) in 1957 and its business “consisted of recycling liquid oil wastes into fuel oil
and lubricating oil.” (Id.) Newton Refining operated multiple re-refining facilities in Syracuse,
New York and Long Island City, New York, among other cities. (Id.) “In May, 1976, Mahler
sold Newton Refining and its subsidiary companies to Ag-Met, Inc., which owned the company
until January, 1979.” (Id.) “In 1979 Ag-Met resold certain of the assets to Mahler,” who
established Portland Holding prior to its asset sale to Quanta. (Id.)
Pursuant to an asset purchase agreement dated April 25, 1980, Quanta was authorized to
purchase certain assets of companies owned and operated by Mahler, including Portland
Holding, Hudson Oil Refining Corporation, Edgewater Terminals, Northeast Oil of Syracuse,
Casco Equipment Corporation, Polar Industries, and Oil Transfer Corporation (collectively, “the
Mahler Companies”). (Smith Decl., Exhibit 4, Deposition of Eugene Prashker 5 (“Prashker
Dep.”) at 33:8-34:1, Dkt. Entry No. 1571-3.) When Quanta acquired the Long Island City rerefining facility as part of the Mahler Companies’ asset purchase, Quanta was aware that the
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Thomas R. Smith is an attorney for RCPI and a member of the law firm of Bond, Shoeneck & King, PLLC.
(Smith Decl. at ¶ 1.)
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Eugene Prashker served as a director on the Board of Directors for Quanta as of April 25, 1980. (Prashker
Dep. at 34:12-17.)
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property was subject to a consent order by the New York State Department of Environmental
Conservation (“NYSDEC”) compelling it to clean up the waste petroleum products at the
property site. (Smith Decl., Exhibit 5, Prashker Dep. at 82:9-14, Dkt. Entry No. 1571-3.)
Subsequent to the asset purchase, Quanta negotiated its own consent order with NYSDEC. (Id.
at 83:1-3.)
Old RCPI and Old Revere were customers of the Mahler Companies insofar as they
employed Mahler Companies to transport their waste oils for disposal to a processing facility in
Syracuse, New York. (RCPI’s Rule 56.1 Statement at ¶ 4, Dkt. Entry No. 1571-1.) Some of
those wastes were transshipped from the Syracuse facility to the Quanta Facility. (Id.)
III.
Quanta Bankruptcy
In June of 1980, Straubing & Rubin, an engineering firm, prepared a report detailing
some of the environmental deficiencies at the Quanta Facility. (Smith Decl., Deposition of
Kenneth Mansfield 6 (“Mansfield Dep.”) at 221:5-225:16, Dkt. Entry No. 1571-3.) From May 7,
1982 through December 1, 1982, the City of New York Department of Environmental Protection
(“NYCDEP”) took emergency response actions to remove contaminated petroleum waste
products containing polychlorinated biphenyls (“PCBs”) and other hazardous materials from the
Quanta Facility. (Smith Decl., Exhibit 18, Quanta Resources City on Scene Coordinator’s
Report to the Commissioner, Dkt. Entry No. 1571-4.) In a letter dated August 2, 1982, addressed
to Quanta, the New York City Department of Health declared the Quanta Facility to be a public
nuisance due to the “unsafe and illegal manner” in which hazardous waste oil and sludge is
stored. (Smith Decl., Exhibit 24, Dkt. Entry No. 1571-4.) In another letter dated August 24,
1982, addressed to the Commissioner of the NYSDEC, the Commissioner of the NYCDEP
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Kenneth Mansfield “was employed by the Mahler Companies in 1974, and remained employed by the
Mahler Companies until the sale to Quanta Resources Corporations in July 1980. Following the sale, Mr. Mansfield
continued to be employed by Quanta Resources Corporation until 1981.” (Smith Decl. at ¶ 12.)
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deemed the Quanta property site an abandoned and “inactive hazardous waste disposal site”
fraught with corroded waste oil storage tanks. (Smith Decl., Exhibit 26, Dkt. Entry No. 1571-4.)
On November 12, 1980, Quanta entered into an administrative consent order (“AOC”)
with the NYSDEC that granted Quanta temporary authority over the Quanta Facility. (Smith
Decl., Exhibit 29, Dkt. Entry No. 1571-4.) With the discovery of significant amounts of PCBs
and other hazardous waste materials at the Quanta Facility, Quanta concluded in the summer of
1981 that operation of its waste oil re-refinery would be unprofitable. (Id.) Therefore, on
October 6, 1981, Quanta filed a petition for Chapter 11 bankruptcy. (Id.) On November 12,
1981, Quanta’s Chapter 11 bankruptcy petition was converted to a liquidation pursuant to
Chapter 7 of the U.S. Bankruptcy Code. (Id.)
IV.
Old Revere and Old RCPI Bankruptcy
As noted above, Old Revere, Old RCPI and certain other subsidiaries and affiliates (“the
Old Revere Companies”) each filed petitions for bankruptcy protection on October 27, 1982.
(Kennedy Decl. at ¶ 2.) These bankruptcy petitions were ordered consolidated and jointly
administered by the BDSDNY on October 27, 1982. (Id. at ¶ 8.) On May 10, 1985, the Old
Revere Companies provided creditors and equity shareholders with notice of a hearing on
approval of the Old Revere Companies’ disclosure statement and of the hearing on confirmation
of the reorganization plan. (Id. at ¶ 12.) On July 29, 1985, the BDSDNY approved the plan for
reorganization and signed the Order Confirming the Plan (“Confirmation Order”). (Id. at ¶ 14.)
The Confirmation Order was officially entered on July 30, 1985. (Id.)
On October 10, 2013, RCPI, as the corporate successor to the Old Revere Companies,
sought to reopen the bankruptcy proceedings before the BDSDNY asserting that the TPPs’
claims against it were discharged pursuant to the 1985 Confirmation Order. (RCPI Motion for
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Pre-Motion Conference at 2.) On May 6, 2014, the BDSDNY denied RCPI’s motion to reopen
the underlying bankruptcy proceedings.
(Declaration of Allen G. Reiter, Exhibit 3, Order
Denying Revere’s Motion to Reopen the Bankruptcy Cases, Dkt. Entry No. 1532-2.) RCPI now
moves for summary judgment before this Court again arguing that the TPPs claims against it
constitute pre-petition claims that were discharged pursuant to the 1985 Confirmation Order.
DISCUSSION
I.
Summary Judgment Standard of Review
Summary judgment is appropriate when “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.
R. Civ. P. 56(a). “In ruling on a summary judgment motion, the district court must resolve all
ambiguities, and credit all factual inferences that could rationally be drawn, in favor of the party
opposing summary judgment and determine whether there is a genuine dispute as to a material
fact, raising an issue for trial.” McCarthy v. Dun & Bradstreet Corp., 482 F.3d 184, 202 (2d Cir.
2007) (internal quotations omitted). A fact is “material” within the meaning of Rule 56 when its
resolution “might affect the outcome of the suit under the governing law.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248 (1986). An issue is “genuine” when “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.” Id. To determine whether an
issue is genuine, “[t]he inferences to be drawn from the underlying affidavits, exhibits,
interrogatory answers, and depositions must be viewed in the light most favorable to the party
opposing the motion.” Cronin v. Aetna Life Ins. Co., 46 F.3d 196, 202 (2d Cir. 1995) (citing
United States v. Diebold, Inc., 369 U.S. 654, 655 (1962) (per curiam) and Ramseur v. Chase
Manhattan Bank, 865 F.2d 460, 465 (2d Cir. 1989)). “[T]he evidence of the non-movant is to be
believed, and all justifiable inferences are to be drawn in his favor.” Anderson, 477 U.S. at 255.
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However, “[w]hen opposing parties tell two different stories, one of which is blatantly
contradicted by the record, so that no reasonable jury could believe it, a court should not adopt
that version of the facts for purposes of ruling on a motion for summary judgment.” Scott v.
Harris, 550 U.S. 372, 380 (2007).
The moving party bears the burden of “informing the district court of the basis for its
motion, and identifying those portions of [the record] . . . which it believes demonstrates the
absence of a genuine issue of fact.” Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal
quotations omitted). Once the moving party has met its burden, “the nonmoving party must
come forward with ‘specific facts showing that there is a genuine issue for trial.’” Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (emphasis omitted) (internal
citation omitted). The nonmoving party must offer “concrete evidence from which a reasonable
juror could return a verdict in [its] favor.” Anderson, 477 U.S. at 256. The nonmoving party
may not “rely simply on conclusory statements or on contentions that the affidavits supporting
the motion are not credible, or upon the mere allegations or denials of the nonmoving party’s
pleading.” Ying Jing Gan v. City of New York, 996 F.2d 522, 532-33 (2d Cir. 1993) (internal
citations and quotations omitted). “Summary judgment is appropriate only ‘[w]here the record
taken as a whole could not lead a rational trier of fact to find for the non-moving party.’”
Donnelly v. Greenburgh Cent. Sch. Dist. No. 7, 691 F.3d 134, 141 (2d Cir. 2012) (quoting
Matsushita, 475 U.S. at 587).
II.
The TPPs Claims Were Not Discharged in Bankruptcy
“[T]he existence of a valid bankruptcy claim depends on (1) whether the claimant
possessed a right to payment, and (2) whether that right arose before the filing of the petition.”
Pension Benefit Guaranty Corporation v. Oneida Ltd., 562 F.3d 154, 157 (2d Cir. 2009) (internal
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quotation marks and citation omitted). In order to make such determinations, the courts must
look to “the substantive non-bankruptcy law that gives rise to the debtor’s obligation.” Id.
A claim will be deemed pre-petition when it arises out of a relationship
recognized in, for example the law of contracts or torts. A claim exists only if
before the filing of the bankruptcy petition, the relationship between the debtor
and the creditor contained all of the elements necessary to give rise to a legal
obligation . . . under the relevant non-bankruptcy law.
In re Duplan Corp., 212 F.3d 144, 152 (2d Cir. 2000).
“CERCLA claims arise for purposes of bankruptcy at the earliest on the date that CERCLA
became effective, December 11, 1980.” Id. at 151. Indeed, the court in In re Chateaugay Corp.
held that, “where there is no legal relationship defined at the time of petition, that is, where the
statute imposing the liability has not been enacted, it would be impossible to find even the
remotest right to payment.” In re Chateaugay Corp., 154 B.R. 416, 419 (S.D.N.Y. 1993).
Here, CERCLA had been enacted prior to the confirmation of Old RCPI’s bankruptcy on
July 30, 1985. However, Section 113(f) of CERCLA, under which the TPPs brought this action
against RCPI, had not yet been enacted at the time of the hazardous waste releases or even before
the 1985 Confirmation Order. Furthermore, the statutory scope of section 107(a) of CERCLA
had not yet permitted suit by private parties to recover cleanup costs from other private parties.
Such suit first was made possible in 2007 by the Supreme Court in United States v. Atlantic
Research Corp., which provided that a potentially responsible party (“PRP”) could pursue a §
107 claim for recovery of cleanup costs against another PRP. 551 U.S. 128, 139-141 (2007).
Although RCPI contends that CERCLA § 107(a) bears the same statutory language as the date of
its enactment and permitted private parties to pursue contribution claims thereunder at the
statute’s inception in 1980, the TPPs still were precluded from seeking contribution claims
against Old RCPI under § 107 until the Supreme Court issued its 2007 decision in Atlantic
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Research. As the Honorable Robert M. Levy, U.S.M.J., correctly noted in his Report and
Recommendation issued on July 6, 2015, denying TPD’s summary judgment motion as to Count
1 of the TATPC:
Prior to December 2004, when the U.S. Supreme Court decided Cooper
Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004), every federal
appellate court to address the interplay of §§ 107 and 113–including the Second
Circuit–held that a PRP could not bring a § 107(a) cost recovery action against
another PRP.
(Report and Recommendation (“R & R”) at 13, Dkt. Entry No. 1564, adopted on Mar. 31, 2016,
Dkt. Entry No. 1608.) However, Cooper Industries merely stood for the proposition that a
private party that had not been sued under CERCLA § 106 or § 107(a) cannot obtain contribution
under CERCLA § 113(f)(1) from other potentially liable parties. 543 U.S. at 168. Cooper
Industries also declined to consider whether a private PRP could recover response costs against
another private PRP under CERCLA § 107(a)(4)(B). Id. at 170-71.
In United States v. Atlantic Research, the Supreme Court held that § 107(a) allows for the
recovery of remediation costs “without any establishment of liability to a third party” where the
party seeking recovery has incurred the costs directly. 551 U.S. 128, 139 (2007). Furthermore,
Atlantic Research found that “[a PRP’s] costs incurred voluntarily are recoverable only by way
of § 107(a)(4)(B).” Id. at 139 n. 6. As was born out in the R & R’s exhaustive case law and
statutory analysis, the issue of the voluntariness of a PRP’s direct cost incurrence as a
determinant in whether a party may proceed under § 107(a) or § 113(f) remains a contested issue
that the Supreme Court has not yet definitively decided.
RCPI relies on In re Chateaugay, 944 F.2d 997 (2d Cir. 1991), to support its contention
that the TPPs’ CERCLA claims constitute pre-petition claims since they arose out of pre-petition
releases or threatened releases of hazardous waste materials, notwithstanding that the response
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costs were not incurred until after the bankruptcy. (RCPI Memorandum of Law in Support of
Summary Judgment Based Upon Discharge in Bankruptcy (“RCPI Mem. of Law”) at 9, Dkt.
Entry No. 1572-3.) This reliance is misplaced. Chateaugay is factually distinguishable from the
instant matter. As the TPPs correctly note, in Chateaugay, the U.S. Environmental Protection
Agency (“EPA”) already had incurred remediation costs and sought reimbursement at the time of
the bankruptcy’s confirmation. (TPPs’ Memorandum of Law in Opposition to RCPI’s Motion
for Summary Judgment (“TPPs’ Mem. of Law”) at 20, Dkt. Entry No. 1573-7; 944 F.2d at 9991001.) Moreover, in Chateaugay, the EPA acknowledged that, although it incurred response
costs for remediation at a certain number of sites, it was unaware of the full scope of its
environmental claims. 944 F.2d at 999. Here, the TPPs lacked knowledge as to the existence of
any claim whatsoever at the time RCPI filed for bankruptcy protection. Furthermore, CERCLA
§ 107(a) as interpreted by courts at both the time of RCPI’s bankruptcy filing and years later did
not afford the TPPs an opportunity to pursue any contribution claims. See United Technologies
Corp. v. Browning-Ferris Industries, 33 F.3d 96, 99 (1st Cir. 1994) (defining contribution as “a
claim by and between jointly and severally liable parties for an appropriate division of the
payment one of them has been compelled to make”) (internal quotation marks and citation
omitted); Consolidated Edison Co. of New York, Inc. v. UGI Utilities, Inc., 423 F.3d 90, 94 (2d
Cir. 2005) (finding that while Section 107(a) permitted certain sued private parties to sue other
parties to recover response costs incurred voluntarily, it did not grant to parties against whom
liability has been imposed any express right to sue other parties for contribution). In the instant
matter, the TPPs did not voluntarily incur response costs, but rather were sued by DMJ under
CERCLA Section 107(a). In this capacity, the TPPs were not accorded the statutory authority to
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sue any PRPs under Section 107(a) until the Supreme Court rendered its decision in Atlantic
Research.
Notwithstanding RCPI’s contention that the occurrence and discovery of the
environmental contamination prior to the filing of the bankruptcy petition discharges any claims
against it, the issue remains as to whether there were any legally assertable non-bankruptcy
claims against RCPI at the time of the petition’s filing. Under Duplan, there were no such
claims because the relationship between Old RCPI and the TPPs did not contain all of the
elements necessary to give rise to a legal obligation. 212 F.3d at 152. The elements necessary to
give rise to such a legal obligation arose when the Supreme Court decided Atlantic Research.
Accordingly, the CERCLA § 107 and § 113 claims against RCPI do not constitute pre-petition
claims.
III.
Adequate Notice of Bankruptcy Petition Filing
Because the claims against RCPI are not dischargeable in bankruptcy, it is not necessary
for the Court to address the issue of whether the TPPs received adequate notice of the Old
Revere Companies’ bankruptcy filing. Accordingly, the issue of receipt of adequate notice is
moot.
CONCLUSION
Accordingly, RCPI’s motion for summary judgment based on discharge in bankruptcy is
denied.
SO ORDERED.
Dated: Brooklyn, New York
September 22, 2016
/s/
DORA L. IRIZARRY
Chief Judge
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