Lyondell Chemical Company and Millennium Custodial Trust

UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
_______________________________________
)
In re: 	) 	Chapter 11
)
LYONDELL CHEMICAL COMPANY, et al., 	)
) 	Case No. 09-10023 (REG)
)
Debtors. 	) 	Jointly Administered
_______________________________________)
BENCH DECISION 1 ON DEBTORS’ OBJECTIONS,
UNDER BANKRUPTCY CODE SECTION 502(e)(1)(B),
TO PRP ENVIRONMENTAL CONTRIBUTION CLAIMS
APPEARANCES:
CADWALADER, WICKERSHAM & TAFT, LLP
Counsel to the Debtors
One World Financial Center
New York, New York 10281
By: 	Christopher R. Mirick, Esq.
-and-
700 Sixth Street, N.W.
Washington, D.C. 20001
By: 	David F. Williams, Esq. (argued)
Douglas H. Fischer, Esq.
BROWN RUDNICK, LLP
Counsel to the Official Committee of Unsecured Creditors
One Financial Center
Boston, Massachusetts 02111
By: 	John C. Elstad, Esq. (argued)
Steven D. Pohl, Esq.
1 	I use bench decisions to lay out in writing decisions that are too long, or too important, to dictate in open
court, but where the circumstances do not permit more leisurely drafting or more extensive or polished
discussion. Because they often start as scripts for decisions to be dictated in open court, they typically have
a more conversational tone.
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PERKINS COIE, LLP
Attorneys for Weyerhaeuser Company
1201 Third Avenue, Suite 4800
Seattle, Washington 98101
By: 	Mark. W. Schneider, Esq. (argued)
DORSEY & WHITNEY, LLP
Attorneys for Weyerhaeuser Company
250 Park Avenue
New York, New York 10177
By: 	James V. Parravani, Esq.
LATHAM & WATKINS, LLP
Attorneys for Georgia-Pacific, LLC
53rd at Third, 885 Third Avenue
New York, New York 10022
By: 	Mark A. Broude, Esq. (argued)
Sara Orr, Esq.
JONES DAY
Attorneys for Hamilton Beach Brands
222 East 41 st Street
New York, New York 10017
By: 	Ross S. Barr, Esq. (argued)
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ROBERT E. GERBER
U.S. BANKRUPTCY JUDGE:
In this contested matter in the jointly administered chapter 11 cases of Lyondell Chemical
Company and its affiliates, the Debtors object to private party claims (the “Private Party
Claims”) for future environmental remediation costs also sought by the federal government and
certain state governmental entities, under section 502(e)(1)(B) of the Code, which generally
disallows claims (1) for reimbursement or contribution (2) by those liable with the debtor (3) to
the extent that such claims are contingent.
With one exception, I conclude that these claims are of the type for which disallowance is
required under section 502(e)(1)(B) and its associated caselaw, and except insofar as the
exception applies, the Debtors’ objections are sustained. With respect to the exception (where
remediation costs were already paid by the claimant), the Debtors’ exceptions are overruled.
Findings of Fact2
1. Government Environmental Claims
In July and August 2009, the United States, on behalf of the U.S. Environmental
Protection Agency, the U.S. Department of the Interior, and the National Oceanic and
Atmospheric Administration (collectively, the “EPA”), filed proofs of claim (the “EPA
Claims”) against certain of the Debtors asserting claims for, among other things, unreimbursed
past and estimated future response costs for environmental cleanup under section 107(a) of the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. §§ 9601
et seq. (“CERCLA”).
2 	Pursuant to the parties’ agreement and the provisions of Case Management Order #1, all of the facts (but
not necessarily arguments and conclusions) in the declarations submitted to me have been taken as true. To
shorten this Decision, I’ve limited factual citations and detail to the most significant matters.
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Various state governments, or their environmental regulatory agencies,3 did likewise.
The governmental claims totaled approximately $5.5 billion in identified amounts, in addition to
contingent and unliquidated claims that were asserted in unstated amounts. 4 These
environmental claims represented one of the largest, if not the largest, groups of unsecured
claims asserted in the Lyondell bankruptcy cases.
2. Environmental Settlement Agreement with U.S. and Certain States
In April 2010, I approved a settlement agreement (the “Settlement Agreement”) among
the Debtors, the EPA, and ten state environmental agencies, resolving their environmental claims
and providing for funds for future clean-up efforts. The Settlement Agreement, in relevant part,
provided for:
(1) the allowance of over $1 billion in general unsecured claims for the
benefit of the U.S. for unreimbursed past and future response costs incurred by
the U.S. pursuant to CERCLA section 107(a);
(2) a cash payment to the U.S. to resolve alleged injunctive obligations at
a number of environmental sites; and
(3) the formation and funding of an environmental custodial trust to take
title to and to remediate certain Debtor-owned properties with known or suspected
environmental contamination.
The Agreement also provided allowed claims in fixed amounts to various states’ environmental
authorities.
3 	For simplicity, I ignore this distinction going forward, and refer to such claims simply as being asserted by
the respective states.
4 	The proofs of claim filed by the U.S. and state governmental agencies totaled approximately $5.5 billion,
with the federal claims totaling approximately $5 billion, and the state claims representing the remainder.
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The Settlement Agreement granted Millennium Holdings, LLC (“MHLLC”)
contribution protection under CERCLA section 113(f)(2) for environmental liabilities resolved
by the Settlement Agreement. The implication of that contribution protection was that other
“potentially responsible parties” (“PRPs”) with respect to those environmental liabilities would
not be able to seek payment from MHLLC for cleanup costs, because MHLLC would have
satisfied its liability on account of the sites addressed in the Settlement Agreement.
3. The Private Party Environmental Claims
Over 70 Private Party Claims associated with the properties covered by the EPA’s and/or
the state government entities’ proofs of claims—relying either implicitly or explicitly on
CERCLA sections 107(a) and 113(f)(1), discussed below—sought an estimated $1.1 billion for
both past and future cleanup costs. After having settled the EPA and state governmental claims,
the Debtors objected to the Private Party Claims.
The Debtors don’t object to the Private Party Claims to the extent they are for money
spent by claimants in the past. But the Debtors argue that the Private Party Claims must be
disallowed under section 502(e)(1)(B) of the Bankruptcy Code to the extent they seek payment
of future cleanup costs.
Most of the Private Party claimants did not contest the Objections. But some did.
Objections with respect to three Orally Arguing Claimants were orally argued at the hearing on
April 16, 2010—those with respect to responders Georgia-Pacific, LLC (“Georgia-Pacific”),
Weyerhaeuser Company (“Weyerhaeuser”), and Hamilton Beach Brands, Inc. (“Hamilton
Beach,” and collectively with Georgia-Pacific and Weyerhaeuser, the “Orally Arguing
Claimants”).5
5 	Other claimants (the “Other Claimants”) filed timely responses but did not orally argue: Arkema
Incorporated, Certain Teed Corporation, Marvin Jonas Transfer Station Site Orally Arguing Claimants
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4. Georgia-Pacific and Weyerhaeuser’s Claims
Georgia-Pacific and Weyerhaeuser’s claims relate to the Allied Paper/Portage
Creek/Kalamazoo River Superfund Site (the “Kalamazoo Site”) in Michigan. Paper mill
operations once located on the Kalamazoo Site discharged paper residue into the environment,
including the Kalamazoo River, and deposited massive amounts of polychlorinated biphenyls
into waterways, surface water, soils, and sediments. On August 30, 1990, the EPA placed the
Kalamazoo Site on the “National Priorities List”—EPA’s list of the most serious hazardous
waste sites. MHLLC, Georgia-Pacific, and Weyerhaeuser (or their respective predecessors) were
all former mill operators at the Kalamazoo Site. The Site is divided into 5 “operable units”
(“OU”s), and the EPA has stated that it believes that the cleanup of OU-5, an 80-mile long
stretch of the Kalamazoo River and Portage Creek, will be the main source of costs at the Site.
The EPA filed a proof of claim against MHLLC, alleging that MHLLC is liable to the
U.S. under CERCLA section 107 for $2.6 billion for response costs at the Kalamazoo Site,
including all five OUs, and that other parties along with MHLLC may also be jointly and
severally liable. The EPA estimates future response costs for OU-5 to be $2.4 billion—
constituting by far the largest portion of the total cost.
The EPA has not issued cleanup orders to MHLLC, Georgia-Pacific, or Weyerhaeuser at
this time. The EPA has entered into administrative orders on consent (“AOCs”) and consent
decrees with Georgia-Pacific and Weyerhaeuser with respect to the Kalamazoo Site, and I’ll
discuss the specific orders and decrees with respect to each Respondent separately below.
Group, Ashland, Inc., Givaudan Fragrances Corporation, ISP Environmental Services Inc., LPRSA Site
Cooperating Parties, Mallinckrodt, Inc., Teval Corp., The Dial Corporation, The Stanley Works, and Wolff
& Sampson Group/Wolff & Sampson PC. Based on the papers and on the oral arguments from those who
sought to orally argue, I believe that the analysis that follows requires disallowing the Other Claimants’
claims as well, and to avoid lengthening this decision further, I won’t discuss their particular facts. But if
any of them believes that I overlooked circumstances that might make its situation distinguishable, I will
permit any such entity to move for reargument, based on matters not addressed here.
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A. Georgia-Pacific’s Claim
The EPA has identified Georgia-Pacific and MHLLC as PRPs with respect to the
Kalamazoo Site. While Georgia-Pacific and the EPA have entered into several AOCs and one
Consent Decree, the agreements covering OU-5 did not specify a final remedy for that portion of
the Kalamazoo Site.
(1) AOCs for OU-5
In February 2007, Georgia-Pacific, MHLLC, the state of Michigan, and the EPA entered
into an AOC to perform a removal action at an area within OU-5 (“First AOC”). The same
month, Georgia-Pacific, MHLLC, and the EPA entered into another AOC to perform a
supplemental remedial investigation and feasibility study for OU-5 and a feasibility study of OU-
1 (the “Second AOC”). In June 2009, Georgia-Pacific and the EPA entered into a third AOC to
perform a removal action at an area within OU-5 (“Third AOC,” and collectively, with First
AOC and the Second AOC, the “Georgia-Pacific AOCs”).6 Although the U.S. has
unreimbursed response costs, investigations at the Kalamazoo Site are still pending, and the final
remedy for OU-5 has not yet been selected.
(2) Consent Decree
In May 2009, Georgia-Pacific entered into a proposed consent decree with the EPA (the
“Georgia-Pacific Consent Decree”), which at the time of Georgia-Pacific’s filing of its proof of
claim, had not yet been approved by the District Court. In the Consent Decree, Georgia-Pacific
agreed to perform and implement the EPA’s remedial plan for OU-2, and to pay the related past
and future response costs incurred by the EPA. MHLLC is not a party to the Consent Decree.
6 	Under the AOCs, Georgia-Pacific and MHLLC are obligated to pay the costs necessary to perform—as
well as the future response costs incurred by EPA in connection with—the First and Second AOCs.
Georgia-Pacific alone is also obligated to pay the costs necessary to perform—as well as the future
response costs incurred by EPA in connection with—the Third AOC.
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(3) Allocation Agreement
In August 1991, Georgia-Pacific and MHLLC entered into an agreement with ARCADIS
of New York, Inc. (“ARCADIS”), under which ARCADIS would perform services including
environmental investigation and remediation at the Kalamazoo Site. Under a cost sharing
agreement (the “Allocation Agreement”), Georgia-Pacific and MHLLC agreed to share costs
relating to the Kalamazoo Site—with MHLLC paying 55% and Georgia-Pacific paying 45% of
the costs. ARCADIS used the Allocation Agreement when billing Georgia-Pacific and MHLLC
for services performed in connection with the Kalamazoo Site. Georgia-Pacific maintains that
MHLLC has failed to pay Georgia-Pacific the amounts required under the Allocation
Agreement, and has failed to pay ARCADIS for its services.
Much later, in June 2009, Georgia-Pacific and ARCADIS entered into an assignment
agreement (“Assignment Agreement”) under which ARCADIS assigned to Georgia-Pacific all
of the ARCADIS rights against MHLLC for services ARCADIS performed at the Kalamazoo
Site. Georgia-Pacific maintains that MHLLC has not paid Georgia-Pacific the amounts due
under the Assignment Agreement.
Georgia-Pacific filed a proof of claim against MHLLC seeking primarily to recover:
(1) past and future response costs and natural resource damages incurred
in connection with the Kalamazoo Site,
(2) amounts paid by Georgia-Pacific to satisfy the obligations of MHLLC
to ARCADIS, and
(3) amounts owed by MHLLC to ARCADIS and transferred to Georgia-
Pacific pursuant to the Assignment Agreement.7
7 	Georgia-Pacific maintains that as of the time of the filing, it had incurred approximately $7 million in
response costs at the Kalamazoo Site, and that MHLLC owes Georgia-Pacific approximately $3.87 million
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Georgia-Pacific asserts its claim under CERCLA section 113, stating that the EPA’s
commencement of the suit that led to the Consent Decree provides the basis for a section
113(f)(1) contribution claim. Georgia-Pacific doesn’t dispute that its claim is for contribution
and that it is based on co-liability with MHLLC. 8 Georgia-Pacific argues only that its claim is
not contingent.
B. 	Weyerhaeuser’s Claim
From 1963 to 1970, Weyerhaeuser operated a mill and landfill next to the Kalamazoo
River, about ten miles downstream from MHLLC’s facilities. Remediation is still ongoing, and
is in its early stages. The EPA has listed MHLLC, Weyerhaeuser, and others as PRPs at the
Kalamazoo Site. In November 2004, Weyerhaeuser entered into a consent decree (the
“Weyerhaeuser Consent Decree”) with the EPA with respect to OU-4. 	Weyerhaeuser filed a
proof of claim against MHLLC in the amount of $9 million for past response costs, and also
seeks payment on account of MHLLC’s liability for future costs and liabilities.
Weyerhaeuser argues that it is not co-liable with MHLLC for the amounts sought in its
proof of claim because it is seeking only to recover response costs under CERCLA section 107
that it has already incurred and will incur itself. Weyerhaeuser also argues that its claim is not
contingent, or for “reimbursement or contribution” under section 502(e)(1)(B).
5. Hamilton Beach’s Claims
Debtors MHLLC and Millenium America, Inc. (“Millenium America”) are also the
subjects of claims by the State of North Carolina for environmental cleanup of the Mt. Airy and
of this amount under the Allocation Agreement. Georgia-Pacific further states that MHLLC owes Georgia-
Pacific an additional $3.12 million by reason of MHLLC’s obligations to pay for ARCADIS’s prior
services at the Kalamazoo Site. It is worth noting that these are past costs, or costs that have already been
incurred by Georgia-Pacific. As noted above, Georgia-Pacific’s claim also seeks future costs.
8 	See 4/16/2010 Hr’g Tr. at 118:7-12 (“Georgia-Pacific is asserting only a 113 claim. So issues of
contribution or reimbursement . . . we’re not arguing that these—that we don’t have claims for contribution
or reimbursement. We’re simply arguing that our claims are not contingent.”).
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Southern Pines sites in North Carolina (the “Mt. Airy Site” and the “Southern Pines Site”).
Unlike the Kalamazoo Site, the Mt. Airy and Southern Pines sites are not covered by the
Settlement Agreement with EPA.
North Carolina filed a proof of claim against MHLLC and all other Debtors for over $6
million for environmental assessment and cleanup costs of the Mt. Airy Site, asserting its claim
on the basis of:
(1) state environmental law and
(2) an October 2004 administrative agreement (the “Mt. Airy
Administrative Agreement”) among Hamilton Beach, MHLLC, and North
Carolina to conduct remediation at the Mr. Airy Site.
North Carolina also filed a proof of claim against Millennium America and all other
Debtors for assessment and remedial costs for environmental contaminations at the Southern
Pines Site. North Carolina asserts its claim on the basis of:
(1) a memorandum of understanding between North Carolina and the EPA
which provides that the Southern Pines Site is to be remediated pursuant to
applicable state law; and
(2) a January 1999 AOC between North Carolina, Hamilton Beach, and
Millennium America, Inc. (the “Southern Pines Order”) to investigate and
remediate the Southern Pines Site.
Hamilton Beach filed substantially identical proofs of claim against MHLLC and another
Debtor, seeking future costs for environmental cleanup at the Mt. Airy and Southern Pines Sites.
Hamilton Beach predicates its claim on:
(1) the Mt. Airy Administrative Agreement;
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(2) the Southern Pines Order; and
(3) a December 2003 settlement agreement (“2003 Settlement
Agreement”) between Hamilton Beach and MHLLC, under which they agreed to
assess and remediate the Mt. Airy and the Southern Pines Sites and allocated the
costs between the two parties.
Hamilton Beach adopts the legal arguments of the other Orally Arguing Claimants, and
asserts that its claim is not contingent, as the environmental damage has already been done and
liability has already been apportioned under the 2003 Settlement Agreement. Hamilton Beach
also asserts that its claim is not based on co-liability with the Debtors—although (as the Debtors
point out) in its proof of claim Hamilton Beach seemed to claim that it was jointly and severally
liable with MHLLC under the 2003 Settlement Agreement and applicable non-bankruptcy law.
Finally, by incorporation of the others’ arguments, Hamilton Beach argues that its claim is not
for reimbursement or contribution.
Discussion
All parties agree that section 502(e)(1)(B) of the Bankruptcy Code determines whether
the Private Party Claims should be disallowed. As noted above, the Orally Arguing Claimants
argue, for various reasons, that their claims should not be disallowed because they fail to satisfy
one or more of the elements of section 502(e)(1)(B), as laid out in the statute or the interpretive
caselaw—that the claims be for reimbursement or contribution, that they be contingent, or be
based on co-liability with the Debtors.
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I.
The Statutory Environment
Though the Code doesn’t define all of the terms that ultimately are important here, and
many of the gaps have been filled by caselaw, I nevertheless start with textual analysis.9 Section
502(e) provides, in relevant part, that notwithstanding provisions of section 502 under which
claims would otherwise be allowable:
(e)(1) … the court shall disallow any claim for
reimbursement or contribution of an entity that is liable
with the debtor on … the claim of a creditor, to the extent
that—
…
(B) such claim for reimbursement or contribution
is contingent as of the time of allowance or
disallowance of such claim for reimbursement or
contribution….
Thus, by section 502(e)(1)(B)’s terms, three elements must be met for a claim to be disallowed
under section 502(e)(1)(B):
(1) the party asserting the claim must be liable with the debtor on the
claim of a third party;
(2) the claim must be contingent at the time of its allowance or
disallowance; and
(3) the claim must be for reimbursement or contribution.
But textual analysis here is of limited utility. None of the terms or expressions
“reimbursement,” “contribution,” “contingent” or “liable with the debtor” is defined in the
9 	See, e.g., Alta Partners Holdings LDC v. Credit Suisse First Boston LLC (“In re Global Crossing Ltd.”),
385 B.R. 52, 66 (Bankr. S.D.N.Y. 2008); In re General Motors Corp., 407 B.R. 463, 486 (Bankr. S.D.N.Y.
2009) (“GM-Sale Decision”), appeal dismissed and aff'd, 428 B.R. 43 (S.D.N.Y. 2010), and 430 B.R. 65
(S.D.N.Y. 2010); In re Motors Liquidation Co., No. 09-50026, 2010 WL 3219506, *5 (Bankr. S.D.N.Y.
Jul.16, 2010) ; In re Adelphia Communications Corp., No. 02-41729, --- B.R. ---, 2010 WL 4791795, *3 &
n.17 (Bankr. S.D.N.Y. Nov. 18, 2010).
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Bankruptcy Code, nor does the Code articulate standards for their application.10 Thus a court
construes section 502(e)(1)(B)’s requirements based on caselaw. Section 502(e)(1)(B)’s
requirements have been interpreted in a fair body of relevant caselaw, most of which has
disallowed claims for contribution and indemnification by those who are liable, along with a
debtor, to others for amounts to be determined only in the future—including a decision of mine a
few months ago, where I sustained objections, on 502(e)(1)(B) grounds, to claims for
contribution and/or indemnification for liability in connection with pending or threatened
lawsuits by plaintiffs alleging injuries from exposure to the chemical Diacetyl, where the
claimants, along with Chemtura, might be liable for the plaintiffs’ Diacetyl injury.11 The issue
here, whether a different rule should apply to claims by PRPs who, along with a Debtor, are
liable for environmental remediation costs, requires consideration of the relevant environmental
statutes—most significantly provisions in CERCLA.
Section 106 (captioned “Abatement Actions”) provides, its subsection (a):
In addition to any other action taken by a State or local
government, when the President determines that there may
be an imminent and substantial endangerment to the public
health or welfare or the environment because of an actual
or threatened release of a hazardous substance from a
facility, he may require the Attorney General of the United
States to secure such relief as may be necessary to abate
such danger or threat, and the district court of the United
States in the district in which the threat occurs shall have
jurisdiction to grant such relief as the public interest and the
equities of the case may require. The President may also,
after notice to the affected State, take other action under
this section including, but not limited to, issuing such
10 	It should be noted, however, while focusing on textual analysis, that section 502(e)(1)(B) imposes no
requirements as to how or why the party asserting the claim potentially subject to section 502(e)(1)(B) must
be liable with the debtor on the claim of the third party. There is no statutory requirement, for example,
that the debtor and the party asserting the claim be liable on the claim of the third party in the same action,
under a common statute, or on the same legal theory.
11 	See In re Chemtura Corp., 436 B.R. 286 (Bankr. S.D.N.Y. 2010) (“Chemtura”).
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orders as may be necessary to protect public health and
welfare and the environment. 12
Section 106’s subsection (b) then provides for fines for failure to comply with an order
issued under subsection (a), and, for those who have received and complied with an order issued
under subsection (a), reimbursement from the Hazardous Substance Superfund for the reasonable
costs of such action.13
Then, CERCLA Section 107 (captioned “Liability”) provides, in relevant part:
(a) …Notwithstanding any other provision or rule of law,
and subject only to the defenses set forth in subsection (b)
of this section—
(1) the owner and operator of a vessel or a facility,
(2) any person who at the time of disposal of any
hazardous substance owned or operated any facility
at which such hazardous substances were disposed
of,
(3) any person who by contract, agreement, or
otherwise arranged for disposal or treatment, or
arranged with a transporter for transport for disposal
or treatment, of hazardous substances owned or
possessed by such person, by any other party or
entity, at any facility or incineration vessel owned
or operated by another party or entity and
containing such hazardous substances, and
(4) any person who accepts or accepted any
hazardous substances for transport to disposal or
treatment facilities, incineration vessels or sites
selected by such person, from which there is a
release, or a threatened release which causes the
incurrence of response costs, of a hazardous
substance, shall be liable for—
(A) all costs of removal or remedial action
incurred by the United States Government or
12 	CERCLA § 106(a), 42 U.S.C. § 9606(a) (emphasis added).
13 	See CERCLA § 106(b), 42 U.S.C. § 9606(b).
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a State or an Indian tribe not inconsistent
with the national contingency plan;
(B) any other necessary costs of response
incurred by any other person consistent with
the national contingency plan;
(C) damages for injury to, destruction of, or
loss of natural resources, including the
reasonable costs of assessing such injury,
destruction, or loss resulting from such a
release; and
(D) the costs of any health assessment or
health effects study carried out under
[CERCLA section 104].14
Thus, CERCLA section 107(a) imposes liability for environmental cleanup costs, natural
resource damages, and certain other categories of recovery on PRPs—including, as relevant here,
(1) the current “owner or operator” of a site contaminated with hazardous substances, and (2) any
person who previously owned or operated a contaminated site at the time of a hazardous waste
disposal.
Then, CERCLA Section 113 (captioned “Civil Proceedings”) provides in its
subsection (f) (captioned “Contribution”), in relevant part:
(1) Contribution
Any person may seek contribution from any other
person who is liable or potentially liable under
[section 107(a)], during or following any civil
action under[section 106] or under [section 107(a)].
Such claims shall be brought in accordance with
this section and the Federal Rules of Civil
Procedure, and shall be governed by Federal law.
In resolving contribution claims, the court may
allocate response costs among liable parties using
such equitable factors as the court determines are
appropriate. Nothing in this subsection shall
diminish the right of any person to bring an action
14 	CERCLA § 107, 42 U.S.C. § 9607.
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for contribution in the absence of a civil action
under [section 106] or [section 107].
(2) Settlement
A person who has resolved its liability to the United
States or a State in an administrative or judicially
approved settlement shall not be liable for claims
for contribution regarding matters addressed in the
settlement. Such settlement does not discharge any
of the other potentially liable persons unless its
terms so provide, but it reduces the potential
liability of the others by the amount of the
settlement.
(3) Persons not party to settlement
(A) If the United States or a State has obtained
less than complete relief from a person who has
resolved its liability to the United States or the State
in an administrative or judicially approved
settlement, the United States or the State may bring
an action against any person who has not so
resolved its liability.
(B) A person who has resolved its liability to the
United States or a State for some or all of a
response action or for some or all of the costs of
such action in an administrative or judicially
approved settlement may seek contribution from
any person who is not party to a settlement referred
to in paragraph (2).
(C) In any action under this paragraph, the rights
of any person who has resolved its liability to the
United States or a State shall be subordinate to the
rights of the United States or the State. Any
contribution action brought under this paragraph
shall be governed by Federal law.15
Thus 113(f)(1) provides that PRPs who fund response actions can seek contribution from other
PRPs “during or following any civil action” instituted under CERCLA section 106 or 107. And
CERCLA section 113(f)(3)(B) permits private parties to seek contribution after they settle their
15 	CERCLA § 113(f), 42 U.S.C. § 9613(f).
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liability with the EPA or a state in an administrative or judicially approved settlement.
Conversely, section 113(f)(2) protects PRPs who have settled from contribution claims by other
PRPs.
II.
Satisfaction of Section 502(e)(1)(B) Elements
While acknowledging that its claim is for contribution and that it is based on co-liability
with MHLLC, Georgia-Pacific argues that its claim is not contingent. Weyerhaeuser and
Hamilton Beach, like Georgia-Pacific, argue that their claims are not contingent, and further
contend that they are not co-liable with MHLLC for the amounts sought in their proofs of claim,
and that their claims are not for “reimbursement or contribution.”
Because the three Orally Arguing Claimants’ positions overlap to such significant
degrees, and because they assert, in many respects, similar deficiencies with respect to
502(e)(1)(B)’s three elements, for purposes of analysis I group the objections by the 502(e)(1)(B)
elements.
A.
“Contingency” Element
Each of Georgia-Pacific, Weyerhaeuser16 and Hamilton Beach contends that its claim is
not contingent. I must disagree.
In my recent decision in Chemtura,17 I ruled, among other things, that the claims then
before me were contingent. There, as I’ve noted, five corporate entities had filed claims against
Chemtura for contribution and/or indemnification with respect to amounts they might pay in the
16 	Weyerhaeuser addresses contingency with respect to both past costs it incurred, and future costs. I think
the Debtors have now acknowledged that past costs incurred by Weyerhaeuser are not contingent, and
cannot be disallowed for that reason, but to the extent the Debtors continue to argue otherwise, I reject their
position in that regard.
17 	See n.11 above, 436 B.R. at 286.
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future in litigation against them. I found that except to the extent they sought contribution for
amounts already paid to tort litigants, their claims were contingent.18 While in some instances
the potential for payment by any of the Orally Arguing Claimants is more advanced than it was
in Chemtura, similar principles apply, and key facts remain the same. The most significant of
these is that except for remedial action accomplished in the past, for which the right to
reimbursement or contribution is unchallenged (or should be), Georgia-Pacific, Weyerhaeuser,
and Hamilton Beach are similarly seeking reimbursement for amounts that have not yet been
paid.
Though neither is squarely on point, two decisions from the Second Circuit have
discussed contingency in deciding whether or not a creditor held a “claim.”19 In Chateaugay, the
EPA argued that “it does not have a ‘claim’ within the meaning of the Bankruptcy Code . . . for
reimbursement of CERCLA response costs until those costs have been incurred.”20 Therefore,
the EPA argued, any future response costs that the EPA might incur would pass though the
bankruptcy organization as non-discharged liabilities. The Second Circuit rejected this
argument, holding that the future costs were pre-petition “claims.” The Circuit stated, as part of
its rationale, that:
[T]he location of these sites, the determination of their
coverage by CERCLA, and the incurring of response costs
by the EPA are all steps that may fairly be viewed, in the
regulatory context, as rendering the EPA’s claim
“contingent,” rather than as placing it outside the Code’s
definition of “claim.” 21
18 	See Chemtura, 436 BR at 297.
19 	See In re Chateaugay Corp., 944 F.2d 997 (2d Cir. 1991) (“Chateaugay”); Olin Corp. v. Riverwood Int’l
Corp. (“In re Manville Forest Products Corp.”), 209 F.3d 125 (2d Cir. 2000) (“Manville Forest”).
20 	Chateaugay.
21 	Id. at 1005.
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Similarly, in Manville Forest, the Second Circuit decided that a party’s liability
constitutes a “claim” against the debtor, albeit contingent. It stated:
the fact that [claimant] Olin did not know the specific
parameters of its liability does not place that liability
outside of the definition of “claim” but rather is precisely
what made the claim contingent. Under this specific
combination of circumstances, we find that future
environmental liability was actually or presumedly
contemplated by the parties upon their signing of the
indemnification agreements and constitutes a valid
contingent claim. 22
The Debtors cite Chateauguay for the proposition that claims are contingent until costs
for remediation work are actually expended or paid. 23 I don’t read Chateauguay, which of
course is not a 502(e)(1)(B) case, to go that far—to hold that a claim for reimbursement or
contribution is contingent until an underlying payment (here, costs for remediation) is actually
made. 24 But I do find it instructive that in both Chateauguay and Manville Forest, it was
undisputed that the debtors faced some environmental liability, but the Second Circuit
22 	Manville Forest, 209 F.3d at 129 (emphasis added).
Other caselaw—again in the context of determining the existence of a claim, rather than in deciding
whether or not it was “contingent”—likewise describes a situation where the need for remediation is
known, but the amount, if any, to be paid for the remediation is not, as giving rise to a “contingent claim.”
See Cal. Dep’t of Health Services v. Jensen (“In re Jensen”), 995 F.2d 925, 930-31 (9th Cir. 1993) (per
curiam) (“We conclude that the state had sufficient knowledge of the Jensens’ potential liability to give rise
to a contingent claim for cleanup costs before the Jensens filed their personal bankruptcy petition on
February 13, 1984”); In re Chicago, Milwaukee, St. Paul & Pacific Railroad Co., 974 F.2d 775, 786 (7th
Cir. 1992) (in context of a former Bankruptcy Act § 77 railroad reorganization, to same effect: “when a
potential CERCLA claimant can tie the bankruptcy debtor to a known release of a hazardous substance
which this potential claimant knows will lead to CERCLA response costs, and when this potential claimant
has, in fact, conducted tests with regard to this contamination problem, then this potential claimant has, at
least, a contingent CERCLA claim for purposes of Section 77.”).
23 	See Debtors Reply Br. at ¶8.
24 	Somewhat earlier in the Chateaugay decision, also as part of its analysis as to whether the EPA had a claim
at all, the Circuit dealt with the easy case. It stated, with respect to the EPA’s incurrence of CERCLA
response costs:
When such costs are incurred, EPA will unquestionably have what can
fairly be called a “right to payment.” That right is currently unmatured
and will not mature until the response costs are incurred.
944 F.2d at 1004.
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nevertheless described those claims as contingent because the scope, amount, and form of that
liability was undetermined.25
But other authority, including three decisions by other bankruptcy judges in this very
district,26 another by a district judge in this district, 27 and another a thoughtful decision from
Delaware28 —all 502(e)(1)(B) determinations—supports the conclusion that until and unless
amounts are actually paid, the claims for reimbursement or contribution with respect to those
amounts remain contingent for 502(e)(1)(B) purposes.29 For instance, in Alper Holdings, in this
district, Judge Lifland disallowed claims for indemnification for future liability in environmental
contamination litigation, finding that they were
25 	See Chateaugay, 944 F.2d at 1005.
26 	See In re Alper Holdings USA, No. 07-12148, 2008 WL 4186333,*6-*7 (Bankr. S.D.N.Y. Sept. 10, 2008)
(Lifland, C.J.) (“Alper Holdings”) (disallowing future environmental indemnification costs “as the amounts
and ultimate liability are presently unknown,” and finding contingency on the ground that amounts for
which indemnification was sought were undetermined and unpaid); In re Drexel Burnham Lambert Group,
Inc., 148 B.R. 983, 986-90 (Bankr. S.D.N.Y. 1992 ) (Conrad, J.) (“Drexel Burnham”) (disallowing
indemnity claims of co-underwriters for potential liability in pending fraud suits, because claimants had not
yet paid judgments or settlements); In re Wedtech Corp., 85 B.R. 285, 290 (Bankr. S.D.N.Y. 1998)
(Buschman, J.) (“Wedtech I”) (disallowing debtor’s officers’ contingent indemnification claims).
27 	See Aetna Casualty and Surety Company v. Georgia Tubing Corp. (“In re Georgia Tubing Corp.”), No. 93
Civ. 3659, 1995 WL 429018,*3 -*4 (S.D.N.Y. July 20, 1995) (Preska, C.J.), aff’d, 93 F.3d 56 (2d Cir.
1996) (disallowing an insurance company’s claim regarding hazardous waste bonds where primary creditor
was a state environmental agency, stating that a surety claim was contingent until the claimant “pays the
principal creditor and fixes his own right to payment from the debtor” (quoting 3 Collier on Bankruptcy
¶ 502.05 at 502-88 (15th edition 1995)).
28 	See In re APCO Liquidating Trust, 370 B.R. 625 (Bankr. D. Del. 2007) (Shannon, J.) (“APCO”).
29 	Similarly, Collier expressly identifies claims for contribution arising under CERCLA as examples of
claims that are contingent. See 4 Collier ¶ 502.06[2][d] (16th ed.). Collier provides:
In addition to codebtor situations created by contract, section
502(e)(1)(B) applies to disallow contingent reimbursement or
contribution claims created by statute. For example, a claim for
contribution arising under the Comprehensive Environmental
Response, Compensation and Liability Act may be a contingent claim
subject to disallowance under section 502(e)(1)(B). . . . In such a case,
the government is the primary obligee that may seek satisfaction of its
claim against the debtor from third parties who, under the statute, are
obligated with the debtor to the government on the same debt. The
statute under which the third-party liability is created, however, must
provide for a reimbursement or contribution claim against the debtor.
(footnote omitted).
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properly categorized as “contingent as of the time of
allowance or disallowance” as the amounts and ultimate
liability are presently unknown.30
Likewise, in Drexel Burnham, in this district, it was observed that “[t]he Claimants’ claim is
contingent until their liability is established and the co-debtor has paid the creditor. . . . One who
is secondarily liable may only secure distribution rights by paying the amount owed the
creditor.”31
Similarly, in APCO, Judge Shannon disallowed a claim for the costs of remedial
activities filed by the City of Wichita, which like the debtor there, was a PRP with respect to a
site with groundwater contamination. Significantly, the City had agreed not just to perform a
remedial investigation and feasibility study of the contaminated site; it had agreed to undertake
the remedial activities identified in the study to clean up the site,32 and had prevailed in a trial at
which the APCO debtors were determined to be responsible for 1.72% of the City’s past and
future costs for the remediation, and for 100% of the City future source control costs to be
incurred at a different site, 33 securing a judgment for the future cleanup costs of which a portion
was unpaid.34
Among other things, Judge Shannon ruled that “because the City has not yet incurred any
future source control costs” at one of the sites,35 the claim was contingent, even though “the
30 	2008 WL 4186333 at *6.
31 	148 B.R. at 987 (emphasis added; internal citations omitted).
32 	See 370 B.R. at 629.
33 	Id.
34 	Id. at 630.
35 	Id. at 636.
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parties’ liability has been established.”36 Quoting, among other decisions, Drexel Burnham, he
observed that
The law is clear that ‘[t]he contingency contemplated by
[section] 502(e)(1)(B) relates to both payment and
liability.” … Therefore, a claimant’s “claim is contingent
until their liability is established … and the co-debtor has
paid the creditor.”37
I’ve stated many times that the interests of predictability in this district are of great
importance, and that where there is no controlling Second Circuit authority, I follow the
decisions of other bankruptcy judges in this district in the absence of clear error. 38 But to say
that these decisions, in this district and elsewhere, should be followed under that standard would
be faint praise here. In my view, the conclusions in those cases were plainly correct. That is so
because even though the need for remediation of the underlying environmental site might be
obvious, the EPA or state environmental agency might have a multitude of different ways of
getting the remediation done, and any one of those means might or might not call for—or result
in—payment by the separate PRP that is asserting the claim against the debtor. And the PRP
might or might not wind up actually making the payment for which it then would be seeking
reimbursement or contribution.
Thus, in my view, the fact that an EPA claim may have accrued against any of Georgia-
Pacific, Weyerhaeuser, or Hamilton Beach does not mean that any of their separate claims
36 	Id.
37 	Id. (emphasis in original; internal citations omitted).
38 	See, e.g., In re Adelphia Communications Corp., 359 B.R. 65, 72 n.13 (Bankr. S.D.N.Y. 2007) (“This Court
has been on record for many years as having held that the interests of predictability in this District are of
great importance, and that where there is no controlling Second Circuit authority, it follows the decisions of
other bankruptcy judges in this district in the absence of clear error.”); GM-Sale Decision, 407 B.R. at 487
& n.19 (same).
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against the Debtor are no longer contingent. We don’t know whether either of them will lay out
the funds necessary to engage in the curative action, and, if so, to what extent.
In arguing that its claim for future response costs is not contingent, Georgia-Pacific
contends that a claim is contingent only when it has not yet accrued (in contrast to paid), and
Georgia-Pacific maintains that its claim for contribution under section 113 has accrued. As
support, Georgia-Pacific cites the Supreme Court’s Aviall Services decision,39 a case that did not
involve section 502(e)(1)(B), wherein the Supreme Court held that a private party can bring a
CERCLA section 113(f)(1) action for contribution only after it has been sued under CERCLA
section 106 or 107(a).
However, Aviall Services can properly be read as going only to the requirements for
bringing a claim under CERCLA section 113(f); it cannot be extended to deciding whether a
claim by a PRP is or is not “contingent” within the meaning of section 502(e)(1)(B), which
Aviall Services quite obviously did not address. Georgia-Pacific incorrectly assumes that the
requirements for bringing a section 113(f)(1) contribution claim under CERCLA are the same as
the requirements for having non-contingent 113(f)(1) claim under section 502(e)(1)(B) of the
Code.
Additionally, Georgia-Pacific and Weyerhaeuser argue that the Debtors are conflating
contingency and liquidation. While I fully understand that “unliquidated” and “contingent” are
not the same thing40 (and suspect that the Debtors do too), here I find that the claims of each of
Georgia-Pacific, Weyerhaeuser, and Hamilton Beach are both. The claims at issue here are for
39 	Cooper Industries, Inc. v. Aviall Services, Inc., 543 U.S. 157 (2004) (“Aviall Services”).
40 	See, e.g., Chemtura, 436 B.R. at 297 (“Thus, while we all understand and agree that there is a distinction
between “contingent” and unliquidated, that distinction isn't material here. The unliquidated but non-
contingent costs of defense here still result in a potentially allowable claim, but the claims for contribution
in the event that a Tort Claimant succeeds against Corporate Claimants are still contingent, and satisfy this
prong of the 3-part test for establishing 502(e)(1)(B) disallowance.”).
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future cleanup costs that might or might not actually be incurred, and then might or might not
actually be paid, by any of them. 41
Though I ultimately decide the issue on the statutory language and the caselaw, I note, to
the extent it matters, that this ruling advances not just bankruptcy policy, but environmental
policy as well. Disallowance of Georgia-Pacific’s claims here advances CERCLA’s policy goal
of encouraging expeditious cleanup, because claimants are encouraged to remediate promptly by
the threat of disallowance of claims that have not been fixed.42 As Judge Shannon observed in
APCO:
It may appear that the Court’s ruling is a harsh result for the
City, and that may be true. Nevertheless, the Court’s
decision is mandated by the express language of the Code
and is entirely consistent with the principles animating
CERCLA. At bottom, CERCLA and similar state and
federal environmental statutes create a scheme whereby
parties are incentivized to promptly clean up contaminated
sites. The prospect of the potential disallowance of
contingent contribution claims under section 502(e)(1)(B)
offers a further incentive to undertake the cleanup: if the
work is done (or at least underway), the contribution claim
is not contingent as to amounts incurred by the contribution
claimant. Thus, if the City had commenced or completed
source control remediation at 1001 E. Lincoln in
connection with its work on the G & M Site as a whole, the
41 	Weyerhaeuser cites Judge Sontchi’s decision in In re RNI Wind Down Corp., 369 B.R. 174 (Bankr. D. Del.
2007) (“RNI”) in support of this contention. But as I noted in Chemtura, see 436 B.R. at 296-97, the
claimant in RNI waived any claims he might have for amounts he might have to pay on the underlying
claims (there, by the SEC). The right to payment that Judge Sontchi found to be “unliquidated but not
contingent” was the right to the advancement of those costs of defense, and not the right to contribution or
indemnity for amounts ultimately paid to a third party—the circumstance that was relevant there and here.
Judge Sontchi merely found (understandably, given appropriate analysis) that the right to advancement was
a then-existing right (under the certificate of incorporation, bylaws, and Delaware law), subject only to
uncertainty at the time as to just how much the defense costs would turn out to be. I observed, in fact, that
Judge Sontchi had actually used claims for contribution as an example of what would satisfy the
contingency elements. See Chemtura, 436 B.R. at 297.
42 	See In re Eagle-Picher Indus. Inc., 164 B.R. 265, 272 (S.D. Ohio 1994) (“Eagle-Picher”) (“502(e)(1)(B)
fosters the primary objective of CERCLA by requiring those who seek contribution to incur the expenses
relating to cleanup before stating an allowable claim.”); APCO, 370 B.R. at 636 (same, quoting Eagle-
Picher).
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City’s claim would be allowed to the extent of the amounts
incurred.43
Similarly, Hamilton Beach relies on the fact that the environmental damage at the Mt.
Airy and Southern Pines Sites has already occurred to support its argument that its claim is not
contingent. I explained above that the establishment of some liability alone is insufficient to
render a claim non-contingent. Similarly, the fact that Hamilton Beach is liable for
environmental damage is also by itself insufficient to render a claim non-contingent, as APCO
makes quite clear. Although Hamilton Beach has entered into a settlement agreement in which
the parties allocated the liability with respect to the two sites, there is no indication that money
has been spent. For the same reasons that I determined that Georgia-Pacific’s claim is
contingent, I determine that Hamilton Beach’s claim is contingent as well.
Finally, Weyerhaeuser argues that it has already incurred over $11 million in response
costs, in addition to amounts it may have to pay in the future. I believe that with respect to these
past response costs, the Debtors have now acknowledged that they are non-contingent. To the
extent the Debtors haven’t conceded the point, I agree with Weyerhaeuser. But with respect to
payments Weyerhaeuser hasn’t made yet, I must find that the amounts are contingent, for the
reasons stated above.
B.
“Co-Liability” Element
Making three principal arguments, Weyerhaeuser and Hamilton Beach44 also contend that
the co-liability element has not been satisfied. Once more I cannot agree.
43 	370 B.R. at 636-37.
44 	Having incorporated all of the others’ arguments, Hamilton Beach also argues that its claim is not based on
co-liability. But with only one exception (discussed at page 33 below), Hamilton Beach doesn’t articulate
any theories or authority distinct from those asserted by Weyerhaeuser, and its situation is governed by the
analysis that follows.
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1. The Atlantic Research Contentions
Weyerhaeuser’s first argument is that its claim is not premised on co-liability because its
claim is based on cost recovery under CERCLA section 107(a), and not contribution under
section 113(f).45 In that connection, Weyerhaeuser notes that in U.S. v. Atlantic Research
Corp.,46 the Supreme Court held that a private party may recover under CERCLA section 107(a)
without any establishment of liability to a third party. Because it is asserting a section 107(a)
claim, therefore, Weyerhaeuser argues, the basis for finding co-liability is lacking.
But Weyerhaeuser’s reliance on Atlantic Research is flawed. The issue in Atlantic
Research, a non-bankruptcy case, was whether a PRP could sue to recover voluntarily incurred
cleanup costs under section 107(a), rather than relying solely on section 113(f). 47 Section
107(a)(4)(A) expressly authorizes the federal government, the states, and Indian tribes to sue for
cost recovery under section 107(a), and section 107(a)(4)(B) gives the same right to sue to “any
other person.” Specifically, the Court was asked to determine whether a PRP is included in the
phrase “any other person” in 107(a)(4)(B).
The Supreme Court held that the operator’s status as a PRP did not preclude the operator
from suing under section 107(a), as section 107(a)(4)(B) covers any person not identified in
subparagraph (A), and that a PRP was not limited to relief under section 113(f). 48 Nevertheless,
the Supreme Court highlighted the “complementary yet distinct” nature of the rights established
45 	Weyerhaeuser makes a secondary argument that joint and several liability is not required by CERCLA for
all superfund sites. See sub-section 3.
46 	U.S. v. Atlantic Research Corp., 551 U.S. 128 (2007) (“Atlantic Research”). Contrasting CERCLA section
107(a) with section 113(f), the Supreme Court stated the following: Ҥ 107(a) permits recovery of cleanup
costs but does not create a right to contribution. A private party may recover under § 107(a) without any
establishment of liability to a third party.” Atlantic Research, 551 U.S. at 139.
47 	The PRP was the owner of the facility and filed a suit against the U.S. under CERCLA section 107 to
recover cleanup costs.
48 	Atlantic Research, 551 U.S. at 135.
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under section 107(a) and 113(f)—specifically, that a private party may sue under section 107(a)
without any establishment of liability to a third party, something it could not do under section
113(f).49 The Supreme Court allowed the claimant to recover from other PRPs costs that it had
incurred by voluntary cleanup—or in other words, by cleanup or payments not prompted by a
government action under sections 106 or 107.
On the issue of co-liability, Weyerhaeuser erroneously assumes that only claims under
section 113(f) are premised on co-liability with the defendant (in this case, the Debtor), and that
cost recovery claims under section 107(a) are all direct claims, and not claims for either
reimbursement or contribution. The Atlantic Research court held that a claim under section
107(a) need not be based on co-liability to a third-party (e.g. a governmental entity). But it did
not hold that a claim under 107(a) cannot be based on co-liability. If a PRP undertakes
“voluntary” clean up (as opposed to cleanup pursuant to government action under section 106 or
107)—and sues under 107(a) to seek recovery for that cleanup from another PRP—that has no
effect on, and certainly does not nullify, the fact that the two may still be co-liable to the
Government.
Weyerhaeuser and MHLLC, who have both been designated as PRPs by the EPA, have a
shared statutory obligation, under CERCLA, to provide for the cleanup of the Kalamazoo Site,
by one means or another. That Weyerhaeuser might satisfy its own obligations by voluntary
cleanup, rather than by waiting for a government action, is laudable, but not relevant to the
502(e)(1)(B) determination. Weyerhaeuser’s claims rely on the theory that if the Debtors pay
less than their share of cleanup costs, Weyerhaeuser will have to pay more. That is the essence
of co-liability.
49 	Id. at 139.
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2. The Allegheny Contentions
Weyerhaeuser further asserts that co-liability is lacking based on a district court decision
in the Allegheny bankruptcy case.50 In Allegheny, the owner of the site filed a claim for past and
future response costs against a debtor that had sold the site to the claimant prior to filing for
bankruptcy. Applying the three-part test described on page 10 above, the Allegheny court ruled
that section 502(e)(1)(B) did not exclude the claimant’s direct claims for future response costs
under CERCLA section 107(a).51 While the Allegheny debtor argued that there was a possibility
that the creditor might never be required to expend any funds if the EPA were subsequently to
order the debtor to perform the remediation, the Allegheny court reasoned that this risk of double
liability could be avoided by having the creditor’s claim paid into a trust to be expended on
remediation of the waste sites. 52
I find the claims at issue in Allegheny to be distinguishable from Weyerhaeuser’s
claims,53 but more fundamentally, I must join the other courts that have disagreed with the
Allegheny decision. 54
As we all know, section 502(e)(1)(B) serves the important purpose of avoiding redundant
recoveries.55 The situation here, where both Weyerhaeuser and MHLLC were named as PRPs,
50 	In re Allegheny Int’l, Inc., 126 B.R. 919 (W.D. Pa. 1991), aff’d without opinion, 950 F.2d 721 (3d Cir.
1991) (“Allegheny”).
51 	See Allegheny, 126 B.R. at 923.
52 	See id. at 924.
53 	In Allegheny, the claimant’s cleanup was entirely voluntary; no environmental government agency had
taken any action with regard to the claimant’s property. Here, however, the EPA has listed Weyerhaeuser
as a PRP at the Kalamazoo Site and Weyerhaeuser has entered into a Consent Decree with the EPA with
regard to a portion of the Site.
54 	See Eagle-Picher, 164 B.R. at 271; Drexel Burnham, 148 B.R. at 988; In re Cottonwood Canyon Land Co.,
146 B.R. 992, 996 (Bankr. D. Colo. 1992) (“Cottonwood Canyon”).
55 	See APCO, 370 B.R. at 634 (“[T]he sole purpose served by section 502(e)(1)(B) is to preclude redundant
recoveries . . . .”); Wedtech I, 85 B.R. at 289 & n.4 (noting that Congress enacted the provision, in part, to
prevent competition between primary and secondary creditors for the “limited proceeds of the estate”
(quoting H.R. Rep. No. 95 595, 95th Cong., 1st Sess. 354 (1977))).
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presents precisely the danger of double recovery from the Debtors on account of the same
liability, ultimately to the EPA. 56 Because the EPA already has an allowed claim against the
Debtors for the Kalamazoo site, allowing Weyerhaeuser’s claim would be setting up precisely
the redundant recoveries section 502(e)(1)(B) was created to prevent.
The Allegheny court acknowledged that its decision not to disallow the claimant’s claim
under section 502(e)(1)(B) left the debtors vulnerable to multiple recoveries. What the
Allegheny court failed to realized, however, is that this risk of duplicative recoveries arose
because the debtors and claimant were co-liable. For that reason, several cases have rejected
Allegheny’s logic.57
In Cottonwood Canyon, for instance, the court stated that the fact that the Allegheny court
found it necessary to establish a trust shows that the debtor and the claimant share a common
liability against which the claimant sought to protect itself. 58 The Cottonwood Canyon court
stated:
CSI argues that it is asserting a direct claim against Kaiser
under Section [107(a)] and not a claim for reimbursement
56 	It is not possible to maintain that the cost recovery claim does not involve an obligation that both the
Debtor and Weyerhaeuser owe to a third party, given that the EPA has specified that both parties are PRPs
at the Kalamazoo Site.
57 	Weyerhaeuser also cites In re Harvard Indus., Inc., 138 B.R. 10 (Bankr. D. Del. 1992) (Balick, J.)
(“Harvard Industries”), which follows Allegheny’s logic. In Harvard Industries, Judge Balick
distinguished between claims by a PRP for a cleanup performed by the PRP and claims for where the EPA
performed the cleanup, and ruled, inter alia, that where the party sought to recover funds it would expend
in the future, section 502(e)(1)(B) does not apply. She acknowledged that double liability could occur if
the PRP recovered for personal expenditures but then failed to cleanup the site and the EPA brought an
action against the debtor, and, as in Allegheny, set up a trust to resolve that potential problem. But since, as
in Allegheny, Harvard Industries subjects debtors to the risks of duplicative recoveries, I believe that
Harvard Industries is subject to the same criticism that has been raised with respect to Allegheny.
58 	Cottonwood Canyon, 146 B.R. at 996. See also Drexel Burnham, 148 B.R. at 989 (“The Cottonwood court
insisted that this is demonstrated by the solution devised by the Allegheny court in response to the concern
that the allowance of the claim might lead to multiple recoveries against the debtor. The debtor would be
subject to multiple recovery if the claimant failed to take remedial action to remove the hazard after it had
received a distribution from the debtor, leaving the debtor liable to a claim by the Government for
remediation of the plants.”). The Allegheny court even noted that “both debtor and [claimant] are liable for
the waste remediation . . . .” Allegheny, 126 B.R. at 923.
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or contribution. It would clearly appear that a claim for
reimbursement or contribution under either the California
statute, CERCLA or the indemnification provisions of the
contract is, by definition, a claim to recover costs incurred
by reason of CSI's liability for cleanup as the “owner” of
the site, which is the same liability Kaiser has for cleanup
as the party which deposited the hazardous substances in
the first instance. Such a claim would necessarily be one
for liability for which both Kaiser and CSI are responsible
and would fall within the ambit of 11 U.S.C. § 502(e).59
Similarly, in Eagle-Picher, 60 the court rejected Allegheny’s logic for similar reasons, and
disallowed the creditors’ reimbursement claims (which were under section 113(f)) for future
response costs under CERCLA. The Eagle-Picher court stated that “[d]ouble liability could
occur under the circumstances of this case since EPA remains free to pursue [the debtor] for
remediation costs should the claimants fail to fulfill their cleanup obligations.”61
Here, we have a situation similar to Eagle-Picher. The Debtors here do not dispute
Weyerhaeuser’s claims for costs it already incurred from voluntary remediation; the claims at
issue are for future remediation costs. Both the Debtors and Weyerhaeuser are liable for
cleanup at the Kalamazoo Site. Here, in fact, the EPA has already entered into the Settlement
Agreement with the Debtors for remediation of the Kalamazoo Site. Allowing Weyerhaeuser’s
59 	Cottonwood Canyon, 146 B.R. at 996.
60 	Weyerhaeuser criticizes the Debtors for relying on Eagle-Picher and Cottonwood Canyon, which are pre-
Atlantic Research cases, and argues that they were overruled by Atlantic Research. The Eagle-Picher
court, citing circuit court decisions, had found that the claims asserted there (a PRP against another PRP)
could only be brought under CERCLA §113, and not §107, and Weyerhaeuser is correct that Atlantic
overruled Eagle-Picher in this respect—since Atlantic Research now allows a PRP to seek recovery from
another PRP under §107. But that distinction does not matter here. I rely on Eagle-Picher for its narrower
(and I believe undisputable) finding that the Debtor and claimant were co-liable. Because the Atlantic
Research decision did not reach that issue, the portion of Eagle-Picher upon which I rely was not
overruled. And because Atlantic Research did not decide issues under Bankruptcy Code section
502(e)(1)(B), it had no effect on Cottonwood Canyon. Thus I find Weyerhaeuser’s criticism unpersuasive.
61 	Eagle-Picher, 164 B.R. at 271.
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claim would not only expose the Debtors to—but would actually result in—paying multiple
recoveries on account of the same liability.62
3. The Burlington Northern Contentions
Finally, Weyerhaeuser asserts that even if I should find that there is no difference, for the
purpose of co-liability, between recovery under section 107 or 113(f), Weyerhaeuser should still
prevail on this element because CERCLA does not always require joint and several liability for
superfund sites. Weyerhaeuser cites the Supreme Court’s decision in Burlington Northern and
Santa Fe Railway Co. v. U.S.63 for the point that “in the superfund context, liability will not be
joint and several if there’s a reasonable basis for apportionment.”64 In Burlington Northern, the
Supreme Court decided that joint and several liability would not apply because the defendant in
that case owned some, but not all, of the property at issue. Weyerhaeuser then makes an
argument by analogy, asserting that apportionment is also appropriate in this case because, based
on the laws of gravity, Weyerhaeuser cannot be held liable for any damage upstream of where it
owned or used property. Therefore, Weyerhaeuser argues, any cleanup costs that it will incur in
the future over and above those for its own liability are costs for which it is not co-liable with
MHLLC.
But there is a fundamental flaw in Weyerhaeuser’s argument on this point. If the Debtors
and Weyerhaeuser are not jointly and severally liable, then Weyerhaeuser would have not a
62 	The fact that Debtors settled their claims with the EPA is not necessary to my decision here, though, it is
worth noting that the contribution protection in the Settlement Agreement protects the Debtors from
duplicative payments on account of the same liabilities, a risk that exists because the Debtors are co-liable
with the Private Party Claimants. As the Debtors correctly explained, that provision “plays into the central
purpose of 502(e)(1)(b), which is to avoid double dipping for duplicate claims asserted by more than one
creditor.” 4/16/2010 Hr’g Tr. at 63.
63 	129 S.Ct. 1870 (2009) (“Burlington Northern”).
64 	4/16/2010 Hr’g Tr. at 92.
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claim against the Debtors in the first place, as Weyerhaeuser would never be required to pay
more than its fair share.65 This issue arose at the hearing:
THE COURT: If there is no joint liability, either joint and
several or in some other proportion, then what's the basis
for your client filing a claim in the first place? What’s the
nexus between your guys writing out a check and the
debtors reimbursing you?
MR. SCHNEIDER: We’ve spent money that’s attributable
to them and not to us. And that happens all the time in
superfund cases where you have parties who will undertake
environmental investigations or cleanups because the
contamination is not attributable to your activities. And
that’s the situation here.66
The problem with Weyerhaeuser’s response to the Court’s question is that it addressed
expenses that it had incurred in the past, not future expenses. Claims for past expenses, not
disputed by the Debtors, are not at issue here. If, by means of technology or techniques
described by Weyerhaeuser’s counsel during the Hearing67 (or by some other means),
Weyerhaeuser can establish that it is liable to the EPA for less than had previously been
assumed, that merely underscores why its claim should be limited to amounts it actually pays.
C.
“Reimbursement or Contribution” Element
Weyerhaeuser also relies on its contention that it seeks a claim for cost recovery under
section 107(a), rather than a claim for contribution under section 113(f), to argue that its claim is
not one for “reimbursement or contribution” under section 502(e)(1)(B). But whether the
65 	Or if it was required, Weyerhaeuser could make this same argument in the appropriate forum to avoid
having to pay a full judgment.
66 	4/16/2010 Hr’g Tr. at 92.
67 	See 4/16/2010 Hr’g Tr. at 91-92.
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Weyerhaeuser claim is one for cost recovery under section 107(a), or contribution under
113(f)(1), I must find that it still is covered by section 502(e)(1)(B).
CERCLA section 113(f), by its terms, directly provides for “contribution”; therefore,
quite indisputably, any recovery under section 113 must be considered contribution for the
purposes of 502(e)(1)(B). 68 Section 107(a), under which Weyerhaeuser asserts that its claims are
brought, provides for “recoverable costs,” but does not contain the words “contribution” or
“reimbursement.” But I do not find this distinction to be dispositive, and I find that the claims of
Weyerhaeuser,69 even if premised on section 107(a), are in substance still claims for
“reimbursement” for the purposes of 502(e)(1)(B).
Section 502(e)(1)(B) states that “the court shall disallow any claim for reimbursement or
contribution . . .” 70 As I noted above,71 section 502(e)(1)(B) imposes no requirements as to the
means or reason by which co-liability exists. Although “reimbursement” is not defined in the
Bankruptcy Code, Black’s Law Dictionary defines “reimbursement” as “1. Repayment. 2.
Indemnification.”72 In Wedtech II, Chief Judge Brozman, in this district, explained that “[t]he
use of the word ‘reimbursement’ in the statute cannot be viewed as accidental. It is a broad word
which encompasses whatever claims a co-debtor has which entitle him to be made whole for
monies he has expended on account of a debt for which he and the debtor are both liable.”73
Similarly, in Chemtura, wherein I rejected the notion that the “liable with” prong requires
that the Debtors establish that “the successful prosecution of a claim of [a Tort Plaintiff] against
68 	Georgia-Pacific, who asserts that it has an allowable claim under section 113(f), does not dispute that its
claim is for “contribution or reimbursement” under 502(e)(1)(B).
69 	And other similarly situated private party claimants, such as Hamilton Beach
70 	11 U.S.C. § 502(e)(1)(B) (emphasis added).
71 	See n. 10 above.
72 	Black’s Law Dictionary 1399 (9 th ed. 2009).
73 	In re Wedtech, 87 B.R. 279, 287 (Bankr. S.D.N.Y. 1988) (Brozman, C.J.) (“Wedtech II).
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[a Corporate Claimant] would automatically result in the Debtors being liable to such underlying
tort plaintiff as well,”74 I noted that Congress clearly meant to include all situations wherein
indemnitors or contributors could be liable with the debtor within the scope of § 502(e)(1)(B).75
Other courts similarly focused on substance over form when addressing this issue, and I
find their reasoning and conclusions to be persuasive. In Cottonwood Canyon, discussed above,
the court disallowed, as “contribution or reimbursement,” claims asserted under CERCLA
107(a). The risk, both there and in Allegheny, that the Debtors would make duplicative payments
for the same liability, revealed that “the clear character of the claim” was that “debtor was not
being asked to satisfy a [direct] claim for injury to the claimants property” but rather was being
sought for reimbursement.76
Looking at substance over form here, the claims at issue plainly are for “reimbursement”
as that term is used in section 502(e)(1)(B). Weyerhaeuser seeks repayment of money that it
alleges it will spend on environmental remediation, and the Debtors and Weyerhaeuser, all PRPs,
are co-liable for environmental cleanup. There is a substantial risk that if these private party
claims are allowed, the Debtors will pay twice for the same liability. In light of these facts,
Weyerhaeuser’s claims, even if brought for cost recovery under section 107(a), are claims for
reimbursement under 501(e)(1)(B).
Weyerhaeuser’s reliance on the distinctions between sections 107(a) and 113(f) noted in
Atlantic Research and Aviall Services is misplaced. As explained above, Atlantic Research
merely holds that co-liability is not required for cost recovery under 107(a). Weyerhaeuser’s
claim may not be one for contribution, and may in fact be “cost recovery” under 107(a). But
74 	Chemtura, 436 B.R. at 293.
75 	See id. at 295-96.
76 	Cottonwood Canyon, 146 B.R. at 996.
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Atlantic Research and Aviall do not address section 502(e)(1)(B) (or, more specifically
“reimbursement”) at all, and do not affect earlier decisions, such as Cottonwood Canyon, which
found that direct claims for cost recovery under CERCLA section 107 are claims for
“reimbursement” under 502(e)(1)(B).
Weyerhaeuser also argues that if this Court were to create a trust account for payment of
future costs like in Allegheny, the payment of funds into the trust account could be considered
something other than reimbursement, because the money wouldn’t be spent until the future.77 I
find this argument unpersuasive. The money would be paid to return money expended by
Weyerhaeuser. That is reimbursement.
In its one unique contention, Hamilton Beach also maintains that its claim is a direct
contractual claim, and not one for contribution. Contractual claims are similarly disallowed
under 502(e)(1)(B) when they are, in substance, claims for reimbursement.78 Like
Weyerhaeuser, Hamilton Beach seeks payment from the Debtors for money it might spend in the
future. That is a claim for reimbursement.
77 	See 4/16/2010 Hr’g Tr., at 106:5-10.
78 	See Fine Organic Corp. v. Hexcel Corp. (“In re Hexcel Corp”.), 174 B.R. 807, 810 (Bankr. N.D. Cal.
1994) (Tchaikovsky, J.) (disallowing as reimbursement claims arising out of asset purchase agreement
between debtors and claimant in which debtor promised to perform remediation, even though claimant was
not jointly liable with debtor).
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Conclusion
For the foregoing reasons, I conclude that the Orally Arguing Claimants’ claims, to the
extent they are on account of future costs, are contingent claims for reimbursement or
contribution of an entity that is liable with the debtor to a third party creditor. Except for the
amounts that the Orally Arguing Claimants already actually paid, the Objections to the Orally
Arguing Claimants’ claims are sustained.
Dated: New York, New York 	s/Robert E. Gerber
January 4, 2011 	United States Bankruptcy Judge
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