United States v. Apex Oil Company, Incorporated

In the
United States Court of Appeals
For the Seventh Circuit
No. 08-3433
U NITED S TATES OF A MERICA,
Plaintiff-Appellee,
v.
A PEX O IL C OMPANY, INC.,
Defendant-Appellant.
Appeal from the United States District Court
for the Southern District of Illinois.
No. 05-242-DRH—David R. Herndon, Chief Judge.
A RGUED M AY 11, 2009—D ECIDED A UGUST 25, 2009
Before C UDAHY, P OSNER, and K ANNE, Circuit Judges.
P OSNER, Circuit Judge. Apex Oil Company appeals
from the grant of an injunction, at the behest of the Envi-
ronmental Protection Agency and on the authority of
42 U.S.C. § 6973 (a part of the Resource Conservation and
Recovery Act of 1976, 42 U.S.C. §§ 6901 et seq.), that re-
quires Apex to clean up a contaminated site in Hartford,
Illinois. In a 178-page opinion following a 17-day bench
trial, the district judge made findings that millions of
2 No. 08–3433
gallons of oil, composing a “hydrocarbon plume” trapped
not far underground, are contaminating groundwater
and emitting fumes that rise to the surface and enter
houses in Hartford and in both respects are creating
hazards to health and the environment. The judge
deemed it Apex’s legal responsibility to abate this
nuisance because the plume was created by an oil
refinery owned by a corporate predecessor of Apex.
Apex challenges these findings and conclusion, but the
challenge has no possible merit.
The principal question presented by the appeal is
unrelated to the district judge’s findings and con-
clusions; it is whether the government’s claim to an
injunction was discharged in bankruptcy and therefore
cannot be renewed in a subsequent lawsuit—this suit.
The bankruptcy judge’s confirmation (approval) of a
claim in a Chapter 11 proceeding discharges the debtor
from “any debt that arose before the date of” confirmation,
11 U.S.C. § 1141(d)(1)(A), with immaterial exceptions.
“Debt” is defined as “liability on a claim,” § 101(12), and
“claim” as either a “right to payment,” § 101(5)(A), or—the
critical language in this case—a “right to an equitable
remedy for breach of performance if such breach gives
rise to a right to payment, whether or not such right to
an equitable remedy is reduced to judgment, fixed, con-
tingent, matured, unmatured, disputed, undisputed,
secured, or unsecured.” § 101(5)(B). The critical question
is the meaning of “gives rise to a right to payment.”
Because Apex no longer does refining and as a result
has no in-house capability of cleaning up a contaminated
No. 08–3433 3
site, it would have to hire another company to do the
clean up in order to comply with the injunction. It esti-
mates that it would have to pay such a company $150
million for the job, though it might be able to recover
some of the expense from other contributors to the con-
tamination.
The natural reading of the statutory provision that
we quoted is that if the holder of an equitable claim can,
in the event that the equitable remedy turns out to be
unobtainable, obtain a money judgment instead, the
claim is dischargeable. If for example you have a decree
of specific performance (a type of injunction and there-
fore an equitable remedy) that you can’t enforce
because the property that the decree ordered the
defendant to sell you was sold to someone else (from
whom, for whatever reason, you cannot recover it), you
are entitled to a money judgment for the value of the
property, e.g., UFG, LLC v. Southwest Corp., 848 N.E.2d
353, 363, 365 (Ind. App. 2006); Vinson v. Marton & Associ-
ates, 764 P.2d 736, 739-40 (Ariz. App. 1988); Engasser v.
Jones, 198 P.2d 546, 549 (Cal. App. 1948)—and your
claim to that value is a claim to a right to receive pay-
ment and is dischargeable in the seller’s bankruptcy.
In re Davis, 3 F.3d 113, 116 (5th Cir. 1993); In re Irizarry,
171 B.R. 874, 878-79 (9th Cir. BAP 1994).
In addition, some equitable remedies, such as backpay
orders in employment cases, Doe v. Oberweis Dairy, 456
F.3d 704, 714 (7th Cir. 2006); Pals v. Schepel Buick & GMC
Truck, Inc., 220 F.3d 495, 500-01 (7th Cir. 2000); Broadnax
v. City of New Haven, 415 F.3d 265, 271 and n. 1 (2d Cir.
4 No. 08–3433
2005), and orders of equitable restitution, 1 Dan B. Dobbs,
Law of Remedies § 4.3 (2d ed. 1993), are orders to pay, and
so would be dischargeable were it not for specific ex-
ceptions in the Bankruptcy Code. See, e.g., Eden v. Robert
A. Chapski, Ltd., 405 F.3d 582, 586-87 (7th Cir. 2005); Bush
v. Taylor, 912 F.2d 989, 992-93 (8th Cir. 1990) (en banc).
That equitable remedies are always orders to act or not
to act, rather than to pay, is a myth; equity often orders
payment. Williams Electronics Games, Inc. v. Garrity, 366
F.3d 569, 576-77 (7th Cir. 2004); Clair v. Harris Trust &
Savings Bank, 190 F.3d 495, 498-99 (7th Cir. 1999); John H.
Langbein, “What ERISA Means by ‘Equitable,’ ” 103
Colum. L. Rev. 1317, 1350-51 (2003).
But the Resource Conservation and Recovery Act,
which is the basis of the government’s equitable claim,
does not entitle a plaintiff to demand, in lieu of action
by the defendant that may include the hiring of another
firm to perform a clean up ordered by the court, pay-
ment of clean-up costs. It does not authorize any form of
monetary relief. 42 U.S.C. § 6973(a). The Act’s companion
provision authorizing private suits, 42 U.S.C. § 6972(a)(2),
has been held not to authorize monetary relief, Meghrig
v. KFC Western, Inc., 516 U.S. 479, 483-87 (1996); Avondale
Federal Savings Bank v. Amoco Oil Co., 170 F.3d 692, 694-95
(7th Cir. 1999); AM Int’l, Inc. v. Datacard Corp., 106 F.3d
1342, 1348 (7th Cir. 1997); Abreu v. United States, 468 F.3d
20, 31 (1st Cir. 2006); South Carolina Dep’t of Health &
Environmental Control v. Commerce & Industrial Ins. Co., 372
F.3d 245, 256 (4th Cir. 2004), and the relevant language
of the two provisions is identical.
No. 08–3433 5
Thus the government’s equitable claim, if well
founded, as the district court ruled it to be, entitles the
government only to require the defendant to clean up
the contaminated site at the defendant’s expense. Earlier
cases, such as United States v. Northeastern Pharmaceutical
& Chemical Co., 810 F.2d 726, 749-50 (8th Cir. 1986), and
United States v. Conservation Chemical Co., 619 F. Supp. 162,
201 (W.D. Mo. 1985), which allowed an award of clean-up
costs on the basis of general equitable principles
set forth in such cases as Mitchell v. Robert De Mario
Jewelry, Inc., 361 U.S. 288, 291-92 (1960), and Porter v.
Warner Holding Co., 328 U.S. 395, 397-98 (1946), are dead
after Meghrig, if we are correct in thinking that the
identical language in sections 6972(a)(2) and 6973(a)
requires an identical conclusion with regard to a plain-
tiff’s right to seek a money judgment.
That leaves Apex to argue that the cost of complying
with an equitable decree should be deemed a money
claim, and hence dischargeable. We rejected that proposi-
tion, which does not comport with the language of the
Bankruptcy Code—the cost to Apex is not a “right [of the
plaintiff] to payment”—in AM Int’l, Inc. v. Datacard
Corp., supra, 106 F.3d at 1348; see also In re CMC
Heartland Partners, 966 F.2d 1143, 1145-47 (7th Cir. 1992);
In re Torwico Electronics, Inc., 8 F.3d 146, 150 (3d Cir.
1993); In re Commonwealth Oil Refining Co., 805 F.2d 1175,
1186-87 (5th Cir. 1986); Penn Terra, Ltd. v. Department of
Environmental Resources, 733 F.2d 267, 278-79 (3d Cir.
1984); United States v. Hubler, 117 B.R. 160, 164 and n. 1
(W.D. Pa. 1990); In re Chateaugay Corp., 112 B.R. 513, 523-24
(S.D.N.Y. 1990), affirmed, 944 F.2d 997 (2d Cir. 1991).
6 No. 08–3433
Almost every equitable decree imposes a cost on the
defendant, whether the decree requires him to do some-
thing, as in this case, or, as is more common, to refrain
from doing something. The logic of Apex’s position is
thus that every equitable claim is dischargeable in bank-
ruptcy unless there is a specific exception in the Code.
That is inconsistent with the Code’s creation in 11 U.S.C.
§ 101(5)(B) of only a limited right to the discharge of
equitable claims. And if “any order requiring the debtor
to expend money creates a dischargeable claim, it is
unlikely that the state could effectively enforce its laws:
virtually all enforcement actions impose some cost on
the violator.” In re Torwico Electronics, Inc., supra, 8 F.3d
at 150 n. 4.
It is true that in Ohio v. Kovacs, 469 U.S. 274 (1985), the
Supreme Court allowed the discharge in bankruptcy of
an equitable obligation to clean up a contaminated site
owned by the debtor. An injunction ordering the clean
up had been issued before the bankruptcy. The debtor
had failed to comply with the injunction and a receiver
had been appointed to take possession of his assets and
obtain from them the money needed to pay for the clean
up. The receiver thus was seeking money rather than
an order that the debtor clean up the contaminated site.
That was a claim to a “right to payment.” The plaintiff in
our case (the government) is not seeking a payment of
money and the injunction that it has obtained does not
entitle it to payment. See In re Udell, 18 F.3d 403, 409-10
(7th Cir. 1994); In re Torwico Electronics, Inc., supra, 8 F.3d
at 150; In re Chateaugay Corp., 944 F.2d 997, 1008 (2d Cir.
1991).
No. 08–3433 7
Apex cites Johnson v. Home State Bank, 501 U.S. 78 (1991),
which held that a mortgage, which is an equitable
interest, can be discharged in a Chapter 13 bankruptcy. A
mortgage secures a loan, and thus entitles the lender to
force the sale of the mortgaged property (the collateral
for the loan) in the event the borrower defaults, and to
collect the unpaid portion of the debt from the pro-
ceeds. That is a straightforward case of an equitable claim
that gives rise to a right of payment to the claim-
ant—namely, as in Kovacs, the right to payment of his
debt out of the proceeds of a sale of property pursuant to
a decree (the equitable remedy) that the property be sold.
One appellate case, factually similar to the present one,
United States v. Whizco, Inc., 841 F.2d 147, 150-51 (6th
Cir. 1988), does support Apex. But it cannot be squared
with the decisions which hold that cost incurred is not
equivalent to “right to payment,” and it sets forth no
limiting principle that would distinguish cases under
the Resource Conservation and Recovery Act from other
cases in which compliance with an equitable decree
requires expenditures by the defendant. The distinctions
that Apex suggests to limit the scope of a position that
it realizes is untenable (that all equitable claims are
dischargeable in bankruptcy in the absence of a specific
exception in the Code)—between injunctions to do and
injunctions not to do, between injunctions that require
major expenditures and those that require minor ones,
between injunctions that the defendant can comply
with internally and injunctions that it has to hire an
independent contractor in order to achieve compli-
ance—are arbitrary.
8 No. 08–3433
The root arbitrariness of Apex’s position is that
whether a polluter can clean up his pollution himself
or has to hire someone to do it has no relevance to the
policy of either the Bankruptcy Code or the Resource
Conservation and Recovery Act. If adopted by the
courts, Apex’s position would discourage polluters
from developing an internal capability of cleaning up
their pollution, even if hiring third parties to do it
would be more expensive. Moreover, the cost of cleaning
up pollution when the polluter does the cleaning up
himself is as real a cost as the price paid to an outsider
to clean it up. Why distinguish a check written to an
employee from a check written to an independent con-
tractor?
The sparsity of case law dealing with the discharge of
claims such as Apex’s, together with the near consensus
of the cases, cited above, in which the issue has arisen,
suggests a general understanding that discharge must
indeed be limited to cases in which the claim gives rise
to a right to payment because the equitable decree
cannot be executed, rather than merely imposing a cost
on the defendant, as virtually all equitable decrees do.
Apex argues that to deny discharge in a case such as
this disserves the government’s long-term interest in
environmental quality by precluding, as a practical
matter, reorganization in bankruptcy. (The argument
derives from Douglas G. Baird and Thomas H. Jackson,
“Kovacs and Toxic Wastes in Bankruptcy,” 36 Stan. L. Rev.
1199, 1202-03 (1984).) It says that had it known in 1986
when it declared bankruptcy that it might be liable for
No. 08–3433 9
$150 million in clean-up costs, it would have had to
liquidate—it could not have reorganized with such a
huge debt overhanging it—and had it liquidated there
would be no surviving or successor entity to conduct or
pay for the clean up and so the full expense would fall on
the government. But that is just to say that in some cases
the government might benefit from the rule that Apex
advocates; in others not and apparently the government
believes, at present anyway—for it has taken the Baird-
Jackson position in the past, see United States v.
Aceto Agricultural Chemicals Corp., 872 F.2d 1373, 1376
(8th Cir. 1989); United States v. Apex Oil Co., 438 F. Supp. 2d
948, 953 n. 6 (S.D. Ill. 2006); Office of Enforcement
and Compliance Assurance, United States Environ-
mental Protective Agency, “Guidance on the Use of
Section 7003 of RCRA” pp. 22-23 (Oct. 1997),
www.epa.gov/compliance/resources/policies/cleanup/
rcra/971020.pdf (visited Aug. 11, 2009)—that it is better
off on balance if the cost of clean up is not dischargeable.
Apex makes the unrelated argument that the injunc-
tion is vague (it is) and that Rule 65(d) of the civil
rules requires (and it does) that an injunction “state its
terms specifically” and “describe in reasonable detail—and
not by referring to the complaint or other document—the
act or acts restrained or required.” We have insisted on
strict compliance with these requirements. Nuxoll ex rel.
Nuxoll v. Indian Prairie School Dist. #204, 523 F.3d 668,
675 (7th Cir. 2008); Chicago Board of Education v. Substance,
Inc., 354 F.3d 624, 631-32 (7th Cir. 2003); IDS Life Ins. Co.
v. SunAmerica Life Ins. Co., 136 F.3d 537, 543 (7th Cir.
1998); Reno Air Racing Ass’n, Inc. v. McCord, 452 F.3d
10 No. 08–3433
1126, 1132 (9th Cir. 2006); Corning Inc. v. PicVue Electronics,
Ltd., 365 F.3d 156, 158 (2d Cir. 2004) (per curiam). The
rule applies equally to a mandatory injunction (“acts
required”)—an injunction that, as in this case, commands
that acts be done rather than not done, rather than
the more common negative injunction. International Long-
shoremen’s Ass’n v. Philadelphia Marine Trade Ass’n, 389
U.S. 64, 74-76 (1967); Petrello v. White, 533 F.3d 110, 115-16
(2d Cir. 2008); Gates v. Shinn, 98 F.3d 463, 468 (9th Cir.
1996); 13 Moore’s Federal Practice § 65.60[3] (3d ed. 2009).
Yet the injunction contains such vague requirements
as that Apex have a vapor-control system that has “ade-
quate capacities and efficiencies” and that “all work
required by this injunctive order shall be subject to
U.S. EPA oversight and approval,” which is not so
much vague as open-ended because it specifies no
criteria for the EPA’s approval of efforts by Apex to
comply with the decree.
But Apex has no suggestions for rewriting the
injunction to make it less vague or open-ended. The
clean up of the contaminated site is a huge project—Apex
says it will take 15 years to complete (though maybe
it’s just trying to frighten us, or to push the costs as far
into the future as it can). To specify the details of the
project in the decree would either impose impossible
rigidity on the performance of the clean up or, more
likely, require constant recourse to the district judge
for interpretation or modification of the decree.
The decree resembles one of those “regulatory decrees”
that federal courts issue when they take over the
No. 08–3433 11
running of a school system or other complex public
institution that has failed to comply with federal law in
one respect or another. E.g., Freeman v. Pitts, 503 U.S. 467,
489-90 (1992); Gautreaux v. Chicago Housing Authority, 475
F.3d 845, 852 (7th Cir. 2007); Alliance to End Repression v.
City of Chicago, 237 F.3d 799, 799-800 (7th Cir. 2001); Glover
v. Johnson, 138 F.3d 229, 232-33 (6th Cir. 1998). These
decrees, on the interpretation of Rule 65(d) advanced
by Apex, do not comply with the rule.
The aims of Rule 65(d) are to minimize the occasion
for follow-on proceedings to the issuance of an
injunction and to protect defendants from being held in
contempt for failure to follow a directive that was a trap
because of its ambiguity. Schmidt v. Lessard, 414 U.S. 473,
476-77 (1974); Dupuy v. Samuels, 465 F.3d 757, 759-60 (7th
Cir. 2006); CPC Int’l, Inc. v. Skippy Inc., 214 F.3d 456, 459
(4th Cir. 2000); 11 Charles A. Wright & Arthur R. Miller,
Federal Practice and Procedure § 2955, pp. 308-09 (2d ed.
1995). But the cases that insist on strict compliance with
an inflexible interpretation of the rule must be under-
stood as ones in which such compliance is feasible and
desirable. A degree of ambiguity is unavoidable in a
decree ordering a complicated environmental clean up.
“[T]he Rule does not require the impossible. There is a
limit to what words can convey.” Scandia Down Corp. v.
Euroquilt, Inc., 772 F.2d 1423, 1431 (7th. Cir. 1985). The
defendant can always seek clarification or modification
of the decree from the district court, id. at 1432, and is
protected because if the decree remains ambiguous
after efforts at clarification, or after being modified, the
defendant cannot be held in contempt for violating it. Cf.
12 No. 08–3433
D. Patrick, Inc. v. Ford Motor Co. 8 F.3d 455, 460-61 (7th
Cir. 1993); NBA Properties, Inc. v. Gold, 895 F.2d 30, 32
(1st Cir. 1990); Inmates of Allegheny County Jail v. Wecht,
754 F.2d 120, 129 (3d Cir. 1985).
Any disputes over whether the vapor-control system
that Apex installs has “adequate capacities” will be
submitted to the EPA, as in United States v. Conservation
Chemical Co., 628 F. Supp. 391, 410-11 (W.D. Mo. 1985); see
also United States v. Kasz Enterprises, Inc., 862 F. Supp. 717,
723-24 (D.R.I. 1994); Cunningham v. English, 175 F. Supp.
764, 767-68 (D.D.C. 1958), and a party dissatisfied with
the agency’s resolution will be able to seek redress from
the district court, the ultimate arbiter (subject to ap-
pellate review) of the decree’s meaning. See United States
v. Northlake, 942 F.2d 1164, 1167-68 (7th Cir. 1991); cf. Local
28 of Sheet Metal Workers’ International Ass’n v. EEOC,
478 U.S. 421, 481-82 (1986). There is no improper delega-
tion to the EPA (compare United States v. Microsoft Corp.,
147 F.3d 935, 955 (D.C. Cir. 1998)), because its exercise
of “oversight and approval” will be subject to the
court’s override.
A FFIRMED.
8-25-09