U.S. Bank National Association v. U.S. EPA

Apr 20: In the U.S. Court of Appeals, Sixth Circuit, Case No. 08-3083. Eagle-Picher Technologies, LLC (EP Tech), an electronics manufacturer, filed for Chapter 11 bankruptcy in 2005. The United States, on behalf of U.S. EPA and the Department of Interior, filed a claim in the bankruptcy proceeding against EP Tech under CERCLA -- the Comprehensive Environmental Response, Compensation and Liability Act of 1980. The Appeals Court indicates that under CERCLA, the federal government may recover the cost of cleaning up hazardous waste from the parties responsible for its release.

Over the objections of U.S. Bank, the bankruptcy trustee, the bankruptcy court found EP Tech liable for $357,246 of already-incurred costs and $8,735,434 in estimated future costs for the clean-up of groundwater and soil contamination near a now-vacant manufacturing plant in Socorro, New Mexico. U.S. Bank appealed to the district court, which affirmed the finding.

U.S. Bank appealed to the Sixth Circuit, arguing: (i) EP Tech is not liable under CERCLA for hazardous waste releases that occurred before EP Tech acquired an interest in the Socorro plant in 1998; (ii) even if EP Tech is liable for the clean-up costs at the plant, genuine issues of material fact precluded the bankruptcy court from concluding that EP Tech was responsible for contamination detected at a well located a mile and a half south of the plant; and (iii) the bankruptcy court improperly excluded evidence at the hearing on estimating the future cost of cleaning up the hazardous substances.

The Appeals Court said in affirming the finding, "the bankruptcy court’s decision was legally correct, and it did not abuse its discretion by excluding evidence of future costs."

Further explaining its decision the Appeals Court said, "Our review of the hearing transcript indicates, contrary to U.S. Bank’s characterization, that the bankruptcy court was well-aware that, notwithstanding the finality of the divisibility issue, U.S. Bank was allowed to challenge the estimate derived from EPA’s proposed clean-up strategy. And the transcript shows that the court gave both parties wide latitude. The court appreciated the overlap between the divisibility issue and the estimation of future costs. . . It did not categorically bar questions about the scope of the contamination, and instead probed each of the experts on how their proposed clean-up plans fit with the available data. . ."

Access the complete opinion (click here).