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In re Mark IV Industries

September 28, 2011

IN RE MARK IV INDUSTRIES, INC., ET AL., DEBTORS.
MARK IV INDUSTRIES, INC., PLAINTIFF-APPELLANT,
v.
NEW MEXICO ENVIRONMENT DEPARTMENT, DEFENDANT-APPELLEE, AND UNITED STATES ENVIRONMENTAL PROTETION AGENCY, AND CHANT FAMILY II LIMITED PARTNERSHIP, INTERVENOR-APPELLEES.



The opinion of the court was delivered by: Shira A. Scheindlin, U.S.D.J.

OPINION AND ORDER

I. INTRODUCTION

Mark IV Industries, Inc. ("Mark IV") brought this adversary action against the New Mexico Environmental Department ("NMED") seeking a declaratory judgment that its obligation to clean up a contaminated site was discharged in bankruptcy. The United States Environmental Protection Agency ("EPA") and Chant Family II Limited Partnership ("Chant") intervened. On cross-motions for summary judgment, the Bankruptcy Court for the Southern District of New York ("Bankruptcy Court") granted NMED's summary judgment motion and denied Mark IV's summary judgment motion. Mark IV appeals the Final Order and Judgment of the Bankruptcy Court. This Court has jurisdiction pursuant to section 158(a)(1) of Title 28 of the United States Code. For the reasons set forth below, the decision of the Bankruptcy Court is affirmed.

II. BACKGROUND

A. Ownership of and Operations at the Site

From approximately 1956 until 1979, Gulton Industries, Inc. ("Gulton") operated a facility that manufactured electronic circuit boards at 14800 Central Avenue, SE, Albuquerque, New Mexico (the "Site").*fn1 Gulton's operations involved etching metal wafer boards using caustic chemicals and rinsing the boards with a mixture of chlorinated solvents and water.*fn2 Gulton discharged rinse water into a septic tank and leach field and later through unlined evaporation lagoons.*fn3

On August 11, 1978, Gulton sold the Site to the Chant Corporation.*fn4

Gulton continued to operate the Site through 1979 pursuant to a leaseback agreement.*fn5 By late 1979, Gulton ceased operations and vacated the Site.*fn6 Mark IV acquired Gulton in 1987.*fn7 Chant, a successor to Chant Corporation, is the current owner of the Site.*fn8

B. Environmental Investigations and Cleanup Efforts at the Site

Beginning in 1990, NMED began investigating the Site. These investigations revealed chlorinated volatile organic compounds ("VOCs") in the groundwater beneath the Site. The VOC levels exceeded state groundwater quality standards and federal and state drinking water standards.*fn9 According to NMED, the contamination extended a quarter of a mile from the Site, under neighboring properties.*fn10 NMED's investigations also revealed elevated levels of cadmium, chromium, copper, and lead in surface soils at the Site.*fn11

In 1995, Mark IV implemented a remediation plan, pursuant to which it removed the septic tank, leach field, evaporation lagoons, and approximately 1600 cubic yards of soil.*fn12 After Mark IV implemented the remediation plan, VOCs remained in the groundwater in amounts exceeding federal and state drinking water standards.*fn13 NMED contends that the VOCs are probably trapped in fractures in the bedrock beneath the Site.*fn14

In November 1996, Mark IV voluntarily submitted a Stage 1 abatement plan to NMED pursuant to the New Mexico Water Quality Act ("Water Quality Act").*fn15 Pursuant to the Stage 1 plan, Mark IV investigated the location and extent of groundwater contamination at the Site.*fn16 In September 2007, Mark IV submitted a Stage 2 abatement plan at NMED's request. NMED approved the Stage 2 plan in March 2008.*fn17 The Stage 2 plan required Mark IV to clean up the groundwater using a hydrogen releasing compound injection process, which Mark IV had tested in a pilot study a couple years earlier.*fn18 After December 2008, Mark IV ceased cleanup efforts.*fn19 NMED claims that a plume of contaminants is spreading and that the plume could move quickly in an unpredictable path due to the fractured granite bedrock.*fn20

C. Mark IV's Bankruptcy Proceedings

On April 30, 2009, Mark IV filed a petition under Chapter 11 of the Bankruptcy Code.*fn21 In May 2009, Mark IV informed NMED and Chant that it would stop complying with the terms of the Stage 2 abatement plan because of the bankruptcy filing.*fn22 On July 30, 2009, Mark IV and its affiliates filed a reorganization plan, which the Bankruptcy Court confirmed on September 23, 2009, effective November 13, 2009.*fn23

On October 30, 2009, Mark IV initiated this adversary proceeding against NMED by filing a complaint seeking a declaratory judgment that Mark IV's liability to NMED for contamination at the Site is a dischargeable claim under the Bankruptcy Code.*fn24 On November 12, 2009, NMED responded with an answer and counterclaim seeking a declaratory judgment that its action for injunctive relief requiring Mark IV to abate groundwater pollution beneath and from the Site is not dischargeable.*fn25 In January 2010, EPA and Chant intervened in support of NMED.*fn26 After Mark IV and NMED moved for summary judgment, the Bankruptcy Court issued a memorandum decision on October 29, 2010 granting NMED's motion and denying Mark IV's motion.*fn27 On December 6, 2010, the Bankruptcy Court entered an order and final judgment.*fn28

III. LEGAL STANDARDS

A. Bankruptcy Appeals

A district court functions as an appellate court in reviewing judgments rendered by bankruptcy courts.*fn29 Findings of fact are reviewed for clear error*fn30 whereas findings that involve questions of law, or mixed questions of fact and law, are reviewed de novo.*fn31

B. Summary Judgment

Summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law."*fn32 "'An issue of fact is genuine if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. A fact is material if it might affect the outcome of the suit under the governing law.'"*fn33

"The moving party bears the burden of establishing the absence of any genuine issue of material fact."*fn34 "When the burden of proof at trial would fall on the nonmoving party, it ordinarily is sufficient for the movant to point to a lack of evidence to go to the trier of fact on an essential element of the non-movant's claim."*fn35 In turn, to defeat a motion for summary judgment, the non-moving party must raise a genuine issue of material fact. To do so, the non-moving party "'must do more than simply show that there is some metaphysical doubt as to the material facts,'"*fn36 and "'may not rely on conclusory allegations or unsubstantiated speculation.'"*fn37

In deciding a motion for summary judgment, a court must "'construe the facts in the light most favorable to the non-moving party and must resolve all ambiguities and draw all reasonable inferences against the movant.'"*fn38 However,"'[c]redibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge.'"*fn39

"'The role of the court is not to resolve disputed issues of fact but to assess whether there are any factual issues to be tried.'"*fn40

IV. APPLICABLE LAW

A. "Claims" Under the Bankruptcy Code

A confirmation order pursuant to Chapter 11 of the Bankruptcy Code "discharges the debtor from any debt that arose before the date of such confirmation," subject to limited exceptions not at issue here.*fn41 A "discharge under the [Bankruptcy] Code extinguishes a debtor's personal liability on his creditor's claims."*fn42 The Bankruptcy Code defines "claim" as a (A) right to payment, whether or not such right is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or

(B) 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, contingent, matured, unmatured, disputed, undisputed, secured, or unsecured.*fn43

B. Relevant Environmental Statutes

1. New Mexico Water Quality Act

NMED seeks injunctive relief under the Water ...


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