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Keywords

contractliabilityinjunctionappealwillbankruptcyhazardous waste
defendantliabilityinjunctionappealleasebankruptcyrespondenthazardous waste

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Ohio v. Kovacs, 469 U.S. 274, 105 S.Ct. 705, 83 L.Ed.2d 649, 21 ERC 2169, 53 USLW 4068, 11 Collier Bankr.Cas.2d 1067, 12 Bankr.Ct.Dec. 541, Bankr. L. Rep. P 70,163, 15 Envtl. L. Rep. 20,121

Facts

The State of Ohio obtained an injunction against William Kovacs, requiring him to clean up a hazardous waste disposal site. After Kovacs failed to comply, a receiver was appointed to manage the cleanup. Subsequently, Kovacs filed for bankruptcy, prompting the State to file a complaint in Bankruptcy Court to declare that his obligation under the injunction was not dischargeable. The Bankruptcy Court ruled against Ohio, leading to an appeal that was affirmed by the Court of Appeals.

Petitioner State of Ohio obtained an injunction in state court ordering respondent and other defendants to clean up a hazardous waste disposal site. When the injunction was not complied with, the State obtained the appointment in state court of a receiver, who was directed to take possession of the defendants' property and other assets and to implement the injunction.

Issue

Is the debtor's obligation under a state court injunction to clean up a hazardous waste site a 'debt' or 'liability on a claim' subject to discharge under the Bankruptcy Code?

The question before us is whether, in the circumstances present here, Kovacs' obligation under the injunction is a “debt” or “liability on a claim” subject to discharge under the Bankruptcy Code.

Rule

For bankruptcy purposes, a debt is defined as a liability on a claim, which includes the right to an equitable remedy for breach of performance that gives rise to a right of payment, regardless of whether it arises from a contractual arrangement.

For bankruptcy purposes, a debt is a liability on a claim. § 101(11). A claim is defined by § 101(4) as follows: “(4) ‘claim’ means- “(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.”

Analysis

The court analyzed the nature of the obligation imposed by the state injunction and determined that it effectively required a monetary payment to defray cleanup costs. The court found that the obligation to clean up the site had been converted into a monetary obligation, which is dischargeable under the Bankruptcy Code. The court emphasized that the definition of a 'claim' is broad and encompasses obligations arising from statutory violations.

The courts below also found little substance in the submission that the cleanup obligation did not give rise to a right to payment that renders the order dischargeable under § 727. The definition of “claim” in H.R. 8200 as originally drafted would have deemed a right to an equitable remedy for breach of performance a claim even if it did not give rise to a right to payment.

Conclusion

The Supreme Court affirmed the lower court's ruling, concluding that Kovacs' obligation under the state injunction was a dischargeable debt under the Bankruptcy Code.

The judgment of the Court of Appeals is Affirmed.

Who won?

William Kovacs prevailed in the case because the Supreme Court held that his obligation to clean up the hazardous waste site was a dischargeable debt under the Bankruptcy Code.

Kovacs cannot personally clean up the waste he wrongfully released into Ohio waters. He cannot perform the affirmative obligations properly imposed upon him by the State court except by paying money or transferring over his own financial resources.

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