Jensen v. California Department of Health Services

127 B.R. 27 (1991)

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Jensen v. California Department of Health Services

United States Bankruptcy Appellate Panel of the Ninth Circuit
127 B.R. 27 (1991)

Facts

Robert and Rosemary Jensen (plaintiffs) owned Jensen Lumber Company (JLC). On January 25, 1984, the California Regional Water Quality Board (the board) inspected the site that the Jensens leased for their JLC operations. On February 2, the board sent the Jensens a letter informing them that they had illegally released hazardous waste. On February 13, the Jensens filed for bankruptcy under Chapter 7 of the United States Bankruptcy Code. No mention of hazardous-waste cleanup was made at this time. In March, the California Department of Health Services (DHS) (defendant)—a state environmental regulatory agency separate from the board—became involved in plans to remove the hazardous waste. The Jensens received a discharge in July. Later, the DHS took steps under state and federal Superfund statutes to seek recovery for remediation of the contaminated site. In 1989 the Jensens initiated an adversary proceeding, seeking a determination that any claim for cleanup costs had been discharged in 1984. The bankruptcy court ruled in favor of DHS, finding that the claim arose with the right to payment, which in turn arose under Superfund liability. The result, according to the court, was that DHS’s claim was postpetition and therefore not dischargeable. The Jensens appealed. The United States Bankruptcy Court Appellate Panel of the Ninth Circuit granted certiorari.

Rule of Law

Issue

Holding and Reasoning (Ashland, J.)

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