VIA E LECTRONIC FILING

Ill inois Pollution Co ntrol Board

rk'

s Office

LAW OFFICES OF

CAR EY S. ROSEMARIN, P c.

847-897-8000

500 SKOKIE BOULEVARD, S UITE 510

NORTHBROOK, ILLINO I

S 60062

Jul y 1

0,2009

James R. Thompson Cen t

er. Suite 11-500

100 West Randolph Street

hicago, I

ll i

nois 6060 1

htl p :

llwww.i p

cb.state.il.usl

Fa ... : 847-

919-4600

ajm1troscmarin

law.<:01II

Re:

Elmhurst Memorial Healtbeare, et "I.

heJiro

n U

.S.A. JI/ c.

(PCB

009-(66)

This law firm r

epresent s Elmhurst Me mori al l-l ealthcare and Elmhurst Memorial Hospital in

the above-referenced case. Pl ease find enclosed a dispositive motion directed to the Board tit led

" Complainant

s' Motion f

or L

eave to Fil

e Repl

y In stanter in Support of its Motion to Strike

Affir

mati

ve D

efenses." A No tice of Fili ng and Certifica te o f Service arc enclosed as well.

Ene/.

cc:

Via R

egular Mail

Joseph

A. Girardi

Robert

Christi e

enderson

Lyman

Altorneys f

or Chevron U.S.A. I

175 W. Jackso n Bl

vd., Suite 240

Chi

cago, Illinois 60604

Very truly

yo Irs, .

Andrew J. Mark

Electronic Filing - Received, Clerk's Office, July 10, 2009

BEFORE THE I LL INO IS I

'OLL

TIO N C O NTROL IlOARD

ELMH URST MEMO RI A L HEALT I

CARE and

)

ELM HU RST

MEMORIAL HOSPITAL

)

Complainants,

)

PCB 09-66

(C iti ze

n's Enf

orcement - Land)

C HEVRON U.S.A. I

NC. .

)

Respondent.

)

NOTICE OF FILING

To:

Joseph

Girard i

Robert

B. Chri stie

Henderson

Lyma n

Attorneys for Chevron U.S.A.

Inc.

175

W. Jackson Bl vd., Suite 240

Chicago, Illino i

60604

rard

i@/le

er.wnl-IYII/(/II.colIl

rc IIr

@ helute/'so/l-lyll/al1. COlli

Gary.

Blankenship

oa rd Member

Bradl ey P. Halloran

earin g Officer

llinois P

ollution Control Board

James R. Thomson Center, Suite 11-500

00 W. Randolph Street

hi cago, I

llin ois 6060 1

EASE TAKE NOTI CE that I have on Jul y 1

0.2009 el

ec tronically fil ed wilh Ihe Office

o f the Cl

erk

of the P

o lluti on Control Board COMPLA I

NANTS. MOTION FO R LEAVE TO

FILE RE

PLY I

NSTANTER I

N SU PPORT OF I

TS MOTI ON TO STRIKE AFF IRMATIVE

DEFE NSES, a copy of whic h is hereby se rved upon you.

Carey S. Rosemarin (ARDC No. 6181911)

Andrew J. Marks (A RDC No. 6286796)

aw Offices orear

ey S. Roscm

ari n

, P. e.

500 Skokie Boulevard. Suite 510

NO rlhbrook , IL 60062

847-897-8000

3 12-896-5786 (fax)

csr@rosemal'in/m1

'.co

lI/

ajm@rosell/ari,IIC1l Il.COI1l

mhu r

st Me m

orial J

ealthcarc

Elmhurst Memor

ial H

ospital

Electronic Filing - Received, Clerk's Office, July 10, 2009

BEFORE THE ILLINOIS POLLUTION CONTROL BOARD

ELMHURST MEMORIAL HEAL THCARE and

)

ELMHURST MEMORIAL HOSPITAL

)

Complainants,

)

PCB 09-66

)

(Citizen's Enforcement - Land)

CHEVRON U.S.A. INC.,

)

Respondent.

)

COMPLAINTS' MOTION FOR LEAVE TO FILE REPLY INSTANTER

IN SUPPORT OF ITS

MOTION TO STRIKE AFFIRMATIVE DEFENSES

Complainants, Elmhurst Memorial Healthcare and Elmhurst Memorial Hospital

(collectively, "EMH"), by and through their attorney, the Law Offices

of Carey S. Rosemarin,

P.C., and pursuant to 35 Ill. Adm. Code

§ 101.500(e), request leave to file this reply instanter in

support

ofEMH's motion to strike Respondent Chevron's affirmative defenses. EMH's reply is

limited to Chevron's Affirmative Defense Number II, addressing the bankruptcy

of Texaco Inc.

("Bankruptcy Defense"). In support

of this motion, EMH states as follows:

Legal Standard for Leave to Reply - Material Prejudice

The Board should grant movants leave to reply to prevent material prejudice. 35 Ill.

Adm. Code

§ 101.500(e). As Board cases show, such prejudice can result from non-movants'

misstatements

of law and mischaracterizations of fact, as is the case here.

Indian Creek

Development

Co. v. Burlington Northern RR,

PCB 07-44, 2007 WL 928718, at *4-5 (March 15,

2007) (leave to reply granted to prevent material prejudice arising from alleged

misrepresentation

of facts regarding pace and extent of diesel spill remediation);

In re Ensign-

Page 2 of9

Bickford,

AS 00-5, 2003 WL 1785066, at *4 (March 20, 2003) (leave to reply granted to prevent

material prejudice arising from misstatements

of law.);

People

Chiquita Processed Foods,

L.L.c.,

PCB 02-56, 2002 WL 745635, at *3-4 (April 18,2002) (leave to reply granted to prevent

material prejudice arising from allegedly misleading statements regarding party's authority to

control pollution and precautions taken to prevent pollution.)

The

"Response

of Chevron U.S.A. Inc. to Motion to Strike Affirmative Defenses"

("Response") materially prejudices EMH because it would improperly have the Board believe

that the Bankruptcy Court actually dealt with and discharged

EMH's cause of action. For

example, referring to its own Bankruptcy Defense, Chevron stated:

In this affirmative defense, Respondent has asserted that

... the claims

alleged in the Complaint were discharged in the Texaco Inc. bankruptcy

("Texaco Bankruptcy") that took place

in the late 1980s. (Response at p.

4.)

In fact, EMH first came to and purchased the property in 2005 and thus had no claim

until many years after the Texaco Bankruptcy. Therefore, it was

impossible

for the claims

alleged in the Complaint to have been discharged.

Chevron also asserted:

In the instant matter, there is no question that any releases that occurred

under Texaco's operation

of the Property were prior to the Texaco

Bankruptcy. Therefore, any response costs, no matter when incurred,

including those which Complainants allege were recently incurred, are

"claims" and have been discharged. Thus, the fact that these

Complainants did

[not]1 own the Property [701 S. Main] at the time of the

Texaco Bankruptcy, and, therefore, could not have filed a claim, does not

change the rule that the debt for which they now seek recompense was

discharged, and no one can now bring a claim for it. (Response at p. 9,

emphasis added.)

Chevron omitted the word "noto" Based on the remainder of the sentence, EMH assumes this omission was

merely a typographical error and Chevron intended to include the word "not."

Page 3 of9

Electronic Filing - Received, Clerk's Office, July 10, 2009

Chevron's assertion that the 1987 Texaco Bankruptcy discharged all future claims

dealing with pre-bankruptcy contamination by Texaco, including that on the Lombard Property,

is highly misleading, and indeed, false. The 1988 confirmation order stated that "each

of the

Debtors [are] discharged

of and free [from] any and all debts and claims that arose against it

before the date

of the entry of this order." (Response at Ex.l, p. 8, dated March 23, 1988;

emphasis added.)

EMH's current cause

of action could not have arisen prior to the purchase of the Property

in 2005 and thus could not have been discharged. Texaco has emerged from bankruptcy and

EMH's cause

of action is viable and valid. EMH will be materially prejudiced ifit is not

permitted to rectify Chevron's misstatements

oflaw and fact. As demonstrated below, EMH had

no pre-bankruptcy claim against Texaco for the simple reason that it had no pre-bankruptcy

relationship with Texaco. That fundamental fact clearly distinguishes the present matter from

the cases cited in the Response. Indeed, Chevron's own cases solidly support

EMH's position.

Black Letter Bankruptcy Law - No Discharge Absent a Pre-Bankruptcy Relationship

A claim cannot be discharged in bankruptcy if no pre-bankruptcy claim exists, and there

can be no such claim where, as here, there was no pre-bankruptcy relationship between the

claimant and the debtor. A claim is defined in bankruptcy as a "right to payment."

11 U.S.C. §

101 (5)(A);

Avellino

Bienes v. M Frenville Co., Inc.

744 F.2d 332,334 (3

Cir. 1984). And,

as EMH has clearly explained, that right must exist

before

the bankruptcy.

In re Chicago.

Milwaukee.

St. Paul

Pacific R.R.,

3 F.3d 200, 202, 207 (7th Cir. 1993),

discussed in

EMH's

Motion to Strike at pp. 7-8 (June 5, 2009).

Page 4

of9

Chevron does not dispute these fundamental principles of bankruptcy; it simply ignores

them. Rather than confronting or attempting

to distinguish the controlling cases cited in EMH's

Motion to Strike, Chevron relies on cases in which a critical pre-bankruptcy relationship -

clearly absent in the present case - existed.

In re Chateaugay,

944 F .2d 997 (2

Cir. 1991), cited by Chevron, is particularly

instructive. In

Chateaugay,

the U.S. Environmental Protection Agency (""EPA") filed claims in

the bankruptcy proceeding

of LTV Steel. EPA's claims were premised on the federal Superfund

statute, which allows recovery of costs incurred as a result of the release of hazardous

substances, known as '"response costs." EPA argued that its claims for future response costs

could not be discharged because no '"right to payment" existed, and thus no claim existed until

EPA incurred response costs. The Court analyzed this position by examining the components

necessary to detennine whether EPA had a right to payment.

Logically, the

Chateaugay

court commenced the analysis by noting Congress' intent that

"right to payment" be interpreted broadly to fulfill the policy

of the bankruptcy statute.

But the

court immediately realized that such a blind policy could lead to unacceptable results. The Court

stated:

To expect "'claims" to be filed by those who have not yet had any contact

whatever with the tort-feasor has been characterized as

.. 'absurd.' "

See

Schweitzer v. Consolidated Rail Corp. (Conrail) (In re Central R. Co. of New

Jersey),

758 F.2d 936, 943 (3d Cir.) (quoting

Gladding Corp. v. Forrer (In re

Gladding Corp.),

20 B.R. 566, 568 (Bankr.D.Mass.1982»,

cert. denied.

474 U.S.

864, 106 S.Ct. 183, 88 L.Ed.2d 152 (1985);

see also Mooney Aircraft Corp. v.

Foster (In re l\1ooney Aircraft, Inc.),

730 F.2d 367, 375

n. 6 (5th Cir.l984)

2 It

was in this context that the

Chateaugay

court acknowledged the language quoted by Chevron, to the effect that

the definition

of "claim" was intended "to have wide scope." Response at p. 7, apparently quoting from

Texaco Inc.

v. Fred Sanders,

182 B.R. 937, 951 (Bankr. S.D.NY. 1995), in tum, quoting from

Chateaugay.

944 F.2d at 1003.

But unlike Chevron, the

Chateaugay

Court recognized, "That language surely points us in a direction, but provides

little indication

of how far we should trave!." Chevron's analysis ran out of gas at that point, but as discussed in the

text and as

Chateaugay

instructs, a proper analysis requires the journey to continue.

Page 5 of9

Electronic Filing - Received, Clerk's Office, July 10, 2009

(victims of post-bankruptcy accident resulting from pre-bankruptcy faulty design

had no "claims" under former Bankruptcy Act, and court need not consider

whether "claims" would exist under Bankruptcy Code).

Chateaugay,

944 F.2d at 1003-1004.

Yet, this "absurd" position is precisely what Chevron seeks to foist upon on the Board.

Chevron has cited absolutely no pre-bankruptcy contact between EMH and Texaco but it

unabashedly argues that EMH's claim was discharged

in the Texaco Bankruptcy.

Chateaugay

went on to examine the pre-bankruptcy relationship between EPA and L TV and found it

sufficient to qualify as a "claim," albeit a contingent one.

Though there does not yet exist between

EPA and L TV the degree

of relationship

between claimant and debtor typical

of an existing though unmatured contract

claim, the relationship is far closer than that existing between future tort claimants

totally unaware

of injury and a tort-feasor. EPA is acutely aware of LTV and vice

versa. The relationship between environmental regulating agencies and those

subject to regulation provides sufficient

"contemplation"

of contingencies to bring

most ultimately maturing payment obligations based on pre-petition conduct

within the definition

of "claims." True, EPA does not yet know the full extent of

the hazardous waste removal costs that it may one day incur and seek to impose

upon LTV, and it does not yet even know the location

of all the sites at which

such wastes may yet be found. But the location

of these sites, the determination of

their coverage by CERCLA, and the incurring of response costs by EPA are all

steps that may fairly be viewed, in the regulatory context, as rendering EPA's

claim "contingent," rather than as placing it outside the Code's definition

"claim."

Chateaugay,

944 F.2d at 1005 (emphasis added).

No pre-bankruptcy relationship between EMH and Texaco existed, not even the

attenuated relationship that could rise to the level

of a "contingent" claim. And not even one

to that which existed in

Texaco Inc. v. Fred Sanders,

182 B.R. 937 (Bankr. S.D.NY. 1995),

upon which Chevron relies so heavily. Response at 5-8. The pre-bankruptcy relationship in

Sanders

consisted of long-standing contractual relationships relating to oil and gas wells with

certain claimants and salt water storage pits located on one

of the claimant's property.

Sanders,

Page 6 of9

182 B.R. at 941-42. The relationship was further cemented through Texaco's multi-year pre-

bankruptcy operation

of a gas plant near the claimants' properties, during which time Texaco

piped chromate effiuent into the storage pits.

Id.

at 951.

Unlike in

Sanders,

EMH had no pre-bankruptcy relationship with Texaco; it had no right

to payment from Texaco before the Texaco Bankruptcy and thus it had no claim that could have

been discharged. Courts have disagreed upon, and even struggled with the issue

of how close the

pre-bankruptcy relationship must be to give rise

to a claim.

But the Board is spared that task.

All courts agree that when a party has no pre-bankruptcy relationship with the debtor it has no

claim. Indisputably, no relationship equals no discharge.

Compare Chateaugay,

944 F.2d at 1005 (future costs, including unknown future costs, that were within the

contemplation

of the parties were claims because claimant and debtor were "acutely aware" of each other pre-

bankruptcy)

with In re Nat;onal Gypsum Co.,

139 B.R. 397,407-408 (N.D. Tex. 1992) (requiring more than just

contemplation, but "fair" contemplation pre-bankruptcy, which excludes unknown claims)

and United States

Union Scrap Iron

Metal,

123 B.R. 831, 836 (D. Minn. 1990) (despite the fact that the release of hazardous

substances had occurred pre-bankruptcy, the Government's CERCLA claim was not a "claim" that had been

discharged because the dispute arose years after the debtor had emerged from a Chapter

II reorganization);

see also

AM Int'l

Datacard Corp.,

106 F.3d 1342, 1348

(7lh

Cir. 1997) (Motion to Strike at 9) (claims not discharged

where claimant did not have sufficient knowledge

of debtor's pre-bankruptcy releases prior to confirmation of the

bankruptcy, despite relationship between claimant's predecessor and debtor).

Any other finding would be fundamentally unfair and would deprive EMH of its constitutional right to due

process.

See In re Conseco,

330 B.R. 673, 685 (Bankr. N.D. 111.2005), Motion to Strike at p. 8 (discussing the

Conseco

continuum).

See also Sanders,

182 B.R. at 950 ("[I]t is important to acknowledge that in some

circumstances

it may indeed be unfair, and impermissible, to apply the discharge provisions of the Bankruptcy Code

where a claimant would thereby be barred from asserting otherwise valid claims which, as a practical matter,

through no fault

of the claimant, could not be asserted prior to confirmation.");

Chateaugay,

944 F.2d at 1003 (If the

test for determining whether a claim is discharged ignores the pre-petition relationship between a debtor and

claimant, "enormous practical and perhaps constitutional problems would arise.");

see also Schweitzer v.

Consolidated Rail Corp.,

758 F.2d 936, 944 ("If contingent claims were held to include possible future tort claims,

then every hypothetical chain

offuture events leading to liability, regardless of how likely or unlikely, might be the

basis for a contingent claim." Such a result "would raise constitutional questions.")

Page 7 of9

Electronic Filing - Received, Clerk's Office, July 10, 2009

CONCL US ION

Chevron misstates the law and misc haraclcrizcs the Illcts. Its assert i

on th at EM I

r s cause

ofaClion was discharged in the Texaco Bankruptcy i

s simp l

y wrong and cou l

d mate ri ally

prejudice EMI-

!. The Board should grant

EM I

r s

Mot i

on fo r L

eave to Rep l

y Inst

an t

er and grant

EM I

r s Motion to Strike

Chevro n"

s Affinnmivc Defense Number II. As for the remain i

aflirmat ive defenses, EM I-I r

ests on i

ts MOlion to Strike.

Dated: July

10,2009

Carey S . Rosemarin (ARDC No. 618 1

91 1

)

Andrew J. Marks (ARDC No. 6286796)

Law Offices orearey S. Roscmari n. P.e.

500 Skokie Boulevard. Suite 510

Northbrook, I L 60062

847 -897 -8000

3 1

2-896-5786 (fax)

csr @ rosemar il1f(l\II,COIlI

ajlll@rosemarinl(llll.co ll /

espectfu ll y s ubmitted.

Elmhurst Memori

al I-Iealthcare

mhu r

st Memorial Hospi t

BY: ~

attorneys

age8of9

Electronic Filing - Received, Clerk's Office, July 10, 2009

BEFORE THE ILLI NOIS POLLUTION C O NT RO L BOARD

ELM HURST MEMORIAL I

IEA LTH CARE and

)

ELM HURST

MEMORIAL HOSPITA L

)

Complainants,

)

PCB 09-66

)

(Citizen '

s Enforcement - Land)

CHEVRON U.S .

A. I

NC.,

)

Respondent.

)

CERTI F ICATE OF SE RVICE

I, the undersigned, on July 1

0,2009, caused the foregoi ng " COMPLA I

NANTS '

MOT I

ON F

OR LEAVE TO FILE REP L Y I

NSTANTE R I

N SUPPORT OF I

TS MOTION TO

STRIKE AFF IRMAT IVE DEFENSES" and Notice of F

ili ng to be electronically fi l

ed with the

Office of the C l

erk, and caused a true and correct copy of said documents to be served upon :

Joseph A. Gi

rardi

Robert

B. Christi

Henderson

Lyman

Attomeys for Chevron U.S .

A. I

nc.

175 W. Jackson Blvd., Suite 240

Chicago, Il li nois 60604

jgirardi@hendel'son

-Iyman.com

hI'

e@ hendersol1-lyl1l(ll1.colII

by placing same in U.S. Mai l at 500 Skokie Boul

evard, Northbrook, I

lli nois 60062-2620.

Carey S. Rosemarin (ARDC No.6 18 1

91 I)

Andrew

J. Marks (ARDC No. 6286796)

Law Offices

of Carey S. Rosemarin, P .C.

500 Skokie Boulevard, Suite 510

Northbrook, Illinois 60062

(847) 897-8000

csr@roselllaril1!(JjI'.com

ajm@

roselllarin/all'.colll

One,~yJ

' Attorneys for

~)?ursl

Memori

al Healthcare

~ dmhLlrst

Memori

a l H

ospital

Pagc90f9

Electronic Filing - Received, Clerk's Office, July 10, 2009