Boston & Maine Corp. v. Massachusetts Bay Transportation Authority

United States Court of Appeals
For the First Circuit

No. 09-1185

BOSTON AND MAINE CORPORATION,

Plaintiff, Appellant,

v.

MASSACHUSETTS BAY TRANSPORTATION AUTHORITY,

Defendant, Appellee.

APPEAL FROM THE UNITED STATES DISTRICT COURT FOR
THE DISTRICT OF MASSACHUSETTS

[Hon. Joseph L. Tauro, U.S. District Judge]

Before

Lynch, Chief Judge,
Torruella and Howard, Circuit Judges.

Gene C. Schaerr with whom Eric L. Hirschhorn, Andrew C.
Nichols, Winston & Strawn LLP, and Robert B. Culliford were on
brief for the appellant.
John M. Stevens with whom Douglas M. McGarrah, Cicely O.
Parseghian, Foley Hoag LLP, and Thomas F. Scott Darling III were on
brief for the appellee.

November 24, 2009
 LYNCH, Chief Judge. On June 30, 1983, the Boston and

Maine Corporation ("B&M"), a railroad operator, was discharged from

bankruptcy by a Consummation Order stating that it was "free and

clear of all claims." The Order was pursuant to § 77 of the

Bankruptcy Act of 1898, 11 U.S.C. § 205 (repealed 1978). B&M was

the operator of what is now known as the MBTA Commuter Rail

Maintenance Facility ("the Terminal"), a thirty-four-acre railroad

terminal in the greater Boston area used for refueling diesel

trains. In 1983, the Terminal was owned by the Massachusetts Bay

Transportation Authority ("the MBTA"), having been purchased by the

MBTA from B&M in 1976; B&M had operated the Terminal under

bankruptcy protection from 1970 to June 1983 and had owned the

Terminal since the late 1920s. B&M continued to operate the

Terminal under an agreement with and for the benefit of the MBTA

until December 31, 1986.

The MBTA asserted no claims against B&M regarding

environmental matters before B&M's June 1983 discharge from

bankruptcy, pursuant to the Consummation Order. The MBTA did,

however, assert a claim on May 4, 2004, almost 21 years later,

against B&M. The claim was for 95 percent of $15,340,810 for past

costs and 95 percent of all future costs, as contribution, under

state environmental law, the Massachusetts Oil and Hazardous

Material Release Prevention and Response Act, Mass. Gen. Laws ch.

21E ("Chapter 21E"), for certain cleanup activities the MBTA had

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undertaken at the Terminal. The state's Department of

Environmental Quality Engineering ("DEQE"), now known as the

Department of Environmental Protection ("DEP"), had ordered the

MBTA in 1989 to clean up oil contamination at the site under

Chapter 21E. The MBTA sought contribution for that portion of

cleanup it said was attributable to B&M for releases of oil and

hazardous substances during B&M's operation and earlier ownership

of the Terminal. The vast majority of these releases occurred

prior to the 1983 Consummation Order.

In August 2005, B&M filed suit in federal district court,

based on the Consummation Order, seeking to enjoin the MBTA from

making its Chapter 21E contribution claims. It sought partial

summary judgment on the ground that those claims had been

discharged in 1983 and thus were barred by the operation of federal

law, specifically § 77 of the Bankruptcy Act of 1898, 11 U.S.C. §

205 (repealed 1978). B&M also sought enforcement of the 1983

Consummation Order. B&M argues that the MBTA's claims are properly

barred because, before June 30, 1983, the MBTA was well aware of

oil contamination on the Terminal grounds; that the oil

contamination, even then, violated environmental laws; that state

and federal regulatory officials had required response actions to

at least those releases that contaminated adjoining waters; and

that Chapter 21E was enacted before the June 1983 bar date of the

Consummation Order. It further asserts that the MBTA had

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maintained a presence at the Terminal before 1983 and had even

funded some of B&M's efforts to stop contamination.

The MBTA argues that it should be excepted from the

discharge in the Consummation Order primarily because Chapter 21E

was enacted and became effective on March 24, 1983, only a short

time before B&M was discharged from bankruptcy; that as of the June

1983 discharge the Commonwealth had not forced the MBTA to clean up

the site and that the MBTA could not then have anticipated that the

Commonwealth would force it to clean up the site or that the MBTA

would need to seek contribution for its cleanup efforts; and that

it would be inequitable for the MBTA to bear the full cost of the

cleanup because B&M caused the contamination as both the operator

and prior owner of the site.

We hold that the MBTA's contribution claims under Chapter

21E for contamination prior to the 1983 discharge from bankruptcy

are barred as a matter of law by the Consummation Order. We

reverse and direct entry of judgment on these claims for B&M.

I.

We take the facts largely as described by the district

court and from the record of the district court proceedings. There

are not material disputes of fact; only disputes as to the legal

consequences of those facts.

The MBTA is a body politic as well as a corporate and

political subdivision of the Commonwealth of Massachusetts. Mass.

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Gen. Laws ch. 161A, § 2. It provides mass transportation services

throughout eastern Massachusetts by means of bus, subway, and light

rail. It is the second largest property owner in Massachusetts.

B&M is a common carrier providing railroad freight

services in the northeastern United States. It owned the Terminal

from the late 1920s, when the engine house and power house were

built, to 1976, when the MBTA purchased the property. B&M

continued to operate the Terminal until December 31, 1986, under

agreements between the MBTA and B&M’s bankruptcy trustees. Under

the final operating agreement, B&M operated the MBTA commuter

railroad as an independent contractor for the benefit of the MBTA

from January 1, 1982, to December 31, 1986.

In the 1700s, the property where the Terminal is now

located mainly consisted of tidal marshland drained by the Millers

River. Railroad operations on the property began in the late

1800s. Around 1928, B&M secured licenses to fill a portion of

Boston Harbor; these licenses included the obligation to collect

and transport to the river the drainage interrupted by the fill

operations. As filling operations progressed, B&M constructed

various yards and railroad facilities on the filled land. In the

1940s, B&M began transitioning from steam to diesel locomotives and

built a storeroom and diesel house to maintain the diesel

locomotives. A one million gallon diesel fuel tank and a one

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hundred thousand gallon diesel fuel tank were installed in 1949 and

1952, respectively.

As diesel locomotive use increased, contamination from

oil and diesel leaks became increasingly common on the site.

Sources of the leaks included oil dripping from trains during

maintenance, leaks from above-ground tanks and pipes, and

overflowing fuel during the refueling of the locomotives. Until

1984, the fuel hoses at the facility did not have automatic shutoff

valves, and the only way technicians knew the locomotive fuel tanks

were full was when they overflowed. The spills onto the ground

became so extensive that the oil and fuel flowed into the drainage

network and from there reached the nearby Millers River. Before

the installation of a system in the early 1960s designed to prevent

the fuel from reaching the river, the Millers River at times caught

fire in the summer.

B&M acquired the rights to fill in the remaining portion

of the Millers River in the early 1960s. B&M then installed a

culvert along the length of the river in order to pick up drainage

from the Terminal grounds and prevent it from reaching the open

river. The culvert carried this oil to an oil separator near the

Prison Point Bridge. This separated the oil caught from the

culvert from the water. The water then continued to “the Miller[s]

River and then out to the Charles.”

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 Because a small amount of oil continued to leak out to

the river, especially during storms, a system of absorbent booms

was installed at the lower portion of the Millers River, apparently

by the early 1960s. According to a 1986 report authored by

longtime B&M employee Lawrence B. Boyd, both the Coast Guard and

DEQE agreed that doing this was "irregular and probably illegal."

Boyd noted in 1986 that "until the MBTA is willing to spend

sufficient money to install a system capable of handling the storm

flows encountered, [the boom system] does reduce the spill

incidents."

In 1970, B&M filed for bankruptcy protection under the

Bankruptcy Act of 1898. We describe the Act and its purposes

later.

In December 1976, the MBTA purchased the Terminal from

B&M out of bankruptcy. The Purchase and Sale Agreement provided

the MBTA a right of entry on the property to inspect it, and both

parties agreed to "bear the cost of, and be responsible for, any

environmental impact study required of it by any governmental

agency." The MBTA entered into two consecutive agreements with

B&M’s bankruptcy trustees, providing for B&M’s continued operation

of the Terminal. The first ran from the conveyance of ownership

over the Terminal in 1976 until December 31, 1981, and the second

agreement was in effect from January 1, 1982, until December 31,

1986. The two agreements contained similar terms, depicting B&M as

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an independent contractor with full authority over the conduct of

its employees. The 1982 operating agreement included provisions

indemnifying B&M against property damage. The agreement also

listed among its reporting requirements that B&M notify the MBTA of

any “oil spill or pollution problem” within thirty minutes of B&M’s

general manager learning of it.

After the December 1976 purchase by the MBTA and before

the June 30, 1983, discharge, a number of oil spills took place at

the Terminal. These spills received attention from both federal

and state regulators. On March 4, 1977, the Coast Guard cited B&M

and the Metropolitan District Commission (“MDC”) for an oil spill

into the Millers River. The MDC had an ongoing construction

project at the Terminal at that time. In response to the spill,

daily monitoring of an oil interceptor chamber took place, with

pumping of excess oil from the chamber into a 15,000 gallon storage

tank on the property as needed.

Prompted by the Coast Guard's warnings and fines, B&M

approached the MBTA about upgrading the oil separation system. In

1978, the MBTA agreed to upgrade the oil trap by installing

additional pumps and an above-ground oil separator. The MBTA

provided funding to build the additional separator, paying

approximately $70,000. In return, the MBTA received “the recovered

petroleum products to burn in the [Terminal’s] boilers.” The

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recovered petroleum products initially, in 1978, amounted to

approximately 35,000 gallons per year.

In spite of these improvements, a second spill occurred

shortly thereafter. On July 19, 1979, the Coast Guard responded to

an oil spill from the Terminal grounds into the Millers River. A

Coast Guard official visited a B&M office, advised a B&M official

of the severity of the spill, and then went to the site to take

samples from the oil interceptor chamber and the river. Shortly

thereafter, J. L. Ford, a B&M supervisor, arrived and “took control

of the problem.” Ford advised the Coast Guard official that B&M

would add new booms and pump out the oil in the chamber. Ford met

with another Coast Guard official at the Terminal a few days later

to discuss the problem and report what action had been taken.

Also in July 1979, as Ford noted, pit 42 at the Terminal

was filled “up to the track level with oil and water.” He

described “a one inch coat of heavy thick oil”--the equivalent of

two hundred gallons of oil--and explained that the pit was

“constantly filling” up with oil, necessitating pumping every week

and a half to two weeks. He also observed that “[t]he entire

ground area” was “saturated with oil from engines.” He suggested

that if this pit filling with oil was going to be a regular

problem, B&M should consider adding a holding tank there, rather

than letting the oil and fuel flow to the oil chamber.

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 On December 14, 1980, another spill took place at the

Budd House, an area used to fuel and lubricate diesel locomotives.

The spill flowed into the floor drains and then to the Yard 14 oil

pit. B&M contractors pumped approximately 14,000 to 15,000 gallons

of oil from the pit. Most of the oil was held in the oil separator

and did not reach the river. When Boyd found out about the spill

on December 14, he telephoned the National Spill Response Center

and contacted the Coast Guard. He also accepted responsibility for

the spill on behalf of B&M. While at the Terminal that day, Boyd

spoke with two Coast Guard officials, one of whom advised Boyd that

the Coast Guard “would not be involved until there was an actual

spill," meaning until the oil release reached the water. The Coast

Guard collected samples and, a few days after the spill, Boyd sent

the Coast Guard’s Marine Safety Office a copy of an internal

memorandum describing the spill and the cleanup efforts.

The Massachusetts Division of Water Pollution Control

Eastern Regional Office, a division of DEQE, also had records of

the December 14, 1980, spill, which noted that regulatory action

was required.

Oil spills were reported to the DEQE Northeast Regional

Office, which kept logs of spills at the Terminal site. Those logs

reflect a number of additional spills during the MBTA's ownership

of the Terminal and before the 1983 bar date. One logged oil spill

from the Terminal property that entered the Millers and Charles

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Rivers took place around July 22, 1981. The same logs contain

another incident report of an oil spill on October 11, 1981,

involving 1100 gallons of number 2 fuel oil on the Terminal grounds

in the area of “Yard 5.” A few days later, on October 19, 1981, a

twenty gallon spill occurred on the grounds that entered the

Millers River. It occurred in the area of “Yard 5” and possibly

resulted from an overflow of the oil separator due to heavy rains

the previous night. Boyd reported the spill to the state Division

of Water Pollution Control, Eastern Regional Office.

On December 16, 1981, 100 gallons of number 2 fuel oil

spilled from the Terminal into the Millers River. The DEQE

Northeast Regional Office logs identify B&M as the responsible

party.

As noted in the DEQE logs, a twenty gallon spill at

Mystic Junction happened at the Terminal on March 8, 1982. In all

of these cases, B&M retained a contractor to remediate the spills

and the relevant DEQE log then listed the matter as closed.

Although it is not clear from the record whether the MBTA

was involved in each of these specific spills, it is clear that its

personnel were aware that spills were occurring and of the

contamination that resulted. Starting in 1979, the MBTA placed an

employee, Richard H. House, an MBTA mechanical officer, at the

Terminal "nearly full time." The MBTA also had an office at the

Terminal. The MBTA had a number of other employees on the premises

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from 1979 to 1983. During that time, Walter Mark, House’s

supervisor, had a desk at the MBTA's office at the Terminal and was

at the property "a few days a week"--and “in some cases . . . quite

a bit." In 1980, Peter Wilson of the MBTA began working at the

Terminal anywhere from one to five days per week. Walter Williams,

Chief Mechanical Officer of the MBTA, worked at various times at

the Terminal between 1979 and 1983.

During the 1979 to 1983 time period, both House and

Wilson knew about the presence of oil on the ground at the

Terminal. Wilson's shoes often became soiled from walking on the

tracks or elsewhere at the Terminal. House described certain areas

of the ground as “pretty saturated with oil, fuel oil.” Wilson

admitted “seeing oil-saturated puddles” on the ground at various

fueling areas.

At times fuel was on the ground right in front of B&M’s

main offices at the Terminal. Wilson admitted that there was “a

constant smell” of diesel fuel in “a lot of areas” from 1979 to

1983. In fact, oil spillage in certain areas was “constant and

often excessive,” according to Boyd's 1986 report. The 1986

report, which includes the period before 1983, identifies the

affected areas as the fueling stands, the filling points for the

storage tanks, the shop service areas, the ready tracks, "where

locomotive and self propelled cars were stored awaiting dispatching

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to service," and the tanks themselves, "both of which were found to

have leaking floors.”

House and Mark, the MBTA employees, also knew about oil

spills occurring at the Terminal. House testified “there probably

[were] some” spills and fuel releases that he witnessed at the

Terminal. He recalled one instance in which a fuel hose broke at

a building on the site and it "filled up with fuel oil three or

four inches deep." House also recalled an occasion on which

someone neglected to remove the nozzle from a locomotive, and the

locomotive ripped the hose when it drove off, resulting in a spill.

He also testified that personnel would sometimes forget to shut off

fueling valves and would later discover that the fuel was

overflowing.

When spills occurred, House, the MBTA's mechanical

officer, discussed them with his supervisor, Mark, generally

discussing the extent of the spill and what was being done to clean

it up. Mark estimated hearing about “possibly as many as five” oil

spills from pipes or tanks between 1979 and 1983.

The MBTA's knowledge of the spill went beyond its three

employees at the site. Wilson testified to hearing about oil

spills during this period from his “superiors at the [MBTA].” At

one point between 1979 and 1983, MBTA employees told him about a

spill of lubricating oil at the Terminal. Wilson further testified

that on another occasion he received a call from William MacDonald,

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the MBTA's Chief Engineer, informing him of an oil spill and asking

him to check the booms on the river. He reported back to MacDonald

that he had seen a "small oil sheen."

Beyond that, Wilson also testified that the MBTA had

oversight of expenses at the Terminal, which would have included

those associated with fuel spills.

MBTA employees also participated in discussions to

address problems related to the oil spills. As mentioned, in 1978,

the MBTA provided funding to upgrade the oil trap at the facility

in return for the right to burn the spilled fuel captured in the

trap.

In 1980, B&M officials also met with one or two MBTA

officials to discuss the need to clean up an area of contamination

in and around the coach house, an engine house area used to service

and repair diesel engines, in order to procure a building permit.

In 1982 or 1983, before undertaking construction at the coach

house, Wilson and Dan Breen, a member of the MBTA’s engineering

staff, discussed the need to clean up and remove contaminated soil.

Roger Bergeron of B&M noted that like in any engine house, there

was an “accumulation of heavy greases.” The soil was removed prior

to the 1984 construction; the removed soil was contaminated with

fuel oil and lubricants.

Leaks from the one million gallon fuel tank, installed on

the property in 1949, were also discussed by B&M and the MBTA.

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Some time between 1981 and 1982, Mark and House participated in

meetings to discuss repairing leaks from the bottom of that tank.

Among the reasons for repairs to the tank was concern about further

regulatory involvement by the Coast Guard.

The MBTA and B&M also had discussions about how to reduce

the amount of spills during refueling; as a result, the number of

fueling locations was reduced, and, in 1984, automatic shutoff

valves were installed on the fueling hoses.

In sum, officials at the MBTA were not only aware of

significant releases of fuel prior to June 1983; they were also

involved in and were aware of efforts to reduce and remediate the

spills.

Before June 1983, the MBTA was also involved with

environmental regulators at other MBTA sites. Specifically, in

1979, state environmental officials from the DEQE investigated the

presence of 184 drums filled with hazardous material on property

owned by the MBTA in Woburn, Massachusetts. Wilson also recalled

hearing about spills or releases of oil at MBTA facilities other

than the Terminal.

On March 24, 1983, three months before B&M’s discharge

from bankruptcy, Chapter 21E became law. Chapter 21E had been

featured in the media for nearly a year before its enactment and

was described as Massachusetts's equivalent to the federal

Comprehensive Environmental Response, Compensation, and Liability

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Act ("CERCLA"), which had been passed in 1980. 42 U.S.C. §§

9601-9675.

Chapter 21E makes any “owner or operator of . . . a site

from or at which there is or has been a release or threat of

release of oil or hazardous material” jointly and severally liable

for cleanup costs. Mass. Gen. Laws ch. 21E, § 5(a). Like many

environmental cleanup laws, see, e.g., 42 U.S.C. § 9607, Chapter

21E enables the Massachusetts environmental regulatory agency, at

that time DEQE, to hold one party responsible for remediating

environmental damage and also creates a cause of action for that

party to recover costs from other responsible parties. Mass. Gen.

Laws ch. 21E, § 4 (amended 1992). As enacted in 1983, Chapter 21E

further provided that private parties could remediate contamination

themselves before the state took regulatory action. Id.

The Consummation Order from B&M's bankruptcy proceedings

issued on June 17, 1983, and set a discharge date of June 30, 1983.

Under the terms of the Consummation Order, B&M's property and

assets, as of the discharge date, were transferred or vested in the

reorganized B&M under its present owner, Guilford Transportation

Industries, Inc., now known as Pan Am Railways, Inc. The transfer

to the reorganized B&M was “free and clear of all claims,” whether

or not approved or acknowledged in the bankruptcy proceedings. The

Consummation Order also enjoined and “permanently restrained” the

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prosecution of any suits against the reorganized B&M that existed

on or before the June 30, 1983, discharge date.

The MBTA did not file a proof of claim in the bankruptcy

proceeding regarding liability under chapter 21E for soil

contamination at the site before June 30, 1983.

After being discharged from bankruptcy, B&M continued to

conduct operations at the Terminal until December 31, 1986. On

January 1, 1987, Amtrak took over operations under a contract with

the MBTA.

We discuss later events to explain how the current

litigation arose. On November 18, 1988, a spill of diesel fuel

occurred at the Terminal in the area of Yard 5. Amtrak personnel

estimated 47,000 gallons spilled. DEQE personnel verbally notified

Amtrak of its responsibility for the release the same day and by

letter, dated April 10, 1989, and issued a Chapter 21E notice of

responsibility and request for information. In a letter, dated

July 31, 1989, the DEQE advised Amtrak that no further emergency

response actions were required, but it noted remaining concerns

requiring preparation of a preliminary assessment and a limited

site investigation of the Terminal. An extended cleanup process

followed, which culminated, in October 2002, with the MBTA filing

reports with the DEP.

On May 4, 2004, an attorney representing the MBTA sent a

demand letter under § 4A of Chapter 21E to B&M’s corporate counsel.

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The letter asserted B&M was liable under Chapter 21E to the MBTA

for past and future costs incurred by the MBTA in responding to the

release of oil and hazardous materials at the Terminal. The letter

claimed that because B&M was responsible for 95 percent of the

contamination at the Terminal, it was liable to MBTA for

approximately $15 million in past costs and 95 percent of any

future costs that MBTA might incur in monitoring and remediating

contamination at the site.

II.

In August 2005, B&M filed suit in the federal district

court of Massachusetts, seeking declaratory judgment and injunctive

relief and asserting that, under the terms of the June 30, 1983,

Consummation Order, the present owners had acquired B&M free and

clear of claims and that this barred the MBTA's action to recover

cleanup costs. The MBTA counterclaimed to recover its costs under

Chapter 21E. The parties agreed to bifurcate the case, with

accelerated discovery and a decision to be made first on whether

MBTA's claim was barred by B&M's discharge from bankruptcy, and a

second phase of litigation to follow as needed. We address here

only questions associated with the discharge from bankruptcy.

The case was referred to a magistrate judge. In a

January 26, 2007, report and recommendation, the magistrate judge

concluded that, because MBTA’s Chapter 21E claim was not “fairly

contemplated” at the time of the 1983 Order, the claim was not

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discharged and thus the MBTA's suit for contribution could go

forward. Boston & Me. Corp. v. Mass. Bay Transp. Auth., Civ. 05-

11656 (D. Mass. Feb. 16, 2007) (report and recommendation). On

November 4, 2008, a district judge simply adopted these

recommendations, and on January 15, 2009, the district court

granted B&M's motion to dismiss both parties' remaining state law

claims so that they could be litigated in state court.

III.

We review a district court's grant of summary judgment de

novo, Pineda v. Toomey, 533 F.3d 50, 53 (1st Cir. 2008), and

consider the facts in the light most favorable to the nonmoving

party, Fiacco v. Sigma Alpha Epsilon Fraternity, 528 F.3d 94, 97

(1st Cir. 2008). A district court may grant summary judgment when

it determines that there is "no genuine issue as to any material

fact and that the movant is entitled to judgment as a matter of

law." Fed. R. Civ. P. 56(c). Further, we review de novo issues of

statutory interpretation, such as the meaning of § 77 of the

Bankruptcy Act of 1898. See United States v. Tobin, 552 F.3d 29,

32 (1st Cir. 2009).

We conclude that the MBTA's Chapter 21E contribution

claims, as to pre-June 30, 1983, activities, are barred by B&M's

1983 Consummation Order, because they are "claims" within the

meaning of § 77. In reaching this conclusion, we review the broad

scope of actual and contingent claims that are subject to discharge

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under § 77. We then find that because the MBTA had a contingent

claim for contribution to pay for cleanup costs and knowledge of

the facts and at least constructive notice of the law giving rise

to the claim at the time of the Consummation Order, its

contribution claims for pre-June 30, 1983, conduct by B&M have been

discharged.

Because B&M filed for bankruptcy in 1970, prior to the

1978 enactment of the Bankruptcy Code, the terms of the bankruptcy

and Consummation Order are governed by the Bankruptcy Act of 1898.

In re Chicago, Milwaukee, St. Paul & Pac. R.R. Co. (Chicago I), 974

F.2d 775, 780 (7th Cir. 1992). The controlling statutory language

is set forth in § 77 of the 1898 Act, 11 U.S.C. § 205 (repealed

1978).1 Section 77 was added to the Act in 1933. It provided much

1
An important question, not raised by the parties, is
whether the precedent the parties have cited, which primarily
involves judicial efforts to resolve the competing policies of
federal bankruptcy law and other federal statutes, applies here,
where the issue involves one state statute and one federal statute.
One rule of statutory construction applies when courts are
construing two federal statutes and courts are attempting to
effectuate the purposes of both. Midlantic Nat'l Bank v. N.J.
Dep't of Envtl. Prot., 474 U.S. 494, 505-06 (1986); In re Hemingway
Transp., Inc., 993 F.2d 915, 924-25 (1st Cir. 1993). "The choice
between two federal statutes requires an analysis of both, to see
if they are indeed incompatible or if they can be harmonized, and
if they are incompatible to decide which one Congress meant to take
precedence." Coker v. Trans World Airlines, Inc., 165 F.3d 579,
583-84 (7th Cir. 1999). For example, when trying to effectuate the
purposes of both § 77 of the 1898 Bankruptcy Act and of CERCLA,
courts "attempt . . . to reconcile the conflicting goals of
environmental cleanup and a 'fresh start' for bankruptcy debtors."
In re Chicago, Milwaukee, St. Paul & Pac. R.R. Co. (Chicago II), 3
F.3d 200, 201 (7th Cir. 1993).
That rule of construction is inapplicable when there are not

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broader relief to bankrupt railroads, through discharging claims,

than to bankrupt non-railroad parties covered by the other parts of

the Act. This was pursuant to a specific policy Congress chose to

encourage and protect reorganization of railroads. As the Supreme

Court explained;

[A railway's] activities can not be halted because
its continuous, uninterrupted operation is necessary
in the public interest; and, for the preservation of
that interest, as well as for the protection of the
various private interests involved, reorganization
was evidently regarded as the most feasible solution
whenever the corporation had become "insolvent or
unable to meet its debts as they mature."

Cont'l Ill. Nat'l Bank & Trust Co. v. Chicago, R.I. Ry. Co., 294

U.S. 648, 671-72 (1935). While "[o]rdinary bankruptcy aims at

liquidation of a business, [r]eorganization under § 77 aims at a

continuation of the old business under a new capital structure that

respects the relative priorities of the various claimants." Baker

v. Gold Seal Liquors, Inc., 417 U.S. 467, 470 n.3 (1974). "The

public interest, as well as the interests of creditors and

stockholders, is at issue." Id. at 474.

two federal statutes at issue. Here, there is only one federal
statute, the Bankruptcy Act, and the claim sought to be excused
from the discharge arises under state law. But no party raised
this point with the district court, and it has not been briefed.
Rather, the parties have in their briefs assumed that the relevant
caselaw is that of whether bankruptcy discharges bar federal
environmental claims. We will assume, dubitante, that this is so.
In any event, we do engage in construction of the term "claim"
as under the 1898 Bankruptcy Act itself. See Ohio v. Kovacs, 469
U.S. 274 (1985).

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 Based on this goal of ensuring that railroads continue to

function, courts enforcing the provisions of § 77 have narrowly

construed exceptions to the statute to ensure a fresh start for

reorganized railroads. See Gardner v. New Jersey, 329 U.S. 565,

573 (1947); see also Chicago II, 3 F.3d at 201; In re Penn Cent.

Transp. Co. (Penn Central II), 944 F.2d 164, 167-68 (3rd Cir.

1991). "[T]he purpose of the bankruptcy law and the provisions for

reorganization could not be realized if the discharge of debtors

were not complete and absolute." Duryee v. Erie R. Co., 175 F.2d

58, 63 (6th Cir. 1949).

The protection for railroads offered by § 77 is reflected

in its provisions governing the discharge of claims, and B&M's

Consummation Order was drafted in light of this language. Under

the Consummation Order, B&M was discharged and released from "all

obligations, debts, liabilities and claims . . . whether or not

filed or presented, whether or not approved, acknowledge or allowed

in these proceedings and whether or not provable in bankruptcy

. . . ." Further, the Order issued an injunction against bringing

such claims.

The Act itself provides that upon discharge the railroad

shall be "free and clear of all claims of the debtor, its

stockholders and creditors," except when consistent with the

provisions of the reorganization plan and reserved in the order

confirming the plan. 11 U.S.C. § 205(f) (repealed 1978). This

-22-
exception is inapplicable here. The Act defines "creditors" as

"all holders of claims of whatever character against the debtor or

its property, whether or not such claims would otherwise constitute

provable claims under this [Act]." Id. § 205(b). "Claims" under

the Act are defined as "includ[ing] debts, whether liquidated or

unliquidated, securities (other than stock and option warrants to

subscribe to stock), liens, or other interests of whatever

character." Id.

The definition of a "claim" under § 77 deliberately did

not invoke the provability requirement for claims under other parts

of the Bankruptcy Act. 11 U.S.C. § 205(b), (f) (repealed 1978).

This reflects the "sweeping" and "all-inclusive" breadth of the

kinds of claims discharged under § 77. Gardner, 329 U.S. at 572-

73; see also City of New York v. N.Y., N.H. & H.R. Co., 344 U.S.

293, 295 (1953). "[I]f courts should relax the provisions of the

law and facilitate the assertion of old claims against discharged

and reorganized debtors, the policy of the law would be defeated .

. . ." Duryee, 175 F.2d at 63.

The term "claim" under § 77 encompasses both contract

claims and tort claims, as well as statutory obligations to the

government. See Chicago I, 974 F.2d at 781, 786; see also N.Y.,

N.H. & H.R. Co., 344 U.S. at 300-01. Claims for contribution to

environmental cleanup costs, like the one asserted by the MBTA,

clearly fall within the scope of what § 77 would discharge as a

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"claim," and the MBTA, to its credit, does not argue otherwise.

See, e.g., Chicago II, 3 F.3d at 207.

Further, the definition of a "claim" in § 77 includes not

only existing causes of action but also "contingent claims." See

Schweitzer v. Consol. Rail Corp., 758 F.2d 936, 942 (3d Cir. 1985);

Chicago I, 974 F.2d at 781. "This proposition follows from the

broad language of section 77(b) which provides that 'claims'

include 'interests of whatever character.'" Schweitzer, 758 F.2d

at 942. A contingent claim is "[a] claim that has not yet accrued

and is dependent on some future event that may never happen."

Black's Law Dictionary 282 (9th ed. 2009).

This circuit has held, at least with respect to the

current Bankruptcy Code, that a contingent claim for contribution

to environmental cleanup costs may be discharged even if it is

uncertain. In re Hemingway Transp., 993 F.2d at 923. This ensures

that holders of contingent and indeterminate claims not "stand

aloof and obtain . . . the equivalent of a preference for them over

unsecured creditors with accrued or determinable claims." In re

Radio-Keith-Orpheum Corp., 106 F.2d 22, 26 (2d Cir. 1939).

For a contingent claim to exist, the law giving rise to

the claim or the same "type of liability" must have existed before

the bar date, so as not to give rise to constitutional concerns.

See Penn Central II, 944 F.2d at 167-68; cf. Chicago II, 3 F.3d at

208 (remanding to the district court to determine whether the "type

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of liability" created by a statute passed after a railroad's

discharge from bankruptcy existed under statutes pre-discharge, in

order to determine the existence of a pre-bar date contingent

claim); In re Chateaugay Corp., 944 F.2d 997, 1003 (2d Cir. 1991).

Since our case involves actual knowledge, there is no

need to discuss cases presenting outlier facts where a potential

claimant did not know of the contamination. Even so, actual

knowledge by the creditor of the claim is not necessary;

constructive knowledge suffices.2 Chicago II, 3 F.3d at 207.

Here, the MBTA had actual notice of the contamination and at least

constructive notice of the law well before B&M's Consummation

Order. Cf. AM Int'l, Inc. v. Datacard Corp., 106 F.3d 1342, 1348

(7th Cir. 1997) (affirming that CERCLA claims where not discharged

when there had been no possible notice of contamination). A

contingent claim to recover cleanup costs exists if sufficient

information was available to the prospective claimants that, if

sought out, would give the plaintiff constructive knowledge of the

claim. Chicago II, 3 F.3d at 207. Section 77 does not allow

2
In N.Y., N.H. & H.R. Co., 344 U.S. at 301, the Supreme
Court declined to bar claims of a creditor who had not received
actual notice from the court of the claims bar date. Section 77
itself requires that "reasonable notice" of the bankruptcy
proceeding be provided to potential creditors. 11 U.S.C. §
205(c)(8) (repealed 1978). There is no claim by the MBTA that it
did not have notice of the bankruptcy proceeding itself.

-25-
plaintiffs "to put on blinders or attempt an 'ostrich defense.'"3

Id.

Given the broad scope of § 77, we conclude that, at the

time of the 1983 discharge from bankruptcy, the MBTA clearly had

both sufficient knowledge and a contingent claim that was subject

to discharge by the Consummation Order.

In this case, there is no doubt, as the facts make clear,

that the MBTA had actual knowledge of the oil contamination at the

site, both surface and subsurface, in June 1983. MBTA employees

saw puddles of fuel oil sitting on the property and would have

known that for the fuel to have reached the Millers River it had to

flow across the property and into the river or the drainage system.

As the Seventh Circuit noted in Chicago II, "[o]ne does not need an

engineering degree to conclude that grease, oil and fuel left

standing for a long period of time have the capacity to seep into

the subsurface of soil." 3 F.3d at 207. The MBTA paid for and

participated in decisions to remediate some of the effects of these

spills. It was aware that at least federal regulators were

watching spills at the Terminal, and information was available that

the state was keeping logs on the spills. There is also no

question here that the MBTA knew that B&M was tied to, and a source

3
The Third Circuit has held a pre-discharge antitrust
claim barred when the plaintiffs had no actual knowledge of the
facts giving rise to the claim but had notice of the discharge
date. In re Penn Cent. Transp. Co., 771 F.2d 762, 769 (3d Cir.
1985).

-26-
of, the contamination. See Chicago I, 3 F.3d at 206. And there is

no question that the MBTA had actual knowledge of releases of

hazardous substances before June 30, 1983. The MBTA also knew the

oil contamination was significant, and certainly was not de

minimis.

Further, by contract, the MBTA had reason to be aware of

the spills at the site. The original purchase agreement provided

that the parties would split the costs of any environmental impact

study. The MBTA had oversight of the expenses B&M incurred

addressing the spills and leaks. Starting in 1982, B&M was

required by contract to inform the MBTA of any "oil spill or

pollution problem" at the Terminal. And there were contractual

indemnification provisions. If nothing else, the legal and

practical relationship between the two ensured the MBTA's knowledge

of the contamination. In re Chateaugay Corp., 944 F.2d at 1005.

There is also no doubt that, at the time of the

Consummation Order, both B&M and the MBTA were subject to

enforcement action by DEQE under Chapter 21E. Mass. Gen. Laws ch.

21E, § 5(a) ("[T]he owner or operator of a . . . site from or at

which there is or has been a release or threat of release of oil or

hazardous material . . . shall be liable, without regard to fault

. . . . [S]uch liability shall be joint and several.").

Here, the Chapter 21E claim arises under state law, and

Supreme Judicial Court of Massachusetts ("SJC") precedent requires

-27-
a conclusion that the MBTA had at least a contingent claim before

the discharge date.4 In Reynolds Bros., Inc. v. Texaco, Inc., the

SJC held that when the owner of land knows of the contamination and

of potential liability for cleanup costs, the owner has a claim

under Chapter 21E, despite the fact that the right to payment from

another for the cleanup costs may not technically have yet arisen.

647 N.E.2d 1205, 1208-09 (Mass. 1995). The state high court held

that such a claim under Chapter 21E was a "claim" under the

Bankruptcy Code and was discharged when not listed before the bar

date. Id. at 1209. Specifically, it held the owner of an oil

storage facility who had knowledge of the potential liability of

the debtor, a previous owner of the site who had used it as an oil

storage facility, was barred. Id.

The MBTA argues that it should be given an exception to

the discharge because Chapter 21E was the first time soil

contamination due to oil was regulated, and, at the time of 1983

discharge, it had no reason to know that as a property owner

Chapter 21E would force it to incur costs to remediate

contamination. Even if this argument were not foreclosed by

4
When state law creates obligations on debtors in
bankruptcy, courts must determine whether those obligations
constitute "claims" within the meaning of federal law such that
they are discharged. See Davis v. Cox, 356 F.3d 76, 81-85 (1st
Cir. 2004); In re 229 Main St. Ltd. P'ship, 262 F.3d 1, 3-4 (1st
Cir. 2001).

-28-
Reynolds, it fails.5 Chapter 21E was enacted about three months

before B&M was discharged from bankruptcy and claims were barred.

Cf. In re Reading Co., 115 F.3d 1111, 1115, 1125 (3d Cir. 1997)

(finding a CERCLA claim barred when the statute was enacted three

weeks prior to the discharge date). The new law, Chapter 21E,

plainly told the MBTA that it was liable as a present owner in 1983

for all hazardous substance contamination, including the oil

contamination, which the MBTA knew was present at the site. In

addition to Chapter 21E, the same "type of liability" also existed

prior to 1983. See Chicago II, 3 F.3d at 208. The MBTA was

potentially liable for cleanup costs even before the passage of 21E

under the common law of nuisance. Nassr v. Commonwealth, 477

N.E.2d 987, 993 (1985) (holding that under "well established"

common law principles property owners could be liable, regardless

of their own fault, for a public nuisance caused by lessors of the

property that poured waste on the ground which posed risks of

groundwater contamination and on-site ignition).

5
Additionally, CERCLA had been enacted in 1980, and it was
not legally foreclosed that there was CERCLA exposure for the MBTA
and contribution against B&M for at least waste oil contamination.
In re Crystal Oil, 158 F.3d 291, 296 (5th Cir. 1998). The MBTA
points out that CERCLA specifically exempts petroleum, crude oil,
and crude oil fractions from the definition of hazardous
substances. 42 U.S.C. § 9601(14). But it was far from clear that
waste oil was not covered by CERCLA, and by April 1985 the EPA had
concluded it was. Notification Requirements; Reportable Quantity
Adjustments, 50 Fed. Reg. 13,456 (Apr. 4, 1985).

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 Further, it is clear that under Chapter 21E, had the MBTA

incurred cleanup costs prior to the discharge date either because

it chose to remediate the contamination or because DEQE required it

to do so, it would have had a claim for contribution against B&M.

Mass. Gen. Laws ch. 21E, § 4 ("Any person who undertakes

assessment, containment or removal action regarding the release or

threat of release of oil or hazardous material shall be entitled to

reimbursement from any other person liable for such release or

threat of release for the reasonable costs of such assessment,

containment and removal.") (amended 1992); see also Reynolds Bros.,

Inc., 647 N.E.2d at 1209 n.10; Atlas Tack Corp. v. Crosby, 671

N.E.2d 954, 956 n.5 (Mass. App. Ct. 1996) ("Under [Chapter 21E],

regardless of any involvement by the DEP, there is a private right

of action in favor of any person who undertakes the removal of oil

or hazardous materials and who seeks recovery of response costs

from the person liable for the contamination.").

Even before the passage of Chapter 21E, the MBTA would

have had a contribution claim against B&M under nuisance law.

Mass. Gen. Laws ch. 231B, § 1(a) ("[W]here two or more persons

become jointly liable in tort for the same injury to person or

property, there shall be a right of contribution among them even

though judgment has not been recovered against any or all of

them.").

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 Indeed, the MBTA does not argue that it did not have a

contingent claim for contribution against B&M prior to June 30,

1983. The MBTA's argument is that the appropriate inquiry under

§ 77 turns, not on the existence of a contingent claim, but on

whether it could have "fairly contemplated" the claim at the time.

It contends that, according to case law, contribution claims

between private parties cannot be discharged unless the parties

expressly contemplated them before the bankruptcy, or involvement

of regulatory agencies prior to the bar of claims gave the parties

reason to have foreseen or contemplated the need to seek

contribution to pay for cleanup activities.6

We see no basis in the text of the statute, 11 U.S.C.

§ 205 (repealed 1978), or in its legislative history for the

adoption of a "fair contemplation" test under § 77. To the

contrary, such a construction would be inconsistent with the text

and history of the statute. Section 77 plainly defines "claims" to

include "interests of whatever character," making no mention of

6
The MBTA distinguishes its contribution claim from a
direct claim by a regulatory agency like DEQE. The MBTA conceded
at oral arguments that under § 77 any claims by the state against
B&M under Chapter 21E would have been discharged in this case. It
argues that whereas a regulatory agency need simply know of the
contamination to foresee a claim, a private party must not only
know of the contamination but also have reason to contemplate being
compelled to take remedial action that would give rise to a
contribution claim. We see no reason why a private party should be
treated better than a state.

-31-
claims that can be fairly contemplated. Id. § 205(b). Further,

none of the cases cited by the MBTA support such a conclusion.

This application of a fair contemplation test is also

inconsistent with congressional purposes behind § 77. By allowing

contingent claims that existed prior to the discharge from

bankruptcy to be raised later, the fair contemplation test thwarts

the goal of rehabilitating railroads. Baker, 417 U.S. at 470 n.3;

Duryee, 175 F.2d at 63 ("[C]reditors would not participate in

reorganizations if they could not feel that the plan was final[,]

and . . . it would be unjust and unfair to those who had accepted

and acted upon a reorganization plan if the court were thereafter

to reopen the plan and change the conditions which constituted the

basis of its earlier acceptance.").

To be sure, a statute must be interpreted to comply with

constitutional due process concerns. But the "fair contemplation"

test is far broader than any due process test and cannot be

justified as grounded in constitutional concerns. Due process

concerns might exist, for example, if the type of claim was newly

created by statute and the statute did not come into existence

until after the debtor was discharged from bankruptcy. Cf. Penn

Central II, 944 F.2d at 167-68. Due process concerns might also

exist if a party had no possible basis to know from the facts that

a claim existed at the time of the discharge. An example would be

a person being injured at some time in the future by the failure of

-32-
a bridge built by a construction company that had previously filed

for bankruptcy, cf. In re Chateaugay Corp., 944 F.2d at 1003, or a

victim of an airplane crash that happened years after the

manufacturer was discharged from bankruptcy. But this case

presents no possible due process concerns. This is not a situation

in which the MBTA literally could not have known on either the law

or the facts that it had a claim.

It is enough in this case that the MBTA had a contingent

claim for contribution, knew of the facts giving rise to that

claim, was potentially liable for the oil contamination at the

Terminal under state law, and had notice of the date to assert the

claim to avoid being barred by B&M's discharge from bankruptcy. In

re Penn Cent. Transp. Co., 71 F.3d 1113, 1117 (3d Cir. 1995)

(noting that a contingent claim for contribution existed after the

passage of CERCLA made the party "potentially liable . . . for

contribution and indemnity"); Chicago II, 3 F.3d at 207; see also

In re Chateaugay Corp., 944 F.2d at 1005.

Public policy also weighs strongly against the MBTA's

"fair contemplation" test. It would be against public policy to

adopt a test that would require government agencies, such as DEQE,

to have actually ordered remedial action before the owner of a

contaminated site could be deemed to have knowledge of a potential

cleanup action. Indeed, in many cases the owner will be more

likely than regulators to have knowledge of contamination and so of

-33-
the need for a cleanup. Parties should not be rewarded for

delaying their cleanup activities and delaying notice to potential

contributors. See Chicago II, 3 F.3d at 207; In re

Radio-Keith-Orpheum, 106 F.2d at 26-27.

Both sides have been ably represented by counsel; the

facts and the law require rejection of the MBTA's arguments. The

MBTA's contribution claims arising out of pre-June 30, 1983,

conduct by B&M are barred by the Consummation Order, so B&M is

entitled to an order enjoining the MBTA from pursuing claims for

investigation or remediation costs for contamination at the

Terminal occurring before June 30, 1983.7

For these reasons, we reverse the judgment of the

district court and direct entry of judgment on these claims for

B&M. No costs are ordered on appeal.

7
To the extent B&M sought an order that the MBTA was in
contempt of the injunctive relief portion of the Consummation
Order, it has abandoned that claim.

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