In Re Reading Co.

Opinions of the United

1997 Decisions States Court of Appeals

for the Third Circuit

6-13-1997

In Re Reading Co

Precedential or Non-Precedential:

Docket 95-1987,95-1988

Follow this and additional works at: http://digitalcommons.law.villanova.edu/thirdcircuit_1997

Recommended Citation

"In Re Reading Co" (1997). 1997 Decisions. Paper 131.

http://digitalcommons.law.villanova.edu/thirdcircuit_1997/131

This decision is brought to you for free and open access by the Opinions of the United States Court of Appeals for the Third Circuit at Villanova

University School of Law Digital Repository. It has been accepted for inclusion in 1997 Decisions by an authorized administrator of Villanova

University School of Law Digital Repository. For more information, please contact Benjamin.Carlson@law.villanova.edu.

Filed June 13, 1997

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

Nos. 95-1987 and 95-1988

In The Matter of READING COMPANY,

Debtor

United States of America,

Appellant in 95-1987

In The Matter of READING COMPANY,

Debtor

Consolidated Rail Corporation,

Appellant in 95-1988

On Appeal from the United States District Court

for the Eastern District of Pennsylvania

(D.C. Civil Action No. 71-cv-00828)

Argued July 15, 1996

Before: SLOVITER, Chief Judge, COWEN and R OTH,

Circuit Judges

(Opinion Filed June 13, 1997)

Robert P. Frank, Esq. (Argued)

Andrew J. Soven, Esq.

Reed, Smith, Shaw & McClay

1650 Market Street

2500 One Liberty Place

Philadelphia, PA 19103-7301

John W. Morris, Esq.

Suite 1300

30 S. 15th Street

Philadelphia, PA 19102

Attorneys for Appellee In Re:

Reading Co.

Lois J. Schiffer, Assistant Attorney

General

Alan Tenenbaum, Esq.

Alan D. Greenberg, Esq.

Martin W. Matzen, Esq.

John A. Bryson, Esq. (Argued)

United States Department of Justice

P.O. Box 23795

L'Enfant Plaza Station

Washington, DC 20026

Earl Salo, Esq.

John Wheeler, Esq.

U. S. Environmental Protection

Agency

Washington, DC 20026

Attorneys for Appellant United

States of America in 95-1987

2

Philip J. Katauskas, Esq. (Argued)

Michael H. Reed, Esq.

Edmund B. Spaeth, Jr., Esq.

Anne M. Package, Esq.

Pepper, Hamilton, Scheetz

18th & Arch Streets

3000 Two Logan Square

Philadelphia, PA 19103-2799

Attorneys for Appellee in 95-1987

and Appellant in 95-1988

Consolidated Rail Corporation

("Conrail")

OPINION OF THE COURT

ROTH, Circuit Judge:

After a decade-long reorganization, the Reading Railroad

emerged from bankruptcy on January 1, 1981. On that

day, the newly-established Reading Company1 was given a

fresh start by a consummation order which granted

Reading protection from all pre-consummation debts and

liabilities. Now, sixteen years later, the Consolidated Rail

Corporation (Conrail) asks that we circumvent the

protection of the bankruptcy discharge and permit Conrail

to seek contribution from Reading for environmental clean-

up costs. The district court rejected Conrail's claim. We will

affirm the judgment of the district court.

This appeal involves a number of issues under the

Comprehensive Environmental Response, Compensation,

and Liability Act (CERCLA), 42 U.S.C. §§ 9601-9675, as

amended by the Superfund Amendments and

Reauthorization Act of 1986 (SARA), Pub.L. No. 990499,

§ 101 et seq., 100 Stat. 1613 (1986). We will first have to

determine what type of claim or claims appellants, Conrail

and the United States, can maintain against Reading. We

_________________________________________________________________

1. In this opinion, we will refer to the bankrupt railroad as the Reading

Railroad and the post-bankruptcy, non-rail entity as the Reading

Company, or simply Reading.

3

will then consider how Reading's bankruptcy affects

appellants' ability to enforce any claims.

As a result of our consideration of these issues, wefind

that Conrail's only viable claim against Reading is one for

contribution under § 113(f). We also find that this claim

was not discharged by Reading's consummation order.

Nevertheless, we determine that Conrail's claim fails as a

matter of law because Reading is not liable to the United

States under § 107(a) and consequently Reading cannot be

liable to Conrail for contribution of the response costs that

Conrail must pay to the United States.

I. FACTS

The roots of this dispute stretch back to November 23,

1971, when the Reading Railroad filed for reorganization

under § 77 of the Bankruptcy Act of 1898, formerly 11

U.S.C. § 205 (1976) (repealed 1978). By 1973, seven other

major American railroads had joined Reading in

reorganization. The seemingly intractable nature of these

bankruptcies, combined with the obvious public need for

continuing rail service, spurred Congress to action. The

result was the Regional Rail Reorganization Act of 1973

("RRRA"), 45 U.S.C. § 701 et seq., which established a plan

for conveying the rail assets of the bankrupt corporations to

a new entity, Conrail. The railroads would receive Conrail

securities in return for their assets, and the former

railroads would then emerge from bankruptcy as new, non-

rail entities. See In re Reading Co., 24 B.R. 858, 859-60

(E.D. Pa. 1980).

On May 2, 1974, the district court subjected the Reading

Railroad to the RRRA. See In re Reading Co., 378 F.Supp.

474, 481 (E.D. Pa.), aff'd sub nom. In re Penn Central

Transp. Co., 384 F. Supp. 895 (Sp. Ct.R.R.A. 1974). On

April 1, 1976, Reading Railroad's rail assets were conveyed

to Conrail pursuant to the final system plan, In re Reading

Co., 24 B.R. at 860, and the company's 5,664 rail

employees became eligible for employment with Conrail,

Final System Plan of the U.S. Railway Assoc. at 162,

reprinted in Supplemental Appendix at 178. "The remainder

of the estate then consisted of real property, a trucking

4

company, some marine equipment, other investments, and

the probable proceeds from the [rail assets] valuation case

. . .." 24 B.R. at 860. For all practical purposes, Reading

ceased to be a railroad on April 1, 1976.

The Reading Railroad reorganization continued for

another four years. By mid-1979, the Trustees hadfiled an

Amended Plan for Reorganization with the district court. On

May 21, 1980, after notice to numerous parties including

the United States and Conrail, the district court approved

the Amended Plan. 24 B.R. at 874. Both the United States

and Conrail attended hearings on the plan's confirmation

and proposed consummation. Neither objected. On

December 23, 1980, the district court entered an order that

established December 31, 1980, as the consummation date

for the plan.

The most significant feature of the consummation plan

for purposes of this appeal was a sweeping injunction

which protected the Reading Company from all liability

based on the obligations of its predecessor:

7.02 Injunction. All persons, firms, governmental

entities and corporations, wherever situated, located or

domiciled, are hereby permanently restrained and

enjoined from instituting, prosecuting or pursuing, or

attempting to institute, prosecute or pursue, any suits

or proceedings, at law or in equity or otherwise against

the Reorganized Company or its successors or assigns

or against any of the assets or property of the

Reorganized Company or its successors or assigns,

directly or indirectly, on account of or based upon any

right, claim or interest of any kind or nature

whatsoever which any such person, firm, governmental

entity or corporation may have in, to or against the

Debtor, the Reading Trustees, or any of their assets or

properties . . . by reason or on account of any

obligation or obligations incurred by the Debtor or any

of its Trustees in these proceedings, except the

obligations imposed on the Reorganized Company by

the Plan or by this Order or reserved for resolution or

adjudication by this Order.

In re Reading Co., Memorandum and Order 2004, Bankr.

No. 71-823 (E.D. Pa. Dec. 23, 1980) (Consummation Order

5

and Final Decree). With this injunction in place, the

Reading Company emerged from bankruptcy on January 1,

1981.

At the same time that the Reading Railroad's Trustees

were drawing up Reading's final plan of reorganization,

major developments were taking place in Congress. On

December 11, 1980, three weeks before the Reading

Railroad's plan consummation date, CERCLA became law,

effective immediately. The statute imposed retroactive

liability on any person who, prior to the statute's passage,

had disposed of, transported, or arranged for the disposal

of hazardous substances. In re Penn Cent. Transp. Co., 944

F.2d 164, 167 (3d Cir. 1991). It granted the Environmental

Protection Agency ("EPA") broad powers to enforce this

mandate. United States v. Alcan Aluminum. Corp., 964 F.2d

252, 258 (3d Cir. 1992).

CERCLA's embrace would encompass Conrail and the

nation's railroads. See 126 Cong. Rec. 26,061-62 (1980)

(letter to Senator Howard W. Cannon from Richard Briggs,

Association of American Railroads) (describing CERCLA as

a threat to the railroad industry); Superfund: H.R. 4571,

5290 Before the Subcomm. On Transp. & Commerce of the

House Interstate & Foreign Commerce Comm., 96th Cong.

1st Sess. 132 (1980) (statement of Barbara Blum, Deputy

Administrator, EPA) (identifying railroads as one type of

violator whom CERCLA would address). The EPA

demonstrated its awareness of the new law and its

immediate applicability to the Reading bankruptcy by

notifying Reading prior to discharge that the EPA would

treat a hazardous waste site in McAdoo, Pennsylvania, as a

CERCLA site. Fifth Report to the Court on the Progress of

Cleanup at McAdoo, Pa., In re Reading Co., Bankr. No. 71-

828 (E.D. Pa. Dec. 23, 1980). However, neither the EPA nor

the United States filed any claims in the Reading

bankruptcy; nor did they make any mention in those

proceedings of other hazardous waste sites or of the

potential for additional hazardous waste liability.

This appeal arises from the clash of CERCLA liability with

the discharge granted to Reading as a result of its

bankruptcy, a clash which occurred at a fifty acre site on

the south bank of the Schuylkill River, opposite

6

Douglassville, Pennsylvania. Since 1941, a business,

eventually known as Berks Associates, Inc., had operated a

solvent recovery and oil recycling business on the property.

On October 31, 1980, 41 days prior to CERCLA's passage,

the EPA identified Douglassville as a potentially hazardous

site.2

The EPA was already familiar with Douglassville because

of problems that had occurred there in the early 1970s. In

November 1970, heavy rains caused storage lagoons at

Douglassville to fail. Two to three million gallons of waste

sludge escaped into the Schuylkill River. The Department of

the Interior, acting pursuant to the Clean Water Act, 33

U.S.C. § 1251 et. seq., responded to the spill. Two years

later, Hurricane Agnes caused a major flood of the

Schuylkill, washing more sludge into the river. The EPA

responded, invoking the oil spill provisions of the Clean

Water Act. As part of the clean-up, the EPA transported

sludge from the Douglassville site, using boxcars supplied

by the Reading Railroad, which had a rail line serving the

facility.

On June 12, 1986, acting pursuant to CERCLA § 104(e),

42 U.S.C. § 9604(e), the EPA requested information from

Reading about Douglassville. On June 29, 1988, the EPA

designated Reading a potentially responsible party ("PRP"),

alleging that between July 6, 1965, and March 12, 1976,

Reading had either generated or transported shipments of

waste oil to Douglassville. Then, on July 31, 1991, acting

pursuant to CERCLA § 106, 42 U.S.C. § 9606, the United

States ordered thirty-six PRPs to undertake remedial

actions at the Douglassville site. The list of PRPs included

Conrail, but not Reading. On the same day, the United

States brought an action under CERCLA § 107(a), 42 U.S.C.

§ 9607(a), against the same group of PRPs for response

costs incurred in cleaning up the Douglassville site and for

a declaration of future costs. United States v. Berks Assoc.,

_________________________________________________________________

2. Further EPA activity took place at the Douglassville site in April, 1982,

when the EPA began actively investigating the location. On September 8,

1983, the EPA added Douglassville to CERCLA's National Priorities List,

a list of the nation's worst environmental sites. Solvent recovery and oil

recycling operations at the Douglassville site ceased in 1985.

7

Inc., Civ. Action No. 91-4868, 1992 WL 68346 (E.D.Pa.

Apr.1, 1992).

Conrail and the other primary defendants then brought a

third-party action against the Reading Company and six

hundred other PRPs, seeking contribution for any liability

from the Douglassville site. Reading in turn sought an

injunction from the district court, on the basis that any

liability, which it may have had, had been discharged in

bankruptcy.

The district court granted Reading's request for injunctive

relief. In re Reading Co., 900 F.Supp. 738, 741 (E.D. Pa.

1995). The court held that the word "contribution" as used

in § 113(f) should be given its plain meaning so that

Conrail's action, by one PRP seeking recovery from another

PRP, could only proceed as a claim for contribution under

CERCLA § 113(f), 42 U.S.C. § 9613(f). Id. at 748. Moreover,

because the usual meaning of "contribution" requires

common liability over to a third party, Reading's liability to

Conrail was dependent on whether Reading was potentially

liable to the United States. Id. The district court held that

any such liability had been discharged by the bankruptcy

consummation order because all the necessary elements of

a CERCLA claim existed when the plan was consummated

and the United States had constructive knowledge that the

claim existed at that time. Id. at 745. As a result, the

district court concluded that Reading was not liable to

Conrail for contribution. Both Conrail and the United

States appealed.

II. JURISDICTION AND STANDARD OR REVIEW

The district court exercised jurisdiction under 28 U.S.C.

§§ 1331 and §1334 (repealed 1978) and 42 U.S.C. § 9613.

We take jurisdiction from the district court's final order

pursuant to 28 U.S.C. § 1291. This appeal presents issues

of statutory interpretation, subject to plenary review. Manor

Care, Inc. v. Yaskin, 950 F.2d 122, 124 (3d Cir. 1991). The

lone exception is the district court's factual finding of

knowledge, see discussion infra, Part III.B., which we

review for clear error. See Sheet Metal Workers, Local 19 v.

2300 Group, Inc., 949 F.2d 1274, 1278 (3d Cir. 1991); Riehl

v. Travelers Ins. Co., 772 F.2d 19, 24 (3d Cir. 1985).

8

III. DISCUSSION

A. The Nature of Conrail's Claim

The core question posed by this appeal is whether

Conrail can make a claim against Reading for the costs of

the Douglassville clean-up. To answer this question, we

must determine the nature of the cause of action that

Conrail possesses and whether that cause of action is

dependent on Reading's liability to the United States for

costs of the Douglassville clean-up. Conrail's third party

complaint against Reading alleged four different causes of

action: (1) cost recovery under 42 U.S.C. § 107(a)(4)(B), (2)

contribution under 42 U.S.C. § 113(f), (3) common law

contribution, and (4) common law restitution. We will first

address the validity of the common law claims.

Like the district court, we find that CERCLA preempts

Conrail's common law theories. See In re Reading Co., 900

F.Supp. at 744 n.6. As the Supreme Court has explained in

preemption analysis "our sole task is to ascertain the intent

of Congress." California Federal Sav. and Loan Ass'n v.

Guerra, 479 U.S. 272, 280 (1987). Congress may manifest

its intent when it expressly preempts state regulation, when

it implicitly preempts state regulation by so occupying the

field with comprehensive federal regulation that it leaves no

room for state law, or, again implicitly, when there is an

actual conflict between state and federal law. Conflict may

arise either because "compliance with both federal and

state regulations is a physical impossibility," or because the

state law stands "as an obstacle to the accomplishment and

execution of the full purposes and objectives of Congress."

Id. at 280-81. We have held that, in enacting CERCLA,

Congress did not explicitly preempt all state law, nor did it

create a comprehensive scheme of regulation leaving no

room for supplementation. Manor Care, Inc. v. Yaskin, 950

F.2d 122, 125-26 (3d Cir. 1991). We must therefore

consider the third basis for preemption, actual conflict.

Unlike other areas where we have declined to find an

actual conflict between CERCLA and state regulation, see

Witco Corp. v. Beekhuis, 38 F.3d 682, 688-90 (3d Cir. 1994)

(finding no conflict between CERCLA statute of limitations

9

for contribution and Delaware state law limiting time period

for claims against decedent's estate); Manor Care, 950 F.2d

at 127 (finding no conflict between CERCLA and cost

recovery provisions of New Jersey Spill Compensation and

Control Act), we do find a conflict here between Conrail's

common law claims for contribution and restitution and the

remedies expressly provided in the statute. The conflict

arises because the state law remedies obstruct the intent of

Congress. Guerra, 479 U.S. at 281. As we explain more

fully below, when Congress expressly created a statutory

right of contribution in CERCLA § 113(f), 42 U.S.C.

§ 9613(f), it made that remedy a part of an elaborate

settlement scheme aimed at the efficient resolution of

environmental disputes. Permitting independent common

law remedies would create a path around the statutory

settlement scheme, raising an obstacle to the intent of

Congress. We conclude therefore that Conrail's common law

claims are preempted by CERCLA § 113(f).

We next turn to Conrail's statutory claims. Conrail

contends that it possesses two separate and distinct causes

of action, one under § 107(a)(4)(B) and the other under

§ 113(f). Reading argues on the other hand that Congress's

creation of an express provision in § 113(f), governing

contribution, superseded the judicially created private right

of action that existed under § 107(a)(4)(B). For this reason,

Reading contends that Conrail cannot assert a

§ 107(a)(4)(B) claim when the provisions of§ 113(f) have

come into effect. We agree that, in an action which presents

a claim for apportionment of clean-up costs, § 113(f)

trumps § 107(a)(4)(B).

This interaction between § 113(f) and § 107(a)(4)(B)

presents a question of statutory interpretation. We begin

our review therefore with an examination of the language of

the statute. Section 107 establishes CERCLA's basic

framework under which persons are liable for past

environmental harms. It sets out four prerequisites for cost

recovery:

(1) the defendant falls within one of the four categories

of "responsible parties";3

_________________________________________________________________

3. Under 42 U.S.C. § 9607(a), these categories are:

(1) the owner and operator of a vessel or a facility,

10

(2) the hazardous substances are disposed at a "facility";4

(3) there is a "release"5 or threatened release of

_________________________________________________________________

(2) any person who at the time of disposal of any hazardous

substance owned or operated any facility at which such hazardous

substances were disposed of,

(3) any person who by contract, agreement, or otherwise arranged

for disposal or treatment, or arranged with a transporter for

transport for disposal or treatment, of hazardous substances owned

or possessed by such person, by any other party or entity, at any

facility or incineration vessel owned or operated by another party or

entity and containing such hazardous substances; and

(4) any person who accepts or accepted any hazardous substances

for transport to disposal or treatment facilities, incineration vessels

or sites selected by such person, from which there is a release, or

a threatened release which causes the incurrence of response costs,

of a hazardous substance . . ..

4. Under 42 U.S.C. § 9601(8), a facility is defined as:

(A) any building, structure, installation, equipment, pipe or pipeline

(including any pipe into a sewer or publicly owned treatment works),

well, pit, pond, lagoon, impoundment, ditch, landfill, storage

container, motor vehicle, rolling stock, or aircraft, or (B) any site or

area where a hazardous substance has been deposited, stored,

disposed of; or placed, or otherwise come to be located; but does not

include any consumer product in consumer use or any vessel.

5. Under 42 U.S.C. § 9601(22), a "release" is defined as:

any spilling, leaking, pumping, pouring, emitting, emptying,

discharging, injecting, escaping, leaching, dumping, or disposing

into the environment (including the abandonment or discarding of

barrels, containers, and other closed receptacles containing any

hazardous substance or pollutant or contaminant), but excludes (A)

any release which results in exposure to persons solely within a

workplace, with respect to a claim which such persons may assert

against the employer of such persons, (B) emissions form the engine

exhaust of a motor vehicle, rolling stock, aircraft, vessel, or pipeline

pumping station engine, (C) release of source, byproduct, or special

nuclear material from a nuclear incident, as those terms are defined

in the Atomic Energy Act of 1954, if such release is subject to

requirements with respect to financial protection established by the

Nuclear Regulatory Commission under section 170 of such Act, or,

for the purposes of section 9604 of this title or any other response

action, any release of source byproduct, or special nuclear material

from any processing site designated under section 7912(a)(1) or

7942(a) of this title, and (D) the normal application of fertilizer.

11

hazardous substances from the facility into the

environment;

(4) the release causes the incurrence of "response costs."6

42 U.S.C. § 9607; United States v. Alcan Aluminum Corp.,

964 F.2d 252, 258-59 (3d Cir. 1992). Where these

requirements are met, § 107 also establishes four general

categories of damages for which parties are liable. Among

these, § 107(a)(4)(B) provides that a PRP's liability shall

include "any other costs of response incurred by any other

person consistent with the national contingency plan." 42

U.S.C. § 9607(a)(4)(B).7

The "any other costs of response" language in

§ 107(a)(4)(B) forms the basis for Conrail's claim for

recovery under that section. We note that pre-SARA,

Conrail could make a viable claim for contribution under

§ 107(a)(4)(B). As originally enacted, CERCLA lacked any

express mechanism by which one party could recover from

another for paying more than its pro rata share of the costs

of a clean-up. See United Technologies v. Browning-Ferris

Industries, Inc., 33 F.3d 96, 100 (3d Cir. 1994). Courts filled

this gap by interpreting § 107(a)(4)(B) as providing a private

right of action by which a party, who had expended

resources on cleanup efforts, could obtain contribution

from others. See Key Tronic Corp. v. United States, 511 U.S.

809, 816 n.7 (1994) (noting interpretation); United States v.

New Castle County, 642 F.Supp. 1258, 1269 (D. Del. 1986)

(recognizing cause of action). Until the passage of SARA in

1986, the judicially-created expansion of § 107(a)(4)(B)

served as the sole means by which parties could obtain

contribution.

SARA, however, in § 113(f), 42 U.S.C. § 9613(f), expressly

provided for contribution. The section states:

_________________________________________________________________

6. Under 42 U.S.C. § 9601(25), the terms "respond" or "response" are

defined to mean "remove, removal, remedy, and remedial action; all such

terms (including the terms `removal' and `remedial action') include

enforcement activities related thereto."

7. As written, the four categories of damages appear to relate only to

§ 107(a)(4). Courts have consistently ignored this drafting error, and it is

well established that the liability categories apply to all four categories of

PRPs under § 107(a).

12

Any person may seek contribution from any other

person who is liable or potentially liable under section

9607(a) [§ 107(a)] of this title, during or following any

civil action under section 9606 of this title or under

section 9607(a) of this title. . . . Nothing in this

subsection shall diminish the right of any person to

bring an action for contribution in the absence of a

civil action under section 9606 of this title or section

9607 of this title.

42 U.S.C. § 9613(f)(1).

The meaning of the plain language of this section is

supported by SARA's legislative history, which states that a

principal goal of § 113(f) was to "clarif[y] and confirm[ ] the

right of a person held jointly and severally liable under

CERCLA to seek contribution from other potentially liable

parties, when the person believes that it has assumed a

share of the cleanup or cost that may be greater than its

equitable share under the circumstances." S.Rep.No.11,

99th Cong., 1st Sess. 44 (1985), reprinted in 2 Legislative

History of the Superfund Amendments and Reauthorization

Act of 1986 at 636 (1990). In passing § 113(f), Congress

acted to codify existing federal common law and to replace

the judicially crafted measure with an express statutory

remedy.

Thus, the language of § 113(f), permitting contribution,

replaced the judicially created right to contribution under

§ 107(a)(4)(B). We find support for this conclusion in the

comprehensive scheme that SARA created. SARA's

modifications encourage the efficient resolution of

environmental disputes by creating a settlement system in

which potential damages increase dramatically for parties

who refuse to settle. See generally United States v. Charter

Int'l Oil Co., 83 F.3d 510 (1st Cir. 1996) (describing

scheme). The first part of the system grants protection from

contribution actions to settling parties for actions arising

from "matters addressed" in a consent decree. 42 U.S.C.

§ 9613(f)(2). The second part limits the settlement's effect to

a reduction in the aggregate liability of the remaining PRPs.

Because settlement reduces the total amount recoverable

from the remaining, non-settling parties only by the

amount of settlement, non-settling PRPs remain liable for

13

the balance of the aggregate environmental liability. Id.

Consequently, PRPs, who choose to settle, gain protection

from contribution, enjoy potentially favorable settlement

terms, and retain the ability to seek contribution from other

defendants. PRPs, who choose not to settle, are barred from

seeking contribution from the settling PRPs and thus face

potentially disproportionate liability. This system gives the

United States obvious and important leverage to encourage

quick and effective resolution of environmental disputes.

If a party seeks contribution under § 113(f)(1) from a

settling party, the protections of § 113(f)(2) and (f)(3) are

immediately applicable. SARA's system operates as

intended. But if a party should instead seek contribution

under § 107(a)(4)(B), that would throw the proverbial

monkey wrench into the works. If a party could end run

§ 113(f)(2) and (3) by suing a settling party under

§ 107(a)(4)(B) for "costs of response," the settlement scheme

would be bypassed. The incentive to early settlement would

disappear, and the extent of litigation involved in a CERCLA

case would increase dramatically. Consent agreements

would no longer provide protection, and settling parties

would have to endure additional rounds of litigation to

apportion their losses. This undesirable alternative suggests

all the more clearly that Congress intended to replace

§ 107(a)(4)(B)'s implied contribution remedy when it enacted

§ 113(f).

Against this authority, Conrail proposes two sources in

support of its separate § 107 contribution action. It first

points to language in § 113(f), which refers to "a civil action"

under § 107(a). The fact, however, that § 113(f)(1) mentions

the availability of a civil action under § 107(a) does not a

fortiori indicate that Congress intended to permit an action

for contribution to be brought either under § 107(a) or

under § 113(f)(1), at the discretion of the litigant. After all,

a "civil action" can be initiated for direct costs, as well as

for contribution.

Conrail's second argument is based on a comment in Key

Tronic Corp. v. United States, 511 U.S. 809 (1994), where in

dictum the U.S. Supreme Court observed: "the statute

[CERCLA] now expressly authorizes a cause of action for

contribution in § 113 and impliedly authorizes a similar

14

and somewhat overlapping remedy in § 107." Id. at 815-

816. To the extent that the Supreme Court refers to an

"overlap," we construe this overlap to consist of the fact

that some courts have held that a landowner may bring a

direct action under § 107(a)(4)(B) to recover its own clean-

up costs from a polluter. Accord, Rumpke of Indiana, Inc. v.

Cummins Engine Co., 107 F.3d 1235, 1242 (7th Cir. 1997);

AM Int'l, Inc. v. Datacard Corp. Inc., 106 F.3d 1342, 1347

(7th Cir. 1997) (holding that a landowner, who paid less

because it knew it was buying into an expensive cleanup,

was "a little less `innocent' than the landowner described in

Akzo" but still might recover under § 107(a)(4)(B) for

cleanup of contamination on its property due to a third

party spill); Akzo Coating, Inc. v. Aigner Corp., 30 F.3d 761,

765 (7th Cir. 1994) (hypothesizing that "a landowner forced

to clean up hazardous materials that a third party spilled

onto its property or that migrated there from adjacent

lands" might, as a private party, have a direct cost recovery

action under § 107(a)); United Technologies, 33 F.3d at 100.

Like our sister courts, we believe that § 107(a)(4)(B) retains

this role. See New Castle County v. Halliburton NUS Corp.,

___ F.3d ___ [typescript at 16] (3d Cir. 1997). The fact,

however, that a direct action might be brought under

§ 107(a) does not open the door for a PRP to bring an action

for contribution under that same section. Indeed, the fact

that § 113(f)(1) specifically permits an action for

contribution to be brought "in the absence of a civil action

under . . . section [107]" reenforces our conclusion that

Congress intended § 113 to be the sole means for seeking

contribution--at whatever time in the cleanup process the

party, seeking contribution, decides to pursue it.

We rely therefore on CERCLA's plain meaning to hold

that § 113(f) replaces the judicially created cause of action

under § 107(a)(4)(B) to the extent that a party seeks

contribution. See Halliburton NUS Corp., ___ F.3d ___, 1997

WL 217627 (3d Cir. 1997); Redwing Carriers, Inc. v.

Saraland Apartments, 94 F.3d 1489, 1496 (11th Cir. 1996);

United States v. Colorado & Eastern Railroad Co., 50 F.3d

1530, 1534-36 (10th Cir. 1995); United Technologies Corp.,

33 F.3d at 101-03; Akzo, 30 F.3d at 764-65; Amoco Oil Co.

v. Borden, Inc., 889 F.2d 664, 672 (5th Cir. 1989). Having

reached this determination, we will proceed to the next step

15

in our analysis: whether Conrail's § 107(a)(4)(B) claim falls

within § 113(f)'s ambit.

As its plain language indicates, § 113(f) is concerned with

contribution. Although "contribution" is nowhere defined

within CERCLA, it is a term with a familiar and readily

acceptable meaning. Black's Law Dictionary defines

"contribution" as the recovery of "portional shares of

judgment from other joint tort-feasors whose negligence

contributed to the injury and who were also liable to the

plaintiff. . . . The sharing of a loss or payment among

several[;] [t]he act of any one or several of a number of co-

debtors, co-sureties, etc., in reimbursing one of their

number who has paid the whole debt or suffered the whole

liability, each to the extent of his proportionate share."

Black's Law Dictionary 297 (5th ed. 1979). As the Court of

Appeals for the Seventh Circuit has described it,

contribution denotes a claim "by and between jointly and

severally liable parties for an appropriate division of the

payment one of them has been compelled to make." Akzo,

30 F.3d at 764; see also Colorado & Eastern, 50 F.3d at

1535-36; United Technologies, 33 F.3d at 101. We have

found nothing that counsels against this reading.

Accordingly we will adopt it.

In view, therefore, of the language of § 113(f), we have

little difficulty holding that Conrail is in fact seeking

contribution from Reading and that Conrail must seek that

remedy under § 113(f). See Colorado & Eastern, 50 F.3d at

1536 ("In our case, [the] claim . . . must be classified as one

for contribution"); United Technologies, ("[a]pplying this

definition, the instant action clearly qualifies as an action

for contribution under section 9613(f)(1)"); Akzo, 30 F.3d at

764 (explaining that if a party "liable in some measure for

the contamination . . . [alleges] that the costs that it has

incurred should be apportioned equitably amongst itself

and the others responsible . . ., [t]hat is a quintessential

claim for contribution"). In its third-party complaint against

Reading, Conrail, in its § 107(a) claim, seeks

reimbursement for "all" response costs and, in its § 113(f)

claim, seeks reimbursement of its "share of contribution"

for response costs. Clearly, Conrail is seeking contribution

from Reading for all potential liability Conrail may owe to

16

the United States. To the extent that, in either statutory

claim, this is Conrail's aim, Conrail's claim is one for

contribution. We hold that such a claim must be brought

under § 113(f), not under § 107(a).

B. The Effect of Reading's Bankruptcy on

Conrail's § 113(f) Claim

How then has Reading's bankruptcy discharge affected

Conrail's claim for contribution. The law of this circuit

regarding the discharge of claims in bankruptcy has been

established in a series of cases, many of which involve § 77

railroad reorganizations. The leading case is Schweitzer v.

Consolidated Rail Corp., 758 F.2d 936 (3d Cir. 1985). In

Schweitzer, a group of employees sued Reading after its

reorganization for asbestos-related injuries under the

Federal Employers' Liability Act, 45 U.S.C. § 51 et seq..

Reading invoked its bankruptcy discharge to bar the

employees' claims, pointing out that the plaintiff-employees

were exposed to the asbestos well before the plan

consummation date. We rejected Reading's claim to

absolute protection, noting that the language of § 77

provides for the discharge of all "claims" against the debtor.

We interpreted this language to mean that the employees'

claims would only be discharged if their causes of action

existed at the time of plan consummation. 758 F.2d at 941.

We explained that "a bankruptcy claim must be based on

state or federal law that, wholly apart from bankruptcy,

created substantive obligations." Id. (citation omitted). We

looked to federal tort law to determine when the claim

arose. Noting that identifiable, compensable injury was a

basic element of a tort claim, we held that no cause of

action accrued until that element had been satisfied.

Because the plaintiffs' injuries did not become manifest

until after the reorganization, their claims did not exist

until after plan consummation, and for that reason the

claims were not discharged. Id. at 942; see also In re

Central R.R. Co., 950 F.2d 887 (3d Cir. 1991) (following

Schweitzer); Zulkowski v. Consolidated Rail Corp., 852 F.2d

73 (3d Cir. 1988) (same); cf. In re M. Frenville Co., 744 F.2d

332 (3d Cir. 1984) (applying Schweitzer analysis to claim

for contribution and indemnity arising after automatic stay

under Bankruptcy Code).

17

In Schweitzer, we also discussed the concept of a

"contingent" claim, that is, a claim which would enable a

person to be a creditor in the bankruptcy action even

though that person had no present cause of action against

the debtor. We found statutory support for such a claim in

the language of § 77(b), which defined claims to include

"interests of whatever character." 758 F.2d at 942. We cited

In re Radio-Keith-Orpheum Corp., 106 F.2d 22 (2d Cir.

1939), as providing an example of a contingent claim.

There, the Second Circuit barred the contingent claim of a

landlord against the debtor/guarantor of a lease. The court

found that because an express contract of guarantee

existed, the landlord could not stand idly by while the

guarantor went into bankruptcy. The court determined that

the claim on the guarantee had been discharged. Id. at

942-43. Schweitzer, however, was a tort claim for personal

injury; there was no guarantee, no legal relationship, and

no contingent claim that could be discharged.

We have followed Schweitzer in cases involving

environmental damage. The first such case was In re Penn

Cent. Transp. Co., 944 F.2d 164 (3d Cir. 1991) ("Paoli

Yard"). In Paoli Yard, the United States brought suit against

Conrail, the Southeastern Pennsylvania Transportation

Authority ("SEPTA"), and Amtrak as a result of a release of

environmental contaminants at the Paoli Rail Yard. Conrail

petitioned to implead the Penn Central Corporation ("PCC"),

the reorganized entity that emerged from the § 77

reorganization of the Penn Central Transportation Company

("PCTC"). SEPTA and the United States also brought claims

against PCC. As Reading has done in the present case, PCC

argued that its § 77 reorganization barred the United

States' claim.

Applying Schweitzer, we held that the petitioners' claims

were not barred. We first looked to see if a claim existed

under CERCLA prior to the consummation date. We held

that no claim existed because CERCLA had not been

passed at the time of the reorganization:

On October 24, 1978, the reorganization of PCTC was

consummated and the injunction against the filing of

future lawsuits . . . was entered. We note, however,

that at the moment of the bankruptcy discharge and

18

the inception of the injunction, CERCLA had not yet

been passed by Congress. Indeed CERCLA was not

enacted until 1980. Consequently, at the time of the

Consummation Order, there was no statutory basis for

liability to be asserted against PCTC by the petitioners.

Just as the employees in Schweitzer had no

recognizable tort causes of action under the FELA prior

to the employer railroad's relevant consummation

dates, the petitioners here could not have brought

claims under CERCLA prior to the Consummation

Date.

Id. at 167.

The Paoli Yard court then turned to the possibility of

contingent claims. As in Schweitzer we found that there

were no contingent claims to be discharged because of the

absence of a legal relationship.

[I]t was not until the passage of CERCLA that a legal

relationship was created between the petitioners and

PCC relevant to the petitioners' potential causes of

action such that an interest could flow. Because this

legal relationship did not evolve until after the

Consummation Date, the petitioners did not have

contingent claims against PCTC. Accordingly, our

decision in Schweitzer leads us to the conclusion that

the petitioners' asserted claims under CERCLA did not

constitute dischargeable claims within the meaning of

section 77 and thus survive the discharge of the

debtor.

Id. at 168.

Other Third Circuit cases are consistent with Paoli Yard

and Schweitzer. In In re Penn Central Transp. Co., 771 F.2d

762 (3d Cir. 1985) ("Pinney Dock"), the plaintiffs brought

antitrust actions against PCC and PCTC for pre-

reorganization conspiracies. We examined the nature of the

plaintiffs' antitrust claims and found that they existed at

the time of the reorganization. Consequently, the claims

were presumed discharged by § 77, absent other

considerations.8 We expressly distinguished Pinney Dock's

_________________________________________________________________

8. We later rejected the plaintiffs' claims of fraudulent concealment and

inadequate notice. Id. at 768-72.

19

facts, where all elements of the claim arose before

reorganization, from Schweitzer, where one element of the

claim, the manifestation of the injury, did not appear until

after consummation. Id. at 767.

In our most recent decision on the subject, we applied

the same principles. See In re Penn Cent. Transp. Co., 71

F.3d 1113 (3d Cir. 1995) ("Bessemer"), cert. denied, ___ U.S.

___, 116 S.Ct. 1851 (1996). Here, the Bessemer Railroad

and USX Corporation sought contribution from PCTC for

judgments entered against them in antitrust conspiracies.

PCTC raised the shield of its § 77 reorganization, and we

applied the Paoli Yard/Schweitzer analysis. We first looked

to nonbankruptcy law to determine when the claims

accrued. We noted that the plaintiffs sought contribution.

Id. at 1115. The event triggering contribution occurred after

the date of PCTC's 1978 Consummation Order. As in

Schweitzer, the claim did not yet exist at the time of

reorganization and thus was not barred. Moreover, as in

Schweitzer, the plaintiffs lacked any contingent claim that

might have been dismissed because there was no legal

relationship between the parties. The joint rate-making

agreement signed by the parties did not confer a right of

indemnification, so there was no intent to look to PCTC for

indemnity or contribution. Absent such an agreement, the

necessary legal relationship was lacking. Id. at 1116.

These cases establish the framework for our § 77

discharge analysis. First, we must determine whether the

CERCLA claim had accrued at the time of the

reorganization. If so, then it was discharged. Pinney Dock,

771 F.2d at 766. To determine whether a claim existed, we

look to the substantive area of law governing the underlying

claim. See Bessemer, 71 F.3d at 1114. If a claim had not

accrued, then we must determine whether the claimant

possessed an interest rising to the level of a contingent

claim that would be discharged. Schweitzer, 758 F.2d at

942.

Applying these principles to Conrail's contribution claim

yields a relatively straightforward answer. Under Paoli Yard,

Conrail's § 113 claim was not discharged because SARA

had not yet been enacted. In Paoli Yard, we rejected a

CERCLA claim against PCTC because "at the moment of the

20

bankruptcy discharge and the inception of the injunction,

CERCLA had not yet been passed by Congress. . . .

Consequently, at the time of the Consummation Order,

there was no statutory basis for liability to be asserted

against PCTC by the petitioners." 944 F.2d at 167. This

rule applies to the current case. SARA was not passed

until 1986. Consequently, at the time of Reading's

consummation order, there was no statutory basis for

contribution liability.

Reading attempts to avoid this conclusion by arguing

that § 113(f) permits a contribution action based on

prospective liability. See 42 U.S.C. § 9163(f) ("any person

may seek contribution from any other person who is liable

or potentially liable under section 9607(a) of this title . . ..

Nothing in this subsection shall diminish the right of any

person to bring an action for contribution in the absence of

a civil action . . ..") (emphasis added). Reading also notes

that courts, finding an implied right of action under

§ 107(a)(4)(B), interpreted that section as extending to cases

of potential liability. See, e.g., City of Philadelphia v. Stepan

Chemical Co., 544 F. Supp. 1135 (E.D. Pa. 1982) (early case

finding private right of action).

Adopting either of Reading's arguments would lead to a

harsh result. Both would sanction Conrail for failing to

allege claims that in December 1980 had no recognized

legal form. Section 113's language on potential liability had

not been enacted in 1980. Moreover, although we could

interpret § 107(a)(4)(B)'s private right of action as emerging

fully formed with the passage of CERCLA, the courts did

not for several years interpret § 107(a) as containing such

a cause of action. If we accepted Reading's position, we

would penalize Conrail for failing to register a claim which

would not be judicially recognized for two years. See Stepan

Chemical, 544 F. Supp. at 1141-43. For these reasons, we

will apply Paoli Yard and hold that Conrail's § 113(f)

contribution claim did not yet exist at the time of Reading's

§ 77 reorganization. Thus, it was not discharged.

This ruling on discharge does not, however, end matters.

Although Conrail's contribution claim was not discharged

by Reading's bankruptcy, the claim nevertheless fails as a

matter of law. Conrail's contribution claim depends on

21

Conrail and Reading both being liable to a third party, in

this case to the United States. Because, for the reasons we

state below, we find that the United States's claim was

discharged by Reading's bankruptcy, Conrail's contribution

action, based on Reading's common liability with Conrail to

the United States, cannot proceed.

As a threshold matter, the United States argues that we

need not reach the issue of Reading's liability to the United

States. The United States claims that the sole issue raised

by this appeal is whether the contribution claim was

discharged in bankruptcy. The United States asks that we

remand this case so that the derivative nature of the

contribution claim and its potential failure can be resolved

by the district court. We reject this contention for two

reasons. First, as a matter of judicial efficiency, remand

would be wasteful. The district court reached both issues,

holding that Conrail's § 113(f) contribution is a derivative

claim and that the United States' claim was discharged by

bankruptcy. Both are matters of statutory interpretation,

presenting questions of law subject to plenary review by

this court. See Manor Care, 950 F.2d at 124. Rather than

remanding to the district court so that it can reexamine the

conclusions it has already reached, we will address the

issues. Second, although an absence of joint liability may

be a defense, when there is no question that joint liability

is lacking, a necessary element to establish contribution

cannot be proven. The claim for contribution must then, as

a matter of law, fail. Consequently, the question of

Reading's liability to the United States under § 107 is

entirely germane to our current discussion.

We held in Part III.A, supra, that § 113(f) uses the term

contribution in its traditional, common law sense. This

means that CERCLA contribution, like common law

contribution, requires some form of joint liability. See David

B. Lilly Co. v. Fisher, 18 F.3d 1112, 1123 (3d Cir. 1994);

Green v. United States, 775 F.2d 964, 971 (8th Cir. 1985);

Restatement (Second) of Torts § 886A(1) (1977) ("when two

or more persons become liable in tort to the same person

for the same harm, there is a right of contribution among

them, even though judgment has not been recovered

against all or any of them").

22

CERCLA § 113(f) captures the requirements of joint

liability in its statutory language: "Any person may seek

contribution from any other person who is liable or

potentially liable under section 9607(a) of this title, during

or following any civil action under section 9606 of this title

or under section 9607(a) of this title." 42 U.S.C. § 9613(f).

Conrail suggests, however, that this provision establishes a

new form of statutory contribution that spreads liability

beyond traditional common law principles. Quoting

Sylvester Bros. Dev. Co. v. Burlington N.R. Co., 133 B.R.

648, 653 (D.Minn. 1991),9 Conrail argues that common

liability by two or more defendants to one common

government agency is not necessary under § 113(f). We

disagree. Contribution, by its own definition, requires a

common liability for the same injury. For example, the

Uniform Contribution Among Tortfeasors Act provides

"where two or more persons become jointly or severally

liable in tort for the same injury to person or property or for

the same wrongful death, there is a right of contribution

among them even though judgment has not been recovered

against all or any of them." Uniform Contribution Among

Tortfeasors Act (1955 Revised Act) § 1, 12 U.L.A. 194. We

read the language of § 113(f) as adopting the same

traditional sense of contribution. In permitting a party to

seek contribution from "any other person who is liable or

potentially liable" under § 107(a), it is inherent in the

concept of contribution that the persons commonly liable

be liable to the same entity. Otherwise, contribution could

become an endless circle of attempts to seek

reimbursement from unrelated parties.

Because § 113(f)(1) reflects the traditional concept of

contribution, its language does not permit contribution

among liable parties who do not have a common derivation

of liability. Section 113(f) parallels the scope of common law

contribution, which

_________________________________________________________________

9. Conrail's quoted language from Sylvester ("This provision [CERCLA

§ 113(f)(1)] does not expressly require common liability to a governmental

agency, as would be the case under common law contribution." 133 B.R.

at 653) is arguably dictum because the court reached this conclusion

only after it had already determined that the State of Minnesota's claim

against the debtor had not been discharged in bankruptcy and that a

common law right to contribution existed.

23

applies to all "joint tortfeasors," in the sense of two or

more persons who are liable to the same person for the

same harm. It is not necessary that they act in concert

or in pursuance of a common design, nor is it

necessary that they be joined as defendants.

Restatement (Second) of Torts § 886A, cmt. b. (1977).

Applying this traditional meaning of contribution to the

current case, we conclude that Reading's liability to Conrail

depends on Reading's liability to the United States. To be

liable for contribution, Reading must be liable to the United

States under § 107(a).

Conrail points out that there are two relevant bases of

liability under § 107(a). As provided in § 107(a)(4)(A), a PRP

is liable in contribution for "all costs of removal or remedial

action incurred by the United States Government or a State

or an Indian tribe not inconsistent with the national

contingency plan . . .." Or, under § 107(a)(4)(B), a party is

liable for "any other necessary costs of response incurred

by any other person consistent with the national

contingency plan." 42 U.S.C. § 9607(a)(4)(B).

Conrail contends that, because Reading can be liable to

Conrail under § 107(a)(4)(B) for costs incurred by Conrail,

contribution is not dependent on Reading's liability to the

United States under § 107(a)(4)(A). But Conrail is mixing

apples and oranges. It is describing a direct action for

cleanup costs and arguing that the possibility of such an

action demonstrates that common liability is not necessary

for contribution. We do not accept this circular argument

as valid.

As we have demonstrated in Part III.A., to the extent that

Conrail seeks apportionment of the expenses of cleanup, it

must do so under § 113(f). Reading's § 113(f) liability for

contribution depends on its liability to the United States.

Having come to this conclusion, we must then examine the

effect of Reading's § 77 reorganization on the United

States's claim against Reading. Applying the Schweitzer/

Paoli Yard analysis, we find that all four CERCLA elements

making up the United States' claim existed at the time of

Reading's § 77 reorganization. The United States' claim

against Reading had therefore accrued, and it was

discharged by the consummation order.

24

We set out the elements of a § 107(a) CERCLA claim in

Part III.A., supra. As to the four elements, there is no

dispute that Reading was a "responsible party," that

hazardous substances were disposed of at the Douglassville

"facility," or that a "release" occurred. The only issue is

whether the United States incurred response costs prior to

December 31, 1980. It did.

Under the law of this circuit, "if a particular government

action qualifies as a `removal action' under the definition

contained in CERCLA, the government's costs are

recoverable under the unambiguous language of § 107,

regardless of what statutory authority was invoked by EPA

in connection with its action." United States v. Rohm &

Haas, 2 F.3d 1265, 1274-75 and n.15 (3d Cir. 1993)

(emphasis added). A removal action involves

the cleanup or removal of released hazardous

substances from the environment, such actions as may

be necessary taken in the event of the threat of release

of hazardous substances into the environment, such

actions as may be necessary to monitor, assess, and

evaluate the release or threat of release of hazardous

substances, the disposal of removed material, or the

taking of such other actions as may be necessary to

prevent, minimize, or mitigate damage to the public

heal or welfare or to the environment.

42 U.S.C. § 9601(23).

In both 1970 and 1972, federal environmental agencies,

acting pursuant to the Clean Water Act, 33 U.S.C. § 1321,

undertook cleanups of massive releases from the

Douglassville site. These cleanups meet the definition of a

"removal action." The United States never recovered its

"response costs" for these efforts. Consequently, on the date

of Reading's § 77 reorganization, all four CERCLA elements

were met. The United States possessed an actual claim

against Reading.

The United States has not challenged any of these

elements on appeal, choosing instead to advance a novel

interpretation of Schweitzer. The United States suggests

that Schweitzer always requires a legal relationship between

the claimant and the debtor before a claim can be barred.

25

The United States then metamorphoses the legal

relationship requirement into a test turning on whether the

government had knowledge of the potential claim. This is

simply wrong. Schweitzer requires a legal relationship only

for the discharge of a contingent claim in bankruptcy. No

such relationship is needed for an accrued claim. The

United States' CERCLA claim had accrued at the time of

the reorganization. The question of a legal relationship is

therefore irrelevant. See Paoli Yard, 944 F.2d at 167-68

(discussing legal relationship only for contingent claim);

Schweitzer, 758 F.2d at 943 (same); see also In re

Remington Rand Corp., 836 F.2d 825, 833 (3d Cir. 1988)

(applying Schweitzer; holding government contract claim

discharged where claim was contingent and relationship

arose from government audit revealing claim).

Moreover, even if we were to accept the United States's

argument and assume that some degree of knowledge is a

prerequisite for discharge of an accrued claim (and under

Schweitzer it is not), we would still hold that the claim was

discharged. The question of knowledge is a question of fact,

subject to review only for clear error. See Riehl v. Travelers

Ins. Co., 772 F.2d 19, 24 (3d Cir. 1985) (describing

knowledge of toxic dumping as an issue of fact); see also

Consumers Produce Co., Inc. v. Volante Wholesale Produce,

Inc., 16 F.3d 1374, 1383 (3d Cir. 1993) (reviewing finding of

constructive knowledge of breach of trust for clear error);

Brock v. Claridge Hotel & Casino, 846 F.2d 180, 188 (3d

Cir. 1988) (reviewing finding of knowledge of legal violation

for clear error). The district court made factualfindings that

the United States had knowledge of its claim prior to the

bankruptcy discharge: the United States knew the

Douglassville site was an environmental trouble spot and

Reading Railroad was connected to it; by October 31, 1980,

the EPA had identified the site as potential hazardous

waste site; federal officials had twice responded to cleanup

needs at the site; EPA knew Reading Railroad had operated

a rail line to the site; in 1972 EPA had ordered Reading

Railroad to haul waste from the site; and ICC tariffs,

available as part of the bankruptcy proceedings, showed

that Reading transported hazardous materials to the site. In

re Reading Co., 900 F.Supp. at 745-46. In making these

findings, the district court also relied on the length of the

26

Reading Railroad's bankruptcy, the government's

substantial participation in it, and the large amount of

publicity that surrounded CERCLA's passage, along with

EPA's advocacy of the statute. Id. The court's finding of

knowledge merits deference. With ample support in the

record, we cannot say its holding was clearly erroneous.

Because of this finding, the United States would lose on the

knowledge issue even if we were to conclude that knowledge

was necessary.

We hold therefore that under our decisions in Schweitzer

and Paoli Yard, the United States' CERCLA claim against

Reading for environmental clean-up at the Douglassville

site was discharged in the § 77 reorganization. Reading is

not liable to the United States under § 107(a)(4)(A), and

Reading is therefore not a "person who is liable or

potentially liable under [§ 107(a)] of this title," 42 U.S.C.

§ 9613(f)(1). Conrail's claim for contribution under § 113(f)

fails as a matter of law.

At oral argument, Conrail mentioned for the first time

that it had spent over $1 million on remedial measures at

the Douglassville site. Because of the lateness of Conrail's

assertion of any such direct expense, we will not analyze

the nature of Conrail's claims to ascertain if Conrail is in

fact asserting a claim that is more than one for

contribution. See, e.g., United States v. Voigt, 89 F.3d 1050,

1064 n.4 (3d Cir. 1996) (holding that failure to raise an

issue until it is brought up at oral argument constitutes a

waiver). For that reason, we do not need to consider

whether, under the guidelines we have set out in New

Castle County v. Halliburton NUS Corp., Conrail can

maintain a direct claim under § 107(a)(4)(B) in addition to a

claim for contribution.

IV. CONCLUSION

We hold therefore that Reading's § 77 reorganization bars

any claim by Conrail for § 113(f) contribution from Reading

for the Douglassville site. In reaching this conclusion, we

have not elevated bankruptcy law over CERCLA, nor do we

perceive a clash between the two systems. Each performs

its respective function. Our opinion merely demonstrates

27

that CERCLA claims are treated like any other claim in

bankruptcy. Because Reading's liability to the United States

for the Douglassville site was discharged in its § 77

reorganization, we will affirm the order of the district court.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

28