## Facts

- Robert and Rosemary Jensen owned and operated Jensen Lumber Co., which ran a lumber mill in California using a dip tank containing about 5,000 gallons of toxic fungicide solution (including pentachlorophenol).
- The corporation filed a Chapter 11 bankruptcy petition on December 2, 1983.
- A state water-quality inspector visited the inactive site on January 25, 1984 and soon warned Robert Jensen that a release could cause severe environmental harm and requested prompt hazard abatement.
- The Jensens filed a personal bankruptcy petition in February 1984 and later received a discharge in July 1984.
- The fungicide was not effectively removed by the Jensens; the state requested intervention by the California Department of Health Services (DHS).
- DHS removed the waste, discovered leakage, and conducted a broader remediation, spending more than $900,000; it later attributed 10% of the costs to the Jensens.
- After the bankruptcies were closed, DHS notified the Jensens that it considered them responsible (or potentially responsible) parties for cleanup costs.
- In 1988, the Jensens reopened their personal bankruptcy case to add DHS as a creditor and sought a ruling that DHS’s monetary claim had been discharged.

## Issues

1. Whether DHS’s right to payment for environmental cleanup costs was a prepetition “claim” under 11 U.S.C. § 101(5) discharged in the Jensens’ bankruptcy, or a post-petition obligation that survived discharge.
2. How broadly “claim” under § 101(5) applies to governmental cleanup reimbursement tied to contamination and conduct occurring before the petition date.

## Decision

- The Ninth Circuit affirmed the Bankruptcy Appellate Panel and reversed the bankruptcy court’s timing determination.
- DHS held a prepetition claim because its asserted right to payment was based on prepetition ownership/operations and the existing hazardous condition, not on the later cleanup expenditures.
- Because the claim was prepetition, it was discharged by the Jensens’ 1984 bankruptcy discharge.

## Legal Principles

- “Claim” under 11 U.S.C. § 101(5) is defined broadly to include contingent, unmatured, and unliquidated rights to payment.
- A governmental reimbursement demand for environmental response costs can be a dischargeable bankruptcy claim when it is traceable to prepetition conduct and the resulting liability was reasonably foreseeable at the petition date.
- Post-petition governmental action that enforces regulatory duties does not necessarily create a nondischargeable obligation; where the government seeks money reimbursement tied to prepetition conditions, the obligation fits within the Code’s “right to payment” concept.

## Conclusion

The court treated state environmental cleanup reimbursement as a contingent prepetition claim when the hazard and debtor conduct predated bankruptcy and the potential for state intervention was reasonably foreseeable, resulting in discharge of the state’s monetary claim against the individual debtors.


Cal. Dep’t of Health Servs. v. Jensen (In re Jensen), 995 F.2d 925 (9th Cir. 1993)