## Facts

- Robert and Rosemary Jensen owned and operated a closely held corporation that ran a lumber mill using a dip tank holding about 5,000 gallons of fungicide containing toxic chlorinated phenols.
- On January 25, 1984, a California environmental regulator inspected the inactive site and found the hazardous solution in the tank.
- On February 2, 1984, the regulator warned Robert Jensen that a release could cause major harm and asked for prompt steps to prevent or remove the hazard.
- On February 13, 1984, the Jensens filed a Chapter 7 petition; their schedules did not list a specific hazardous-waste cleanup obligation.
- The Jensens received a Chapter 7 discharge in July 1984.
- After the petition date, the California Department of Health Services (DHS) became involved in arranging removal and later sought to recover response and cleanup costs under CERCLA and California’s Hazardous Substance Account Act.
- In 1989, the Jensens filed an adversary proceeding seeking a declaration that DHS’s cleanup-cost demand was a prepetition claim discharged in their 1984 case.

## Issues

1. Whether DHS’s statutory right to recover environmental cleanup costs constituted a bankruptcy “claim” that arose prepetition, even though DHS incurred response costs postpetition.
2. Whether, for bankruptcy timing, a cleanup-cost claim depends on accrual of a nonbankruptcy cause of action or can exist as a contingent or unmatured claim based on prepetition events and knowledge.
3. Whether prepetition knowledge of the contamination held by one state environmental agency could be attributed to DHS in determining when the claim arose.

## Decision

- The Bankruptcy Appellate Panel reversed the bankruptcy court.
- The Panel held DHS’s cleanup-cost demand was a prepetition “claim” because the hazard and the debtors’ potential responsibility were identified before the bankruptcy filing, making the liability at least contingent or unmatured as of the petition date.
- The Panel rejected a rule tying claim existence to when cleanup costs were incurred or when a cost-recovery cause of action accrued under environmental law.
- The Panel treated the state’s prepetition regulatory knowledge as attributable to DHS for claim-timing purposes.
- Because the claim arose prepetition, it was subject to the Jensens’ Chapter 7 discharge (subject to ordinary notice and due process limits not resolved by the claim-timing holding).

## Legal Principles

- The Bankruptcy Code defines “claim” broadly to include rights to payment that are contingent or unmatured, not limited to causes of action that have accrued under nonbankruptcy law.
- For discharge purposes, an environmental cleanup-cost obligation can be a prepetition claim when prepetition conduct and an identifiable hazard create a prepetition relationship between the debtor and the government, even if costs are incurred later.
- Statutory prerequisites to filing a cost-recovery action (such as cost incurrence) do not control when a bankruptcy claim arises.
- When multiple state agencies act in related regulatory capacities concerning the same contamination, prepetition knowledge held by one agency may be imputed to another in evaluating whether the state’s claim arose prepetition.

## Conclusion

The Panel held that California’s cleanup-cost liability was a contingent prepetition bankruptcy claim because the contamination and potential responsibility were identified before the Chapter 7 filing, so the state’s later-incurred response-cost demand fell within the scope of the discharge rather than constituting a new postpetition debt.


Jensen v. Cal. Dep’t of Health Servs. (In re Jensen), 127 B.R. 27 (B.A.P. 9th Cir. 1991)