## Facts

- Chemetron Corporation filed a Chapter 11 bankruptcy petition in the U.S. Bankruptcy Court for the Western District of Pennsylvania.
- The bankruptcy court confirmed Chemetron’s reorganization plan in July 1990, and the confirmation order discharged debts addressed by the plan.
- Chemetron allegedly deposited radioactive and other hazardous substances at a dump located in a residential neighborhood in Newburgh Heights, Ohio.
- In 1992, Phyllis Jones and other neighborhood residents and family members (including a child who was in utero when the plan was confirmed) sued Chemetron in Ohio state court, alleging injuries from exposure to the substances deposited at the dump.
- Chemetron sought dismissal in the Ohio action, asserting that the bankruptcy court retained jurisdiction in light of the confirmed plan; the parties stayed the state-court case while bankruptcy issues were litigated.
- The plaintiffs asked the bankruptcy court to allow their claims despite the bankruptcy deadlines, or alternatively to permit an adversary proceeding to determine that their claims were not discharged.
- The plaintiffs argued, among other things, that under Ohio law their tort claims accrued after plan confirmation because they did not know (and could not reasonably have known) the causal link between their injuries and Chemetron’s dumping until later.
- Chemetron argued that a federal bankruptcy accrual standard—rather than Ohio tort accrual rules—controlled when the plaintiffs’ claims arose for discharge purposes.
- The bankruptcy court held that Ohio law governed accrual and concluded that, under Ohio law, the plaintiffs’ claims accrued before confirmation because, with reasonable investigation, the plaintiffs could have discovered the causal connection before confirmation.
- The plaintiffs appealed.

## Issues

1. For purposes of determining whether a state-law toxic-exposure claim was discharged by a confirmed Chapter 11 plan, is the claim’s accrual governed by state tort law (Ohio) or by a federal bankruptcy accrual rule?
2. Applying the governing accrual rule, did the plaintiffs’ claims arise before plan confirmation (and thus were discharged), including the claim of the child who was in utero at the time of confirmation?

## Decision

- The Third Circuit held that, under controlling circuit precedent at the time, the existence of a “right to payment” for discharge purposes depended on when the underlying cause of action accrued under applicable nonbankruptcy law; here, Ohio law supplied the accrual rules.
- Applying Ohio accrual principles for latent-injury claims, the court agreed that claims of plaintiffs whose injuries and causal connection were discoverable through reasonable diligence before confirmation were pre-confirmation claims subject to discharge.
- The court distinguished claimants whose causes of action could not accrue until after confirmation under Ohio law (including the child who was in utero when the plan was confirmed) and held that such post-confirmation claims were not discharged on the same theory.
- The court affirmed the discharge determination as to the pre-confirmation, discoverable claims and remanded for further proceedings consistent with its treatment of the post-confirmation claim(s).

## Legal Principles

- In the Third Circuit’s then-governing approach, whether a bankruptcy “claim” exists for discharge purposes turns on when the claimant has a state-law “right to payment,” which is determined by applicable state accrual rules.
- For latent toxic-exposure injuries under Ohio law, accrual may occur when a “cognizable event” should lead a reasonable person to investigate and the plaintiff knew or should have known of both the injury and its likely cause.
- A Chapter 11 confirmation discharge bars later litigation of claims that accrued before confirmation, even if the lawsuit is filed after confirmation.
- A claimant whose cause of action could not accrue until after confirmation under the applicable state law is not treated as holding a discharged pre-confirmation claim on an accrual-based theory.

## Conclusion

In *Jones v. Chemetron Corp.*, the Third Circuit applied Ohio tort accrual law—rather than a freestanding federal bankruptcy accrual rule—to decide whether neighborhood residents’ toxic-exposure claims were discharged by Chemetron’s confirmed Chapter 11 plan, concluding that claims discoverable through reasonable diligence before confirmation were discharged while claims that could not accrue until after confirmation (including the in utero claimant) were not.


Jones v. Chemetron Corp., 212 F.3d 199 (2000)