1992-08-13_GENERAL DOCUMENTS - C1981017 (2)

Home Browse Search

construed as the enforcement of a money judgment? Case law favors the regulators. The following two circuit court decisions are representative. In Penn Terra Ltd. v. Dept. of Environ. Resources, 733 F.2d 267 (3rd Cir. 1984), a coal surface mine operator violated state environmental protection statutes and entered into a consent order requiring remedial action by the operator. The operator then filed a Chapter 7 bankruptcy, and the state sought an injunction which would have compelled performance of the consent order. The bankruptcy court found that the debtor would have been required to expend funds to perform the consent order and that the state was, in effect, attempting to collect a money judgment; "the purpose was not only to enforce a regulation, but to exhaust the debtor's assets." The bankruptcy court therefore held that the stay precluded enforcement of the consent order. On appeal, the Third Circuit reversed, holding that the remedial action was being sought to prevent potential future harm. The fact that the debtor would have to spend money to carry out the consent order did not preclude the exercise of the state's regulatory powers. Matter of Commonwealth Oil Refining Co., 805 F.2d 1175 (5th Cir. 1986), involved an oil refinery which was governed by the Resource Conservation and Recovery Act of 1976 (RCRA). During the pendency of the debtor's Chapter 11 case, the EPA terminated the refinery's interim permit and required the debtor to file a closure plan. The debtor argued that the EPA's actions constituted an attempt to collect a money judgment because the debtor would be forced to expend funds to comply with the closure plan. The Fifth Circuit followed Penn Terra and held that forcing the debtor to spend money fell within the EPA's regulatory powers and did not represent enforcement of a money judgment. The Court rejected the debtor's argument that a showing of "imminent and identifiable harm or urgent public necessity" should be required before forcing a debtor to deplete its estate performing remedial work. Priority of Reclamation Claims Colorado's right to require Resources to expend funds in an amount sufficient to reclaim mined property constitutes a "claim" within the meaning of the Bankruptcy Code. A claim includes a right to payment, including contingent, unliquidated, unmatured, and equitable rights, and also includes a right to an equitable remedy for breach of performance, if such breach gives rise to a right to payment. 11 U.S.C. § 101(5). Obligations to perform environmental cleanups have been found to constitute a claim in bankruptcy. Ohio v. Kovacs, 469 U.S. 274, 105 S. Ct. 705 (1985). • -4-