Search Site
Menu
D.N.J.: CERCLA Cleanup Costs Not Subject to the Automatic Stay Provision of the US Bankruptcy Code

Following a previous Third Circuit decision, the United States District Court for the District of New Jersey recently confirmed that corporations cannot stay in personam claims for environmental cleanup costs under the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA,” also known as “Superfund”) by declaring bankruptcy.

In U.S. v. Alsol Corp., 2014 U.S. Dist. LEXIS 1179 (D.N.J. Jan. 2, 2014), the EPA brought suit under CERCLA against several defendants, alleging that they were responsible for the costs associated with remedial work conducted at a contaminated site in New Jersey. The remediation costs for this site exceeded $3 million, before either interest or ongoing expenses were taken into account.

After this suit began, two of the defendant corporations filed for bankruptcy. Under the United States Bankruptcy code, such a filing would normally provide an automatic stay of the commencement or continuation of a judicial action against a debtor that had been or could have been brought before the start of the bankruptcy proceeding. The purpose of this stay is to give the debtor a “breathing spell” from creditors racing to collect against debts, and to provide for an orderly division of assets. However, this stay has several exceptions, including claims brought by a “governmental unit” to enforce its regulatory power. 11 U.S.C. §362 (b)(4).

The District Court followed the Third Circuit’s holding in U.S. v. Nicolet, Inc., 857 F.2d 202 (1990), that in personam actions for the collection of CERCLA cleanup costs fall into this regulatory power exception to a bankruptcy stay. In doing so, the court recognized that this stay provision was ripe for abuse by debtors seeking to frustrate governmental actions by declaring bankruptcy, especially in cases of environmental contamination liability. The Court reasoned that the goals of environmental protection embodied in CERCLA outweigh the interests of bankrupt debtors, noting that “enforcement of the environmental protection laws merits a higher priority than the debtor’s rights to a ‘cease fire’…”

This is an important development for current and former owners and operators of property believed to be impacted by releases of hazardous substances. Additionally, individuals and organizations pursuing bankruptcy or reorganization must consider their cleanup obligations as ongoing despite the application of a bankruptcy stay to other of their financial obligations.

The attorneys at Lieberman Blecher & Sinkevich P.C., who regularly assist clients with environmental issues that arise in the context of CERCLA and related environmental statutes, will be closely following the developments in this area of the law. Our team of environmental lawyers are experienced in both litigation and remediation issues. We have assisted many clients in managing potential CERCLA liability and responding to CERCLA litigation.

 

Leave a Reply

Your email address will not be published. Required fields are marked *

Our Attorneys

Recent Twitter Posts

  • U.S. Supreme Court will hear PennEast Pipeline appeal of New Jersey eminent domain dispute. https://t.co/AqqvTw1QD2
    3 weeks ago
  • Fishing to be allowed in future wind farm off the coast of Atlantic City. https://t.co/x8vlsXFtcW
    1 month ago
  • New Jersey Economic Development Authority approves pilot program to replace diesel trucks with electric vehicles in… https://t.co/EZ5xkmDIjY
    1 month ago
  • New Jersey sues the Federal Government over PFAS contamination at military bases. https://t.co/f3BTcTmMJ8
    1 month ago

Recent Blog Posts

San Diego Receives Federal Funding to Fight Mexican Sewage

San Diego has just received substantial federal funding from the EPA to address a chronic problem: raw sewage coming from Tijuana Mexico. That sewage has been migrating over the border
Read More
San Diego Receives Federal Funding to Fight Mexican Sewage

New Jersey Supreme Court rules for NJ Transit in insurance claim for damages due to Superstorm Sandy

A New Jersey Supreme Court opinion issued on January 27, 2021 affirmed an Appellate Division decision in favor of NJ Transit over its insurers. In 2012, when Superstorm Sandy hit
Read More
New Jersey Supreme Court rules for NJ Transit in insurance claim for damages due to Superstorm Sandy

New York and New Jersey lawmakers make attempts to combat increasing recycling problem

New York and New Jersey have recently been making legislative efforts to find a solution to their share of the United States’ increasing recycling problem. In January 2018, China halted
Read More
New York and New Jersey lawmakers make attempts to combat increasing recycling problem

Lawsuit filed over Florida’s wetlands delegation

Several environment organizations have filed suit challenging the EPA’s relinquishment of control over wetlands in Florida. Many have criticized the manner in which Florida has historically regulated wetlands alleging that
Read More
Lawsuit filed over Florida’s wetlands delegation

In the media

  • Gulf Coast Town Center facing foreclosure

    Naples Daily News, September 16, 2015

    Wells Fargo filed a lawsuit Sept. 8 against an affiliate of CBL & Associates, the owners of the decadeold, 1.2 million-square-foot mall in south Fort Myers for a $190.9 million unpaid loan. The center has 94 stores on 204 acres, with such anchors as Super Target, Belk, Best Buy, Dick’s Sporting Goods, Marshalls and Costco...

    Read More
  • Town liable for private company's leaking underground tanks, court rules

    NJ.com Jul 26, 2017

    CRANFORD -- A couple that owned a businesses in town and became sick from leaking underground tanks owned by an adjacent business can sue the township for damages because the tanks were partially ...

    Read More
  • Dark Waters: How a Class Action Catapulted NJ to Forefront of 'Forever Chemicals' Battle

    NJ Law Journal Jan 09, 2020

    As property owners become increasingly aware of PFAS contamination, and as individuals exposed to PFAS learn of the health risks associated with exposure, liability will likely affect entire supply chains.

    Read More
  1. 1
  2. 2
  3. 3
  4. 4
  5. 5
Contact Our Firm

Quick Contact Form