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In re In re Quanta Resources Corp.

Citation: 14 ELR 20563
No. No. 83-5142, 739 F.2d 912/21 ERC 1241/(3d Cir., 07/20/1984)

The court holds that a trustee in bankruptcy may not abandon a hazardous waste site where such abandonment would constitute disposal of waste in violation of state law. The Quanta site contains over 70,000 gallons of polychlorinated-biphenyl-contaminated oil, which by state law must be guarded, contained, and eventually disposed of, all at great cost. The trustee sought to abandon the site under Bankruptcy Reform Act § 554, which permits abandonment of property burdensome to the estate. The court holds that the issue is one of preemption, and that in general state law is preempted only if the nature of the regulated subject matter permits no other conclusion or if Congress expressly intended to preempt. The court notes that the purpose of the abandonment law — to promote speedy, equitable settlement of creditors' accounts — and the purpose of the state law — to protect the public from dangerous chemicals — are seemingly irreconcilable in the present situation. However, the court finds no congressional intent to preempt state public safety laws. The abandonment section has no specific legislative history, though it codifies a judicially created abandonment power that was subject to important exercises of state police power and governed by principles of equity. Various sections of the Bankruptcy Reform Act suggest that Congress did not intend to give the trustee carte blanche to ignore state laws, and intended the courts to use equitable principles to decide the extent of the trustee's powers. The court holds that the public interest in enforcing laws to protect the public from toxic chemicals outweighs the public interest in preserving the estate for the creditors and, therefore, the state law is not pre-empted. Finally, the court holds that the state may be eligible for reimbursement from the estate for cleanup costs as an administration expense under Bankruptcy Reform Act § 503(b). The court declines to rule, however, on the priority of the state's claim.

A dissent finds that the plain language of § 554(a) empowers the trustee to abandon burdensome property, without exception. It criticizes the majority for relying on unpersuasive case law, interpreting the Act so as to raise a taking question, sidestepping the issue of the priority of the state cleanup cost claim, applying parts of the Act dealing with operation of businesses to the liquidation of businesses, saddling the trustee and creditors with resonsibility for the debtor's prior unlawful acts, misconstruing cleanup costs as administrative, and leaving the district court without guidance on critical issues.

[A companion case is published at 14 ELR 20572 — Ed.]

Counsel for Appellants
Norman Spiegel, Ass't Attorney General
2 World Trade Ctr., New York NY 10047
(212) 488-3313

Counsel for Appellees
William F. McEnroe
Nolan, O'Neill & Moore
60 Park Pl., Newark NJ 07102
(201) 643-6300

Joined by Higginbotham, J.