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United States v. Mattiace Indus.

Citation: 17 ELR 21004
No. No. 86-CV-1792, 73 Bankr. 816/26 ERC 1484/(E.D.N.Y., 05/15/1987)

The court holds that the automatic stay provision of the Bankruptcy Code, 11 U.S.C. § 362(a)(1), does not entitle a debtor in possession to an automatic stay of Environmental Protection Agency (EPA) litigation to obtain injunctive relief, response costs, punitive damages, and civil penalties under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA). Although § 362(a)(1) of the Bankruptcy Code operates generally to stay judicial proceedings against a debtor, § 362(b)(4) creates an exception to the stay for actions to enforce a governmental unit's police or regulatory powers. Injunctive relief and fines are squarely within this exception to the stay provision. The court holds that EPA's request for response costs and punitive damages also falls within the exception to the automatic stay provision. Although the legislative history behind and case law interpreting § 362(b)(4) indicate that the exception does not apply to governmental actions to protect the "pecuniary interests" of the government in the debtor's property, the "pecuniary interests" rule is inapplicable here. CERCLA was enacted to protect public health, safety, and welfare, and even response cost recovery and punitive damages serve a deterrence function to protect these interests.

Counsel for Plaintiff
Joseph J. McGovern
Land and Natural Resources Division
Department of Justice, Washington DC 20530
(202) 223-3258

Counsel for Defendants
David Henry Sculnick
Gordon & Silber
99 Park Ave., New York NY 10016
(212) 687-2090

Joseph Zedrosser
Rivkin, Radler, Dunne & Bayh
EAB Plaza, Uniondale NY 11556-0111
(516) 357-3000