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In re In re Commerce Oil Co.

ELR Citation: 18 ELR 21017
Nos. No. 86-6215, 847 F.2d 291/27 ERC 1801/(6th Cir., 05/23/1988)

The court holds that proceedings by the state to assess civil penalties under the Tennessee Water Quality Control Act (WQCA) fall within the police power exception to the automatic stay provision of the Bankruptcy Code. The court first holds that the case is not moot, despite the debtor's failure to object to the state's claim against the estate within the time period established by the bankruptcy court. Although this debtor may not raise the question again, the state will likely wish to cite other bankruptcy debtors in violation of state environmental laws. Moreover, the bankruptcy court's time constraints precluded appellate review. The court then holds that the police power exception in 11 U.S.C. §362(b)(4) applies not only to remedial actions taken by the state and injunctive relief but also to the state's determination and review of the civil penalty assessment. The court holds that the state's actions were regulatory in nature within the meaning of §362(b)(4), since the assessment was not made for primarily pecuniary purposes. The WQCA is a remedial statute, and civil penalties under the Act are intended to provide an economic deterrent to unlawful discharges and to cover costs of enforcement. Any money collected from a violator pursuant to the Act's civil penalty provisions is placed in a special fund used only for administration of the Act. The debtor's argument that allowing the exception will waste resources by forcing it to petition the bankruptcy court for a stay under 11 U.S.C. §105 to preserve the estate fails, since preservation of the debtor's estate is not necessarily of greater priority than enforcement of environmental laws.

Counsel for Plaintiffs-Appellants
W. J. Michael Cody, Attorney General
450 James Robertson Parkway, Nashville TN 37219
(615) 741-6474

Counsel for Defendants-Appellees
Kyle R. Weems
Weems & Wilson
Suite 404, 736 Georgia, Chattanooga TN 37402
(615) 266-2400

Before: MARTIN and GUY, Circuit Judges; and JOHNSTONE, Chief District Judge[*]