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In re In re Advance Coatings Co.

Citation: 19 ELR 21420
No. No. 89-40108-JFQ, (Bankr. D. Mass., 07/12/1989)

The court holds that cost recovery under §§ 107 and 113 of the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), against a Chapter 11 debtor, is excepted from the automatic stay under § 362(b)(4) of the Bankruptcy Code. The United States' CERCLA suit sought recovery of response costs already incurred, and requested declaratory relief that defendants in the case were liable for all future costs incurred by the United States at the site. The court noted that both the Senate and House committee reports on the automatic stay provision expressly exempted from the automatic stay a governmental unit's suit to prevent or stop violations of environmental protection laws, and suits attempting to fix damages for violations of such laws. The court holds that such a suit is to enforce the governmental unit's police or regulatory power, even though it seeks compensation for expenditures and § 362(b)(5) prevents the government from enforcing any money judgment which it obtains. the court observes that the government's action is based on the public policy of protection of the environment rather than its own pecuniary interest, that such suits have a deterrent effect that reduces further violations, and that funding of the government's activities is significantly dependent upon such suits. Finally, the court holds that granting the exemption is proper because the debtor has not requested the court to use its general powers under § 105(a) of the Bankruptcy Code, or demonstrated any frustration in reorganization resulting from exempting the government's suit.

Counsel for Federal Government
Casper E. Carpenter, Ass't U.S. Attorney
1107 John W. McCormack
P.O. and Courthouse, Boston MA 02109-4583
(617) 223-9400

Robert Maher
Land and Natural Resources
U.S. Department of Justice, P.O. Box 7611, Ben Franklin Station, Washington DC 20044
(202) 633-4241

Counsel for Debtor
David Nickless
Nickless & Philips
401 Main St., Fitchburg MA 01420
(508) 342-4590