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In re In re Smith-Douglass, Inc.

ELR Citation: 18 ELR 21472
Nos. Nos. 87-1683, -1684, 856 F.2d 12/28 ERC 1209/(4th Cir., 09/06/1988)

The court holds that a bankruptcy trustee may unconditionally abandon property that contains violations of state environmental laws, since the site poses no imminent health threat and the debtor's estate includes no unencumbered assets to finance the cleanup. The prohibition of the abandonment of property that constitutes an immediate threat to public health and safety is a narrow exception to the trustee's abandonment power. Federal bankruptcy law preempts state law that obstructs the expeditious and equitable distribution of the estate. In addition to considerations of public health, the financial condition of the debtor is relevant to a determination of whether abandonment is permissible. Cleaning up environmental violations is properly considered an administrative expense that is subordinate to secured claims, but that has priority over unsecured claims. Therefore, where an estate has unencumbered assets, stricter compliance with state environmental laws should be permitted.

Counsel for Plaintiffs
John M. Murchison Jr.
Kennedy, Covington, Lobdell & Hickman
3300 NCNB Plaza, Charotte NC 28280
(704) 377-6000

Marcia Bellows, Ass't Attorney General
Environmental Control Division
100 W. Randolf St., Chicago IL 60601
(312) 917-2381

Counsel for Defendants
Gregory B. Crampton
Merriman, Nicholls & Crampton
100 St. Albans Dr., Raleigh NC 27619
(919) 781-1311

Thomas B. Anderson Jr.
Jenkens & Gilchrist
1445 Ross Ave., Dallas TX 75202
(214) 855-4795

Before HALL and WILKINSON, Circuit Judges, and MERHIGE, Senior District Judge for the Eastern District of Virginia, sitting by designation.