ELR Citation: ELR 20171
No(s). C 91-1257 BAC (N.D. Cal. Jul 1, 1992)

The court holds that the postpetition purchasers of a bankruptcy debtor's contaminated property are not barred by the Bankruptcy Code's automatic stay provision from seeking damages under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) from the debtor for the environmental contamination at the site. The contaminated property was purchased from the debtor-in-possession in April 1987, nearly two months after the owner filed its Chapter 11 reorganization petition in bankruptcy. The court holds that because the bankruptcy judge crossed out the "exclusive jurisdiction" language in the petition upon signing the proposed confirmation order, the debtor's motion to dismiss the purchasers' complaint must be denied. The court next observes that because the purchasers' complaint could not have been commenced against the seller prior to its filing for bankruptcy, the applicability of the Bankruptcy Code's automatic stay depends on whether the court finds that the purchasers' CERCLA claim arose prepetition. The court, applying the policy considerations in Juniper Development Group v. Kahn, 73 B.R. 494 (Bankr. D. Mass. 1987), holds that the purchasers' claim against the debtor arose postpetition when the contaminated facility was transferred, and thus, the automatic stay does not apply. A debtor should not be allowed to circumvent CERCLA by virtue of a postpetition transfer of contaminated property, particularly where there are allegations that the debtor had knowledge of the environmental problems that it did not disclose to the purchaser.

Counsel for Plaintiffs
Matthew Righetti, Paul A. Montesanti
The Righetti Law Firm
4900 Hopyard Rd., Ste. 220, Pleasanton CA 94588
(510) 460-0900

Counsel for Defendants
Garrett E. Mulrooney, Gordon J. Apple
Maun & Simon
2300 World TradeCtr., St. Paul MN 55101
(612) 229-2900

CAULFIELD, District Judge