ELR Citation: ELR 20015
No(s). 89-5077 (3d Cir. Sep 15, 1989)

The court holds that the district court lacked authority under $105(a) of the Bankruptcy Code to require a railway to apply for expedited approval under the New Jersey Environmental Cleanup Responsibility Act (ECRA) to allow a debtor's trustees to convey real property to the railway. The debtor is a railroad company that has been in bankruptcy proceedings since 1977. Under a 1982 reorganization plan, the railway, which had been operating the debtor's railroad, agreed to purchase all the debtor's operating assets and real property. In 1986, the railway entered into an agreement with the trustee and an insurance company under which the insurance company agreed to purchase certain of the debtor's real property. The proceeds of the sale were split between the railway and the trustee. The railway assumed liability under the agreement for bringing a parcel of the debtor's property known as the Rockaway site into compliance with ECRA, which requires approval by the New Jersey Department of Environmental Protection (DEP) for the transfer of real property containing an industrial establishment. The trustee, concerned that DEP approval was not imminent, moved the district court to require the railway to apply to the DEP for expedited approval. An expedited approval does not require submittal of a detailed cleanup plan, but requires the applicant to supply financial assurance in an amount at least equal to DEP's estimate of the cleanup costs. The court holds that the district court lacked authority to issue such an order under the Bankruptcy Code. The 1986 agreement did not require the railway to take steps under ECRA to obtain a permit, and neither §105(a) nor any other provision of the Code authorizes the district court to force the railway to assume cleanup liability. Section 105(a) does not authorize a court to expand the contractual obligations of the parties.

Counsel for Appellant
Roger C. Ward, Steven J. Halpern
Pitney, Hardin, Kipp & Szuch
P.O. Box 1945, 163 Madison Ave., Morristown NJ 07960
(201) 267-3333

Counsel for Appellee
David J. Sheehan
Crummy, Del Deo, Dolan, Griffinger & Vecchione
One Gateway Center, Newark NJ 07102-5311
(201) 622-2235