ELR Citation: ELR 20562
No(s). CV85-H-823-S (N.D. Ala. May 10, 1985)

The court holds that a suit seeking to enforce various federal environmental laws against a debtor in an ongoing Chapter 11 bankruptcy proceeding may be withdrawn from the bankruptcy judge and is exempt from the automatic bankruptcy stay.

The court first holds that the suit, alleging violations of the Clean Water Act, the Resource Conservation and Recovery Act, and the Comprehensive Environmental Response, Compensation, and Liability Act, is subject to the district court's order which referred all cases "related to" the Title 11 reorganization to the bankruptcy court. The reorganization would be greatly affected by injunctive relief, and provisions allowing withdrawal from referral suggest that Congress intended a broad construction of "related to." The court then considers the applicability of 28 U.S.C. §157(d), which provides for withdrawal of cases from the bankruptcy judge. It rejects the defendants' contentions that the present action is exempt from §157(d) as a "core proceeding," holding that the section applies to all types of proceedings. Indeed, the resolution of the case involves substantial and material consideration of non-bankruptcy statutes, so that even a narrow interpretation of the provision mandates withdrawal. Furthermore, the imminent danger involved and the possibility of de novo review of any findings of the bankruptcy court by the district court indicate that the case would qualify for permissive withdrawal.

The court then holds that the case is exempt from Bankruptcy Act §362's automatic stay of actions against the debtor, because of §362(b)(4) and (b)(5)'s exemptions for environmental protection suits and injunctions. The court rejects the defendants' claim that an injunction which costs money to obey is a money judgment and therefore not subject to §362(b)(5). Compliance with environmental laws is more important than preservation of the defendant's estate, the defendants' claim would effectively exclude almost all injunctions from (b)(5), and the injunctions sought here are intended to prevent future harm rather than compensate for past damages.

The court allows the state of Alabamato intervene in the suit because the injunctive relief which it seeks is exempted from the stay by §362(b)(5), and its suit for civil penalties will be stayed only when it seeks to enforce the judgment.

Counsel for Plaintiffs
Frank Donaldson
U.S. Attorney's Office
Room 200, Federal Courthouse, Birmingham AL 35203
(205) 254-7185

Henry Habicht
Environmental Enforcement Section
Department of Justice, Washington DC 20530
(202) 633-4241

Counsel for Defendants
Jack E. Held
Sirote, Permutt, Friend, Friedman, Held & Appolinsky
2222 Arlington Ave. So., Birmingham AL 35205
(205) 933-7111