Quanta Resources Corp. (Quanta) processed waste oil at
facilities located in New York and New Jersey. The New Jersey
Department of Environmental Protection (NJDEP) discovered that
Quanta had violated a provision of the operating permit for the New
Jersey facility by accepting oil contaminated with a toxic
carcinogen. During negotiations with NJDEP for the cleanup of the
New Jersey site, Quanta filed a petition for reorganization under
Chapter 11 of the Bankruptcy Code, and after NJDEP had issued an
order requiring cleanup, Quanta converted the action to a
liquidation proceeding under Chapter 7. An investigation of the New
York facility then revealed that Quanta had also accepted similarly
contaminated oil at that site. The trustee notified the creditors
and the Bankruptcy Court that he intended to abandon the property
under § 554(a) of the Bankruptcy Code, which authorizes a trustee
to "abandon any property of the estate that is burdensome to the
estate or that is of inconsequential value to the estate." The City
and the State of New York objected, contending that abandonment
would threaten the public's health and safety, and would violate
state and federal environmental law. The Bankruptcy Court approved
the abandonment, and, after the District Court affirmed, an appeal
was taken to the Court of Appeals for the Third Circuit. Meanwhile,
the Bankruptcy Court also approved the trustee's proposed
abandonment of the New Jersey facility over NJDEP's objection, and
NJDEP took a direct appeal to the Court of Appeals. In separate
judgments, the Court of Appeals reversed, holding that the
Bankruptcy Court erred in permitting abandonment.
Held: A trustee in bankruptcy may not abandon property
in contravention of a state statute or regulation that is
reasonably designed to protect the public health or safety from
identified hazards. Congress did not intend for § 554(a) to preempt
all state and local laws. A bankruptcy court does not have the
power to authorize an abandonment without formulating
Page 474 U. S. 495
conditions that will adequately protect the public's health and
safety. Pp.
474 U. S.
500-507.
(a) Before the 1978 revisions of the Bankruptcy Code, which
codified in § 554 the judicially developed rule of abandonment, the
trustee's abandonment power had been limited by a judicially
developed doctrine intended to protect legitimate state and federal
interests. In codifying the rule of abandonment, Congress also
presumably included the corollary that a trustee could not exercise
his abandonment power in violation of certain state and federal
laws. Pp.
474 U. S.
500-501.
(b) Neither this Court's decisions nor Congress has granted a
trustee in bankruptcy powers that would lend support to a right to
abandon property in contravention of state or local laws designed
to protect public health or safety. Where the Bankruptcy Code has
conferred other special powers upon the trustee, and where there
was no common law limitation on such powers, Congress has expressly
provided that the trustee's efforts to marshal and distribute the
estate's assets must yield to governmental interests in public
health and safety. It cannot be assumed that Congress, having
placed such limitations upon other aspects of trustees' operations,
intended to discard the well-established judicial restriction on
the abandonment power. Moreover, 28 U.S.C. § 959(b), which commands
the trustee to "manage and operate the property in his possession .
. . according to the requirements of the valid laws of the State,"
provides additional evidence that Congress did not intend for the
Bankruptcy Code to preempt all state laws. Pp.
474 U. S.
502-505.
(c) Additional support for restricting the abandonment power is
found in repeated congressional emphasis, in other statutes, on the
goal of protecting the environment against toxic pollution. Pp.
474 U. S.
505-506.
739 F.2d 912 and 739 F.2d 927, affirmed.
POWELL, J., delivered the opinion of the Court, in which
BRENNAN, MARSHALL, BLACKMUN, and STEVENS, JJ., joined. REHNQUIST,
J., filed a dissenting opinion, in which BURGER, C.J., and WHITE
and O'CONNOR, JJ., joined,
post, p.
474 U. S.
507.
Page 474 U. S. 496
JUSTICE POWELL delivered the opinion of the Court.
These petitions for certiorari, arising out of the same
bankruptcy proceeding, present the question whether § 554(a) of the
Bankruptcy Code, 11 U.S.C. § 554(a), [
Footnote 1] authorizes a trustee in bankruptcy to abandon
property in contravention of state laws or regulations that are
reasonably designed to protect the public's health or safety.
I
Quanta Resources Corporation (Quanta) processed waste oil at two
facilities, one in Long Island City, New York, and
Page 474 U. S. 497
the other in Edgewater, New Jersey. At the Edgewater facility,
Quanta handled the oil pursuant to a temporary operating permit
issued by the New Jersey Department of Environmental Protection
(NJDEP), respondent in No. 84-801. In June, 1981, Midlantic
National Bank, petitioner in No. 84-801, provided Quanta with a
$600,000 loan secured by Quanta's inventory, accounts receivable,
and certain equipment. The same month, NJDEP discovered that Quanta
had violated a specific prohibition in its operating permit by
accepting more than 400,000 gallons of oil contaminated with PCB, a
highly toxic carcinogen. NJDEP ordered Quanta to cease operations
at Edgewater, and the two began negotiations concerning the cleanup
of the Edgewater site. But on October 6, 1981, before the
conclusion of negotiations, Quanta filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code. The next
day, NJDEP issued an administrative order requiring Quanta to clean
up the site. Quanta's financial condition remained perilous,
however, and, the following month, it converted the action to a
liquidation proceeding under Chapter 7. Thomas J. O'Neill,
petitioner in No. 84-805, was appointed trustee in bankruptcy, and
subsequently oversaw abandonment of both facilities.
After Quanta filed for bankruptcy, an investigation of the Long
Island City facility revealed that Quanta had accepted and stored
there over 70,000 gallons of toxic, PCB-contaminated oil in
deteriorating and leaking containers. Since the mortgages on that
facility's real property exceeded the property's value, the
estimated cost of disposing of the waste oil plainly rendered the
property a net burden to the estate. After trying without success
to sell the Long Island City property for the benefit of Quanta's
creditors, the trustee notified the creditors and the Bankruptcy
Court for the District of New Jersey that he intended to abandon
the property pursuant to § 554(a). No party to the bankruptcy
proceeding disputed the trustee's allegation that the site was
"burdensome" and of "inconsequential value to the estate" within
the meaning of § 554.
Page 474 U. S. 498
The City and the State of New York (collectively, New York),
respondents in No. 84-805, nevertheless objected, contending that
abandonment would threaten the public's health and safety, and
would violate state and federal environmental law. New York rested
its objection on "public policy" considerations reflected in
applicable local laws, and on the requirement of 28 U.S.C. § 959(b)
that a trustee "manage and operate" the property of the estate
"according to the requirements of the valid laws of the State in
which such property is situated." New York asked the Bankruptcy
Court to order that the assets of the estate be used to bring the
facility into compliance with applicable law. After briefing and
argument, the court approved the abandonment, noting that
"[t]he City and State are in a better position in every respect
than either the Trustee or debtor's creditors to do what needs to
be done to protect the public against the dangers posed by the
PCB-contaminated facility."
The District Court for the District of New Jersey affirmed, and
New York appealed to the Court of Appeals for the Third
Circuit.
Upon abandonment, the trustee removed the 24-hour guard service
and shut down the fire-suppression system. It became necessary for
New York to decontaminate the facility, with the exception of the
polluted subsoil, at a cost of about $2.5 million. [
Footnote 2]
On April 23, 1983, shortly after the District Court had approved
abandonment of the New York site, the trustee gave notice of his
intention to abandon the personal property at the Edgewater site,
consisting principally of the contaminated oil. The Bankruptcy
Court approved the abandonment on May 20, over NJDEP's objection
that the estate had
Page 474 U. S. 499
sufficient funds to protect the public from the dangers posed by
the hazardous waste. [
Footnote
3]
Because the abandonments of the New Jersey and New York
facilities presented identical issues, the parties in the New
Jersey litigation consented to NJDEP's taking a direct appeal from
the Bankruptcy Court to the Court of Appeals pursuant to §
405(c)(1)(B) of the Bankruptcy Act of 1978.
A divided panel of the Court of Appeals for the Third Circuit
reversed.
In re Quanta Resources Corp., 739 F.2d 912
(1984);
In re Quanta Resources Corp., 739 F.2d 927 (1984).
Although the court found little guidance in the legislative history
of § 554, it concluded that Congress had intended to codify the
judge-made abandonment practice developed under the previous
Bankruptcy Act. Under that law, where state law or general
equitable principles protected certain public interests, those
interests were not overridden by the judge-made abandonment power.
The court also found evidence in other provisions of the Bankruptcy
Code that Congress did not intend to preempt all state regulation,
but only that grounded on policies outweighed by the relevant
federal interests.
Page 474 U. S. 500
Accordingly, the Court of Appeals held that the Bankruptcy Court
erred in permitting abandonment, and remanded both cases for
further proceedings. [
Footnote
4]
We granted certiorari and consolidated these cases to determine
whether the Court of Appeals properly construed § 554, 469 U.S.
1207 (1985). We now affirm.
II
Before the 1978 revisions of the Bankruptcy Code, the trustee's
abandonment power had been limited by a judicially developed
doctrine intended to protect legitimate state or federal interests.
This was made clear by the few relevant cases. In
Ottenheimer
v. Whitaker, 198 F.2d 289 (CA4 1952), the Court of Appeals
concluded that a bankruptcy trustee, in liquidating the estate of a
barge company, could not abandon several barges when the
abandonment would have obstructed a navigable passage in violation
of federal law. The court stated:
"The judge-made [abandonment] rule must give way when it comes
into conflict with a statute enacted in order to ensure the safety
of navigation; for we are not dealing with a burden imposed upon
the bankrupt or his property by contract, but a duty and a burden
imposed upon an owner of vessels by an Act of Congress in the
public interest."
Id. at 290.
In
In re Chicago Rapid Transit Co., 129 F.2d 1 (CA7),
cert. denied sub nom. Chicago Junction R. Co. v. Sprague,
317 U.S. 683 (1942), the Court of Appeals held that the trustee of
a debtor transit company could not cease its operation
Page 474 U. S. 501
of a branch railway line when local law required continued
operation. While the court did not forbid the trustee to abandon
property (
i.e., to reject an unexpired lease), it
conditioned his actions to ensure compliance with state law.
Similarly, in
In re Lewis Jones, Inc., 1 BCD 277 (Bkrtcy
Ct.ED Pa.1974), the Bankruptcy Court invoked its equitable power to
"safeguard the public interest" by requiring the debtor public
utilities to seal underground steam lines before abandoning
them.
Thus, when Congress enacted § 554, there were well-recognized
restrictions on a trustee's abandonment power. In codifying the
judicially developed rule of abandonment, Congress also presumably
included the established corollary that a trustee could not
exercise his abandonment power in violation of certain state and
federal laws. The normal rule of statutory construction is that, if
Congress intends for legislation to change the interpretation of a
judicially created concept, it makes that intent specific.
Edmonds v. Compagnie Generale Transatlantique,
443 U. S. 256,
443 U. S.
266-267 (1979). The Court has followed this rule with
particular care in construing the scope of bankruptcy
codifications. If Congress wishes to grant the trustee an
extraordinary exemption from nonbankruptcy law,
"the intention would be clearly expressed, not left to be
collected or inferred from disputable considerations of convenience
in administering the estate of the bankrupt."
Swarts v. Hammer, 194 U. S. 441,
194 U. S. 444
(1904);
see Palmer v. Massachusetts, 308 U. S.
79,
308 U. S. 85
(1939) ("If this old and familiar power of the states [over local
railroad service] was withdrawn when Congress gave district courts
bankruptcy powers over railroads, we ought to find language fitting
for so drastic a change"). Although these cases do not define for
us the exact contours of the trustee's abandonment power, they do
make clear that this power was subject to certain restrictions when
Congress enacted § 554(a).
Page 474 U. S. 502
III
Neither the Court nor Congress has granted a trustee in
bankruptcy powers that would lend support to a right to abandon
property in contravention of state or local laws designed to
protect public health or safety. As we held last Term when the
State of Ohio sought compensation for cleaning the toxic waste site
of a bankrupt corporation:
"Finally, we do not question that anyone in possession of the
site -- whether it is [the debtor] or another in the event the
receivership is liquidated and the trustee abandons the property,
or a vendee from the receiver
or the bankruptcy trustee --
must comply with the environmental laws of the State of Ohio.
Plainly, that person or firm may not maintain a nuisance, pollute
the waters of the State, or refuse to remove the source of such
conditions."
Ohio v. Kovacs, 469 U. S. 274,
469 U. S. 285
(1985) (emphasis added).
Congress has repeatedly expressed its legislative determination
that the trustee is not to have
carte blanche to ignore
nonbankruptcy law. Where the Bankruptcy Code has conferred special
powers upon the trustee and where there was no common law
limitation on that power, Congress has expressly provided that the
efforts of the trustee to marshal and distribute the assets of the
estate must yield to governmental interest in public health and
safety.
Infra at
474 U. S.
503-504. One cannot assume that Congress, having placed
these limitations upon other aspects of trustees' operations,
intended to discard a well-established judicial restriction on the
abandonment power. As we held nearly two years ago in the context
of the National Labor Relations Act, "the debtor-in-possession is
not relieved of all obligations under the [Act] simply by filing a
petition for bankruptcy."
NLRB v. Bildisco & Bildisco,
465 U. S. 513,
465 U. S. 534
(1984).
Page 474 U. S. 503
The automatic stay provision of the Bankruptcy Code, § 362(a),
[
Footnote 5] has been described
as "one of the fundamental debtor protections provided by the
bankruptcy laws." S.Rep. No. 95-989, p. 54 (1978); H.R.Rep. No.
95-595, p. 340 (1977). Despite the importance of § 362(a) in
preserving the debtor's estate, Congress has enacted several
categories of exceptions to the stay that allow the Government to
commence or continue legal proceedings. For example, § 362(b)(5)
permits the Government to enforce "nonmonetary" judgments against a
debtor's estate. It is clear from the legislative history that one
of the purposes of this exception is to protect public health and
safety:
Page 474 U. S. 504
"Thus, where a governmental unit is suing a debtor to prevent or
stop violation of fraud,
environmental protection,
consumer protection,
safety, or similar police or regulatory
laws, or attempting to fix damages for violation of such a
law, the action or proceeding is not stayed under the automatic
stay."
H.R.Rep. No. 95-595,
supra, at 343 (emphasis added);
S.Rep. No. 95-989,
supra, at 52 (emphasis added).
Petitioners have suggested that the existence of an express
exception to the automatic stay undermines the inference of a
similar exception to the abandonment power: had Congress sought to
restrict similarly the scope of § 554, it would have enacted
similar limiting provisions. This argument, however, fails to
acknowledge the differences between the predecessors of §§ 554 and
362. As we have noted, the exceptions to the judicially created
abandonment power were firmly established. But in enacting § 362 in
1978, Congress significantly broadened the scope of the automatic
stay,
see 1 W. Norton, Bankruptcy Law and Practice §
20.03, pp. 5-6 (1981), an expansion that had begun only five years
earlier with the adoption of the Bankruptcy Rules in 1973,
see
id. § 20.02, at 4-5. Between 1973 and 1978, some courts had
stretched the expanded automatic stay to foreclose States' efforts
to enforce their antipollution laws, [
Footnote 6] and Congress wanted to overrule these
interpretations in its 1978 revision.
See H.R.Rep. No.
95-595,
supra, at 174-175. In the face of the greatly
increased scope of § 362, it was necessary for Congress to limit
this new power expressly.
Page 474 U. S. 505
Title 28 U.S.C. § 959(b) [
Footnote 7] provides additional evidence that Congress did
not intend for the Bankruptcy Code to preempt all state laws.
Section 959(b) commands the trustee to "manage and operate the
property in his possession . . . according to the requirements of
the valid laws of the State." Petitioners have contended that §
959(b) is relevant only when the trustee is actually operating the
business of the debtor, and not when he is liquidating it. Even
though § 959(b) does not directly apply to an abandonment under §
554(a) of the Bankruptcy Code -- and therefore does not delimit the
precise conditions on an abandonment -- the section nevertheless
supports our conclusion that Congress did not intend for the
Bankruptcy Code to preempt all state laws that otherwise constrain
the exercise of a trustee's powers.
IV
Although the reasons elaborated above suffice for us to conclude
that Congress did not intend for the abandonment power to abrogate
certain state and local laws, we find additional support for
restricting that power in repeated congressional emphasis on its
"goal of protecting the environment against toxic pollution."
Chemical Manufacturers Assn., Inc. v. Natural Resources Defense
Council, Inc., 470 U. S. 116,
470 U. S. 143
(1985). Congress has enacted a Resource Conservation and Recovery
Act, 42 U.S.C. §§ 6901-6987, to regulate the treatment, storage,
and disposal of hazardous wastes by monitoring wastes from their
creation until after their permanent disposal. That Act authorizes
the United States to seek judicial or administrative restraint of
activities involving
Page 474 U. S. 506
hazardous wastes that "may present an imminent and substantial
endangerment to health or the environment." 42 U.S.C. § 6973;
see also S.Rep. No. 98-284, p. 58 (1983). Congress
broadened the scope of the statute and tightened the regulatory
restraints in 1984. [
Footnote
8] In the Comprehensive Environmental Response, Compensation,
and Liability Act, as amended by Pub.L. 98-80, § 2(c)(2)(B),
Congress established a fund to finance cleanup of some sites, and
required certain responsible parties to reimburse either the fund
or the parties who paid for the cleanup. The Act also empowers the
Federal Government to secure such relief as may be necessary to
avert
"imminent and substantial endangerment to the public health or
welfare or the environment because of an actual or threatened
release of a hazardous substance."
42 U.S.C. § 9606. In the face of Congress' undisputed concern
over the risks of the improper storage and disposal of hazardous
and toxic substances, we are unwilling to presume that, by
enactment of § 554(a), Congress implicitly overturned longstanding
restrictions on the common law abandonment power.
V
In the light of the Bankruptcy trustee's restricted pre-1978
abandonment power and the limited scope of other Bankruptcy Code
provisions, we conclude that Congress did not intend for § 554(a)
to preempt all state and local laws. The
Page 474 U. S. 507
Bankruptcy Court does not have the power to authorize an
abandonment without formulating conditions that will adequately
protect the public's health and safety. Accordingly, without
reaching the question whether certain state laws imposing
conditions on abandonment may be so onerous as to interfere with
the bankruptcy adjudication itself, we hold that a trustee may not
abandon property in contravention of a state statute or regulation
that is reasonably designed to protect the public health or safety
from identified hazards. [
Footnote
9] Accordingly, we affirm the judgments of the Court of Appeals
for the Third Circuit.
It is so ordered.
* Together with No. 84-805,
O'Neill, Trustee in Bankruptcy
of Quanta Resources Corp., Debtor v. City of New York et al.,
and
O'Neill, Trustee in Bankruptcy of Quanta Resources Corp.,
Debtor v. New Jersey Department of Environmental Protection,
also on certiorari to the same court.
[
Footnote 1]
Section 554(a) reads:
"After notice and a hearing, the trustee may abandon any
property of the estate that is burdensome to the estate or that is
of inconsequential value to the estate."
Technical amendments in the Bankruptcy Amendments and Federal
Judgeship Act of 1984 added the words "and benefit" after "value"
in § 554(a). Pub.L. 98-353, Tit. III, § 468(a), 98 Stat. 380.
[
Footnote 2]
The sole issue presented by these petitions is whether a trustee
may abandon property under § 554 in contravention of local laws
designed to protect the public's health and safety. New York is
claiming reimbursement for its expenditures as an administrative
expense. That question, however, like the question of the ultimate
disposition of the property, is not before us.
[
Footnote 3]
The trustee was not required to take even relatively minor steps
to reduce imminent danger, such as security fencing, drainage and
diking repairs, sealing deteriorating tanks, and removing explosive
agents. Moreover, the trustee's abandonment at both sites
aggravated already existing dangers by halting security measures
that prevented public entry, vandalism, and fire. Joint Appendix in
No. 83-5142 (CA3), pp. 11-12 (affidavit of Richard Docyk, Deputy
Chief Inspector for N.Y. City Fire Department);
id. at 26
(transcript of proceedings before DeVito, J.). The 470,000 gallons
of highly toxic and carcinogenic waste oil in unguarded,
deteriorating containers
"present risks of explosion, fire, contamination of water
supplies, destruction of natural resources, and injury, genetic
damage, or death through personal contact."
Brief for United States as
Amicus Curiae 4, 23;
see Joint Appendix,
supra, at 17 (70,000 gallons
at New York site); Appendix in No. 83-5730 (CA3), p. A7 (400,000
gallons at New Jersey site);
id. at A46 (deteriorating
containers); Joint Appendix,
supra, at 11 (deteriorating
tanks);
id. at 26 (guard service);
id. at 12
(risk of fire);
id. at 11 (contamination of adjacent
areas);
id. at 20 (health effects of exposure to PCBs and
their derivatives).
[
Footnote 4]
Judge Gibbons dissented, arguing that § 554 permits abandonment
without any exception analogous to that provided to the automatic
stay. The dissent further contended that the majority's
interpretation of § 554 raised substantial questions under the
Takings Clause by potentially destroying the interest of secured
creditors,
see United States v. Security Industrial Bank,
459 U. S. 70
(1982), and that the majority had failed to address the important
underlying issue of the priority of the States' claims for
reimbursement.
[
Footnote 5]
Section 362(a) provides:
"(a) Except as provided in subsection (b) of this section, a
petition filed under section 301, 302, or 303 of this title, or an
application filed under section 5(a)(3) of the Securities Investor
Protection Act of 1970 (15 U.S.C. 78eee(a)(3)), operates as a stay,
applicable to all entities, of -- "
"(1) the commencement or continuation, including the issuance or
employment of process, of a judicial, administrative, or other
proceeding against the debtor that was or could have been commenced
before the commencement of the case under this title, or to recover
a claim against the debtor that arose before the commencement of
the case under this title;"
"(2) the enforcement, against the debtor or against property of
the estate, of a judgment obtained before the commencement of the
case under this title;"
"(3) any act to obtain possession of property of the estate or
of property from the estate;"
"(4) any act to create, perfect, or enforce any lien against
property of the estate;"
"(5) any act to create, perfect, or enforce against property of
the debtor any lien to the extent that such lien secures a claim
that arose before the commencement of the case under this
title;"
"(6) any act to collect, assess, or recover a claim against the
debtor that arose before the commencement of the case under this
title;"
"(7) the setoff of any debt owing to the debtor that arose
before the commencement of the case under this title against any
claim against the debtor; and"
"(8) the commencement or continuation of a proceeding before the
United States Tax Court concerning the debtor."
[
Footnote 6]
See, e.g., In re Hillsdale Foundry Co., 1 BCD 195
(Bkrtcy Ct. WD Mich.1974) (action by Michigan Attorney General to
enforce State's antipollution laws held subject to automatic stay).
The House Report also referred to an unreported case from Texas
where a stay prevented the State of Maine from closing down a
debtor's plant that was polluting a river in violation of the
State's environmental protection laws. H.R.Rep. No. 95-595, pp.
174-175 (1977).
[
Footnote 7]
Section 959(b) provides:
"Except as provided in section 1166 of title 11, a trustee,
receiver or manager appointed in any cause pending in any court of
the United States, including a debtor in possession, shall manage
and operate the property in his possession as such trustee,
receiver or manager according to the requirements of the valid laws
of the State in which such property is situated, in the same manner
that the owner or possessor thereof would be bound to do if in
possession thereof."
[
Footnote 8]
Congress eliminated the small generator exception, and subjected
many more facilities to the regulations. Pub.L. 98-616, 98 Stat.
3221, 3248-3272 (codified at 42 U.S.C. § 6921(d) (1982 ed., Supp.
III)). Another provision automatically broadens the Act's coverage
by automatically assigning a hazardous rating to substances that
the Environmental Protection Agency does not classify by a set
deadline. 98 Stat. 3227-3231 (codified at 42 U.S.C. §§ 6924(d),
(e), (f)(3), (g)(6) (1982 ed., Supp. III)). Amended enforcement
provisions allow more citizen suits, 98 Stat. 3271-3272 (codified
at 42 U.S.C. § 6973 (1982 ed., Supp. III)), and authorize
administrative orders or suits to compel "corrective action" after
a leak has occurred. 98 Stat. 3257-3258 (codified at 42 U.S.C. §
6928(h) (1982 ed., Supp. III)).
[
Footnote 9]
This exception to the abandonment power vested in the trustee by
§ 554 is a narrow one. It does not encompass a speculative or
indeterminate future violation of such laws that may stem from
abandonment. The abandonment power is not to be fettered by laws or
regulations not reasonably calculated to protect the public health
or safety from imminent and identifiable harm.
JUSTICE REHNQUIST, with whom THE CHIEF JUSTICE, JUSTICE WHITE,
and JUSTICE O'CONNOR join, dissenting.
The Court today concludes that Congress did not intend the
abandonment provision of the Bankruptcy Code, 11 U.S.C. § 554(a),
to preempt "certain state and local laws." In something of a
surprise ending, the Court limits the class of laws that can
prevent an otherwise authorized abandonment by a trustee to those
"reasonably designed to protect the public health or safety from
identified hazards." While this limitation reduces somewhat the
scope of my disagreement with the result reached, it renders both
the
ratio decidendi and the import of the Court's opinion
quite unclear. More important, I remain unconvinced by the Court's
arguments supporting state power to bar abandonment. The principal
and only independent ground offered -- that Congress codified
"well-recognized restrictions of a trustee's abandonment power" --
is particularly unpersuasive. It rests on a misreading of three
pre-Code cases, the elevation of that
Page 474 U. S. 508
misreading into a "well-recognized" exception to the abandonment
power, and the unsupported assertion that Congress must have meant
to codify the exception (or something like it). These specific
shortcomings in the Court's analysis, which are addressed in
greater detail below, stem at least in part from the Court's
failure to discuss, even in passing, either the nature of
abandonment or its role in federal bankruptcy.
Abandonment is "the release from the debtor's estate of property
previously included in that estate." 2 W. Norton, Bankruptcy Law
and Practice § 39.01 (1984), citing
Brown v. O'Keefe,
300 U. S. 598,
300 U. S.
602-603 (1937). Prior to enactment of the Bankruptcy
Code in 1978, there was no statutory provision specifically
authorizing abandonment in liquidation cases. By analogy to the
trustee's statutory power to reject executory contracts, courts had
developed a rule permitting the trustee to abandon property that
was worthless or not expected to sell for a price sufficiently in
excess of encumbrances to offset the costs of administration. 4 L.
King, Collier on Bankruptcy 1554.01 (15th ed.1985) (hereinafter
Collier). [
Footnote 2/1] This
judge-made rule served the overriding purpose of bankruptcy
liquidation: the expeditious reduction of the debtor's property to
money, for equitable distribution to creditors,
Kothe v. R. C.
Taylor Trust, 280 U. S. 224,
280 U. S. 227
(1930). 4 Collier 554.01. Forcing the trustee to administer
burdensome property would contradict this purpose, slowing the
administration of the estate and draining its assets.
Page 474 U. S. 509
The Bankruptcy Code expressly incorporates the power of
abandonment into federal bankruptcy legislation for the first time.
The relevant provision bears repeating:
"(a) After notice and a hearing, the trustee may abandon any
property of the estate that is burdensome to the estate or that is
of inconsequential value to the estate."
11 U.S.C. § 554(a) (amended 1984). This language, absolute in
its terms, suggests that a trustee's power to abandon is limited
only by considerations of the property's value to the estate. It
makes no mention of other factors to be balanced or weighed, and
permits no easy inference that Congress was concerned about state
environmental regulations. [
Footnote
2/2] Indeed, as the Court notes, when Congress was so
concerned, it expressed itself clearly, specifically exempting some
environmental injunctions from the automatic stay provisions of §
362 of the Code, 11 U.S.C. §§ 362(b)(4), (5) (1982 ed. and Supp.
II).
See Ohio v. Kovacs, 469 U. S. 274
(1985).
Nor does the scant legislative history of § 554 support the
Court's interpretation. Nowhere does that legislative history
Page 474 U. S. 510
suggest that Congress intended to limit the trustee's authority
to abandon burdensome property where abandonment might be opposed
by those charged with the exercise of state police or regulatory
powers.
The Court seeks to turn the seemingly unqualified language and
the absence of helpful legislative history to its advantage.
Adopting the reasoning of the Court of Appeals, the Court argues
that, in light of Congress' failure to elaborate, § 554 must have
been intended to codify prior "abandonment" case law, and that,
under prior law, "a trustee could not exercise his abandonment
power in violation of certain state and federal laws,"
ante at
474 U. S. 501.
I disagree. We have previously expressed our unwillingness to read
into unqualified statutory language exceptions or limitations based
upon legislative history unless that legislative history
demonstrates with extraordinary clarity that this was indeed the
intent of Congress.
E.g., Garcia v. United States,
469 U. S. 70,
469 U. S. 75
(1984). I think that, upon analysis, the "legislative history"
relied upon by the Court here falls far short of this standard.
The Court relies on just three cases for its claimed
"established corollary" to the pre-Code abandonment power. A close
reading of those cases, however, reveals that none supports the
rule announced today. In
Ottenheimer v. Whitaker, 198 F.2d
289 (CA4 1952), the Court of Appeals held that a trustee could not
abandon worthless barges obstructing traffic in Baltimore Harbor
when the abandonment would have violated federal law. The Court
concluded that the "judge-made rule [of abandonment] must give way"
to "an Act of Congress in the public interest."
Id. at
290.
Ottenheimer thus depended on the need to reconcile a
conflict between a judicial gloss on the Bankruptcy Act and the
commands of another federal statute. We implicitly confirmed the
validity of such an approach two Terms ago in
NLRB v. Bildisco
& Bildisco, 465 U. S. 513,
465 U. S.
523-524 (1984). Here, by contrast, the "conflict" is
with the uncertain commands of
Page 474 U. S. 511
state laws that the Court declines to identify. [
Footnote 2/3] In addition, the Court of Appeals
relied heavily on the fact that the pre-Code law of abandonment was
judge-made, which, in turn, raises the somewhat Delphic inquiry as
to whether that court would have decided the case the same way
under the present Code.
In re Lewis Jones, Inc., 1 BCD 277 (Bkrtcy Ct. ED
Pa.1974), was a Bankruptcy Court decision concluding that the
principle of
Ottenheimer did not apply because there was
no conflicting statute. But because the right to abandon was based
on judge-made law, the court nonetheless found itself free to
protect the public interest by requiring a trustee seeking
abandonment to first spend funds of the estate to seal manholes and
vents in an underground pipe network. While this case admittedly
comes closer to supporting the Court's position than does
Ottenheimer, it too turns on the judge-made nature of the
abandonment power. Moreover, I do not believe that the isolated
decision of a single Bankruptcy Court rises to the level of
"established law" that we can fairly assume Congress intended to
incorporate.
See Merrill Lynch, Pierce, Fenner & Smith,
Inc. v. Curran, 456 U. S. 353, 3
456 U. S.
379-382 (1982).
In
In re Chicago Rapid Transit Co., 129 F.2d 1 (CA7),
cert. denied sub nom. Chicago Junction R. Co. v. Sprague,
317 U.S. 683 (1942), the District Court sitting in bankruptcy had
authorized the bankrupt to abandon a lease of a rail line, and a
lessor appealed. The bankrupt did not appeal the District Court's
imposition of conditions on the abandonment; the propriety of those
conditions thus was not before the
Page 474 U. S. 512
Court of Appeals, which affirmed the District Court's
authorization of abandonment. So while there may be dicta
in the Court of Appeals' opinion that would support some limitation
on the power of abandonment, the holding of the case certainly does
not. In short, none of these cases supports the Court's view that §
554(a) contains an implicit exception for "certain state and local
laws."
Even assuming these cases stand for the proposition ascribed to
them in the Court's opinion, that opinion's brief discussion of the
cases,
ante at
474 U. S.
500-501, certainly does not support the claim that they
reflect an "established corollary" to pre-Code abandonment law.
Generally speaking, three rather isolated cases do not constitute
the sort of settled law that we can fairly assume Congress intended
to codify absent some expression of its intent to do so. Perhaps
recognizing this, respondents place substantial reliance for their
view that the exception was "well settled" on the following
statement in the (pre-Code) 14th edition of Collier on Bankruptcy,
accompanying a citation to
Ottenheimer and
Chicago
Rapid Transit:
"Recent cases illustrate, however, that the trustee in the
exercise of the power to abandon is subject to the application of
general regulations of a police nature."
4A J. Moore, Collier on Bankruptcy � 70.42[2], pp. 502-504 (14th
ed.1978);
see also In re Quanta Resources Corp., 739 F.2d
912, 916 (1984) (quoting same language from Collier). Respondents
further observe that the section of this treatise addressing
abandonment was cited in a note to an early precursor of § 554, §
4-611 of the proposed Bankruptcy Act of 1973, H.R. Doc. No. 93-137,
Part II, p. 181, reprinted in A. Resnick & E. Wypyski, 2
Bankruptcy Reform Act of 1978: A Legislative History, Doc. No. 22
(1979). While resourceful, this argument is wholly
unpersuasive.
The reference to Collier is not part of the Code's
"
legislative history' in any meaningful sense of the term,"
Board of Governors, FRS v. Dimension Financial Corp., ante
at 474 U. S. 372.
And the proposition for which the section in Collier is cited
is
Page 474 U. S. 513
not the view that authority for abandonment is qualified by
state police power, but instead the much less remarkable
proposition that "[t]he concept of abandonment is well recognized
in the case law.
See 4A Collier � 70.42[3]." In order to
divine that the statutory power to abandon in the proposed Code was
to be conditioned on compliance with state police power
regulations, therefore, a Senator or Congressman would not merely
have had to look at the legislative history of the precursor to the
Code, but also would have had to read the several-page treatise
section cited in that earlier legislative history.
Neither the three cases cited by the Court nor the attenuated
reference to the since-superseded version of Collier supports the
inference that Congress, while writing § 554 in unqualified terms,
intended to incorporate so ill-defined and uncertain an exception
to the abandonment authority of the trustee. After suggesting that,
"if Congress intends for legislation to change the interpretation
of a judicially created concept," it should do so expressly,
ante at
474 U. S. 501,
the Court concedes that these cases "do not define for us the exact
contours of the trustee's abandonment power,"
ibid. The
Court never identifies the source from which it draws the "exact
contours" of the rule it announces today; congressional intent does
not appear to be a likely candidate. Congress knew how to draft an
exception covering the exercise of "certain" police powers when it
wanted to.
See 11 U.S.C. §§ 362(b)(4), (5) (1982 ed. and
Supp. II);
supra at
474 U. S. 509.
It also knew how to draft a qualified abandonment provision.
See § 1170(a)(2) (abandonment of railroad lines permitted
only if "consistent with the public interest"). Congress' failure
to so qualify § 554 indicates that it intended the relevant inquiry
at an abandonment hearing to be limited to whether the property is
burdensome and of inconsequential value to the estate.
I find the Court's discussion of 28 U.S.C. § 959(b) somewhat
difficult to fathom. After suggesting that § 959(b)
Page 474 U. S. 514
"provides additional evidence" for the self-evident proposition
"that Congress did not intend for the Bankruptcy Code to preempt
all state laws,"
ante at
474 U. S. 505,
the Court concedes that the provision "does not
directly
apply to an abandonment under § 554(a) of the Bankruptcy Code,"
ibid. (emphasis added). The precise nature of its
indirect application, however, is left unclear.
Respondents contend that § 959(b) operates to bar abandonment in
these cases. Assuming that temporary management or operation of a
facility during liquidation is governed by § 959(b), I believe that
a trustee's filing of a petition to abandon, as opposed to
continued operation of a site pending a decision to abandon, does
not constitute "manage[ment]" or "opera[tion]" under that
provision. Not only would a contrary reading strain the language of
§ 959(b),
cf. In re Adelphi Hospital Corp., 579 F.2d 726,
729, n. 6 (CA2 1978) (per curiam) (in pre-Code liquidation
proceeding, trustee "is in no sense a manager of an institution's
operations"), it also would create an exception to the abandonment
power without a shred of evidence that Congress intended one. As
one commentator has noted, § 554(a) "is among the few provisions in
the Bankruptcy Code that do not contain explicit exceptions." Note,
85 Colum.L.Rev. 870, 883 (1985). I would not read 28 U.S.C. §
959(b) as creating an implicit exception.
Citing
SEC v. United Realty & Improvement Co.,
310 U. S. 434,
310 U. S. 455
(1940), respondents argue that the Bankruptcy Court's equitable
powers support the result reached below. I disagree. While the
Bankruptcy Court is a court of equity, the Bankruptcy Code "does
not authorize freewheeling consideration of every conceivable
equity."
Bildisco & Bildisco, 465 U.S. at
465 U. S. 527.
The Bankruptcy Court may not, in the exercise of its equitable
powers, enforce its view of sound public policy at the expense of
the interests the Code is designed to protect. In these cases, it
is undisputed that the properties in question were burdensome and
of inconsequential value to the estate. Forcing the trustee to
expend estate
Page 474 U. S. 515
assets to clean up the sites would plainly be contrary to the
purposes of the Code.
I fully appreciate the Court's concern that abandonment may
"aggravat[e] already existing dangers by halting security measures
that preven[t] public entry, vandalism, and fire."
Ante at
474 U. S. 499,
n. 3. But in almost all cases, requiring the trustee to notify the
relevant authorities before abandoning will give those authorities
adequate opportunity to step in and provide needed security. As the
Bankruptcy Court noted in No. 84-805:
"The City and State are in a better position in every respect
than either the Trustee or debtor's creditors to do what needs to
be done to protect the public against the dangers posed by the
PCB-contaminated facility."
App: to Pet. for Cert. 73a. And requiring notice before
abandonment in appropriate cases is perfectly consistent with the
Code. It advances the State's interest in protecting the public
health and safety, and, unlike the rather uncertain exception to
the abandonment power propounded by the Court, at the same time
allows for the orderly liquidation and distribution of the estate's
assets. Here, of course, the trustee provided such notice and the
relevant authorities were afforded an opportunity to take
appropriate preventative and remedial measures.
I likewise would not exclude the possibility that there may be a
far narrower condition on the abandonment power than that announced
by the Court today, such as where abandonment by the trustee itself
might create a genuine emergency that the trustee would be uniquely
able to guard against. The United States, in its brief as
amicus curiae, suggests, for example, that there are
limits on the authority of a trustee to abandon dynamite sitting on
a furnace in the basement of a schoolhouse. Although I know of no
situations in which trustees have sought to abandon dynamite under
such circumstances, the narrow exception that I would reserve
surely would embrace that situation.
Page 474 U. S. 516
What the Court fails to appreciate is that respondents' interest
in these cases lies not just in protecting public health and
safety, but also in protecting the public fisc. In N. 84-805,
before undertaking cleanup efforts, New York unsuccessfully sought
from the Bankruptcy Court a first lien on the Long Island City
property to the extent of any expenditures it might make to bring
the site into compliance with state and local law. New York did not
appeal the court's denial of a first lien, and proceeded to clean
up the site (except for the contaminated subsoil). It now presses a
claim for reimbursement, maintaining that the trustee should not
have been allowed to abandon the site. The New Jersey Department of
Environmental Protection, in No. 84-801, apparently seeks to undo
the abandonment and force the trustee to expend the estate's
remaining assets cleaning up the site, thereby reducing the cleanup
costs that must ultimately be borne by the State. [
Footnote 2/4]
The Court states that the
"abandonment power is not to be fettered by laws or regulations
not reasonably calculated to protect the public health or safety
from imminent and identifiable harm."
Ante at
474 U. S. 507,
n. 9. Because the Court declines to identify those laws that its
deems so "reasonably calculated," I can only speculate about its
view of respondents' claim that abandonment can be conditioned on a
total cleanup. One might assume, however, that, since it affirms
the judgments below, the Court means to adopt respondents'
position. The Court of Appeals, as I read its opinions in these
cases, apparently would require the trustee to expend all of
Quanta's available assets to clean up the sites. [
Footnote 2/5] But barring abandonment and forcing a
cleanup would effectively
Page 474 U. S. 517
place respondents' interest in protecting the public fisc ahead
of the claims of other creditors. Congress simply did not intend
that § 554 abandonment hearings would be used to establish the
priority of particular claims in bankruptcy. While States retain
considerable latitude to ensure that priority status is allotted to
their cleanup claims,
see Ohio v. Kovacs, 469 U.S. at
469 U. S.
285-286 (O'CONNOR, J., concurring) believe that the
Court errs by permitting them to impose conditions on the
abandonment power that Congress never contemplated. Accordingly, in
each of these cases, I would reverse the judgment of the Court of
Appeals.
[
Footnote 2/1]
Under the former Bankruptcy Act, title to the debtor's property
vested in the trustee. Abandonment divested the trustee of title
and revested it in the debtor. 4 Collier � 554.02[2]. Under the
Code, the trustee no longer takes title to the debtor's property,
and he is simply divested of control over the property by the
abandonment.
Ibid. Although § 554 does not specify to whom
the property is abandoned, the legislative history suggests that it
is to the person having a possessory interest in the property.
S.Rep. No. 95-989, p. 92 (1978);
Ohio v. Kovacs,
469 U. S. 274,
469 U. S.
284-285, n. 12 (1985).
[
Footnote 2/2]
Last Term, in
Ohio v. Kovacs, supra, which involved the
dischargeability of certain environmental injunctions in
bankruptcy, we briefly addressed the abandonment of hazardous waste
sites:
"After notice and hearing, the trustee many abandon any property
of the estate that is burdensome to the estate or that is of
inconsequential value to the estate. 11 U.S.C. § 554. Such
abandonment is to the person having the possessory interest in the
property. S.Rep. No. 95-989, p. 92 (1978). . . . If the site at
issue were [the debtor's] property, the trustee would shortly
determine whether it was of value to the estate. If the property
was worth more than the costs of bringing it into compliance with
state law, the trustee would undoubtedly sell it for its net value,
and the buyer would clean up the property, in which event, whatever
obligation [the debtor] might have had to clean up the property
would have been satisfied. If the property were worth less than the
cost of cleanup, the trustee would likely abandon it to its prior
owner, who would have to comply with the state environmental law to
the extent of his or its ability."
Id. at
469 U. S.
284-285, n. 12.
[
Footnote 2/3]
The Court finds "additional support" for its restriction of the
abandonment power in recent federal statutes concerned with
protecting the environment. If these statutes operated to bar
abandonment here -- something neither respondents nor the Court
suggests -- then this might be a different case.
See NLRB v.
Bildisco & Bildisco, 465 U. S. 513
(1984). But the statutes do not bar abandonment, and the majority's
reference to their obvious concern over the risks of storing
hazardous substances is little more than a makeweight.
[
Footnote 2/4]
NJDEP does not contend that the estate, including any assets
otherwise subject to Midlantic's secured claim, contains sufficient
assets to complete the cleanup.
[
Footnote 2/5]
I would think that this command qualifies, in the words of the
Court, as a "conditio[n] on abandonment . . . so onerous as to
interfere with the bankruptcy adjudication itself,"
ante
at
474 U. S.
507.