Oil Company, Inc. - ALJ Ruling, December 31, 1996
ALJ Ruling, December 31, 1996
STATE OF NEW YORK : DEPARTMENT OF ENVIRONMENTAL CONSERVATION
In the Matter of
Alleged Violations of Articles 15, 17, 19, 25, 71 and 72 of the
New York State Environmental Conservation Law, Article 12 of the New York State Navigation Law
and Title 6 of the Official Compilation of Codes, Rules and Regulations of the State of New York,
Parts 201, 211, 229, 231, 608, 613, 661, 703, 750 and 751, and Title 17 of the
Official Compilation of Codes, Rules and Regulations of the State of New York, Parts 30 and 32, by
OIL CO., INC., d/b/a and formerly known
as EAGLE OIL, also formerly known as
WECHTER PETROLEUM CORPORATION; WILLIAM S. NAPPO, Sr., individually and as
President and Chief Executive officer of Oil Co., Inc., d/b/a Eagle Oil Co., Inc.; and
WILLIAM K. NAPPO, individually and as Secretary of Oil Co., Inc., d/b/a Eagle Oil Co., Inc.
RULING ON MOTION TO DISMISS
By Notice of Motion and supporting Affirmation of Marvin E. Kramer, Esq., both dated November 6, 1996, Respondents seek dismissal of Department Staff's complaint in the above referenced matter. The complaint contains twelve causes of action and sets forth alleged environmental violations at Respondents' Inwood, New York fuel storage facility. Alleged violations address air pollution control, tidal wetlands regulation, water pollution control, state pollutant discharge elimination system ("SPDES"), and New York Navigation Law. Staff, through the complaint, seek monetary penalties of $3.533 million and remedial investigation and remediation. The complaint includes a proposed compliance schedule and penalty calculations.
Respondents assert that because Respondent Oil Co., Inc. is a Debtor in Possession pursuant to chapter 11 of the U.S. Bankruptcy Code, the present enforcement action is automatically stayed, pursuant to 11 USC 362(a)(1). The Office of Hearings and Mediation Services received Respondents' motion papers on November 13, 1996. Department Staff filed an Affidavit in Opposition to the motion, dated November 15, 1996 (Affidavit of Louise M. Aja, Esq.). Staff's opposition papers were received by this Office on November 18, 1996.
Thereafter, the matter was assigned to Administrative Law Judge Kevin J. Casutto, who contacted the parties to discuss further scheduling. During a telephone conference on November 26, 1996, Respondents' attorney indicated his desire to modify the motion, based upon review of case law cited in Staff responsive papers. Respondents concede that the 11 USC 362(a)(1) stay does not apply to the environmental remediation relief sought by Staff in its complaint. However, Respondents assert that the stay does apply to the monetary penalty component of the action. Therefore, Respondents seek bifurcation of the action, essentially dismissing staff's request for monetary penalties. Respondents' attorney confirmed this position by letter dated December 4, 1996.
Staff reiterated its opposition by letter dated December 10, 1996. In that letter, Staff stated that its administrative action does not constitute enforcement of a money judgment, but instead comprises Staff's attempt to obtain a money judgment based upon the Department's exercise of its police and regulatory powers. Staff concludes that if it obtains such a money judgment, the Department will then seek enforcement of the money judgment before the Bankruptcy Court.
11 USC 362(a)(1), provides that, except as provided in 11 USC 362(b), the filing of a petition under specified sections of Title 11, operates as a stay applicable to all entities of the commencement or continuation of an administrative proceeding against a debtor that was or could have been commenced before the commencement of the case under Title 11, or to recover a claim against the debtor that arose before the commencement of the case under Title 11. 11 USC 362(a)(2) provides that, except as provided in 11 USC 362(b), the filing of a petition under specified sections of Title 11, operates as a stay applicable to all entities of the enforcement, against the debtor or against the property of the estate, of a judgment obtained before the commencement of the case under Title 11.
Staff asserts two applicable exceptions to the automatic stay provision. 11 USC 362(b)(4) provides an exception to the automatic stay provision of 362(a)(1), for the commencement or continuation of an action or proceeding of a governmental unit to enforce such unit's police or regulatory powers. 11 USC 362(b)(5) provides an exception to the automatic stay provision of 362(a)(2), for a judgment, other than a money judgment, obtained in an action or proceeding by a governmental unit to enforce such governmental unit's police or regulatory power.
The Department is a governmental unit that brought the present action to enforce its police and regulatory power. Fixing liability including civil penalties for a respondent/debtor's failure to comply with environmental laws has been held to fall within the police and regulatory powers exception to the automatic stay provision. Penn Terra Ltd. v Dept. of Env'l Resources, 733 F.2d 267, 272 (3rd Cir., 1984); Matter of Commonwealth Oil Refining Co., 805 F2d 1175 (5th Cir. 1986); U.S. v Jones & Laughlin Steel Corp., 804 F2d 348 at 351 (6th Cir. 1986).
The above cited exceptions to the bankruptcy automatic stay provision presumes that the governmental unit will obtain the judgments contemplated under 11 USC 362(b)(4) through preliminary proceedings, and then allow the governmental unit to take an action to enforce all such judgments, except for money judgments. Cournoyer v Town of Lincoln, 790 F2d 971, 974-975 (1st Cir. 1986); Penn Terra Ltd., supra; Matter of Commonwealth Oil Refining Co., supra. The courts recognize a distinction between obtaining a judgment and enforcing a judgment:
"The mere entry of a money judgment by a governmental unit is not affected by the automatic stay, provided that such proceedings are related to that government's police or regulatory powers . . . It is the seizure of a defendant-debtor's property, to satisfy the plaintiff-creditor, which is proscribed by subsection 362(b)(5)."
Penn Terra Ltd., supra at 275. The present action is Staff's attempt to obtain a judgment, not to enforce a judgment.
Staff may properly seek to obtain all relief identified in its complaint, both environmental remediation and monetary penalties. This action is not stayed by the 11 USC 362 automatic stay provision. Respondents' motion to dismiss is denied.
Kevin J. Casutto
Administrative Law Judge
Dated: Albany, New York
December 31, 1996
To: Marvin E. Kramer, Esq.
Marvin E. Kramer & Associates, P.C.
Attorneys for Respondents
1325 Franklin Avenue, Suite 165
Garden City, New York 11530
Louise M. Aja
Assistant Regional Attorney
NYSDEC Region 1
SUNY Campus - Building 40
Stony Brook, New York 11790-2356