United States of America et al v. NCR Corporation et al

Filing 297

DECISION AND ORDER granting 236 Motion for Order directing that automatic bankruptcy stay does not apply to plaintiff's claims against defendant NewPage, signed by Judge William C Griesbach on 01/23/2012. See Decision and Order for full detail. (cc: all counsel) (Griesbach, William)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
UNITED STATES OF AMERICA, et al.
Plaintiffs,
v.

Case No. 10-C-910

NCR CORP., et al.,
Defendants.

DECISION AND ORDER

Plaintiffs have moved for an order declaring that this action, at least as it pertains to
Defendant Newpage Wisconsin Systems, Inc., does not violate the automatic stay imposed by the
Bankruptcy Code. They assert that this action falls within the “police and regulatory power”
exception to the automatic stay.
In brief, this is a lawsuit brought by the United States and the State of Wisconsin under
Sections 106 and 107 of the Comprehensive Environmental Response, Compensation and Liability
Act, better known as CERCLA. 42 U.S.C. §§ 9606-07. The Plaintiffs seek a ruling that the
Defendants must perform cleanup work in the Fox River. They also seek damages for costs they
have incurred in cleaning up the site themselves, as well as natural resources damages. Against
Defendant NewPage, which filed for Chapter 11 bankruptcy in September 2011, Plaintiffs seek cost
recovery and natural resources damages.
At issue here is the automatic stay’s exception for proceedings brought by governmental
units “to enforce such governmental unit’s . . . police and regulatory power.” 11 U.S.C. § 362(b)(4).

In determining whether a given action is within the ambit of the “police and regulatory power”
exception, courts look to the purpose of the proceedings to determine whether they relate to public
health or safety or whether they are directed at protecting the government’s pecuniary interest in the
debtor’s property.
The fact that money is sought in a proceeding does not necessarily mean the purpose of the
litigation is purely pecuniary. Here, although the governments seek payment of funds, it is obvious
that the overarching purpose of these CERCLA proceedings is to get the Lower Fox River Site
cleaned up, and the remediation of the Site obviously requires money. Seeking reimbursement for
past and future costs of cleanup is well within the public health function of the governmental
plaintiffs. For example, in In re Phillips, the bankruptcy court rejected an argument that a city’s
attempt to collect ordinance fines was a purely pecuniary interest. 368 B.R. 733, 741 (Bankr. N.D.
Ind. 2007).
The City's purpose in issuing the ordinance violations was to remove all
materials—garbage, trash, waste water, rubbish, waste, appliances, furniture in the
yard—detrimental to public health. The fines issued to the debtor were not money
judgments; they were the costs of reimbursing the City for the clean-up work (such
as clearing garbage) and safety repairs (such as boarding up a window and door).
The City did not attempt to enforce a money judgment or to create a pecuniary
advantage for itself ahead of other creditors. Instead, the City charged fines to cover
its expenses and placed financial liability on the property owner, the debtor, in the
enforcement of its police power.
Id.
The same holds true here. Not surprisingly, other courts have had little trouble concluding
that the automatic stay is not applicable to CERCLA proceedings like these. See, e.g., United
States v. Nicolet, Inc., 857 F.2d 202, 209 (3d Cir. 1988) (“In pressing this lawsuit, the United States
is not seeking redress for private wrongs or a remedy for a private contract breach. It is not suing
in its role as a consuming participant in the national economy. . . . Rather, the government brought

suit against Nicolet in compliance with its explicit mandate under CERCLA ‘to remove or arrange
for the removal of ... [any] hazardous substance, pollutant, or contaminant.’”)
Accordingly, I conclude that the automatic stay does not apply to the Plaintiffs’ claims
against Defendant NewPage.
SO ORDERED this

23rd

day of January, 2012.

s/ William C. Griesbach
William C. Griesbach
United States District Judge