# Amicus Curiae Brief — O'Neill v. City of New York, 105 S. Ct. 2110 (1985) (No. 84-805) > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0143%3A11 ## Record - **Collection:** Supreme Court brief - **Document type:** Amicus Curiae Brief - **Published:** January 1, 1985 ## Text IN THE Supreme Court of the Unit OCTOBER TERM, 19847 THOMAS J. O’NEILL, TRUSTEE IN BANKRUPTCY OF QUANTA RESOURCES CORPORATION, Debtor, . Petitioner, THE CiTy OF NEW YORK and STATE OF NEW YORK, Respondents. MIDLANTIC NATIONAL BANK, Petitioner, v. NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, Respondent. On Writ of Certiorari to the United States Court of Appeals for the Third Circuit BRIEF OF THE STATE OF WEST VIRGINIA AND FIFTEEN STATES AS AMICI CURIAE Of Counsel to the Attorney CHARLIE BROWN General of West Virginia Attorney General of JAMES D. Morris * West Virginia HOWARD J. WEIN STEVEN JOHNSTON KNOPP Pennsylvania Department Assistant Attorney General of Environmental State of West Virginia Resources Capitol Complex 1314 Chestnut Street Charleston, WV 25305 Suite 1200 (304) 348-9160 Philadelphia, PA 19107 (215) 875-7486 * Counsel of Record for Amici Curiae WILSON - EPES PRINTING Co., Inc. - 789-0096 - WASHINGTON, D.C. 20001 TABLE OF CONTENTS Page EE er Se eicttcincsenenceienensnieninavicnaiinnts ii THE INTEREST OF THE AMICI CURIAE................ 2 SUMMARY OF ARGUMENT ...WWW222.2....2..02--e--cseeeeeeees 3 TE sintcivinisiniinaiinintteasenciinsrteciniviapsinnviinvaiiiiilaiitian 4 The United States Court of Appeals for the Third Circuit protected the public health and safety and vindicated Congressional policy under the Bank- ruptcy Code by refusing to allow the bankrupt Quanta Resources to abandon its responsibilities with respect to two dangerous hazardous waste EE cndichtnctenniathdhcdeléniountiadintebestiecician “oh 4 The United States Court of Appeals for the Third Circuit correctly required the bankruptcy court to carry out its obligations as a federal court of equity by balancing the public health, safety and welfare against the financial interests of Quanta’s ER RE PAREN Ey PAV 7 GTENE cccsnsinsenceninisnsnantiaintnctisiiistisdsisiensebibennsiaipibdinaitias 10 ii TABLE OF AUTHORITIES CASES: Page Astol Calero-Toledo v. Pearson Yacht Leasing Company, 416 U.S. 663 (1974)_-........-.--.2...... 8 In Re Lewis Jones, Inc., 1 Bkr. Ct. Dec. 277 (E.D. EEN ce a a 7 In Re Quanta Resources Corp., 739 F.2d 912 (3rd Ee 2, 4, 6, 7, 8,9 Ottenheimer v. Whitaker, 198 F.2d 289 (4th Cir. esd aR AS Ca . Queenside Hills Realty v. Sazl, U.S. 80 (1946)... STATUTES: Federal: a-~ I caeteilnnnecnne EE is cbiesaaneiicbiaenenn 3 EE a 3 a 3, 6, I ultmasintune 3, a cendinsbnsipne West Virginia: W. Va. Code § 16-20-1 et seq. _.......-..2....--eeeee ne eeeeeenee W. Va. Code § 20-5A-1 et seq. cece cece W. Va. Code § 20-5E-1 et seq... ES W. Va. Code § 20-6-1 et seq. 222.2... nee OTHER: Wein, Environmental Enforcement and the Bank- ruptcy Act, 17 Dug. L. Rev. 183 (1978-1979)... 9 ewwv vo Canran oo hm Ww W bb IN THE Supreme Court of the United States OCTOBER TERM, 1984 No. 84-805 THOMAS J. O’NEILL, TRUSTEE IN BANKRUPTCY OF QUANTA RESOURCES CORPORATION, Debtor, . Petitioner, THE CiTy OF NEW YORK and STATE OF NEW YORK, Respondents. No. 84-801 MIDLANTIC NATIONAL BANK, * Petitioner, NEW JERSEY DEPARTMENT OF ENVIRONMENTAL PROTECTION, Respondent. On Writ of Certiorari to the United States Court of Appeals for the Third Circuit BRIEF OF THE STATE OF WEST VIRGINIA AND FIFTEEN STATES AS AMICI CURIAE 2 THE INTEREST OF THE AMICI CURIAE The amici curiae are the Attorneys General of the State of West Virginia and the states of Indiana, Texas, Oklahoma, Delaware, Pennsylvania, Connecticut, Ten- nessee, Ohio, New Mexico, North Carolina, Michigan, New Hampshire, Vermont, Kansas and Illinois, who file this brief pursuant to Rule 36.4 of the Rules of the Supreme Court of the United States. In each of the amici states, the governors and the legislatures have developed or are developing comprehensive statutory and regulatory programs for assuring the public health, safety and wel- fare by protecting the environment.’ Crucial to such state programs are state statutes and city ordinances intended to impose liability for abate- ment and rehabilitation upon the polluter who violates these laws and thereby causes serious environmental harm. The United States Court of Appeals for the Third Circuit correctly recognized the importance of such laws and reversed the courts below it, remarking “[t]hat Con- gress did not intend to abrogate the enforcement of state police power regulations .. .” 739 F.2d 912, 918. When the bankruptcy courts allow abandonment and thereby relieve illegal operators such as Quanta, and their legal successors, the trustees in bankruptcy, of precisely such responsibility, the bankruptcy courts effectively nullify those state programs and jeopardize the public health and safety. The decision of the United States Court of Ap- 1 West Virginia’s statutes are illustrative of the comprehensive program of environmental protection. Each statute is designed to address a particular area of concern. West Virginia Water Pollu- tion Control Act, W. Va. Code § 20-5A-1 et seq., 1981, 1984 Supp. (Water Pollution); West Virginia Air Pollution Control Act, W. Va. Code § 16-20-1 et seq., 1985 (Air Pollution) ; West Virginia Hazardous Waste Management Act, as amended, W. Va. Code § 20-5E-1 et seq., 1981, 1984 Supp. (Hazardous Waste); West Virginia Solid Waste Management Act, as amended, W. Va. Code § 20-5F-1 et seq., 1981, 1984 Supp. (Solid Waste); West Virginia Surface Coal Mining and Reclamation Act, W. Va. Code § 20-6-1 et seq., 1981, 1984 Supp. (Surface Mining). 3 peals for the Third Circuit prohibiting such a result should be affirmed. The common interest of the amici lies in the preserva- tion of their ability to protect the citizenry through en- forcement of state police power enactments. They also seek to vindicate the Congressional intent that the Bank- ruptcy Code honor, rather than undermine, the legitimate interest of the states in seeking the abatement of hazards and nuisances which threaten the public health, safety and welfare. The amici have a growing concern that lower federal courts are failing as federal courts of equity by allowing bankrupts to subvert these important state interests. In recent years, Congress has increasingly recognized the importance of protecting the same interests served by the state environmental protection statutes.2 The com- prehensive regulatory scheme enacted by Congress is de- signed to protect against, inter alia, existing and past unlawful hazardous waste disposal activities and includes provisions for state enforcement of various federally im- posed requirements. If the Third Circuit’s decision is reversed, that scheme could be impaired severely. The amici also have an interest in protecting the effectiveness of the federal programs and the ability of the states |to enforce the provisions of those laws. SUMMARY OF ARGUMENT The United States Court of Appeals for the Third Cir- cuit protected the public health and safety and vindicated Congressional policy under the Bankruptcy Code by re- fusing to allow the bankrupt Quanta Resources to aban- don its responsibilities with respect to two dangerous haz- ardous waste disposal sites. 2 See, e.g., the Clean Air Act, 42 U.S.C. § 7401; the Federal Water Pollution Control Act, 33 U.S.C. § 1251; the Resource Conservation and Recovery Act, 42 U.S.C. § 6901; the Federal Surface Mining Control and Reclamation Act, 30 U.S.C. § 1201; the Comprehensive Environmental Response, Compensation and Liability Act (Super- fund legislation), 42 U.S.C. § 9601. 4 Even assuming that Congress may have granted the federal bankruptcy courts a new statutory power to over- rule the states’ exercise of the police power reserved to them under the Tenth Amendment, to jeopardize the public health and safety, to ignore the intent of the Bank- ruptey Code and to disregard the federal legislative scheme controlling and regulating hazardous waste, it is manifestly clear that the Constitution requires that such power must be exercised, if ever, in a manner consistent with the balancing of interests required of a federal court sitting in equity, rather than as a purely commercial tribunal whose sole interest lies in the vindication of creditors’ rights. The United States Court of Appeals for the Third Circuit properly reversed such an untoward re- sult and should be affirmed. ARGUMENT The United States Court of Appeals for the Third Circuit protected the public health and safety and vindicated Congressional policy under the Bankruptcy Code by refusing to allow the bankrupt Quanta Resources to abandon its responsibilities with respect to two danger- ous hazardous waste disposal sites. By interfering with the legitimate efforts of New York, New York City and New Jersey to contain and control severe environmental hazards by compelling the bank- rupt to comply with state and local laws respecting en- vironmental protection, the bankruptcy court imperiled the public health and safety in the vicinity of the two sites. The United States Court of Appeals for the Third Circuit correctly reversed the courts below, remarking: “(ejonsidered in the light of other provisions that both limit the supersession of state laws and specifically incor- porate equitable principles into a bankruptcy court’s ju- risdiction, it is clear that Section 554 [of the Bankruptcy Code] does not of itself preempt state police power reg- ulations.” 739 F.2d 912, 918 (8rd Cir. 1984). —s_ 5 Despite state statutes and city ordinances clearly in- tended to impose liability for abatement and rehabilita- tion upon the polluter who violates these laws and there- by causes serious environmental harm, the bankruptcy court in fact relieved Quanta—just such an illegal oper- ator—and its legal successor, the trustee in bankruptcy, of precisely such responsibility. State regulatory agencies throughout the nation are faced every day with the urgent need to protect their citizens from both the immediate dangers posed by the illegal disposal of hazardous and industrial waste, as in the instant cases, and by violations of the other state statutes * designed to protect the public health, safety and welfare. Such statutes represent valid exercises of the police power, reserved to the states under the Tenth Amendment to the Constitution of the United States. Traditionally recognized by this Court as the least limit- able of the reserved powers, Queenside Hills Realty v. Saxl, 328 U.S. 80 (1946), the police power broadly au- thorizes the various states to regulate in order to pro- tect the health, safety and welfare of their citizens. Legitimate state enforcement action pursuant to such statutes is thwarted when illegal activities are sanc- tioned by the federal bankruptcy courts. In the instant cases, the federal bankruptcy court refused to show con- stitutionally mandated deference toward the states in the exercise of the police power. The decision of the United States Court of Appeals for the Third Circuit correctly redressed this imbalance, by reversing the courts below and refusing to allow abandonments which result in violations of the state laws and city ordinances concerning the disposal of hazardous waste. 8 The briefs of New York, New York City and New Jersey are replete with reference to the various state and municipal require- ments relating to police power enactments respecting environmental protection. See n.1, supra. 6 Quanta’s trustee in bankruptcy is under an absolute and unconditional obligation to comply with the laws of New York, New York City and New Jersey, and to ap- ply all necessary assets of the estate to the cleanup of the two environmental disasters which Quanta owned and in the creation of which Quanta aided. The Bank- ruptey Code itself contemplates that state police power actions will not be subjected to interference by the fed- eral bankruptcy courts, see 11 U.S.C. § 362 (b) (4); 28 U.S.C. § 1478(a).* The trustee must comply with val- idly enacted state police power statutes, 28 U.S.C. § 959 (b). As the United States Court of Appeals for the Third Circuit remarked: ‘“[t|jhe question thus presents itself: did Congress intend that the trustee’s abandon- ment power be unrestricted by public health and safety regulations? Our examination of the bankruptcy laws and the authorities interpreting these laws reveals no such congressional intent.” 739 F.2d 912, 916. Furthermore, the action of the bankruptcy court was at marked variance with clearly expressed congressional intent respecting environmental protection against the illegal disposal of hazardous waste, see, e.g., 42 U.S.C. §§$ 6901(b) (4) and 6901(b)(5). The United States Court of Appeals for the Third Circuit specifically recog- nized that state and local law implement the same in- tent: “[t]he primary purpose of the state and local laws regulating the disposal of hazardous wastes is obviously to protect the public from the toxic effect of dangerous substances by preventing their uncontrolled discharge into the environment.” 739 F.2d 912, 915 (8rd Cir. 1984). The action of the bankruptcy court frustrated the op- eration and administration of the federal laws concern- ing the protection of the public against the dangers posed 4 Section 1478 of Title 28 was modified by the Bankruptcy Amend- ments and Federal Judgeship Act of 1984, P.L. 98-353. However, the policy protecting states from removal remained the same. 7 by the ‘llegal disposal of dangerous industrial waste. Given the bankruptcy court’s failure to respect the reserved police power of New York and New Jersey, and given its obstruction of the operation and admin- istration of the federal environmental law, the decisions of the Bankruptcy Court were properly reversed, and the decision of the United States Court of Appeals for the Third Circuit should be affirmed. The United States Court of Appeals for the Third Cir- cuit correctly required the bankruptcy court to carry out its obligations as a federal court of equity by balanc- ing the public health, safety and welfare against the financial interests of Quanta’s creditors. The bankruptcy court below also failed as a federal court of equity.” The United States Court of Appeals for the Third Circuit properly identified the bankruptcy court as just such a court, 739 F.2d 912, 917, and pro- ceeded to present the balancing of equities which the bankruptcy court should have, but here failed, to do: In this case, the state and local regulations advance a very important policy: to protect the public health by regulating disposal of toxic wastes. Abandonment by the trustee clearly contravened applicable law, and did so not merely technically, but with severely dele- terious implications for the public safety. . . To be weighed against this manifestly important public policy is the policy advanced by abandonment, to preserve as much of the estate as possible for dis- tribution to creditors. This policy must be viewed in light of the indications of a concurrent federal legis- lative policy to limit intrusion into state police power regulations, including environmental protection laws... 5 See Ottenheimer v. Whitaker, 198 F.2d 289 (4th Cir. 1952); In re Lewis Jones, Inc., 1 Bkr. Ct. Dec. 277 (E.D. Pa. 1974), which were cited with approval by the United States Court of Appeals for the Third Circuit, 739 F.2d 912, 916-918 (1984). 8 But the extent (unproven in these proceedings) of the expenditures necessary to dispose of the waste properly is not in itself sufficient to outweigh the public interest at stake here. . . The supremacy clause does not require the suspension of the opera- tion of New York’s hazardous waste disposal laws. 739 F.2d 921-922 (footnotes omitted) (emphasis sup- plied). As a court of equity, the bankruptcy court below suc- ceeded only in protecting the limited group of entities which financed the creation of the two illegal hazardous waste disposal sites. It provided no consideration or pro- tection for the citizenry actually or potentially affected by the illegal hazardous waste, and it chose to impose indirectly the costs of cleanup upon the already strained fise of New York, New York City and New Jersey. Were the trustee compelled to address his responsibil- ities with respect to the Quanta sites, the various cred- itors who financed the creation of the Quanta disasters would have nothing legitimate to complain of. A pru- dent lender is on inquiry notice with respect to real estate security, and such a lender ought logically at least on occasion to police such collateral. Even assuming that the creditors were unaware of the illegal conduct on the part of their debtor, this Court has sustained actions by governmental agencies which worked far more onerous deprivations without finding a compensable taking. For example, in Astol Calero-Toledo v. Pearson Yacht Leas- ing Company, 416 U.S. 663 (1974), a yacht lessor’s boat was seized and forfeited by the authorities of Puerto Rico pursuant to the arrest of a dealer in illegal drugs who was using the boat to transport drugs. Despite the yacht lessor’s complete lack of knowledge of or connec- tion with the criminal enterprise, this court held that no unconstitutional deprivation was worked by the for- feiture. Finally, the bankruptcy court below proceeded as though totally unaware that the state s.atuies and ordi- 9 nances involved in the instant cases (as well as their equivalents in West Virginia and other states) were en- acted to implement and complement federal legislative action under the Commerce Clause.* The constitutional scheme protecting both the police power of the states and the power of the federal government to regulate interstate commerce was severely disrupted when the bankruptcy court below allowed abandonment to proceed. The United States Court of Appeals for the Third Cir- cuit has set forth a lucid and sensible analysis for bank- ruptcy courts to apply when they consider abandonments which may involve violations of state and local laws re- specting the disposal of hazardous waste. On the one hand, the court must consider “. ... a very important policy: to protect the public health by regulating dis- posal of toxic wastes.” 739 F.2d 912, 921. On the other hand, the court must consider “. . . the policy advanced by abandonment, to preserve as much of the estate as possible for distribution to creditors.” 739 F.2d 912, 921. Where the two policies conflict, the court must rule in favor of the public health, safety and welfare. As the United States Court of Appeals for the Third Circuit concluded: “(t]he Supremacy clause does not require the suspension of New York’s hazardous waste disposal laws.” 739 F.2d 912, 921. Its judgments should be con- firmed. 6 See, e.g., the Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; the Water Pollution Control Act, 33 U.S.C. § 1251 et seq. and the Surface Mining Control and Reclamation Act, 30 U.S.C. §1201 et seq. See also, Wein, Environmental Reguiation and the Bank- ruptcy Act, 17 Dug. L. Rev. 133, 186 (1978-1979). 10 CONCLUSION The United States Court of Appeals for the Third Circuit protected the public health and safety and vindi- cated Congressional policy under the Bankruptcy Code by refusing to allow the bankrupt Quanta Resources to abandon its responsibilities with respect to two dan- gerous hazardous waste disposal sites. The United States Court of Appeals for the Third Circuit correctly re- quired the bankruptcy court to carry out its obligations as a federal court of equity by weighing the public health, safety and welfare against the financial interests of Quanta’s creditors. _ Accordingly, the judgments of United States Court of Appeals for the Third Circuit should be affirmed. Respectfully submitted, Of Counsel to the Attorney CHARLIE BROWN General of West Virginia Attorney General of JAMES D. Morris * fi West Virginia HOWARD J. WEIN STEVEN JOHNSTON KNOPP Pennsylvania Department Assistant Attorney General of Environmental _ State of West Virginia Resources Capitol Complex 1314 Chestnut Street Charleston, WV 25305 Suite 1200 (304) 348-9160 Philadelphia, PA 19107 (215) 875-7486 § Counsel of Record for Amici Curiae --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385012_0143%3A11. Public record. Not legal advice.