At the Intersection of Environmental and Bankruptcy Laws

Where environmental liability and bankruptcy intersect, the landscape with respect to allocation of liability among potentially responsible parties (“PRPs”) with ongoing obligations to remediate contaminated property has been greatly affected by cases such as In re Chemtura Corp., 443 B.R. 601 (Bankr. S.D.N.Y. 2011) and In re Lyondell Chem. Co., 442 B.R. 236 (Bankr. S.D.N.Y. 2011), both decided by Judge Gerber in the Southern District of New York. The New Jersey Law Journal article, “At the Intersection of Environmental and Bankruptcy Laws,” by Uzoamaka Okoye and Natasha Songonuga, examines a small, but interesting aspect of the Chemtura decision to allow the contingent “future” portion of the proof of claim filed by the Delaware Sand & Gravel Remedial Trust (the “Trust”), notwithstanding that the claim related to the debtors’ future costs to pay for remedial work at a Superfund site.

The article examines the allowance of the Trust’s claims by the Bankruptcy Court in light of the disallowance of other similar claims noting that practitioners assisting and advising PRPs regarding environmental issues are well advised to consider the structure and function of remedial trusts given their potential to be viewed as separate legal entities and thus, capable of subverting the disallowance under section 502(e)(1) of a PRP’s contribution claim in the event of the bankruptcy of another PRP.

To read the full article and to learn more about how these recent decisions will affect PRPs, click here.