"Environmental Law and Application in Bankruptcy Law as used in In Re Fv Steel And Wire Co."

Appearing in JNREL Vol. 22 No. 2 this comment was written by former staff member Marlene Bennett. Staff member Bryan Henley wrote this abstract.

In the United States, bankruptcy laws allow discharge of most debts in exchange for liquidating of most of the debtor's assets in an attempt to repay as much of the debt is possible. By definition, the claims sought by creditors to a bankrupt debtor exceed, in aggregate, the debtor's available assets. Often, the purpose of bankruptcy proceedings is to mete out the available assets. As one might imagine, excluding a claim has a profound effect for all other creditors. Reduction in any one debt necessarily increases the assets available for all other debts. Such a situation provides a strong incentive for creditors to bicker over debts, often so much so that the bankruptcy estate is devoured by the legal process as opposed to paying the actual debts. Accordingly, efficiency is a strong motivation for bankruptcy procedures, like estimation of debts. Parties often submit arguments praying that the court follow one method or another for estimating the amount owed under a given debt. Such was exactly the salient issue for In re Steel and Wire Co., a bankruptcy case involving environmental cleanup debt. 372 B.R. 446 (Bankr. E.D. Wis. 2007).

In 1989, the Environmental Protection Agency ("EPA") identified the Sherman Wire Company as one of the parties responsible for the environmental harm caused to the Chemical Recycling, Inc. site. This dubious distinction bound the Sherman Wire Company to bear a share of the cleanup costs of this site, which operated as a debt. In 2004, Sherman Wire Co. declared bankruptcy. The committee in charge of the site cleanup (CRI committee) urged the court to estimate the debt at nearly two-million dollars due, among other costs, the expense of hauling away mass amounts of soil. The debtor, Sherman Wire Company, contested the need to remove the soil and argued that other proposed actions by the committee could cause more harm than good. The debtor submitted an estimate of seventy-five thousand dollars. The bankruptcy court is afforded great discretion in determining the proper method to estimate a given debt, and here the court used that discretion. It chose, as a bankruptcy court, to find that the soil removal and other expensive processes proposed by the committee were not necessary.

This interaction between bankruptcy law and environmental is not uncommon. Business entities that have breached environmental regulation are unlikely to be able to predict the cleanup costs that the EPA might bring to bear. These costs can be surprisingly burdensome, as this case exemplifies. The bankruptcy court must act quickly to preserve assets. Environmental law also encourages swift action to handle compromised sites, as faster cleanup abates the risks of harm to the surrounding environment and human life. In her comment titled "Environmental Law and Application in Bankruptcy Law", Marlene Bennett thoroughly analyzes one court's synthesis of environmental law and bankruptcy. If history serves as a model for the future, this will not be the last time that these questions arise and we would all be well served in maintaining a familiarity with these issues.

Addressing Fraud in Organic Farming

This post was written by staff member Adrianne Crow.

Almost everyone has heard of the supposed benefits of organic foods. However, recent problems surfacing in the organic food industry suggest that consumers may not always be getting what they pay for.

A recent article in the Lexington Herald-Leader explained that in the past year, several fertilizer makers, some of which are leaders in the California organic market, have come under fire for using substances in their fertilizers that are banned from organic farms. Jim Downing, California moves to curb organic fraud, LEXINGTON HERALD LEADER, available at http://www.kentucky.com/greenspot/story/939041.html (last visited Sept. 22, 2009). In January, Port Organic Products was raided by federal agents who found a stock of aqua ammonia. Jim Downing, Organic crop fraud targeted, THE SACRAMENTO BEE, available at http://www.sacbee.com/business/story/2188480.html (last visited Sept. 22, 2009). Aqua ammonia is a common source of synthetic nitrogen. Additionally, an investigation by The Sacramento Bee discovered that the Department of Food and Agriculture discovered the company California Liquid Fertilizer adding synthetic nitrogen to its fertilizer. Id. This particular company sold its produce to organic food leaders Earthbound Farm and Driscoll's, as well as other organic farming leaders. Id.

While synthetic fertilizers do not necessarily present health risks to consumers, they are disfavored by organic farmers because of the negative environmental impacts they can cause. Id. These fertilizers utilize increased energy in production, lower the natural fertility of soil and increase water pollution. Id. Furthermore, consumers of organic produce are willing to pay a higher price for the goods because of the promise that they were grown without these types of chemicals. Id.

Despite the controversy caused by these dishonest business practices, the only penalty handed down to California Liquid Fertilizer was to stop selling the product on the market. Id. Reacting to this situation, the state of California, which leads the nation in the organic farming, also plans to be the leader in combating fraud in the industry. Id. Assembly Bill 856, which was authored by Assemblywoman Anna Caballero, addresses these problems in the area of organic fertilizer. Id. A copy of the bill in its current state can be found on Cabballero's website: http://democrats.assembly.ca.gov/members/a28/Legislation/default.aspx. The bill, which should arrive on the desk of California Governor Arnold Schwarzenegger soon, increases penalties for violations of organic fertilizer standards. Id. In addition, it increases the authority that state regulators have over inspections and raises approximately $416,000 per year for enforcement due to new fees imposed on fertilizer makers. Id.

What it means to “maintain” a waste site in Kentucky: A Case Comment on Astro, Inc. v. Environmental and Public Protection Cabinet

Former Articles Editor Rebekah Frazier wrote this comment appearing in JNREL Vol. 22 No. 2. This abstract was written by staff member Tara Hester.

Illegal dumping is a serious problem, and many states, including Kentucky, have enacted legislation to promote the cleanup of hazardous waste sites. KRS §§224.40-305 requires a person to obtain a permit in order to "establish, construct, operate [or] maintain a waste site." In Astro, Inc. v. Environmental and Public Protection Cabinet, the Kentucky Court of Appeals addressed what it means to "maintain" a waste site within the meaning of the statute. Astro, Inc. bought the property in question knowing that it contained a large amount of construction/demolition debris (waste), and then added it's own waste to the existing pile Astro did not have a permit as required by KRS §§224.40-305 to add additional waste to the pre-existing pile and was served with several violations pursuant to the statute.

The Secretary of the Environmental and Public Protection Cabinet (EEPC) found that Astro had maintained a waste site without a permit, and stated that Astro did not have a defense because Astro failed to remove the waste it added to the pile, and thus maintained the site. Astro's main contention on appeal was that although they may be liable for the items they added to the pile, they are not responsible for the pre-existing debris. The court found that Astro maintained a waste site on its' property because Astro placed more debris in the waste site and failed to prevent others from doing the same.

The Astro decision is in line with other state court's interpretations of similar statutes. In Vermont, a defendant stacked piles of chicken manure on his farm to harass his neighbors, under the guise that he was using the manure as fertilizer. In Vermont, as in Kentucky, a permit is required to store solid waste such as chicken manure, and the defendant was found to be in violation of the statute. The Kentucky decision is in line with the Vermont decision because both courts upheld the requirement of a permit for waste disposal sites. In addition to Vermont, Maryland courts have also interpreted waste disposal statutes to reflect the need for permits. In a Maryland case, the defendants were held to be in violation of a Maryland statute for operating a landfill on their property without a permit. Even though the defendants stated they were only accepting the waste to create additional flatland that they could use as pasture land, the Maryland court, much like the Vermont and Kentucky courts, held that because the defendants did not have a permit, they were in violation of the Maryland law.

Although the court in Astro limited it's holding to a specific fact pattern, the Astro decision could be applied to determine how a Kentucky court would rule in a situation where a defendant purchased a piece of property with pre-existing waste but did not contribute any additional waste to the site and prevented others from doing so as well. A Massachusetts case ruled that a landowner is liable for maintaining a waste site if they "keep or sustain" the facility. This suggests that Kentucky landowners must take measures to get rid of the waste site to avoid liability. Additionally, a New York case held that landowners, who allow pre-existing waste to remain on their property, even though they have not contributed any additional waste, are liable for a "continuous" violation. It seems the Kentucky courts would be unsympathetic to landowners who buy property with pre-existing waste. However, because KRS §§224.43-020 provides a defense landowners if they are not the generators of the waste and are not disposing or letting others dispose of waste on their property, landowners with pre-existing waste sites may be able to avoid liability in limited circumstances. Ultimately, it is important to remember when buying property in Kentucky with pre-existing waste, one should be careful not to add to the waste or let others add to the waste to prevent liability.

Fire in the Hole: Aluminum Dross in Landfills

This Note appeared in JNREL Vol. 22. No 2. and was written by staff member Thomas Szcsygielski. Staff member Sunni Harris wrote the following abstract.

Every year there are approximately 8,300 fires that occur in landfills. Landfill fires frequently emit harmful dioxins that can cause cancer, liver damage, skin rashes, and reproductive disorders. A growing subset of these fires is caused when aluminum dross reacts with water.

Aluminum dross is the material that is left behind when aluminum ore is melted or processed. Five million tons of aluminum dross is produced per year as aluminum is often used for such commercial products as pistons, engine and body parts for cars, beverage cans, doors, siding and aluminum foil. Aluminum dross can become dangerous when it is improperly stored in landfills because it is highly combustible when mixed with water.

While aluminum dross storage can be easily regulated by legislation, it currently is not. CERCLA (The Comprehensive Environmental Response, Compensation, and Liability Act) is the primary source of federal jurisdiction over hazardous material dump sites. CERCLA allows the EPA to undertake direct removal or remedial action to protect the public health or the environment when it determines that release of a hazardous substance poses an imminent and substantial danger; however, the EPA has not used CERCLA to regulate aluminum dross because it does not consider aluminum dross a hazardous material. It is interesting that while the EPA does not officially recognize the production of aluminum dross as hazardous, it recognizes the need for its regulation.

Barmet Aluminum Corp v. Reilly illustrates this point well. In Barmet, the plaintiff operated an aluminum recycling plant that produced aluminum dross as a by-product. The plaintiff stored the dross in landfills; however, the EPA placed these landfills on a list of high priority hazardous sites under CERCLA and threatened to hold the plaintiff liable for damage to a nearby stream that originated in the waste. The plaintiff sued for injunctive relief arguing that the EPA forced them to expend resources for expensive, remedial feasibility studies before they were deemed responsible for the damage to the nearby river. The court rejected the plaintiff's argument. Barmet is a demonstration that while the U.S. EPA does not deem aluminum dross as legally hazardous, they recognize the importance of its regulation.

Going forward, there are three main suggestions to decrease the amount of fires that are started because of the improper disposal of aluminum dross: (1) continue to allow landfills to be responsible for their own dross, (2) encourage or mandate companies that produce dross as a by-product to recycle it, or (3) have the EPA classify aluminum dross as hazardous substance. The most effective solution will most likely be a combination of the aforementioned approaches.

Challenging the Government’s Management of Wild Horses in our Western States in The Fund for Animals v. U.S. Bureau of Land Management

Appearing in JNREL Vol. 22 No. 2 this comment was written by staff member Melanie Price. The abstract was written by staff member Derek Leslie.

This Comment analyzes the legal avenues available to activist individuals or groups who seek to prevent a government agency from implementing an environmental plan. The Fund for Animals v. U.S. Bureau of Land Management, 460 F.3d 13 (D.C. Cir. 2006), provides an instructive lesson for potential plaintiffs in this area.

The Plaintiff in this case, The Fund for Animals, attempted to stop the U.S. Bureau of Land Management (hereinafter "BLM") from implementing a plan that would reduce the population of wild horses and burros. The BLM's plan was promulgated in order to address increasing concerns about overpopulation of wild horses and its effect on the ecological balance. In fact, the BLM was specifically tasked with maintaining appropriate management levels of these populations in order to achieve this balance under the Wild and Free-Roaming Horses and Burros Act (hereinafter "WHBA") enacted by Congress. The challenged plan was proposed to Congress pursuant to the Act, passed, and BLM field offices had begun implementing the plan at the time of litigation.

The Fund sought to enjoin the BLM from implementing this plan. They argued that the BLM violated the National Environmental Policy Act (hereinafter "NEPA"), because it did not prepare an environmental impact statement before implementing the plan. Recognizing that 5 U.S.C. §702 mandates that the federal courts are not to review agency policy in the abstract and that the WHBA and NEPA both lacked provisions providing standing, the Fund's claim was based on a cause of action under the Administrative Procedure Act (hereinafter "APA"). Under the APA there is a cause of action to "a person suffering legal wrong because of an agency action, or adversely affected or aggrieved by agency action." Importantly, the APA states that courts may only intervene when a specific final agency action has an actual or immediately threatened effect.

The district court dismissed the parts of the Fund's injunction request concerning the removal strategy because the BLM's plan, in their view, was not a final agency action. The Fund's objections to specific gathers, where the plan had already been implemented, the court suggested were moot. The Court of Appeals, affirmed suggesting that a Budget Request to Congress was too tenuous to the removal of the animals to constitute reviewable specific implementation of a broader agency policy. Moreover, they found that an expired internal memorandum to BLM field offices with guidance on implementing the plan within the allotted time did not represent "final agency action" and because of its expiration date, it was moot. As to the seven gathers where the plan had already been implemented, the Court of Appeals, agreed with the district court that this part of the claim was also moot.

This case demonstrates the narrow way courts will approach review of agency action under the APA. Potential plaintiffs have only a minute actionable window in which to bring a claim satisfying justiciability without raising issues of mootness. Plaintiffs must be keenly aware of this narrow opportunity if they have any hope of getting an injunction against agency action. Groups like The Fund for Animals, would do well to be vigilant as budget proposals come to Congress, in hopes of finding politicians, and votes, sympathetic to their point of view. Sympathy, as this case shows, is not the courts main concern when asked to intervene in agency action.

THE JURY’S ROLE IN EMINENT DOMAIN COMPENSATION AS EXPLAINED IN METROPOLITAN WATER DISTRICT OF SOUTHERN CALIFORNIA v. CAMPUS CRUSADE FOR CHRIST, INC.

Appearing in JNREL Vol. 22 No. 2, this comment was written by former Comments Editor Ashley Owens. This abstract was written by staff member Tanner James.

Few legal terms elicit an impassioned response comparable to that inspired by "eminent domain." When discussing the governmental power to take possession of private, real property, the reactions are as varied and intense as one might imagine. Given this volatility, courts are faced with a delicate balancing act when defining the terms and limits of this power and its interpretation.

In Metropolitan Water District v. Campus Crusade for Christ, Inc., 161 P.3d 1175 (Cal. 2007), the California Supreme Court undertook the task of defining the role of judge and jury in determining damages (i.e., compensation) in eminent domain actions. At issue was the question of who should decide what constitutes "the highest and most profitable use to which the property might be put in the reasonably near future." Specifically, when property would require rezoning in order to achieve its "highest and most profitable use," who is to decide whether the possibility of rezoning is sufficient to justify damages based on the planned use of the property?

In a reversal of the lower court, the California Supreme Court held that the jury must be presented any evidence that would show a "reasonable probability" of rezoning. Furthermore, the court held that the question of rezoning-probability should be submitted to the fact-finders if a reasonable juror could find that rezoning is likely. This holding effectively establishes the judge as a gatekeeper, while also granting substantial power to the jury to determine the extent of damages.

The implications of this case are, appropriately, subject to criticism from both poles. While the damages awarded may increase as a result of jury control, the judge still retains the power to exclude certain damages as the ultimate gatekeeper.

Maintaining the Status Quo of Trade with Cuba: The goals of the Embargo

This post was written by staff member Jessica Drake.

In 2008, Fidel Castro stepped down as President of Cuba after ruling his Communist regime for 49 years. Manuel Roig-Franzia, Uncertainty as Castro Steps Down, The Washington Post, Feb. 20, 2008,at A1, available at http://www.washingtonpost.com/wpdyn/content/article/2008/02/19/AR200802

1900147.html.An adversary to American Presidents since the Kennedy era, Castro's continued disregard for international standards of human rights has led this country to place a trade ban against Cuba for nearly 40 years. Despite his resignation, the US embargo against the country continues. See Cuban Liberty and Democratic Solidarity Act ( LIBERTAD), 22 U.S.C.A §§6021- 6091 (1996). However, it is an area of increasing criticism by many US citizens, congressmen, and foreign governments. With President Obama's April 2009 decision to allow travel to Cuba for Cuban-Americans and a democratically-ruled congress, some argue that the embargo could be on its way out. Leslie Clark, Cuban Trade ban stands despite rising efforts to end it, LEXINGTON HERALD LEADER, Sept., 10, 2009 available at http://www.kentucky.com/1084/story/929346.html. However, advocates of the trade ban hold to their belief in the embargo's ability to show civil disobedience to the Communist Nation and its new leader, the brother of Castro himself. The U.S. President's recent decision to renew the ban encourages those who believe civil disobedience is the proper course of action to take towards Cuba.

In 1996, LIBERTAD renewed and codified our country's efforts to limit assistance through trade with Cuba. See supra LIBERTAD. The legislature, in the enactment of LIBERTAD, grounded the trade ban in its stated desire to assist the Cuban people in regaining a democratic government. It found that Fidel Castro exhibited "continued violations of fundamental human rights." 22 U.S.C.A. § 6021(4) (1996). In its rationale, Congress felt the embargo would strengthen international sanctions of Cuba, encourage free elections of governmental officials, and protect US nationals from confiscatory takings by the Castro regime. See 22 U.S.C.A § 6022. To terminate the embargo, the President must find and report to Congress that a transitory government is in place. See22 U.S.C.A § 2064(a). The President then may, upon consultation of Congress, work to terminate the embargo. See 22 U.S.C.A § 2064(c).

In the past, the motivation behind the economic isolation of the country withstood scrutiny. Recently,opposition has arisen, but on September 15, 2009, President Barack Obama decided to renew the embargo for another year, standing by his promise to allow Cuban-Americans to travel and send remittances to family there but maintaining the embargo. Juan O. Tamayo, White House renews trade ban on Cuba, MIAMI HERALD, Sept., 15, 2009, available at http://www.miamiherald.com/1264/story/1233997.html.

President Obama declared that he would not consider lifting the ban until Cuba "improves its human rights and frees political detainees." Nelson Acosta, Cuba Chides Obama over U.S. Trade Embargo, Sept., 16, 2009, available at http://www.canada.com/business/Cuba+chides+Obama+over+trade+embargo/2000661/story.html. Many would suggest that his statement seems arbitrary in light of the fact that the embargo poses no serious problem upon the Cuban government. American-made Products Readily Available in Cuba, Miami Herald, Aug. 29, 2009 available at http://www.miamiherald.com/embargo/story/1209009.html. U.S. goods still get into the country on the black market, and the embargo only serves to make the prices of said goods astronomical, furthering the economic divide between the rich and poor in Cuba. See id. Furthermore, the embargo gives the Communist government more fuel with which to blame America for the plight of the increasingly poor nation. With these facts, despite an admirable stand to articulate, we must accept the substance and reality of the thing. If American goods cause this much damage and could do so much more good by legalizing trade, should we not be willing to swallow our pride and try a different way?

“Damages and Injury: Smith v. Carbide and Chemicals Corporation and the Application of Kentucky Law Under the Price-Anderson Act”

Appearing in JNREL Vol. 22. No.2 this comment was written by former Articles Editor Cole Adams. The abstract was written by staff member John Hendricks.

The Price-Anderson Act was enacted in 1957 to encourage private sector development of nuclear power and provide insurance to private corporations in the event of a nuclear accident. The act also created a federal cause of action for accidents and injuries arising from the actions of nuclear power plants. While the federal courts have jurisdiction for actions under the Price-Anderson Act, these courts are required to adhere to state substantive law. In Smith v. Carbide and Chemicals Corporation, the Kentucky Supreme Court provides guidance on the applicable rules of intentional trespass and damages for an action under the Price-Anderson Act.

In 1988, the containments trichloroethylene and technetium-99 were found to be flowing from the groundwater of the Paducah Gaseous Diffusion Plant ("PDGP"). PDGP is located ten miles west of the town of Paducah, Kentucky and while contamination did not exceed regulatory levels, residents of the area were provided with new water sources. Contaminated groundwater was detected to be originating from PDGP again in 1990. Finally, in 1997 a lawsuit was filed in federal court seeking recovery for diminution in property values as a result of the contaminated ground water. On appeal of summary judgment for the defendant the Kentucky Supreme Court granted certification to answer questions of Kentucky law.

The Court first examined whether proof of actual harm was required to state a claim for intentional trespass. Relying on Ellison v. R & B Contracting, Inc. it was held that actual harm was not a required element to maintain a claim of intentional trespass. Secondly, the Court addressed whether proof of diminution in property values due to an intentional trespass gave rise to a right to recover. Acknowledging the common law principal that any encroachment on to the property of another was sufficient to support a finding of actual injury, the Court acknowledged more than nominal damages could be awarded. Finally, it was stated that the measure of damages should be the diminution in the fair market value of the property.

Smith, could have potential long term implications for environmental litigation in the state of Kentucky. The majority's opinion provides the possibility of increased litigation of environmental trespass cases. It appears that intentional trespass cases now have a stronger chance of surviving motions for summary judgment and reaching a jury. The author of the comment provides a more in-depth analysis of the case, as well as an excellent summary of the dissent in Smith and the case's potential impact on the Commonwealth.

Washington Court backs Department of Fish and Wildlife

This post was written by staff member Andrew S. Leung.

Down by the docks in the state of Washington, the natives grow restless. In the perpetual war between environmental interests and the interests of commercial fishermen, Mother Nature has won the latest battle. Thurston County Superior Court recently denied the petition of a group of commercial fishermen seeking a restraining order against the enforcement of Washington Department of Fish and Wildlife ("WDFW") regulations limiting the amount of Dungeness crab harvested per week. Jeremy Pawloski, Court upholds state's limits on crab catch, THE OLMPIAN, available at http://www.thenewstribune.com/news/local/story/869631.html.

At first glance, the WDFW restrictions do not seem unreasonable, as the current allotment of 4500 pounds per week is nearly double the initial allotment of 2500 pounds per week. Id. Nonetheless, Washington's commercial crab fishermen are disgruntled, claiming that their property rights were violated. Id. Plaintiffs' attorney alluded to an upcoming civil suit in which he planned to sue for economic compensation. Id.

Any suit based on the private citizen's right to the fisheries of a state seems doomed from the onset. Following the time tested doctrine of ratione soli, the Thurston County Superior Court based its decision on the premise that the Dungeness crabs belonged to the state, thus foreclosing the possibility of any property rights to said crabs vested in the private citizen. Washington courts have long held that "...fishermen do not have a 'vested' or 'natural' property [r]ight to fish [or] to take fish...." Puget Sound Gillnetters Ass'n v. Moos, 92 Wash.2d 939 at 947, 603 P.2d 819 at 824 (Wash. 1979). The court also warned that "...we must remember that the state, in its sovereign capacity, owns the fish in the waters of the state... [and] [f]ishermen have no private property rights in taking [fish]." Washington Kelpers Ass'n v. State, 81 Wash.2d 410 at 415, 502 P.2d 1170 at 1172 (Wash. 1972).

Furthermore the Washington Kelpers court found that "...the state owns the fish in its sovereign capacity as the representative of and for the benefit of all people in common." Id.,at416. In the present case, WDFW based the new restrictions on the finding that more than 50% of the crab catch was soft-shelled. See supra Pawloski. A Dungeness crab is soft only period immediate following its molt, but before it spawns for the season.

Despite the probable adverse economic effect upon the class of commercial crab fishermen, the court has reached an appropriate conclusion. The WDFW's finding essentially suggests that approximately half of the adult crabs harvested annually in the state of Washington have not yet had the opportunity to add progeny to state waters. The Washington Kelpers decision provides, "...if you don't regulate to reduce the total catch along the line, then your spawning escapement will suffer and your subsequent production will go down." Id., at 419. For now, Washington's commercial crab fishermen will have to tighten their belts so that future generations of crab fishermen will have something to wrap theirs around.