Commerce Oil Co., In re
Citation | 847 F.2d 291 |
Decision Date | 23 May 1988 |
Docket Number | No. 86-6215,86-6215 |
Parties | , 18 Collier Bankr.Cas.2d 1256, 17 Bankr.Ct.Dec. 1378, Bankr. L. Rep. P 72,298, 18 Envtl. L. Rep. 21,017 In re COMMERCE OIL COMPANY, a Tennessee Corporation, Debtor. James E. WORD, Commissioner, Tennessee Department of Health and Environment, and the Tennessee Water Quality Control Board, Plaintiffs-Appellants, v. COMMERCE OIL COMPANY and Samuel K. Crocker, Defendants-Appellees. |
Court | United States Courts of Appeals. United States Court of Appeals (6th Circuit) |
W.J. Michael Cody, Atty. Gen. of Tenn., Michael D. Pearigen (argued), Nashville, Tenn., for plaintiffs-appellants.
Kyle R. Weems, Weill and Weems, Chattanooga, Tenn., C. Kinian Cosner, Jr. (S. Crocker), Manier, Herod, Holabaugh & Smith, Gail Reese, Eric Helmers (argued), Nashville, Tenn., for defendants-appellees.
Before MARTIN and GUY, Circuit Judges; and JOHNSTONE, Chief District Judge. *
This appeal concerns a ruling of the bankruptcy court for the Eastern District of Tennessee which held that proceedings by the state of Tennessee to fix civil fines and penalties under the Tennessee Water Quality Control Act of 1977, TENN.CODE ANN. Sec. 69-3-101 et seq., are stayed under 11 U.S.C. Sec. 362.
On November 6, 1984, Tennessee's Commissioner of Health and Environment issued a Complaint against Commerce Oil Company (Commerce) for alleged violations of the Tennessee Water Quality Control Act, TENN.CODE ANN. Sec. 69-3-101 et seq. The Complaint ordered Commerce to cease alleged illegal discharges of brine into Stowers Creek, Morgan County, Tennessee from certain wells and to make repairs to those wells. The Complaint assessed damages in the amount of $1,235.37 and civil penalties in the amount of $15,000.00 against Commerce. On December 13, 1984, Commerce appealed the Complaint to the Tennessee Water Quality Control Board pursuant to TENN.CODE ANN. Sec. 69-3-109(a)(3). On December 20, 1984, Commerce filed a Chapter 11 bankruptcy petition in the United States Bankruptcy Court for the Middle District of Tennessee. Thereafter, on March 29, 1985, the state filed a Proof of Claim in the bankruptcy court for the $16,235.37 of fines and penalties which had been assessed against Commerce.
At the appeals hearing before the Tennessee Water Quality Control Board on November 22, 1985, Commerce's attorney contended that the provisions of 11 U.S.C. Sec. 362(a) applied to stay that hearing. He threatened to file a contempt petition in the bankruptcy court unless the state ceased its proceedings. Faced with the contempt threat, the state ceased proceedings and filed this action in the bankruptcy court asking for a determination of whether the "police power" exception to the automatic stay found in Sec. 362(b)(4) applied to the state's proceedings to fix liability for civil penalties and damages.
The bankruptcy court held that the state's consideration of remedial measures and injunctive relief was not stayed because such matters were within the "police power" exception to the automatic stay. However, it also held that the state's review and determination of civil fines and penalties was an action on a claim against the debtor's estate and was stayed under 11 U.S.C. Sec. 362. The state appealed. The district court affirmed, holding that Tennessee is precluded from assessing and/or collecting money damages from the debtor under 11 U.S.C. Sec. 362, but remains free to exercise injunctive relief and to order remedial steps for the protection and safety of its citizens under Sec. 362(b)(4).
Before turning to the substance of the state's appeal, we must consider whether the matter presently before us is moot.
Under the terms of paragraphs 3 and 4 of the bankruptcy court's Order, Commerce was allowed up to 45 days from the hearing on this matter to object to the state's claim against the estate. If Commerce did not object, the Order deemed the state's claim valid and allowed it, rendering "further action by the Board and the Department superfluous." R. at 78. 1 Commerce made no objection, thus 45 days after the court hearing, the state's claim was allowed against the estate. At that point, Commerce urges, the application of the Sec. 362 automatic stay to the state's proceedings became moot.
Under Article II, Sec. 2 of the Constitution, this court only has jurisdiction to hear actual cases and controversies. See Sosna v. Iowa, 419 U.S. 393, 397-403, 95 S.Ct. 553, 556-559, 42 L.Ed.2d 532 (1975). Consequently, we may not decide moot issues. United States v. Alaska S.S. Co., 253 U.S. 113, 116, 40 S.Ct. 448, 449, 64 L.Ed. 808 (1920). However, jurisdiction in this court is not necessarily defeated simply because the order under review has expired. If the underlying dispute between the parties is one "capable of repetition, yet evading review" we may hear the case although it is technically moot. See County of L.A. v. Davis, 440 U.S. 625, 631, 99 S.Ct. 1379, 1383, 59 L.Ed.2d 642 (1979); Southern Pacific Terminal Co. v. ICC, 219 U.S. 498, 515, 31 S.Ct. 279, 283, 55 L.Ed. 310 (1911).
In a case such as the one now before us, the capable of repetition doctrine applies if the challenged action is too short in duration to be fully litigated prior to its cessation or expiration and there is a reasonable expectation that the same complaining party would be subject to the same action again. Weinstein v. Bradford, 423 U.S. 147, 148, 96 S.Ct. 347, 348, 46 L.Ed.2d 350 (1975); United States v. City of Detroit, 720 F.2d 443, 448-49 (6th Cir.1983). Both conditions are met in the present case.
First, the substance of the lower courts' ruling in this case was that proceedings by the state to fix civil penalties are not within the police power exception to the automatic stay. Although Commerce may not raise this question again, 2 Tennessee, as regulator, is continually faced with citing other bankrupt debtors for violations of state environmental laws. 3 Because of the continuing effect of the lower court's decisions, each time the state seeks to fix civil penalties against a bankrupt, it must now apply to the bankruptcy court either for a determination that the automatic stay does not apply to the proceedings, or for relief from the automatic stay. Consequently, there is a reasonable expectation that Tennessee will be subject to this same controversy again within the meaning of the capable of repetition doctrine. See Firefighters Local Union No. 1748 v. Stotts, 467 U.S. 561, 569-72, 104 S.Ct. 2576, 2583-84, 81 L.Ed.2d 483 (1984); Nebraska Press Ass'n v. Stuart, 427 U.S. 539, 546-47, 96 S.Ct. 2791, 2797, 49 L.Ed.2d 683 (1976); Super Tire Engineering Co. v. McCorkel, 416 U.S. 115, 126-27, 94 S.Ct. 1694, 1700, 40 L.Ed.2d 1 (1974); Marshall v. Occupational Safety & Health Review, 635 F.2d 544, 547-48 (6th Cir.1980); Sarabia v. Toledo Police Patrolman's Ass'n, 601 F.2d 914, 916 (6th Cir.1979).
Second, the time constraints placed upon the state by the bankruptcy court's order were simply too short for the substance of the Order, including appellate review, ever to have been completely litigated before the Order ceased of its own accord. The procedural nature of the bankruptcy court's Order in this case effectively insulated the Order from a substantive appellate review. Consequently, if we decline to address the matter now before us, the state will never be able to appeal the substance of the lower court's Order and the ruling on this important issue will continue unreviewed. We believe that this would be a dangerous triumph of form over substance and that this is precisely the type of short term order addressed by the capable of repetition doctrine. See Nebraska Press Ass'n v. Stuart, 427 U.S. 539, 546-47, 96 S.Ct. 2791, 2797, 49 L.Ed.2d 683 (1976); Super Tire Engineering Co. v. McCorkel, 416 U.S. 115, 126-27, 94 S.Ct. 1694, 1700, 40 L.Ed.2d 1 (1974).
The state in this case seeks a declaration that its actions fall within the exception to the automatic stay. R. at 33. Although the procedural relief of lifting the stay has already been afforded the state, this alone does not moot the state's claim for declaratory relief. Indeed, since the lower court's decision casts a "continuing and brooding presence" over the conduct of the state's affairs, Super Tire Engineering Co. v. McCorkle, 416 U.S. 115, 122, 94 S.Ct. 1694, 1698, 40 L.Ed.2d 1 (1974), the state has been and will continue to be affected by the lower court's ruling. Accordingly, we find under the circumstances presented here that there is a substantial controversy between the parties of sufficient immediacy and reality to warrant our consideration. See Preiser v. Newkirk, 422 U.S. 395, 401-403, 95 S.Ct. 2330, 2334-2335, 45 L.Ed.2d 272 (1975).
Thus, we conclude that this case is not moot and proceed to the merits.
The courts below ruled that the state's review of the assessment against Commerce was an action on a claim stayed by 11 U.S.C. Sec. 362(a)(1), but that the state's consideration of remedial measures and injunctive relief was within the "police power" exception to the automatic stay. We disagree with the lower courts' views for several reasons.
First, although the provisions of the automatic stay contained in 11 U.S.C. Sec. 362 are quite broad, the automatic stay is not all-encompassing. In particular, Sec. 362(b)(4) and 362(b)(5) of the automatic stay except both "the commencement or continuation of an action or proceeding" and "the enforcement of 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 powers" from the automatic stay. 11 U.S.C. Sec. 362(b)(4) and (5). Sections 362(b)(4) and (5) comprise the so-called "police power" exception to the automatic stay.
Congress clearly intended for the police power exception to allow governmental agencies to remain unfettered by the...
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