Bankruptcy Court Holds That Debtor's Claims Relating To Environmental Clean-Up of Debtor's Property Are Non-Core
In re: NEC Holdings Corp., et al., Chapter 11, Case No. 10-11890 (PJW); NEC Holdings Corp., et al. v. Linde LLC, et al., Adv. Proc. No. 11-51129 (PJW) (J. Walsh) (May 4, 2011, amended May 18, 2011)
The Court was asked to determine whether environmental claims were core or non-core. Debtors commenced an adversary proceeding against Linde LLC and related entities (“Linde”) seeking recovery of costs, contribution and declaratory relief relating to environmental liabilities of real property located at 400 Clermont Terrance in Union, New Jersey.
The Union property is the Debtors sole remaining substantial tangible asset. Linde was the prior owner of the Union property. The Debtors filed an adversary proceeding seeking recovery for costs and contribution and declaratory relief under CERCLA; contribution under the New Jersey Sill Act and contribution under the New Jersey Joint Tortfeasors Contribution Law. Debtors assert that the claims are core proceedings under section 157(b)(2)(A) and (O). The Defendants moved for a determination that the claims are non-core.
Discussion:
The Court first looked to the non-exhaustive list of core proceedings in section 157(b)(2) of the Bankruptcy Code. The Court then performed a claim-by-claim two-step test by reviewing whether the claim (1) invokes a substantive right provided by title 11 or (2) is a proceeding, that by its nature, could arise only in the context of a bankruptcy case. See In re Exide Technologies, 544 F.3d 196, 206 (3d Cir. 2008).
The Court did not accept the Debtors’ arguments that these claims were core. Debtors asserted that the claims fall under section 157(b)(2)(A) covering “matters concerning the administration of the estate” or section 157(b)(2)(O) covering “other proceedings affecting the liquidation of the assets of the estate or the adjustment of the debtor-creditor or the equity security holder relationship, except personal injury tort or wrongful death claims.”
In ruling for Defendants, the Court held that the claims do not involve any substantive rights arising under the Bankruptcy Code. Further, the claims could arise outside of the bankruptcy context. Thus, even if the claims fit into section 157(b)(2)(A) or (O), they did not satisfy the two-step test for core proceedings.
