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State of New Jersey, Department of Environmental Protection v. Signo Trading International

315 N.J. Super. 261, 717 A.2d 995 (App. Div. 1998)

ENVIRONMENTAL LIABILITY; SPILL ACT—By reason of its police power exception, the automatic stay provision of the Bankruptcy Code does not bar an action by the State Spill Fund to recover environmental costs.

The New Jersey Department of Environmental Protection (DEP) and the New Jersey Spill Compensation Fund filed a complaint in the Law Division seeking to recover the costs of cleanup and removal of various chemical products and wastes, including hazardous substances, from property the DEP alleged had been used for illegal warehousing. The Fund had spent in excess of $4 million and sought to recover its costs from the responsible parties. Most of the parties settled with the state agencies, but one went to trial to fix damages.

When the matter was heard by the lower court, summary judgment was granted in favor of the alleged responsible party based upon that court’s having received proof that the defendant corporation had filed for bankruptcy. The lower court believed that the automatic stay provision of the bankruptcy code barred the reimbursement action. It then dismissed the case without prejudice and subject to reinstatement pursuant to the bankruptcy proceedings. The Appellate Division reversed, finding that the DEP and the Spill Fund’s action to collect damages under environmental statutes fell under the police power exception to the automatic stay provision and allowed the action to proceed.


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