Exide Case Provides Takeaways for Navigating Environmental-Contamination Claims in Bankruptcy, According to September ABI Journal
Alexandria, Va. — Stakeholders involved in bankruptcies involving environmental-contamination claims must be vigilant in their examination of the records and history of the property involved, according to an article in the September ABI Journal. “Environmental-contamination claims present tricky issues for debtors seeking a fresh start through bankruptcy, as well as for creditors and purchasers of distressed assets,” write David W. Houston, VI, and Emily C. Taube of Burr & Forman LLP (Nashville, Tenn.) in their article “The Gross and the Fair of Toxic Tort Claims in Bankruptcy.”
Difficult issues emerge in the context of when exactly an environmental tort claim against a debtor “arises” and in providing adequate notice to interested parties in cases involving environmental contamination issues, Houston and Taube write. The writers found that many of the issues were addressed in an adversary proceeding filed by West Salem Storage (a downstream purchaser of a chapter 11 debtor's lead-contaminated property) in the Exide Technologies case. Bankruptcy Judge Kevin J. Carey found that although West Salem did not sustain damages related to the property until 2017, such damages were nonetheless discharged by a 2015 confirmation order. “As is common to many toxic-contamination situations, the root cause of the damages at issue in Exide can be traced back to industrial manufacturing activities that occurred decades prior to the debtor's bankruptcy and decades prior to the time when the purchaser acquired the property and sustained its damages,” according to the authors.
The takeaways from the case for navigating the tricky issues surrounding environmental contamination claims include:
- Know the history of an industrial or commercial property.
- Conduct an independent title search.
- Investigate any property to be purchased and/or that is to serve as collateral.
- Consider including an indemnification provision as a condition of any purchase or sale agreement.
- Consult environmental professionals prior to any purchase or sale.
To obtain your copy of “The Gross and the Fair of Toxic Tort Claims in Bankruptcy,” please click here.
ABI is the largest multi-disciplinary, nonpartisan organization dedicated to research and education on matters related to insolvency. ABI was founded in 1982 to provide Congress and the public with unbiased analysis of bankruptcy issues. The ABI membership includes nearly 11,000 attorneys, accountants, bankers, judges, professors, lenders, turnaround specialists and other bankruptcy professionals, providing a forum for the exchange of ideas and information. For additional information on ABI, visit www.abiworld.org. For additional conference information, visit http://www.abi.org/education-events.