Toxic Assets: The EPA’s Settlement of CERCLA Claims in Bankruptcy

Scott E. Blair

The Environmental Protection Agency’s (EPA) recent settlement of environmental
cleanup claims against Asarco, the highest such settlement in history, highlights the
incongruity between the tools at the Agency’s disposal to recover cleanup costs and
its actual behavior in pursuing such claims. The Comprehensive Environmental
Response, Compensation, and Liability Act of 1990 (CERCLA) provides statutory
authority that should allow EPA to force polluters to fully bear the burden of
cleaning up pollution. However, despite EPA’s relative success against solvent
responsible parties, EPA appears to be less aggressive in pursuing CERCLA
claims against insolvent polluters, even though the Bankruptcy Code provides additional
tools to give EPA an advantage relative to creditors. This Note explains the
statutory advantages that EPA has under CERCLA and the Bankruptcy Code, and
then explores how EPA fails to behave like a rational economic actor in pursuing
its CERCLA claims. I conclude by positing political factors and budget shortfalls
as two potential explanations of EPA’s behavior.

Not So “Free and Clear”: A Critical Examination of the Piper Test in Light of Bankruptcy Abuse Prevention and Consumer Protection Act of 2005

Christopher S. Oglesby

Chapter 11 of the Bankruptcy Code provides for a complete discharge of “claims” against the debtor once a plan of reorganization has been confirmed. The approach taken by bankruptcy courts to define a bankruptcy claim has varied. One such approach—the Piper test—has sought to balance discharging the maximum amount of claims against a debtor while still providing due process to the debtor’s claimants, including future claimants. The Piper test defines dischargeable claims to include those claims that accrued post-petition, but before plan confirmation. This Note seeks to explore the effectiveness of the Piper test in light of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), which has significantly altered the bankruptcy process by incentivizing debtors to enter and exit Chapter 11 quickly. The consequentially reduced interval between petition and confirmation has weakened the effectiveness of the Piper test, potentially leaving many more liabilities against a debtor outstanding after the bankruptcy process is complete and thereby threatening the going concern value of the reorganized debtor. In light of such an effect, this Note advocates an alternative approach to handling bankruptcy claims. This Note recommends defining a claim as broadly as possible so that the going concern value of reorganized debtors is preserved, while mitigating the resulting due process concerns by adopting wider usage of specific mechanisms to preserve due process to the debtor’s current and future claimants.

Second-Order Choice of Law in Bankruptcy

Ankur Mandhania

This Note attempts to answer the question of which choice-of-law regime ought to apply to bankruptcy cases. Taking the facts of a recent Second Circuit case as my example, I argue that Congress should amend the Bankruptcy Code to include a blackletter second-order choice-of-law section for use in all bankruptcy cases. First, Part I examines the state of Second Circuit jurisprudence on the question before this case, probing the reasoning and basic justifications for the resulting rule. Second, Part II establishes a normative framework, drawing on both bankruptcy and choice-of-law theory, for evaluating any proposed answer to this dilemma. I show here that the Second Circuit solution does not meet this framework and thus must be discarded. Third, Part III articulates my proposed solution, showing that it is most consistent with this framework.

Designing Related-To Bankruptcy Jurisdiction

Jack Zarin-Rosenfeld

This Note offers a framework for analyzing related-to bankruptcy jurisdiction under 28 U.S.C. § 1334 that courts can implement immediately within the bounds of the statute and case law. It argues that that the current requirements for related-to jurisdiction should be better deployed in accordance with the relative merits of jurisdictional rules and standards, and proposes a broad threshold inquiry back-stopped by a robust abstention doctrine, which will allow courts to both define bright-line boundaries where possible and fulfill the policy objectives of bankruptcy jurisdiction on a case-by-case basis.

Toward a Bankruptcy Model for Nonclass Aggregate Litigation

Troy A. McKenzie

In recent years, aggregate litigation has moved in the direction of multidistrict litigation followed by mass settlement without certification of a class action—a form sometimes referred to as the “quasi-class action.” Driven by increased restrictions on class certification, particularly in mass tort cases, the rise of the quasi-class action has been controversial. In particular, critics object that it overempowers lawyers and devalues the consent of individual claimants in the name of achieving “closure” in litigation. This Article presents two claims.

First, the debate about the proper scope and form of aggregate litigation too frequently relies on the class action as the touchstone for legitimacy. References to the class action, however, are more often misleading than helpful. The basic assumptions behind the class action are different in degree and in kind from the reality of the quasi-class action. Overreliance on the class action as the conceptual framework for aggregation carries the significant risk of unintentionally shackling courts in their attempts to coordinate litigation. The very reason the quasi-class action emerged—the ossification of the class action model of litigation—suggests that courts and commentators should look for another reference model when assessing what is proper or improper in quasi-class actions.

Second, bankruptcy serves as a better model for judging when to use, and how to order, nonclass aggregation of mass tort litigation. The entirety of bankruptcy practice need not be imported to realize that bankruptcy may provide a useful lens for viewing aggregation more generally. That lens helps to clarify some of the most troubling concerns about the quasi-class action, such as the proper role of lawyers and the place of claimant consent. Bankruptcy serves as a superior reference model because it starts with an assumption that collective resolution is necessary but tem- pers the collective with individual and subgroup consent and with institutional structures to counterbalance the risk of excessive empowerment of lawyers or particular claimants.