## Facts

- Quanta Resources Corp. operated waste-oil processing facilities in Long Island City, New York, and Edgewater, New Jersey.
- Environmental authorities found that Quanta had accepted large quantities of PCB-contaminated oil at both sites, creating serious toxic hazards.
- Quanta entered bankruptcy proceedings, ultimately converting to Chapter 7 liquidation, and a trustee took control of the estate.
- The contaminated sites were economically burdensome and over-encumbered; cleanup and disposal costs exceeded any value for creditors.
- The trustee sought to abandon the facilities and related contaminated property under 11 U.S.C. § 554(a), which permits abandonment of property that is burdensome or of inconsequential value.
- New York and New Jersey environmental authorities objected, arguing abandonment would violate environmental requirements and threaten public health and safety.
- The bankruptcy court authorized abandonment despite the objections; in the New York matter, the district court affirmed.
- The court of appeals reversed, concluding abandonment could not be approved where it would contravene laws protecting public health and safety.

## Issues

1. Whether 11 U.S.C. § 554(a) authorizes a bankruptcy trustee to abandon estate property when abandonment would violate state statutes or regulations reasonably designed to protect public health or safety from identified hazards.
2. Whether a bankruptcy court may approve abandonment of hazardous property without imposing conditions that adequately protect the public.

## Decision

- The Supreme Court affirmed the court of appeals.
- A trustee may not abandon property in contravention of state statutes or regulations reasonably designed to protect public health or safety from identified hazards.
- Section 554(a) does not preempt all state and local laws affecting abandoned property.
- A bankruptcy court lacks authority to permit abandonment of hazardous property without crafting conditions that adequately protect public health and safety.

## Legal Principles

- The Bankruptcy Code’s abandonment power is not absolute; it is constrained where abandonment would violate health-and-safety laws addressing identified hazards.
- Absent a clear statement from Congress, bankruptcy administration does not displace state police-power measures aimed at preventing serious threats to public health and safety.
- When hazardous conditions exist, bankruptcy courts must either deny abandonment or condition abandonment on protections sufficient to address the danger.

## Conclusion

The Court held that § 554(a) cannot be used to abandon contaminated property in a manner that violates state health-and-safety environmental requirements; trustees and bankruptcy courts must ensure adequate protection of the public before abandonment is allowed.


Midlantic Nat’l Bank v. N.J. Dep’t of Env’t Prot., 474 U.S. 494 (1986)