ABI Journal: The Gross and the Fair of Toxic Tort Claims in Bankruptcy

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Environmental-contamination claims present tricky issues for debtors seeking a fresh start through bankruptcy, as well as for creditors and purchasers of distressed assets. Difficult issues emerge in the context of when exactly an environmental tort claim against a debtor “arises.” Further challenges surround identifying claimants and potential claimants, then providing them with constitutionally sufficient notice of the bankruptcy proceedings.

For starters, does a claim arise when the initial action or exposure creating the claim occurs, or does the claim arise when the injured party becomes aware of the damage caused by the contamination? Does it arise when a claimant can “fairly contemplate” such damage? How does one provide adequate notice to all interested parties in cases involving environmental contamination issues sufficient to satisfy the constitutional requirements of due process? What efforts must be undertaken to ascertain potential claimants, and how should notice be provided to unknown, but likely ascertainable, potential claimants?

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Reprinted with permission from the ABI Journal, Vol. XXXVIII, No. 9, September 2019.

The American Bankruptcy Institute is a multi-disciplinary, non-partisan organization devoted to bankruptcy issues. ABI has more than 12,000 members, representing all facets of the insolvency field. For more information, visit abi.org.

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