In Re Wall Tube & Metal Products Co.

Wall Tube & Metal Products Co. (Wall Tube) (debtor) leased property in Newport, Tennessee, where it fabricated metal products. It drummed and stored hazardous waste generated from its manufacturing processes on site. After Wall Tube quit operating the Newport facility, a Tennessee Department of Health and Environment (TDHE) inspector found several toxic substances on the site defined as hazardous waste under the Comprehensive Environmental Response Compensation Act (CERCLA). The inspector issued a violation of the Tennessee Hazardous Waste Management Act (Tennessee Act), but a second inspection found the site basically unchanged. When Wall Tube filed for bankruptcy under Chapter 7, the TDHE gave the trustee the inspection report. Four months later, the state had its standard hazardous-waste-removal contractor inspect the site and propose a cleanup. The inspection revealed toxic waste dumped, spilled, or leaked inside and outside buildings and in vats and tanks. According to the contractor’s reports and a TDHE chemist, the drums threatened to release toxic substances that could cause multiple health hazards and death. In May 1985, the state asked the bankruptcy court to treat its cleanup expenses as administrative expenses of the bankrupt estate. The bankruptcy court refused, finding the costs not necessary to preserve the estate and that the trustee’s duty to manage and operate property in accordance with state law did not apply to a liquidating trustee. The district court affirmed, and the state appealed.