STATE OF OHIO, PETITIONER V. WILLIAM LEE KOVACS

   No. 83-1020

   In the Supreme Court of the United States

   October Term, 1983

   On Writ of Certiorari To the United States Court of Appeals For the
Sixth Circuit

   Brief For the United States As Amicus Curiae Supporting Petitioner

            TABLE OF CONTENTS
   Interest of the United States
   Statement
   Summary of argument
   Argument:
      A bankrupt polluter may not seek refuge in the
      Bankruptcy Code to escape an injunction that
      requires him to clean up a hazardous waste disposal
      site
   Conclusion

                          QUESTION PRESENTED

   Whether the discharge provisions of the 1978 Bankruptcy Code, 11
U.S.C. 524 and 727, operate to excuse a bankrupt polluter from a state
court injunction requiring him to remove hazardous wastes from a
dumpsite.

                     INTEREST OF THE UNITED STATES

   Like its predecessor, Kovacs I, /1/ this case presents an important
question about the use of the 1978 Bankruptcy Code to impede the
ability of state and federal governments to safeguard public health
and safety by enforcing environmental protection statutes.  In this
instance, the issue is whether a bankrupt defendant may rely on the
discharge provisions of the Bankruptcy Code, 11 U.S.C. 524 and 727, to
void an injunction that requires him to clean up a hazardous waste
disposal site.

   The problem extends beyond state enforcement actions.  It also
arises when the United States seeks to enforce clean-up obligations
imposed by federal law, including the Clean Water Act, 33 U.S.C. 1251
et seq.; the Resource Conservation and Recovery Act of 1976, 42 U.S.C.
(Supp. V) 6901 et seq.; the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. (Supp. V) 9601 et
seq.; the Surface Mining Control and Reclamation Act of 1977, 30
U.S.C. 1201 et seq.; and the Clean Air Act, 42 U.S.C. (Supp. V) 7401
et seq.  Even as it bears on local enforcement efforts, the decision
below implicates the national commitment to a safer environment by
encouraging offenders to file for bankruptcy, and thereby excuse
themselves from performing orders that require them to abate the
health hazards they have created.  /2/

                               STATEMENT

   1. Prior to filing his petition in bankruptcy, the respondent,
William Kovacs, had been engaged in the business of industrial and
hazardous waste disposal in Ohio.  His business was "quite
profitable," and his "corporate empires" dealt in "large sums of
money" (Pet. App. A55).  In 1976, the State of Ohio sued Kovacs as an
individual and as the officer of several bussiness entities, including
the Chem-Dyne Corporation, for alleged violations of various state
environmental laws.  Among other things, the State's complaint charged
that Kovacs and his corporations had improperly deposited the
carcinogenic pesticides endrin, dieldrin, and heptaclor at the
Chem-Dyne site in Hamilton, Ohio, and that those wastes were leaking
into the Great Miami River and its tributary, polluting the water,
killing fish and wildlife, and destroying natural resources.  In
response to the lawsuit, Kovacs signed a stipulation and judgment
entry in the Butler County Common Pleas Court (id. at A43-A51). Kovacs
himself stipulated that approximately 850,000 gallons of liquid wastes
and 4,000 barrels of solid and semi-solid sludges remained at the
Chem-Dyne site (id. at A45).  In the stipulated judgment, Kovacs
agreed not to cause further pollution, to remove all hazardous wastes
from the premises of the Chem-Dyne Corporation within one year (by
July 1980), and to pay $75,000 to the Ohio Department of Natural
Resources as compensation for damage to the State's natural resources
(id. at A46-A47, A48-A50).

   Kovacs failed to comply with any portion of the stipulated judgment
(Pet. App. A53-A54);  indeed, not only did he fail to pay the $75,000
monetary judgment and fail to clean up the Chem-Dyne site, but he
brought additional wastes onto the site (id. at A54). Accordingly,
Ohio returned to state court in January 1980, requesting the
appointment of a receiver to implement the stipulated order.  After
taking evidence at a hearing, the state court found that Kovacs had
acted "in flagrant disregard of the Stipulation and Judgment Decree"
(ibid.).  Because Kovacs' activity "definitely affects this entire
community and conceivably the water for this entire area as well as
the wild life, natural resources of the area, and the fish in the
streams" (id. at A55), the state court appointed a receiver to collect
Kovacs' non-exempt assets and use them to finance the costs of
clean-up at the Chem-Dyne site (J.A. 4-16).  /3/

   Subsequently, in July 1980, Kovacs filed a personal petition in
bankruptcy in the United States Bankruptcy Court for the Southern
District of Ohio.  In re Kovacs, Bankr. No. B-1-80-1499.  /4/ In an
effort to ensure the availability of adequate funds to implement the
clean-up order, Ohio sought a state court hearing on Kovacs' current
employment status and income.  Kovacs thereupon moved the bankruptcy
court to enjoin Ohio from proceeding in state court.  He argued that
the State's goal was to obtain an order permitting the state court
receiver to use Kovacs' post-bankruptcy income to satisfy the
unfulfilled obligation to clean up the Chem-Dyne site and that such an
order would violate the automatic stay provision of 11 U.S.C. 362.
The bankruptcy court agreed (J.A. 23-32).

   2. The bankruptcy court readily acknowledged that neither the
clean-up order nor the order imposing the receivership gave the State
a money judgment with respect to cleaning up the Chem-Dyne premises
(J.A. 28).  /5/ Nonetheless, the bankruptcy court enjoined the State
from proceeding in state court "to levy on" Kovacs' post-filing wages
(J.A. 32).  It reasoned that "there is no difference in substance
between efforts to collect money from a debtor by securing a court
order, and efforts to enforce a money judgment against him * * * (and)
therefore, that the State is estopped to deny that it is not (sic)
seeking to enforce a money judgment against debtor" (J.A. 28).

   The State appealed to the United States District Court for the
Southern District of Ohio, which affirmed.  The district court, too,
found that the State sought to collect money "just as though it were
enforcing a money judgment" (J.A. 20).  Accordingly, the district
court held the automatic stay applicable "because the state's effort
is clearly to enforce a judgment obtained before the filing of the
Bankruptcy petition" (ibid.).

   3. The Sixth Circuit affirmed in Kovacs I, 681 F.2d 454 (1982).
The court concluded that, while Section 362(b) clearly permitted
governmental units to continue to enforce their police powers through
mandatory injunctions despite the filing of a bankruptcy petition, it
denied them the power to collect money in their enforcement efforts
(681 F.2d at 456).  Like the two lower courts, the court of appeals
also believed that Ohio had returned to state court in pursuit of what
"in essence" amounted to a money judgment against Kovacs, which was
"properly" subject to the automatic stay (ibid.).  Concerned that the
state court had ordered Kovacs to release all non-exempt assets,
including money payable to himself in the future, the Sixth Circuit
could find "little in substance to distinguish that order and a money
judgment" (ibid.).  It concluded that Ohio's attempt to reach Kovacs'
post-bankruptcy earnings would "subvert" the purpose of the Bankruptcy
Code to rehabilitate debtors "and to give them relief from harassing
creditors" (ibid.).

   4. Subsequently, this Court granted Ohio's peititon for a writ of
certiorari in Kovacs I, vacated the judgment, and remanded the case to
the Sixth Circuit "to consider the question of mootness" (No. 82-815
(Jan. 24, 1983)).  At that time, an appeal was pending in the Sixth
Circuit from the lower courts' determination that the state court
clean-up injunction would be voided by a discharge under the
Bankruptcy Code.  It is that determination that gives rise to the
instant case.  /6/

   5. On October 20, 1980, the State of Ohio filed a complaint in the
bankruptcy court seeking a declaration that the obligations imposed on
Kovacs by the consent decree and the state court injunction -- to
remove and dispose of industrial and other wastes at the Chem-Dyne
site -- could not be discharged in bankruptcy (Pet. App. A29-A37).
The State argued that because the injunction did not constitute a
"claim" or "debt," the duty to comply with it could not be discharged
in bankruptcy.  See 11 U.S.C. 101(4), 101(11), 524, 727(b).  /7/ The
bankruptcy court extended the reasoning of its earlier decision that
the automatic stay prevented the State from enforcing the injunction
and held that because Kovacs would have to spend money in order to
comply with the injunction, Kovacs "owes plaintiff a debt" that is
dischargeable (Pet. App. A22).  The court also ruled that only those
debts listed within the exceptions to the discharge, 11 U.S.C. 523,
could survive bankruptcy (Pet. App. A22).

   6. The United States District Court for the Southern District of
Ohio affirmed (Pet. App. A11-A16).  It concluded that "under the law
of the case principles, we must accept the determination of the Sixth
Circuit that the State was seeking what amounted to a money judgment
against Kovacs" (id. at A15).  /8/ Thus, perceiving the State's
attempt to enforce the injunction as a request for a monetary payment,
the district court deemed the request a dischargeable "claim" or
"debt" (ibid.).

   7. The Sixth Circuit again affirmed (Pet. App. A1-A10).  That
court, like the district court and the bankruptcy court, ruled that
efforts to force Kovacs to comply with the clean-up injunction by
turning his income over to the state court receiver could not be
distinguished from an attempt by the State to collect an "alternate
right to payment" on a dischargeable "claim" (id. at A9).  Though it
recognized that there was no law of the case to apply since this Court
had vacated the decision in Kovacs I, the Sixth Circuit expressly
readopted the reasoning of its earlier opinion:  "Ohio is essentially
seeking to obtain a money payment from Kovacs" (Pet. App. A10).  Like
the bankruptcy court, the court of appeals suggested that only those
debts listed within the Section 523 exceptions could survive a
discharge (ibid.).

                          SUMMARY OF ARGUMENT

   The court of appeals' decision improperly releases Kovacs from a
mandatory injunction authorized by statute to protect public health
and safety.  By propounding an expansive definition of "money
judgment" in Kovacs I, and then extending that same faulty approach in
Kovacs II, the court eviscerated the difference between a
dischargeable right to payment for a breach of performance and a
non-dischargeable right to enforce an injunction that entails the
expenditure of money.  The consequence is that a preexisting
obligation to clean up a hazardous waste disposal site -- incorporated
in a final judgment -- has been wholly excused.  /9/

   By encouraging abuse of the Bankruptcy Code to void obligations
under state and federal environmental laws, the decision below flouts
Congress's express intent to preserve the ability of governmental
units to protect public health, safety, and the environment.  Indeed,
the decision effectively destroys the government's ability to enforce
any statutory obligation -- whether it be a regulation, permit, or
clean-up injunction -- against any bankrupt if compliance entails any
expense by the debtor or its estate.  This result finds no support in
the Bankruptcy Code.  The Code does not shield wrongdoers from all
consequences of their actions;  there is no fundamental or inalienable
right to obtain a discharge in bankruptcy at the expense of the
legislatively declared right of the public to be safe from
environmental pollution.

                               ARGUMENT

 A BANKRUPT POLLUTER MAY NOT SEEK REFUGE IN THE BANKRUPTCY CODE TO
ESCAPE AN INJUNCTION THAT REQUIRES HIM TO CLEAN UP A HAZARDOUS WASTE
DISPOSAL SITE

   1. a. Because the present decision expressly builds on Kovacs I,
and because the automatic stay provision of the Bankruptcy Code, 11
U.S.C. 362, "is the first part of bankruptcy relief" ultimately
culminating in discharge (H.R. Rep. 95-595, 95th Cong., 1st Sess. 125
(1977)), it is appropriate to begin the analysis in this case with
consideration of the automatic stay as it affects governmental actions
to enforce police or regulatory powers.  In general, the commencement
of a bankruptcy action operates as a stay of all judicial or
administrative proceedings against the debtor or its estate that were
or could have been commenced prior to the filing of the bankruptcy
petition.  11 U.S.C. 362(a)(1).  The automatic stay also bars the
enforcement against the debtor or its estate of a judgment obtained
prior to the filing of the bankruptcy petition.  11 U.S.C. 362(a)(2).

   Importantly, however, certain governmental litigation is wholly or
partially exempt from the automatic stay.  Section 362(b)(4) of the
Code provides that the filing of a bankruptcy petition does not stay
"the commencement or continuation of an action or proceeding by a
governmental unit to enforce such governmental unit's police or
regulatory powers." For purposes of subsection (b)(4), it matters not
what relief the government seeks:  the government may commence or
continue any police or regulatory action.  Subsection (b)(5), on the
other hand, specifies which judgments the government may not then seek
to execute -- ordinary money judgments.  In the present case, there is
no doubt that the state court order was obtained pursuant to Ohio's
police or regulatory powers.  The legislative history is unambiguous
that the automatic stay does not apply to halt the commencement and
continuation of environmental protection actions.  /10/ The only
question, therefore, is whether the state court order sought to be
enforced is a "money judgment" that cannot be executed without leave
from the bankruptcy court.

   Neither the Bankruptcy Code nor its legislative history
specifically define the term "money judgment." Congress did, however,
explain that subsection (b)(5) excluded money judgments from the
governmental exemption in order to prevent the government from
receiving preferential treatment at the expense of other creditors.
/11/ Obviously, when the government's interest in executing a judgment
is essentially pecuniary, then its interest is akin to that of other
creditors.  The government's interest would be predominantly
pecuniary, for example, if it sought to collect damages for injury to
its property or natural resources (see page 3 & note 5, supra).  In
that case, there would be little justification for granting the
government preferential treatment.  By the same token, when the thrust
of the government's action is not to collect money from the debtor but
rather to protect the public health and safety, then the government
does not stand in the shoes of an ordinary creditor.  In short, when
considering the applicability of the exemption to a given judgment, a
court must initially scrutinize the governmental interest at stake in
the litigation.  The mere fact that a judgment entails the expenditure
of money does not automatically remove it from the (b)(5) exemption.

   b. Many injunctions entail the expenditure of money for their
performance.  See Penn Terra Ltd. v. Dep't of Environmental Resources,
No. 83-5448 (3d Cir. Apr. 30, 1984), slip op. 23;  United States v.
Price, 688 F.2d 204, 213 (3rd Cir. 1982).  A defendant may be ordered
to conduct or fund a study to determine the extent of the threat posed
by its waste disposal practices, e.g., Price;  to reclaim areas
damaged by surface mining operations, e.g., Penn Terra;  to remove
leaking drums of toxic wastes that threaten groundwater contamination,
e.g., Kovacs;  to remove industrial wastes previously deposited in
navigable waters, e.g., United States v. Republic Steel Corp., 362
U.S. 482, 490-493 (1960);  to operate its plant in compliance with
environmental regulations, e.g., Commonwealth v. Peggs Run Coal Co.,
55 Pa. Commw. 312, 423 A.2d 765 (1980).  In each case, when the
government seeks to enforce the order, its aim is to protect the
public health, not to enhance the public fisc.

   Virtually every court to consider the issue has concluded that
actions such as those noted above are exempt from the automatic stay
and that the judgments may be executed even if they entail the
expenditure of substantial funds.  Thus, for example, in a case
virtually identical to Kovacs I, Pennsylvania had obtained a state
court order mandating remedial action by the operator of surface coal
mines;  among other things, the state court order required the company
to reclaim the mines, implement soil erosion and sedimentation control
plans, and restore and revegetate the mined area to its original
contour.  Penn Terra Ltd., slip op. 4-5 n.2.  Thereafter, Penn Terra
filed for bankruptcy under Chapter 7 of the Code.  The bankruptcy
court and the district court held that Pennsylvania's attempts to
enforce the state court injunction were barred by the automatic stay's
application to governmental efforts to enforce "money judgments" (11
U.S.C. 362(b)(5)).  The Third Circuit reversed, rejecting the argument
that "a money judgment is anything which costs money to enforce" (slip
op. 21).  The court reasoned (slip op. 23 (footnote omitted)):

      Were we to find that any order which requires the expenditure of
      money is a "money judgment," then the exception to section 362
      for government police action, which should be construed broadly,
      would instead be narrowed into virtual nonexistence.  Yet we
      cannot ignore the fundamental fact that, in contemporary times,
      almost everything costs something.  An injunction which does not
      compel some expenditure or loss of monies may often be an
      effective nullity.

   The Penn Terra court also explained that the result it reached was
most faithful to Congress's intent to accommodate the competing
interests at stake (slip op. 23-24):

         It appears that * * * the Bankruptcy Court * * * placed too
      much weight on the value of preserving the corpus of the
      debtor's funds and estate under its own exclusive control.
      Admittedly, that goal is normally central to the statutory
      scheme of the Bankruptcy Code.  * * * (I)n some instances this
      policy is in inexorable conflict with other, no less salutary,
      governmental goals.  We believe that the resolution of this
      conflict is contained in the statute itself.  In enacting
      exceptions to section 362, Congress recognized that in some
      circumstances, bankruptcy policy must yield to higher
      priorities.  Indeed, if the policy of preservation of the estate
      is to be invariably paramount, then one could not have
      exceptions to the rule.  Since Congress did provide for
      exceptions, however, we may safely assume that the goal of
      preserving the debtor's estate is now always the dominant goal.

   The court concluded by employing the same analysis we urge here,
focusing on the governmental interest advanced by the litigation
rather than the effect on the debtor's purse.  If the governmental
action is intended "to prevent future harm to, and to restore, the
environment" (slip op. 24), then it is not an action to enforce a
money judgment of the sort barred by Section 362(b)(5).  /12/

   Similarly, in another case closely analogous to Kovacs I on its
facts, the Commonwealth Court of Pennsylvania found the governmental
action excempt from the bankruptcy stay.  Commonwealth v. Peggs Run
Coal Co., 55 Pa. Commw. 312, 423 A.2d 765 (1980).  There, Pennsylvania
sued the owner of a coal mine and cleaning plant for alleged
violations of various state environmental statutes.  The complaint
requested both a mandatory injunction ordering compliance with the
laws and the posting of bonds to assure compliance with the
injunction.  The coal company, having filed a petition in bankruptcy,
invoked the automatic stay provision of the Bankruptcy Code to block
the state's action.  After analyzing the legislative history, the
Pennsylvania court concluded that the state was not attempting to
enforce a money judgment.  The court therefore held the proceeding
excempt from the automatic stay.  423 A.2d at 767.  /13/

   In non-environmental cases as well, the courts have upheld
governmental authority to enforce injunctions that entail the
expenditure of money, notwithstanding the Code's automatic stay
provision.  Thus, for example, in Donovan v. TMC Industries, Ltd., 20
Bankr. 997 (N.D. Ga. 1982), the district court held that the
Bankruptcy Code could not be invoked to stymie the government's
efforts to enforce payment of minimum wages required by the Fair Labor
Standards Act because that Act "promote(s) public health and welfare."
Id. at 1005.  The court therefore enjoined the bankrupt employer from
shipping goods produced at sub-minimum wages.  Fully recognizing that
the employer could remedy the statutory violation and satisfy the
injunction only by paying minimum wages for the production of those
goods, id. at 1000, 1006, the court specified the manner in which the
employer should set aside funds sufficient to remove the taint from
its merchandise.  Even though its order entailed the payment of money
by the bankrupt into a trust fund, the court stressed that "(t)his is
not a money judgment.  Failure to comply with this Order cannot result
in execution or levy." Id. at 1007.  As the court observed, the
purpose of the government's request for an injunction was not to
enforce wage claims of underpaid workers in a single firm, but to
safeguard "the welfare of every worker in that firm as well as the
workers in competing companies" (id. at 1006) by the only means
available, namely, by halting shipment to market of "tainted goods" in
order to reduce the impact of substandard wages on an "entire
industry." Ibid.  /14/

   c. It is thus clear that many governmental actions, even if they
entail the expenditure of substantial funds, are exempt from the
Code's automatic stay.  /15/ Congress has made a policy judgment that
these actions are too important to be held up for the many years that
may be required to bring a bankruptcy case to completion.  /16/ As we
now show, it would be anomalous indeed to hold that an action such as
the present one is exempt from the automatic stay, which it clearly
is, but to rule years later that the debtor's obligation is
dischargeable in bankruptcy.  Instead, the same factors that support
the determination that enforcement of the judgment at issue should not
have been stayed by the filing of the bankruptcy petition likewise
support the conclusion that Kovacs' obligations under the state court
injunction are not dischargeable.

   2. A discharge under the Bankruptcy Code operates to erase a
bankrupt's debt.  11 U.S.C. 524(a).  The Code defines "debt" as
"liability on a claim." 11 U.S.C. 101 (11).  Although the term "claim"
is defined broadly, 11 U.S.C. 101(4), it explicitly excludes from its
embrace the type of injunction at issue here.  Two classes of rights
are dischargeable in bankruptcy:  (1) any right to payment, and (2) a
right to an equitable remedy for breach of performance if such breach
itself gives rise to a right to payment.  11 U.S.C. 101(4).  The
clean-up injunction here does not redress a breach of performance, nor
does it operate as an alternative to a right to payment.  Rather, it
orders compliance with state statutes by requiring the abatement of a
public health and environmental hazard.

   a. The legislative evolution of the definition of "claim"
demonstrates conclusively the agreement of both Houses of Congress
that a bankruptcy discharge would not extinguish rights to all
equitable remedies.  As originally proposed, the definition of "claim"
included "an equitable right to performance that does not give rise to
a right to payment." H.R. Rep. 95-595, supra, at 309 (emphasis added).
 See H.R. 8200, 95th Cong., 1st Sess. (1977).  During the course of
debate and amendments, both Houses narrowed the breadth of the
definition.  As explained by one of the bill's sponsors,
Representative Edwards (124 Cong. Rec. 32393 (1978) (emphasis added)):

         Section 101(4)(B) represents a modification of the
      House-passed bill to include (in) the definition of "claim" a
      right to an equitable remedy for breach of * * * performance if
      such breach gives rise to a right to payment.  This is intended
      to cause the liquidation or estimation of contingent rights of
      payment for which there may be an alternative equitable remedy
      with the result that the equitable remedy will be susceptible to
      being discharged in bankruptcy.  For example, in some States, a
      judgment for specific performance may be satisfied by an
      alternative right to payment, in the event performance is
      refused;  in that event, the creditor entitled to specific
      performance would have a "claim" for purposes of a proceeding
      under title II.

         On the other hand, rights to an equitable remedy for a breach
      of performance with respect to which such breach does not give
      rise to a right to payment are not "claims" and would therefore
      not be susceptible to discharge in bankruptcy.  /17/

   As enacted, Section 101(4)(B) limits the definition of "claim" by
excluding any right to an equitable remedy for a breanch of
performance when the breach does not also give rise to an alternative
right to payment.  /18/

   The clean-up injunction at issue here plainly lies within the class
of equitable rights excluded from the definition of "claim," and
thereby preserved from discharge in bakruptcy.  /19/ The state court's
order required Kovacs to remove and dispose of all industrial and
hazardous wastes at the dumpsite;  the order did not redress a breach
of performance or compensate the State for any pecuniary loss or
otherwise satisfy any right to payment.  That the injunction did not
operate as a money judgment is obvious from the fact that the court
separately ordered Kovacs to pay the State some $75,000 for damage to
the State's natural resources.

   The district court readily acknowledged that the Ohio statutes
authorizing the clean-up injunction did not provide the State with an
alternative right to a money payment (Pet. App. A14-A15).  See Pet.
22.  The court of appeals made no contrary finding.  Instead, to
determine whether the clean-up injunction was a "claim" that could be
discharged in bankruptcy, the Sixth Circuit bypassed the statutory
definition and reverted to the simplistic test formulated in Kovacs I:
 if the injunction entails the expenditure of money, then it must be a
right to payment which is a dischargeable claim.  See Pet. App.
A9-A10.  By this faulty logic, equating mandatory injunctions with
money judgments, the court of appeals read the injunctive relief
provisions out of a host of environmental statutes and thereby robbed
the government of a vital tool for protecting public health and the
environment from environmental violations.  A plethora of federal
statutes all include provisions in which Congress explicitly
authorized courts to issue mandatory injunctions to clean up or
otherwise abate health, safety, and environmental hazards.  /20/ Here,
Ohio invoked an analogous injunction provision from its own body of
environmental legislation.

   The court below cavalierly suggested (Pet. App. A9-A10) that the
State may pursue other remedies against Kovacs, such as penalties and
criminal sanctions.  But, of course, penalties and sanctions merely
complement orders to abate a threat to public health and safety caused
by environmental pollution;  they do not accomplish a clean-up.
Effective protection for the public depends on the ability of state
and federal governments to enforce their respective environmental
protection, damages to compensate for pecuniary loss or harm to
natural resources, fines, and penalties each serve a distinct function
in the scheme of statutory remedies available to governmental units.
The court of appeals' failure to appreciate this fact led it to err.

   b. The court below mistakenly assumed that the significance to Ohio
of the consent decree and injunction is that Kovacs "'pay compensation
* * * for pecuniary loss'" (Pet. App. A7 (emphasis in original;
citation omitted)).  As we have discussed in connection with the
automatic stay, this approach obliterates the distinction between a
money judgment for compensation and an injunction ordering the
abatement of a health and safety hazard, when such abatement entails
the expenditure of funds.  Only the latter is at issue here.

   In the present case, the state court's orders were strictly
preventive, not compensatory.  Initially, the court ordered Kovacs
himself to clean up the dumpsite.  Only subsequently, upon the State's
showing that Kovacs had not complied, did the state court order Kovacs
to release certain assets and future earnings to the court-appointed
receiver.  Although this latter order directed the payment of money by
Kovacs to the receiver, the receivership was established for the
limited purpose of implementing the clean-up order.  Accordingly, both
orders, each directed to clean-up of the dumpsite, must be
distinguished from traditional money judgments.  /21/

   The Third Circuit expressly recognized this distinction in Penn
Terra Ltd., slip op. 24:

         We believe that the inquiry is more properly focused on the
      nature of the injuries which the challenged remedy is intended
      to redress -- including whether plaintiff seeks compensation for
      past damages or prevention of future harm -- in order to reach
      the ultimate conclusion as to whether these injuries are
      traditionally rectified by a money judgment and its enforcement.
       Here, the Commonwealth Court injunction was, neither in form
      nor substance, the type of remedy traditionally associated with
      the conventional money judgment.  It was not intended to provide
      compensation for past injuries.  It was not reduceable to a sum
      certain.  No monies were sought by the Commonwealth as creditor
      or obligee.  The Commonwealth was not seeking a traditional form
      of damages in tort or contract, and the mere payment of money,
      without more, even if it could be estimated, could not satisfy
      the Commonwealth Court's direction to complete the backfilling,
      to update erosion plans, to seal mine openings, to spread
      topsoil, and to implement plans for erosion and sedimentation
      control.  Rather, the Commonwealth Court's injunction was meant
      to prevent future harm to, and to restore, the environment. In
      sum, remedial orders obtained under the endangerment

provisions of environmental statutes may require the expenditure of
money either directly or indirectly.  Nevertheless, such remedial
orders do not compensate the government for harm or expenses incurred.
 Their objective is, rather, to protect the public by assuring
compliance with environmental laws and by ordering abatement of health
and environmental hazards.  The court of appeals' view of the
relationship between the Bankruptcy Code and governmental enforcement
actions, as formulated in Kovacs I and readopted in Kovacs II,
improperly ignores the purpose of the governmental action and focuses
exclusively on the impact of the governmental action on the debtor's
purse.  That approach cripples the government's ability to exercise
its police powers to protect public health, safety, and the
environment, and it finds no support in the Bankruptcy Code.

   3. The decision below ignores the fact that the Bankruptcy Code is
not a safe haven for wrongdoers.  See S. Rep. 95-989, 95th Cong., 2d
Sess. 51 (1978);  H.R. Rep. 95-595, supra, at 342.  Although the
general policy of the Code is to provide a "fresh start" for those in
financial difficulty, nowhere in the Code did Congress suggest an
intent to grant "pardons" to those who have violated the law or
jeopardized the public health and safety.  A series of analogous cases
demonstrate the error of the court of appeals' contrary conclusion.

   a. The courts have consistently held that a bankrupt defendant's
obligation to pay criminal restitution -- whether ordered by another
court before or after the petition in bankruptcy -- survives
discharge.  E.g., United States v. Carson, 669 F.2d 216 (5th Cir.
1982);  In re Magnifico, 7 Collier Bankr. Cas. 2d 258 (Bankr. D. Ariz.
1982);  In re Newton, 15 Bankr. 708 (Bankr. N.D. Ga. 1981).  Criminal
restitution orders require bankrupt defendants to make payments to
persons, the victims, who could not themselves bring civil actions
against the defendants due to the Bankruptcy Code.  The courts have
uniformly held criminal restitution actions and orders immune from the
Bankruptcy Code on the ground that the government's action is
undertaken in the public interest, whether it be to protect the public
by deterring criminal conduct or to rehabilitate criminal offenders.
/22/ The analysis focuses on the purpose of the governmental action --
not the fact that the restitution order requires a bankrupt to spend
money.  United States v. Carson, 669 F.2d at 217.  See also Barnette
v. Evans, 673 F.2d 1250, 1251 (11th Cir. 1982) (overturning bankruptcy
court's stay of criminal restitution proceedings on ground that public
interest in such proceedings "overrides any interest the bankruptcy
court may have in protecting the financial interest of debtors");  In
re Lare, 7 Collier Bankr. Cas. 2d 394 (Bankr. D. Md. 1982) (court
refused to stay criminal prosecution that included a request for a
fine because suit aimed to protect public, not simply to obtain
payment).  The same analysis should have been applied in Kovacs II.
Here, too, the government's action was undertaken in the public
interest to protect public health and safety, not to exact money from
Kovacs.

   b. In other contexts, too, bankruptcy courts have found the public
interest paramount to the debtor's interest in a "fresh start" under
the Bankruptcy Code.  Especially pertinent is the decision in In re
Canarico Quarries, Inc., 466 F. Supp. 1333 (D.P.R. 1979).  There, the
district court overturned a bankruptcy court's order prohibiting the
Puerto Rico Environmental Quality Board from enforcing regulations
under the federal Clean Air Act against the debtor.  The district
court held that although the bankruptcy laws strive to promote the
rehabilitation of debtors, such rehabilitation must be done within the
law.  Thus, the debtor must comply fully with state and federal
environmental regulations, even though such compliance may be costly.
/23/

   Similarly, in In re Charles George Land Reclamation Trust, 8
Collier Bankr, Cas. 2d 1307 (Bankr. D. Mass. 1983), the court
dismissed the bankruptcy petition of a polluter to permit the state
and federal governments to proceed with actions to take control of the
bankrupt's property in order to protect public health and the
environment from an environmental emergency.  Hazardous substances
disposed of by the bankrupt were leaking from his property into waters
that fed a public drinking water supply.  "The ongoing violation of
state law and the serious and immediate danger posed to the citizenry
in the surrounding area by these violations, mandated that the Federal
and State environmental agencies be given full and complete control of
the hazardous waste site as soon as possible." Id. at 1313.  /24/

   Finally, in a decision that preceded the 1978 Bankruptcy Code, the
Fourth Circuit denied the request of a bankruptcy trustee to abandon
useless, dilapidated barges floating in a harbor and ordered the
trustee to remove the barges at the expense of the estate.
Ottenheimer v. Whitaker, 198 F.2d 289 (4th Cir. 1952).  "There can be
no doubt that the property not only has no value, but also that the
care and disposition of it will involve the expenditure of a
substantial sum of money.  * * * (Nonetheless,) we are not dealing
with a burden imposed upon the bankrupt or his property by contract,
but a duty and a burden imposed upon an owner of vessels by an Act of
Congress in the public interest." Id. at 290.

   As in all of these cases, so here, the ability of the government to
exercise its police power to protect the public must not be
extinguished solely because it results in an expense for the debtor.

   4. The decision below improperly offers bankrupt polluters a "fresh
start" without regard for public health, safety, and the environment.
According to the logic of the Sixth Circuit's opinion, had Kovacs
created a nuisance in his backyard small enough that he personally
could sweep it up without the help of equipment or technicians, then a
clean-up injunction would be enforceable against him.  But because
Kovacs created a public health hazard so extensive and so dangerous
that safe clean-up requires him to employ independent, experienced
contractors, the court will not order Kovacs to satisfy this costlier
injunction.  Ironcially, the decision below provides that the more
dangerous the environmental violation, the easier it will be for the
polluter to avoid responsibility.

   The Bankruptcy Code, however, does not abide this irony.  It does
not authorize courts to excuse every responsibility of every person
who files a petition in bankruptcy.  It explicitly preserves the power
of governmental units to obtain and enforce injunctions to protect
public health, safety, and the environment.  The preservation of that
power and of the remedial injunction at issue here makes sense within
the framework of the Code:  unlike ordinary creditors, the public does
not contract with potential debtors and thus lacks leverage to require
security against dangerous behavior.  The public's only security lies
in the ability of governments to enforce statutes to protect public
health, safety, and the environment.  Thus, by ignoring the purpose of
Ohio's action and focusing exclusively on the effect of the clean-up
injunction on Kovacs' purse, the court below fell into error.

                              CONCLUSION

   The judgment of the court of appeals should be reversed.

   Respectfully submitted.

   REX E. LEE

      Solicitor General

   F. HENRY HABICHT, II

      Assistant Attorney General

   LOUIS F. CLAIBORNE

      Deputy Solicitor General

   KATHRYN A. OBERLY

      Assistant to the Solicitor General

   PETER R. STEENLAND, JR.

   DIRK D. SNEL

   WENDY B. JACOBS

      Attorneys

   MAY 1984

   /1/ As we detail in a moment, in In re Kovacs (Kovacs I), 681 F.2d
454 (6th Cir. 1982), vacated and remanded, No. 82-815 (Jan 24, 1983),
the court of appeals held that the automatic stay provision of the
Bankruptcy Code (11 U.S.C. 362) barred enforcement of the same state
court injunction involved here, insofar as it required th turnover of
assets or income of the debtor to implement the clean-up of the waste
disposal site.  When the State sought review in this Court, we filed a
memorandum supporting the petition.  On January 24, 1983, the Court
granted certiorari, vacated the judgment of the court of appeals, and
remanded the case for consideration of mootness.  The court of appeals
has not yet acted on the remand.

   /2/ We have cause for concern that both Sixth Circuit decisions in
this case may be used to cripple our own environmental enforcement
efforts.  Already, Kovacs himself has invoked Kovacs I to frustrate a
federal action pending against him.  United States v. Chem-Dyne Corp.,
et al., No. C-1-82-840 (S.D. Ohio filed Aug. 26, 1982).  At least one
district court has refused to vacate a stay against an ongoing federal
action in pursuit of an injunction that would order the defendant to
abate the health hazard created by its disposal of asbestos wastes.
United States v. Johns-Manville Sales Corp., No. 81-299-D (D.N.H. Nov.
15, 1982).

   /3/ The receiver was authorized "to receive and collect any and all
sums of money due or owing to the defendant business entities or
defendant Kovacs in any manner, whether the same are now due or shall
hereafter become due and payable" (J.A. 13).

   /4/ Kovacs' original petition sought reorganization under Chapter
11 of the Bankruptcy Code.  In September 1980, the bankruptcy court,
at Kovacs' request, converted the action to one for straight
bankruptcy under Chapter 7 of the Code.  See Pet. App. A3.

   /5/ The State concedes that it cannot enforce that part of the 1979
stipulated order requiring Kovacs to pay the State $75,000 (Pet. 5
n.*).

   /6/ The present decision of the Sixth Circuit (rendered by a panel
different from that in Kovacs I) recites that "(t)he panel of (the
court of appeals) that considered the automatic stay aspect of the
case dealing with 11 U.S.C. Section 362 has not yet had an opportunity
to act on this remand (from the Supreme Court)" (Pet. App. A7 n.5).
It seems obvious, however, that the automatic stay question will be
moot, as a practical matter, if the present ruling stands, since the
underlying obligation will be discharged.  On the other hand, if this
Court reverses the most recent decision of the Sixth Circuit, the
automatic stay, unless vacated by special order, will remain in effect
until the bankruptcy proceedings are concluded, thereby inhibiting
clean-up operations in the interim.  Accordingly, under petitioner's
submission, the automatic stay question is not moot.  In light of the
holding below that the instant decision is effectively governed by
Kovacs I (see Pet. App. A10), it is appropriate for this Court to
consider arguments and authority on the automatic stay issue at this
time, particularly because the proper resolution of the automatic stay
question sheds considerable light on the dischargeability question
(see pages 8, 15-17, infra).  See Sony Corp. of America v. Universal
City Studios, Inc., No. 81-1687 (Jan. 17, 1984), slip op. 16 n.17.

   /7/ The Bankruptcy Code defines "debt" as "liability on a claim"
and defines "claim" as either the "right to payment" or the "right to
an equitable remedy for breach of performance if such breach gives
rise to a right to payment." 11 U.S.C. 101(4), (11).  The provisions
of the Bankruptcy Code pertinent to this case are set forth at J.A.
38-48.

   /8/ The district court rendered its ruling on September 17, 1982,
before this Court vacated the Sixth Circuit's judgment in Kovacs I.

   /9/ Under the Bankruptcy Code, a discharge "voids any judgment at
any time obtained, to the extent that such judgment is a determination
of the personal liability of the debtor with respect to any debt
discharged under (the Code)." 11 U.S.C. 524(a)(1).  Moreover, a
discharge "operates as an injunction against the commencement or
continuation of an action, the employment of process, or any act, to
collect, recover or offset any such debt * * *." 11 U.S.C. 524(a)(2).

   /10/ H.R. Rep. 95-595, supra, at 343 (emphasis added):

         Paragraph (4) excepts commencement or continuation of actions
      and proceedings by governmental units to enforce police or
      regulatory powers.  Thus, where a governmental unit is suing a
      debtor to prevent or stop violation of fraud, environmental
      protection, consumer protection, safety, or similar police or
      regulatory laws, or attempting to fix damages for violation of
      such a law, the action or proceeding is not stayed under the
      automatic stay.

   See also S. Rep. 95-989, 95th Cong., 2d Sess. 52 (1978) (same);
124 Cong. Rec. 32395 (1978) (remarks of Rep. Edwards) (exception is
intended "to permit governmental units to pursue actions to protect
the public health and safety");  125 Cong. Rec. 33995 (1978)
(identical remarks by Sen. DeConcini).

   /11/ H.R. Rep. 95-595, supra, at 343:

      Paragraph (5) makes clear that the exception extends to permit
      an injunction and enforcement of an injunction, and to permit
      the entry of a money judgment, but does not extend to permit
      enforcement of a money judgment.  Since the assets of the debtor
      are in the possession and control of the bankruptcy court, and
      since they constitute a fund out of which all creditors are
      entitled to share, enforcement by a governmental unit of a money
      judgment would give it preferential treatment to the detriment
      of all other creditors.

   See also S. Rep. 95-989, 95th Cong., 2d Sess. 52 (1978) (same).

   /12/ United States v. Price, supra, was not a bankruptcy case, but
its reasoning is equally applicable here.  In Price, the Third Circuit
faulted the district court for adopting an unduly restrictive view of
its equitable remedial powers in the context of environmental
protection (688 F.2d at 211).  The federal government had requested an
order that defendants fund or conduct a diagnostic study of the threat
posed by a hazardous waste landfill.  The district court denied the
request, believing it an attempt to transform a claim for damages into
an equitable action.  The Third Circuit disagreed (id. at 212):

      Damages are awarded as a form of substitutional redress.  They
      are intended to compensate a party for an injury suffered or
      other loss.  A request for funds for a diagnostic study of the
      public health threat posed by the continuing contamination and
      its abatement is not, in any sense, a traditional form of
      damages.  The funding of a diagnostic study in the present case,
      thought it would require monetary payments, would be preventive
      rather than compensatory.  The study is intended to be the first
      step in the remedial process of abating an existing but growing
      toxic hazard which, if left unchecked, will result in even
      graver future injury, i.e., the contamination of Atlantic City's
      water supply.

   (For other reasons, the Third Circuit was unable to find that the
district court had abused its discretion in denying the government's
request for a preliminary injunction (688 F.2d at 214).)

   /13/ We are aware of only one contrary case.  United States v.
Johns-Manville Sales Corp., No. 81-299-D (D.N.H. Nov. 15, 1982)
(refusing to vacate stay against governmental action to obtain a
pollution abatement injunction).  The Manville decision is flawed for
several reasons.  First, the court relied almost entirely on the
simplistic notion, first advanced in Kovacs I, that any injunction
requiring the expenditure of money must be a "money jujgment." Second,
the court failed to recognize that a prohibitory injunction (which it
would have approved) does not adequately protect the public in many
instances.  For example, the mere cessation of polluting conduct does
not prevent the spread of hazardous substances through the environment
into public drinking water supplies;  effective public protection
therefore requires clean-up or containment of the pollution.  The
Manville court also erroneously assumed that the federal and state
governments can finance the costs of clean-up themselves and then seek
reimbursement from the polluter.  Congress was well aware, however,
that the funds available to the federal government under the so-called
"Superfund" legislation, 42 U.S.C. (Supp. V) 9601 et seq., would not
be adequate to permit the government to take necessary action at the
many thousands of existing dumpsites.  See S. Rep. 96-848, 96th Cong.,
2d Sess. 62-63 (1980);  see id. at 2, 5, 17, 53-55, 57-58.  In
addition, the Superfund legislation imposes restrictions on the
government's expenditures.  See 42 U.S.C. (Supp. V) 9604;  see also 40
C.F.R. 300.65(d), 300.67(e), 300.68(c) (National Contingency Plan).
Finally, the rationale of the Manville decision is severely undercut
by the court's inexplicable willingness to permit an injunction
ordering the bankrupt both to cease and desist from further pollution
and to post a bond to ensure compliance (slip op. 10).  Such an
injunction obviously would require the bankrupt to spend money.

   /14/ See also NLRB v. Evans Plumbing Co., 639 F.2d 291 (5th Cir.
1981) (NLRB order requiring reinstatement of two wrongfully discharged
employees not subject to automatic stay);  In re Thomassen, 5 Collier
Bankr. Cas. 2d 997, 1001 (9th Cir. Bankr. App. 1981) ("pecuniary
purpose" test defferentiates between governmental actions designed to
defeat Bankruptcy Code relief and those brought in furtherance of
police powers).

   /15/ This does not mean that the bankruptcy court is powerless to
protect the estate when necessary.  The bankruptcy court, in its
discretion, may stay actions not covered by the automatic stay
pursuant to its general powers under 11 U.S.C. 105.  As Congress
explained, however, there are certain actions, including governmental
actions to protect the public health and welfare, as to which the
normal presumption of the automatic stay is inappropriate and the
burden of showing the need for a stay is more properly placed on the
debtor (S. Rep. 95-989, 95th Cong., 2d Sess. 51 (1978)):

      The district court and the bankruptcy court as its adjunct have
      all the traditional injunctive powers of a court of equity * *
      *.  Stays or injunctions issued under these other sections will
      not be automatic upon commencement of the case, but will be
      granted or issued under the usual rules for the issuance of
      injunctions.  By excepting an act or action from the automatic
      stay, the bill simply requires that the trustee move the court
      into action, rather than requiring the stayed party to request
      relief from the stay.  There are some actions, enumerated in the
      exceptions, that generally should not be stayed automatically
      upon commencement of the case, for reasons of either policy or
      practicality.  Thus, the court will have to determine on a
      case-by-case basis whether a particular action which may be
      harming the estate should be stayed.

   See also H.R. 95-595, supra, at 342 (same).  Although the question
is not at issue here, we would note our view that a debtor such as
Kovacs would face a difficult task in attempting to satisfy "the usual
rules for the issuance of injunctions." The public interest in
cleaning up a hazardous waste site almost certainly would outweigh the
trustee's interest in preserving the debtor's estate.  Nevertheless,
the authority to issue injunctions in appropriate cases mitigates
whatever harshness might otherwise be thought to flow from the
governmental exemption to the automatic stay.

   /16/ In general, the automatic stay remains in effect until
discharge.  11 U.S.C. 362(c)(2).  Depending upon the size of the
estate, it may take anywhere from a few months to several years to
reach that point.  In Kovacs' case, the automatic stay is still in
effect, and his debts have not yet been discharged, even though the
bankruptcy petition was filed in July 1980.  (The ruling on
dischargeability at issue in this case was obtained in response to
Ohio's request for a declaratory judgment and applies only to Kovacs'
obligations under the state court injunction;  the dischargeability of
the rest of his debts remains to be determined.)

   /17/ See also 124 Cong. Rec. 33992 (1978) (substantially identical
remarks of Sen. DeConcini).

   /18/ See generally Matthews, the Scope of Claims Under the
Bankruptcy Code, 57 Am. Bankr. L.J. 221 (Installment 1) and 339
(Installment 2) (1983);  2 Collier on Bankruptcy Section 101.04 (15th
ed. 1984).

   /19/ The Sixth Circuit plainly erred in its conclusion that "in the
absence of any contention by the State of Ohio in the Bankruptcy Court
that the judgment obligation of Kovacs is exempted from discharge
under some provision of Section 523, a discahrge under Section 727 is
warranted" (Pet. App. A10).  Whether an order fits within an exemption
(11 U.S.C. 523) to the discharge provision is simply irrelevant to the
threshold question:  whether the order constitutes a "claim." Notably,
there is no exemption provided for criminal restitution.  Yet, as
discussed later (see pages 22-23, infra), the obligation to abate a
health and environmental endangerment should survive discharge.

   It is possible, of course, that in certain cases a clean-up
obligation would be non-dischargeable under 11 U.S.C. 523(a)(6), which
exempts from discharge any debt "for willful and malicious injury by
the debtor to another entity or to the property of another entity." In
light of Kovacs' "flagrant disregard" of the state court injunction
and his continued discharge of hazardous wastes after entry of the
stipulated judgment (Pet. App. A54), Section 523(a)(6) may be
especially applicable to the instant case.  As a general matter,
however, a polluter's obligation to clean up his unlawful discharges
does not depend on his state of mind.  Whether the violation is
willful or not, the need to protect the public health and welfare
remains the same.  We therefore agree with petitioner that this case
should be decided on the basis of the statutory definitions of "debt"
and "claim."

   /20/ See, e.g., the Clean Water Act, 33 U.S.C. 1364;  the Resource
Conservation and Recovery Act of 1976, 42 U.S.C. (Supp. V) 6973(a);
the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, 42 U.S.C. (Supp. V) 9606(a);  the Surface Mining Control
and Reclamation Act of 1977, 30 U.S.C. 1271(a)(2);  and the Clean Air
Act, 42 U.S.C. (Supp. V) 7603(a).

   /21/ "A money judgment is one which adjudges the payment of a sum
of money, as distinguished from one directing an act to be done or
property to be transferred or restored.  2 Bouv. Law. Dict. p. 2240."
United States Fidelity & Guaranty Co. v. Ft. Misery Highway Dist., 22
F.2d 369, 372 (9th Cir. 1927).

   /22/ As previously noted (see page 18 note 19, supra), the
Bankruptcy Code provides no express exemption from discharge for
criminal restitution, yet that "omission" does not affect the
obligation to make such payments.  Again, therefore, the court of
appeals' emphasis (Pet. App. A10) on the absence of an express
exemption for mandatory clean-up injunctions was misplaced.

   /23/ The cost of compliance was estimated to be $323,000 (466 F.
Supp. at 1334).  Although Canarico Quarries was decided under the old
Bankruptcy Act, the court took pains to analyze the recently enacted
amendments to the Code and concluded that the Code compelled the same
result.  Id. at 1339-1340.

   /24/ See also In re Vermont Real Estate Investment Trust, 25 Bankr.
804, 806 (Bankr. D. Vt. 1982) (court ordered the bankrupt's estate to
reimburse the city for the cost of removing a dangerous building from
the bankrupt's property, reasoning that the expense was a cost of
administering the estate, "necessary for the safety and welfare of the
public in general").