The opinion of the court was delivered by: PETER LEISURE, District Judge
The United States appeals to this Court for relief from an
Order denying its motion to offset its debt owed to Debtor,
BOUSA, Inc. ("BOUSA" or "Debtor") against the debt BOUSA owes to
the Government. The Order submitted for review was issued by
Judge Cornelius Blackshear of the United States Bankruptcy Court
for the Southern District of New York*fn1 on November 18,
2004. The Government sought relief from an automatic stay issued
when BOUSA filed its petition for bankruptcy protection pursuant
to Chapter 11 of the United States Bankruptcy Code on December
29, 1989. The Government was attempting to setoff allegedly
pre-petition debts owed by BOUSA to the Internal Revenue Service
("IRS"), the Environmental Protection Agency ("EPA"), and the,
then United States Customs Service, now, Department of Homeland
Security, U.S. Customs and Border Protection ("Customs"). The
Government planned to setoff BOUSA's debts against the debts that
the United States Court of International Trade ("CIT") found the
Government owed to BOUSA, arising from Customs' misclassification
of BOUSA's tariff obligations on two shipments of petroleum
products BOUSA imported in 1985 and 1986. CIT found the
Government owed BOUSA $4,361,473.18 plus statutory interest
running from the date of Custom's mistaken tariff entry. The
Government has paid $2,384,298.66 to date, but is holding the remainder in abeyance
in the hopes of exercising a setoff of the $1,571,426.63 debt
owed by BOUSA to the Government. The Court details the facts of
this appeal below and remands this proceeding back to the
Bankruptcy Court for findings of fact and conclusions of law
sufficient to effect an appeal of that Court's denial of the
Government's motion to lift the stay and effect a set off.
The Government, as appellant in this matter, acts on behalf of
three separate agencies, EPA, IRS, and Customs.
BOUSA is a New York corporation that imported petroleum
products into the United States. See In re Bousa,
209 B.R. 29, 29 (S.D.N.Y. 1997) (Leisure, J.). Prior to filing for
bankruptcy protection, BOUSA had annual sales of over
$500,000,000 from its trading and marketing of liquid petroleum.
(Disclosure Statement and Liquidating Plan of Reorganization of
BOUSA, Inc., Affidavit of Kevin G.W. Olson, Esq., dated Apr. 28,
2004 ("Olson Aff.") Ex. J at 5.) BOUSA was forced to file for
bankruptcy protection in the wake of falling oil prices,
creditors' claims of over $400,000,000, and BOUSA's European
affiliates' financial hardships. Id. BOUSA filed for Chapter 11
protection on December 29, 1989.
II. BOUSA's Debts to the Government
The IRS, EPA, and Customs all filed proofs of claim with the
Bankruptcy Court handling BOUSA's Chapter 11 petition, for debts
arising out of unrelated transactions. A. Debt to the EPA
On October 5, 1990, the EPA filed a proof of claim with the
Bankruptcy Court for an unsecured nonpriority claim of $536,250.
(Olson Aff. Ex. I.) The EPA noted on an attached Rider that the
claim would satisfy the outstanding balance of BOUSA's liability
arising out of a settlement agreement with the EPA for violating
Section 211 of the Clean Air Act, 42 U.S.C. § 7545(c). (Id.)
BOUSA and the EPA entered into the settlement agreement on
December 15, 1987. (Id. Ex. J at 5.) The EPA Settlement
Agreement detailed BOUSA's environmental failings in 1985 through
1986 and obligated BOUSA to remit $1,175,000 in semi-yearly
installments to be completed on December 31, 1990. (Id. at 3.)
However, because BOUSA filed for bankruptcy protection on
December 29, 1989, it did not complete the payments.
On August 16, 1993, the IRS filed a proof of claim with the
Bankruptcy Court for a priority amount of $148,420.24 and a
general amount of $4,261.53, totaling $152,681.77. The IRS's
claim estimated BOUSA's liability for failure to file tax returns
covering dates in 1988 and 1999. (Id. Ex. G.) The IRS Claim
states that it is not subject to any set off or counterclaim.
On April 26, 1990, Customs filed a proof of claim for an
unsecured and unidentified amount.*fn3 On January 28,
1992,*fn4 Customs entered an amended proof of claim for a
unsecured nonpriority claim of $882,494.86. (Vargas Decl. June 7, 2004 Ex.
A.) The claim arose out of BOUSA's failure to pay Customs ...