Opinion
03-46590, No. 4:04-CV-926-A.
January 4, 2005
MEMORANDUM OPINION and ORDER
After having considered Pepco's motion to withdraw the bankruptcy reference that was filed December 16, 2004, Debtors' memorandum in opposition to the motion, the objection of Committee to the motion, the transcript of the proceeding conducted December 21, 2004, by the bankruptcy court, and Bankruptcy Judge Lynn's December 29, 2004, Report and Recommendation, the court has concluded that the motion to withdraw should be denied.
Abbreviated references used in this memorandum opinion and order are consistent with those used by the court in its December 23, 2003, memorandum opinion and order that is reported as In re Mirant Corp., 303 B.R. 304 (N.D. Tex. 2003), and by the United States Court of Appeals for the Fifth Circuit in its August 4, 2004, opinion that is reported as In re Mirant Corp., 378 F.3d 511 (5th Cir. 2004).
Debtors' memorandum apparently was not filed with the clerk of court, but the court has obtained an unfiled copy from a member of Bankruptcy Judge Lynn's staff.
Reference is made to Judge Lynn's Report and Recommendation for a listing, Report Recommendation at 1, and description, id. at 4-9, of the matters as to which Pepco seeks withdrawal of reference. The sole ground of Pepco's motion is that withdrawal of reference is mandatory under the second sentence of 28 U.S.C. § 157(d) for the reason that resolution of the proceedings as to which withdrawal of reference is sought will require consideration of both the Bankruptcy Code and the Federal Power Act. Mot. to Withdraw at 2, 7-10. Pepco does not point to any particular part of the FPA that must be considered, but contents itself with reference to an earlier determination of the court that issues concerning the APSA and Back-to-Back Agreement require substantial consideration of the FPA "and thus are properly before the District Court." Id. at 2. The court cannot identify at this time any issue raised by the proceedings as to which withdrawal of reference is sought that will require consideration of both the Bankruptcy Code and the FPA for resolution in the sense contemplated by the second sentence of § 157(d).
The court withdrew the reference as to the motion to reject the Back-to-Back Agreement and the proceedings in which injunctive relief had been granted directly affecting FERC because, as to those matters, there were outcome-determinative issues that required consideration of both the Bankruptcy Code and the FPA. 10/9/03 Order in No. 4:03-CV-944-A at 2. The Fifth Circuit recognized the importance of those issues in its opinion on the appeal from this court's December 23, 2003, order, explaining:
Based upon § 1334 and § 365 of the Bankruptcy Code, Mirant claims that it has the right, subject to the district court's approval, to reject any executory contract, including the Back-to-Back Agreement. FERC argues that the FPA preempts the district court's jurisdiction in this case because Mirant's efforts to reject the Back-to-Back Agreement is actually a collateral attack upon a filed rate. We address for the first time, a case arising at the intersection of these two statutes.In re Mirant Corp., 378 F.3d 511, 518 (5th Cir. 2004).
The uncertainty that arose in the motion to reject at the intersection of the two statutes was for the most part resolved by the ruling of the Fifth Circuit. The feature that was not totally resolved was the definition of the standard to be applied in determining whether rejection should be allowed. This court has now defined that standard. See 12/9/04 Order in No. 4:03-CV-1242-A at 11-12). While the same standard, with appropriate variations, could very well be applicable to certain of the proceedings as to which withdrawal of reference is now being sought, there is no need for further evaluation of what the standard should be. However, if in the course of future proceedings in the bankruptcy court a basis for mandatory withdrawal of reference presents itself, presumably one or more of the affected parties will file an appropriate motion if such party or parties determine that the matter should be presented to the district court for consideration.
The court notes that the standard that would be applied to a determination of whether rejection of the Back-to-Back Agreement should be approved is basically the same standard that should be applied in determining whether Debtors' obligations under the Back-to-Back Agreement are to be enforced or, more generally, whether any action is to be permitted that would prevent Pepco from receiving the payments to which it is entitled under the Back-to-Back Agreement. If, as the Fifth Circuit indicates, a public interest standard should be applied to a decision as to whether a breach of the agreement should be sanctioned by an order authorizing rejection of the agreement, that same standard should be applied in any proceeding that has as a potential outcome the denial to Pepco of all or a part of the payments to which it is entitled under the Back-to-Back Agreement.
Bearing in mind that Pepco's motion to withdraw does not seek discretionary withdrawal of reference under the authority of the first sentence of § 157(d), the court is not devoting attention to that subject other than to note that the court has been provided nothing that would cause it to conclude that "the goals of promoting uniformity in bankruptcy administration, reducing forum shopping and confusion, fostering the economical use of the debtors' and creditors' resources, and expediting the bankruptcy process," Holland Am. Ins. Co. v. Succession of Roy, 777 F.2d 992, 999 (5th Cir. 1985), are not as likely to be attained if the proceedings in question are handled in the first instance by the bankruptcy court.
Therefore,
The court ORDERS that Pepco's motion to withdraw the bankruptcy reference be, and is hereby, denied.