Opinion
Federal ID No 94-0742640, No C-02-1550 VRW, (Bankruptcy Case No. 01-30923 DM)
September 15, 2002
ORDER
The California Public Utilities Commission, the People of the State of California on behalf of a variety of interested state agencies (see Mot for Stay (Doc #100) at 1 n 1), the City and County of San Francisco and the California Hydropower Reform Coalition (collectively, movants) move, pursuant to FRBP 8017(b), for a stay of proceedings pending an appeal to the Ninth Circuit of the court's August 30, 2002, order in this matter. Doc #100. For the reasons detailed below, the motion for stay (Doc #100) is DENIED.
On August 30, 2002, the court entered an order deciding an appeal by Pacific Gas Electricity Company and Pacific Gas Electricity Corporation (collectively, PGE) from the bankruptcy court's Memorandum Decision Regarding Preemption and Sovereign Immunity of February 7, 2002, and subsequent order of March 18, 2002. Doc #93. The court's August 30, 2002, order reversed the decision of the bankruptcy court and remanded the case to that court for further proceedings. Id. PGE filed a request for entry of judgment on September 5, 2002. Doc #94. On September 10, 2002, movants filed a statement of non-opposition to the entry of judgment. Doc #95.
In a companion order issued today, the court has amended its August 30, order, pursuant to 28 U.S.C. § 1292(b), to include a statement that the issue decided in that order is appropriate for immediate interlocutory review by the court of appeals. Movants now request a stay of further proceedings in this matter pending the resolution of their appeal. See FRBP 8017(b).
II
Federal Rule of Bankruptcy Procedure 8017(a) provides for an automatic 10 day stay after the entry of any judgment of a district court on a bankruptcy appeal. FRBP 8017(a). Section 8017(b) allows for a more extended stay upon motion by one of the parties to the appeal. FRBP 8017(b). The 8017(b) stay, if granted, may extend no longer than "30 days after the entry of judgment of the district court * * * unless the period is extended for cause shown." Id. If, however, the party who obtains the stay files an appeal of the judgment before the expiration of the stay period, then the stay remains in effect until the court of appeals reaches a decision on the appeal. Id.
The Federal Rules of Bankruptcy Procedure also provide for a 10 day stay of proceedings upon the entry of an order by a bankruptcy court confirming a reorganization plan, unless the bankruptcy court orders otherwise. See FRBP 3020(e). As the Advisory Committee to the 1999 amendments to the Federal Rules of Bankruptcy Procedure explained, the goal of section 3020(e) is "to provide sufficient time for a party to request a stay pending appeal of an order confirming a plan * * * under chapter 11 of the Code before the plan is implemented and an appeal becomes moot."
FRBP 3020(e), Adv Comm Notes, 1999 Amend. As this explanatory note makes plain, the rule expressly provides for a 10 day period during which parties potentially aggrieved by a bankruptcy court's confirmation of a reorganization plan may seek a stay pending appeal.
To justify a stay of proceedings under FRBP 8017(b), movants must meet the terms of a test virtually identical to that for a preliminary injunction. Movants must show a likelihood of success on the merits and the possibility of irreparable injury were the stay denied or, in an alternative formulation of the same standard, serious legal questions and a balance of hardships were the stay denied. See In re KAR Dev Assoc, LP, 182 B.R. 870, 872 (D Kan 1995); In re Winslow, 123 B.R. 647 (D Colo 1991) (holding that the test for a stay under FRBP 8017 is the same as that under FRBP 8005); Lopez v. Heckler, 713 F.2d 1432, 1435 (9th Cir 1983), rev'd on other grounds, 463 U.S. 1328 (1983) (noting the common language of the test for stay pending appeal and the test for a preliminary injunction).
As with the test for a preliminary injunction, the test for a stay pending appeal is susceptible to different formulation. See, e g, Oakland Tribune, Inc v. Chronicle Publishing Co, 762 F.2d 1374, 1376 (9th Cir 1985). "Under any formulation of the test, plaintiff must demonstrate that there exists a significant threat of irreparable injury." Id (citations omitted). If movants fail to meet the "minimum showing" of a threat of irreparable injury, the court "need not decide whether [movants are] likely to succeed on the merits." Id.
For the purpose of its analysis and given the relative novelty and complexity of the issues addressed by the court's August 30, 2002, order, the court assumes arguendo that movants have adequately met their burden of demonstrating a likelihood of success on the merits under either formulation of the test. Even so, movants must show that they would suffer irreparable harm if denied a stay; that they cannot do.
The essence of movants' argument is that if the court does not grant an immediate stay pending appeal, the course of further bankruptcy proceedings may proceed at such a pace that any appealable issues will have become moot by the time movants are in a position to raise them. If it "is apparent that absent a stay pending appeal * * * the appeal will be rendered moot," that circumstance is, as movants note, "the quintessential form of prejudice" justifying a stay. In re Country Squire Associates of Carle Place, LP, 203 B.R. 182, 183 (2nd Cir BAP 1996) (internal quotation marks and citations omitted). To demonstrate such prejudice, however, movants must make apparent to the court the imminent danger that the issues movants seek to raise on appeal will become moot.
The Ninth Circuit has identified two circumstances in which dismissal for mootness of an appeal from bankruptcy proceedings involving a reorganization plan is warranted: (1) "if a party opposing a reorganization plan has failed to obtain a stay pending appeal, and the plan has been carried out to substantial [consummation];" and (2) if "an appellant neglected to obtain a stay pending appeal and the rights of third parties have intervened." In re Arnold Baker Farms, 85 F.3d 1415, 1419-1420 (9th Cir 1996) (internal quotation marks and citations omitted); see also In re Baker Drake, Inc, 35 F.3d 1348, 1351 (9th Cir 1994).
Movants attempt to demonstrate the imminence of mootness by arguing that "if the bankruptcy court confirms PGE's proposed plan and PGE begins its disaggregation, a court may find that PGE's plan will have been substantially consummated, rendering the appeal moot." Mot for Stay (Doc #100) at 10. As movants' phrasing concedes, however, this eventuality is, at the moment, entirely hypothetical. The bankruptcy court has not, in fact, confirmed PGE's reorganization plan. Indeed the bankruptcy court has expressed its intention to consider the California Public Utility Commission's reorganization plan before taking up PGE's proposal.
See Lopes Decl (Doc #107), ¶ 3. And the fact that PGE has begun preparations for a possible disaggregation, as PGE points out, "should surprise nobody given the size and complexity of the case" and the difficulties that will attend PGE's restructuring whatever form it may take. Opp (Doc #106) at 7. The fact that PGE is taking preparatory steps toward reorganization in anticipation of a favorable decision by the bankruptcy court coupled with no more than the possibility that the bankruptcy court may confirm PGE's reorganization plan do not together amount to a demonstration that the issues movants wish to raise on appeal are in imminent danger of becoming moot before they can be heard.
Additionally, the Federal Rules of Bankruptcy Procedure provide a party to a bankruptcy proceeding in which the bankruptcy court approves a reorganization plan a built-in opportunity to move for a stay pending appeal, an opportunity guaranteed to become available to movants. See FRBP 3020(e). The automatic 10 day stay that follows an order confirming a bankruptcy reorganization plan as provided by rule 3020(e) exists precisely to serve as a backstop against the potential problem about which movants complain. That backstop becomes available to the parties, however, at the time a potential mootness problem is in real danger of becoming an actual mootness problem, namely at the moment the bankruptcy court decides to confirm the reorganization plan proposed and to begin to oversee implementation of that plan. While that backstop remains in place, the potential mootness problem of which movants complain remains remote and speculative.
The case on which movants chiefly rely requires a far more significant danger of mootness to demonstrate a potential irreparable injury absent a stay. In In re Roberts Farms, Inc, 652 F.2d 793 (9th Cir 1981), the Ninth Circuit found the dismissal for mootness of three appeals from bankruptcy proceedings appropriate on two grounds. First, the court found that the bankruptcy court's "plan of arrangement has been so far implemented that it [was] impossible to fashion effective relief for all concerned" at the time an appeal was filed. Id at 797. Second, the court found that "[a]ppellants ha[d] failed and neglected diligently to pursue their available remedies to obtain a stay of objectionable orders of the Bankruptcy Court and ha[d] permitted such a comprehensive change of circumstances to occur as to render it inequitable for this court to consider the merits of their appeal." 652 F.2d at 798. Plans of reorganization of PGE have been presented to the bankruptcy court for consideration, but not adopted, let alone implemented.
Similarly, the court in In re Advanced Mining Systems, Inc, 173 B.R. 467 (S.D.N.Y. 1994) entered a seven day stay pending appeal because, in that case, the court determined found that "[i]f a stay pending appeal is denied, the debtors' assets will be distributed without reserve for the [appellants'] claim." 173 B.R. at 468. The court found that denial of the stay would moot the appeal as a matter of course, because it would immediately drain the estate of any resources out of which to compensate the appellants. Again, such an immediate response to a bankruptcy court decision does not yet threaten movants' claims, because the bankruptcy court has yet to make such a decision, and once it does so movants will have an automatic 10 day period in which to file an appeal of that determination.
The absence of a showing of irreparable injury is itself sufficient to warrant denial of a motion to stay. See Oakland Tribune, 762 F.2d at 1376; Lopez, 713 F.2d at 1435. Were it necessary for the court to consider the other factors in the test, however, consideration of the public interest would yield the same result. As the Ninth Circuit has noted, in applying the test for a motion for stay pending appeal, "the public interest is a factor to be strongly considered." Lopez, 713 F.2d at 1435-1436 (citation omitted).
Two interests of the public weigh strongly against granting a stay of proceedings at this time. First, if the court were to issue a stay at this juncture, it would interfere with the bankruptcy court's management of the proceedings before it. The public interest in economizing judicial resource suggests that issuing a stay pending appeal of the express preemption issues, thereby requiring PGE to move forward with and the bankruptcy court to consider PGE's arguments for implied preemption, would serve little purpose. Resolution of this appeal by the Ninth Circuit may render those arguments wholly unnecessary. Moreover, the bankruptcy court has expressed its intention to begin consideration of proposed reorganization plans by taking up the proposal of the California Public Utility Commission first. See Lopes Decl (Doc #107), ¶ 3.
Second, the public has a significant interest in the expeditious resolution of PGE's bankruptcy, given the size of the bankruptcy, the size of the interest costs that continue to mount as proceedings drag on and the direct connection between these proceedings and the provision of a vital public utility service.
Consideration of both of these strong interests of the public dictate the same conclusion: a stay of proceedings pending appeal at this time is both premature and legally unjustified.
III
In their reply brief, movants argue for the first time that PGE should be judicially estopped from opposing the motion to stay, because permitting PGE's opposition would allow PGE to derive unfair advantage from a position clearly inconsistent with one it adopted in earlier proceedings. See Reply (Doc #109) at 6-8. The court in its discretion can decide whether to consider arguments raised for the first time in a reply brief. See Glenn K. Jackson, Inc v. Roe, 273 F.3d 1192 (9th Cir 2001). If a court chooses to rely on materials raised for the first time in a reply brief, the opposing party must be afforded a reasonable opportunity to respond. See Beaird v. Seagate Tech, Inc, 145 F.3d 1159, 1164-1165 (10th Cir 1998). Because the court has concluded that movants have failed to demonstrate that they would suffer an irreparable injury if not granted a stay, the court declines to consider movants' estoppel argument.
IV
Two other motions filed by PGE continue to appear as pending on the court's docket: a motion to expedite hearing and determination of appeal (Doc #26) and a motion for leave to file excess pages in an opposition brief to a motion to dismiss PGE's appeal (Doc #47). Because the court has already heard argument and ruled on the appeal at issue in the former motion, that motion (Doc #26) is TERMINATED as moot. The parties and court disposed of the latter motion by a stipulation and order dated June 6, 2002. Doc #60. Insofar as it continues to appear as pending, that motion (Doc #47) is TERMINATED as an administrative matter.
V
For the reasons discussed above, the court DENIES movants' motion to stay further proceedings pending appeal of the court's express preemption order. Doc #100. In addition, two other pending motions (Docs ##26, 47) are TERMINATED.
IT IS SO ORDERED.