Opinion
Case No. 02 B 13533 (AJG), Jointly Administered.
May 29, 2003.
ORDER GRANTING DEBTORS' MOTION FOR AUTHORIZATION TO ENTER INTO DISCOUNT PLANS WITH SBC COMMUNICATIONS, INC., EFFECTIVE JANUARY 7, 2003
On July 21, 2002 and November 8, 2002, WorldCom, Inc. and certain of its direct and indirect subsidiaries (collectively, the "Debtors") filed petitions under chapter 11 of title 11 of the United States Code (the "Bankruptcy Code"). The Debtors chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered pursuant to orders, dated July 22, 2002 and November 8, 2002. The Debtors continue to operate their businesses as debtors-in-possession pursuant to sections 1107(a) and 1108 of the Bankruptcy Code.
The Debtors purchase certain telecommunications services from local exchange carriers ("LECs"). The terms and conditions of the purchases are provided in tariffs filed by the LECs. A purchase under the tariffs is made by submitting an access service request ("ASR") to the LEC. SBC Communications, Inc. ("SBC") through its subsidiaries or affiliates, including the Ameritech operating companies (collectively, "Ameritech") and the Southwestern Bell operating companies (collectively, "Southwestern Bell" and, together with Ameritech, the "SBC Affiliates") are LECs providing telecommunications services, each operating within certain regions. Ameritech and Southwestern Bell offer discount pricing plans for certain circuits (the "Circuits") purchased pursuant to ASRs. Pursuant to a certain discount plan offered by Ameritech (the "Ameritech Plan"), the Debtors are allowed significant discounts to the monthly charges in exchange for a commitment to maintain a specified number of Circuits in Ameritech's territory. In a certain plan offered by Southwestern Bell (the "Southwestern Bell Plan"), the Debtors are provided a significant discount in exchange for exceeding a minimum monthly revenue commitment. The Debtors have determined that they will require (i) the requisite number of Circuits to qualify for the Ameritech Plan and (ii) the amount of Circuits that will enable the Debtors to meet or exceed the revenue commitment required by the Southwestern Bell Plan. The Debtors informed Ameritech and Southwestern Bell of their desire to enter into the Ameritech Plan and the Southwestern Bell Plan no later than January 7, 2003. The Debtors viewed the entry into these plans as within the ordinary course of their business as they enter into these types of plans on a regular basis. The SBC Affiliates informed the Debtors that, in their view, entry into the discount plans was not within the Debtors ordinary course of business and required bankruptcy court approval. The SBC Affiliates further informed the Debtors that if they obtained bankruptcy approval for the entry into the discount plans by February 1, 2003, the SBC Affiliates would consent to the authorization being effective retroactively to January 7, 2003.
Thereafter, the Debtors filed a Motion, dated March 14, 2003 (the "Debtors' Motion") which sought entry of an order, pursuant to 11 U.S.C. § 363, approving their agreement to participate in the discount plans, retroactively to January 7, 2003. The SBC Affiliates filed a limited objection, dated April 3, 2003 (the "Limited Objection"), to the Debtors' Motion. In the Limited Objection, the SBC Affiliates supported that portion of the Debtors' Motion that sought authority for the Debtors to enter into the discount plans. However, the SBC Affiliates objected to the Debtors' request that the discount plans become effective as of January 7, 2003. A hearing on this matter was conducted before the Court on April 8, 2003 (the "Hearing"). At the conclusion of the Hearing, the Court entered an order granting the Debtors' authority to enter into the discount plans, however, the Court reserved decision as to the effective date of the authorization.
The Court has considered the Debtors' Motion, the Limited Objection and the evidence adduced at the Hearing. The Court has determined that the Debtors' entry into these discount plans is within the ordinary course of the Debtors' business in that they enter into these types of arrangements as part of the regular course of business. Moreover, even if their entry into these discount plans were not considered within their ordinary course of business, the equities of the case favor authorizing the Debtors' to enter into the discount plans effective January 7, 2003. Allowing the agreements to apply retroactively to the date in which the parties entered into the agreements is fair to the parties as it is consistent with the rights and obligations under the discount plans. Based upon the foregoing and upon all of the proceedings had before the Court and after due deliberation and sufficient cause appearing therefor, it is hereby
Ordered that the portion of the Debtors' Motion seeking to have the Debtors' entry into the discount plans authorized effective January 7, 2003 is granted.