Adopting a recommendation by Bankruptcy Judge Dennis Montali, District Judge Haywood S. Gilliam, Jr. of Oakland, Calif., denied a motion to withdraw the reference of an adversary proceeding to decide whether the Federal Energy Regulatory Commission (FERC) can bar PG&E Corp. from rejecting wholesale power purchase contracts.
Immediately before the energy utility filed a chapter 11 petition on January 29, FERC entered orders declaring that it had concurrent jurisdiction to review decisions on the rejection of power purchase agreements, or PPAs. On the day of filing, PG&E initiated an adversary proceeding in bankruptcy court seeking a declaratory judgment and injunctions enforcing the automatic stay, because the debtor alleged that FERC was interfering with the company’s ability to reject PPAs.
Several power generators quickly moved in district court to withdraw the reference under 28 U.S.C. § 157(d). Judge Gilliam denied the motion in a five-page opinion on March 11.
First, Judge Gilliam dealt with mandatory withdrawal. In the Ninth Circuit, he said, courts are required to withdraw the reference only if the case entails an analysis of significant open and unresolved questions of non-bankruptcy law. Withdrawal is not mandatory, he said, if the bankruptcy court is only applying non-bankruptcy law.
The power generators argued, among other things, that withdrawal was mandatory because the court must decide whether the bankruptcy court can order rejection of PPAs, even though FERC has exclusive jurisdiction over rates and terms for the sale of electricity.
Judge Gilliam said those issues will not entail a substantial and material consideration of non-bankruptcy law. The answer, he said, is contained in the plain language of Section 365. He quoted Judge Montali, who said that Section 365 says whether FERC can “‘second guess the bankruptcy court and impose its own decision on that court.’”
Likewise, Judge Gilliam found no grounds for permissive withdrawal. In “short order,” he said, Judge Montali will decide whether the debtor is entitled to an injunction.
Denying the withdrawal motion, according to Judge Gilliam, will entail the most efficient use of judicial resources.
Adversary Proceeding to Enjoin FERC Remains in Bankruptcy Court
Adopting a recommendation by Bankruptcy Judge Dennis Montali, District Judge Haywood S. Gilliam Junior of Oakland, California, denied a motion to withdraw the reference of an adversary proceeding to decide whether the Federal Energy Regulatory Commission can bar P G and E Corp from rejecting wholesale power purchase contracts.
Immediately before the energy utility filed a chapter 11 petition on January 29, the Federal Energy Regulatory Commission entered orders declaring that it had concurrent jurisdiction to review decisions on the rejection of power purchase agreements, or P P As. On the day of filing, P G and E initiated an adversary proceeding in bankruptcy court seeking a declaratory judgment and injunctions enforcing the automatic stay, because the debtor alleged that the Federal Energy Regulatory Commission was interfering with the company’s ability to reject P P As.