Cajun Elec. Power Co-op., Inc., Matter of
| Decision Date | 05 August 1997 |
| Docket Number | No. 96-30985,96-30985 |
| Citation | 119 F.3d 349 |
| Parties | , Bankr. L. Rep. P 77,486, 11 Tex.Bankr.Ct.Rep. 327 In the Matter of CAJUN ELECTRIC POWER COOPERATIVE, INC., Debtor. The OFFICIAL COMMITTEE OF UNSECURED CREDITORS, Appellant, v. CAJUN ELECTRIC POWER COOPERATIVE, INC., By and Through Its Chapter 11 Trustee, Ralph R. MABEY; Entergy Gulf States, Inc.; Entergy Corporation; United States Department of Agriculture, on Behalf of Rural Utilities Service, Appellees. |
| Court | U.S. Court of Appeals — Fifth Circuit |
Joseph E. Friend, Breazeale, Sachse & Wilson, New Orleans, LA, Gerald M. Amero, Catherine Ruth Connors, Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Portland, ME, for Appellant.
David S. Rubin, Kantrow, Spaht, Weaver & Blitzer, Baton Rouge, LA, Lon A. Jenkins, Kenneth L. Cannon, LeBoeuf, Lamb, Greene & MacRae, Salt Lake City, UT, for Cajun Electric Power Cooperative, Inc.
Tom F. Phillips, Courtney S. DeBlieux, Taylor, Porter, Brooks & Phillips, Baton Rouge, LA, David J. Messina, Taylor, Porter, Brooks & Phillips, New Orleans, LA, for Entergy Gulf States, Inc. and Entergy Corp.
Thomas Mark Bondy, William Kanter, U.S. Department of Justice, Civil Division, Washington, DC, for U.S. Department of Agriculture.
Appeal from the United States District Court for the Middle District of Louisiana.
Before SMITH, BARKSDALE and BENAVIDES, Circuit Judges.
Cajun Electric Power Cooperative, Inc. ("Cajun") is a non-profit rural electrical power cooperative that made an imprudent investment in a nuclear power plant and is now a Chapter 11 debtor. In this bankruptcy appeal, a committee representing more than 500 unsecured trade creditors asserting claims of approximately $7 million objects to the settlement of litigation between Cajun and its two largest creditors. The district court, having withdrawn the reference to the bankruptcy court in order to superintend the case directly, approved the settlement.
Cajun's largest creditor is the federal government's Rural Utilities Service ("RUS") (formerly the Rural Electrification Administration), which provided Cajun with loans and loan guarantees for its investment in the River Bend nuclear plant. RUS asserts that it has secured claims against Cajun of $4.2 billion. Cajun's second-largest creditor is the nuclear plant's builder and principal owner, Gulf States Utilities Co. ("Gulf States"), which through its corporate successor, Entergy Gulf States, Inc., asserts unsecured claims of $400 million. The settlement was agreed to by Cajun's Chapter 11 trustee, Ralph R. Mabey.
The settlement approved by the district court would end the litigation between Cajun, RUS, and Gulf States relating to the River Bend plant. It also would resolve several other claims. In the view of the district court, the settlement would clear the way for approval of a plan of reorganization for the debtor, Cajun.
In the instant appeal, the trade creditors disavow any intention of preventing a settlement of the underlying litigation. They claim, however, that the settlement is flawed and should be "modified." They ask this court to order that the settlement be made contingent upon approval of a reorganization plan, or, alternatively, to equitably subordinate the claims of Gulf States and RUS.
In support of these requests, appellants advance two distinct legal theories. First, they contend that the settlement approved by the district court is an impermissible sub rosa reorganization plan. Alternatively, they contend that the settlement is not fair and equitable.
We affirm the district court order approving the settlement. Consequently, we need not address whether the unusual relief sought by the Committee is appropriately addressed to this court. 1
Cajun and Gulf States were bitter rivals who in 1980 united in a common endeavor: construction of the River Bend nuclear reactor. Cajun invested $588 million in River Bend in exchange for a 30 percent ownership stake. RUS lent Cajun a substantial amount of capital for its investment in River Bend and guaranteed the remainder of Cajun's River Bend loans.
When River Bend turned out to be a financial drain, Cajun attempted to remain solvent by raising its rates. This course was disallowed by the Louisiana Public Service Commission on the ground that River Bend was an imprudent investment. On December 21, 1994, Cajun filed for protection from its creditors under Chapter 11.
It is unnecessary to recount the entire history of Cajun's Chapter 11 proceedings. We need only provide a brief summary of the settlement agreement approved by the district court.
If the settlement is affirmed, Cajun first and foremost would be freed of any future involvement in River Bend. Cajun would be Cajun, unshackled from its River Bend investment, would drop its suit against Gulf States seeking (1) rescission of the River Bend agreement on grounds of fraud and error; or, in the alternative, (2) damages for breach of contract, breach of fiduciary duty, and mismanagement. A four-month trial was held in district court on the fraud suit; it ended with the district court ruling in Gulf States' favor, although a final written opinion has not issued. The breach of contract suit has not yet gone to trial; the trustee has estimated that Cajun might recover $200 million in damages.
obligated, however, to pay $107 million toward its share of the reactor's decommissioning trust fund. Cajun would be absolved of any further liability for the plant's decommissioning, but would be barred from recovering any excess if the decommissioning fund proves to be overfunded.
The parties would relinquish several additional claims against one another, including:
Claims and counter-claims relating to Gulf States' transmission of Cajun power (the "Transmission Services" suit). Based on a ruling favoring Gulf States by the Federal Energy Regulatory Commission ("FERC"), the settling parties estimate that Cajun could be required to pay $55 million in counter-claim damages if this suit runs its course.
A dispute over Cajun's unilateral decision to cease payments to Gulf States on certain River Bend expenses (the "Service Water" suit). Gulf States has obtained a preliminary injunction allowing it to deduct the money withheld by Cajun, $58 million, from Gulf States' payments to Cajun for electricity generated by Cajun's coal-burning plant. The $58 million has been deposited in district court; under the settlement, Gulf States would keep it.
Cajun's claim against Gulf States and RUS for equitable subordination. 2
Claims between Cajun and RUS arising from River Bend, including Cajun's claims for lender liability and waiver of deficiency judgment. Cajun retains the right to claim that RUS did not perfect its security interest.
Cajun transfers two transmission lines worth $20 million to Gulf States, which agrees to transmit Cajun power through its lines.
Also under the settlement, RUS succeeds to Cajun's interest in River Bend. RUS can keep this "asset," sell it, or force Gulf States to take it. In the unlikely event that the plant is sold to a third party, Cajun will deduct the sale price from its debt to RUS. The eventual owner of Cajun's interest in River Bend would receive any proceeds from litigation over design defects, estimated by the trustee to be about $10 million.
The Committee representing the trade creditors did not ask the district court to reject the Agreement. Instead, the Committee requested that the court defer approval until confirmation of a bankruptcy plan, or, in the alternative, approve the settlement conditionally, pending confirmation of a plan. The district court denied these requests and approved the settlement on August 27, 1996. The Committee appeals.
Because the district court did not sit as a bankruptcy appeals court but heard the case itself as a court of bankruptcy, 28 U.S.C. 158(d) does not confer appellate jurisdiction on this court. Instead, our jurisdiction is governed by 28 U.S.C. § 1291. Cajun Elec. Power Coop., Inc. v. Central Louisiana Elec. Co. (In re Cajun Elec. Power Coop., Inc.), 69 F.3d 746 (5th Cir.1995), modified on other grounds on reh'g, 74 F.3d 599 (5th Cir.) (per curiam)(authorizing appointment of trustee in the instant case), cert. denied, --- U.S. ----, 117 S.Ct. 51, 136 L.Ed.2d 15 (1996).
Section 1291 vests the federal courts of appeals with "jurisdiction of appeals from all final decisions of the district courts...." Appellate jurisdiction under this statute ordinarily "depends on the existence of a decision by the District Court that 'ends the litigation on the merits and leaves nothing for the court to do but execute the judgment.' " Coopers & Lybrand v. Livesay, 437 U.S. 463, 467, 98 S.Ct. 2454, 2457, 57 L.Ed.2d 351 (1978) (quoting Catlin v. United States, 324 U.S. 229, 233, 65 S.Ct. 631, 633, 89 L.Ed. 911 (1945)). However, it is settled in this circuit that in the bankruptcy context, the liberalized final judgment rule of 28 U.S.C. § 158(d) applies, even when appellate jurisdiction is based on section 1291. Cajun, 69 F.3d at 748. Under this rule, jurisdiction exists if there is an order finally disposing of some, but not necessarily all, of the claims.
The district court's approval of the settlement order brings to an end the protracted litigation over the River Bend nuclear project and various other claims among Cajun, Gulf States, and RUS. It is "final" as the term is understood in bankruptcy. Accordingly, we have jurisdiction under 28 U.S.C. § 1291.
We review de novo the district court's legal conclusion that the settlement does not effect a sub rosa plan of reorganization. See Richmond Leasing Co. v. Capital Bank, N.A., 762 F.2d 1303, 1307 (5th Cir.1985). Related factual findings are reviewed for clear error. See id. at 1308.
A bankruptcy trustee is authorized by statute to "use, sell, or lease,...
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