Halo Wireless, Inc. v. Alenco Commc'ns, Inc. (In re Halo Wireless, Inc.)

• Decision Date: 18 June 2012
• Docket Number: No. 12–40122.,12–40122.
• Citation: 67 Collier Bankr.Cas.2d 1380,684 F.3d 581,56 Bankr.Ct.Dec. 167
• Parties: In the Matter of HALO WIRELESS, INCORPORATED, Debtor. Halo Wireless, Incorporated, Appellant, v. Alenco Communications, Incorporated; Alma Communications Company; BPS Telephone Company; Bellsouth Telecommunications, L.L.C., doing business as AT&T Alabama; Big Bend Telephone Company, Incorporated; Blue Ridge Telephone Company; Brazoria Telephone Company; Camden Telephone & Telegraph Company, Incorporated; Chariton Valley Telecom Corporation; Chariton Valley Telephone Corporation; Choctaw Telephone Company; Citizens Telephone Company of Higginsville, Missouri; Concord Telephone Exchange, Incorporated; Craw–Kan Telephone Cooperative, Incorporated; Eastex Telephone Cooperative, Incorporated; Electra Telephone Company, Incorporated; Ellington Telephone Company; Farber Telephone Company; Fidelity Communication Services I, Incorporated; Fidelity Communication Services II, Incorporated; Fidelity Telephone Company; Five Area Telephone Cooperative, Incorporated; Ganado Telephone Company; Goodman Telephone Company; Granby Telephone Company; Grand River Mutual Telephone Company; Green Hills Area Cellular; Green Hills Telephone Corporation; Hill Country Telephone Cooperative, Incorporated; Holway Telephone Company; Humphreys County Telephone Company; Iamo Telephone Company; Illinois Bell Telephone Company, doing business as AT&T Illinois; Indiana Bell Telephone Company, Inc., doing business as AT&T Indiana; Industry Telephone Company; K.L.M. Telephone Company; Kingdom Telephone Company; Lake Livingston Telephone Company, Incorporated; Lathrop Telephone Company; Le–Ru Telephone Company; Livingston Telephone Company; Mark Twain Communication Company; Mark Twain Rural Telephone Company; McDonald County Telephone Company; Michigan Bell Telephone Company, doing business as AT&T Michigan; Mid–Missouri Telephone Company; Mid–Plains Rural Telephone Cooperative, Incorporated; Miller Telephone Company; Mokan Dial, Incorporated; Nelson–Ball Ground Telephone Company; Nevada Bell Telephone Company, doing business as AT&T Nevada; New Florence Telephone Company; New London Telephone Company; Nortex Communications Company; North Texas Telephone Company; Orchard Farm Telephone Company; Ozark Telephone Company; Pacific Bell Telephone Company, doing business as AT&T California; Peace Valley Telephone Company, Incorporated; Peoples Telephone Cooperative, Incorporated; Quincy Telephone Company; Rivera Telephone Company, Incorporated; Rock Port Telephone Company; Santa Rosa Telephone Cooperative, Incorporated; Seneca Telephone Company; Southwest Texas Telephone Company; Southwestern Bell Telephone Company, doing business as AT&T Arkansas; Steelville Telephone Exchange, Incorporated; Stoutland Telephone Company; Tatum Telephone Company; Tellico Telephone Company; Tennessee Telephone Company; Missouri Public Service Commission; Ohio Bell Telephone Company, doing business as AT&T Ohio; Totelcom Communications, L.L.C.; Valley Telephone Cooperative, Inc.; West Plains Telecommunications, Incorporated; Wisconsin Bell Telephone, Incorporated, doing business as AT&T Wisconsin; AT&T Kansas; AT&T Missouri; AT&T Oklahoma; AT&T Texas; AT&T Florida; AT&T Georgia; AT&T Kentucky; AT&T Louisiana; AT&T Mississippi; AT&T North Carolina; AT&T South Carolina; AT&T Tennessee; TDS Telecommunications Corporation; Crockett Telephone Co.; West Tennessee Telephone Company, Inc.; North Central Telephone Coop., Incorporated; Highland Telephone Cooperative, Incorporated; Guadalupe Valley Telephone Cooperative, Incorporated; Northeast Missouri Rural Telephone Company; Peoples Telephone Company, Incorporated, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

684 F.3d 581

67 Collier Bankr.Cas.2d 1380

56 Bankr.Ct.Dec. 167

In the Matter of HALO WIRELESS, INCORPORATED, Debtor.Halo Wireless, Incorporated, Appellant,

v.Alenco Communications, Incorporated; Alma Communications Company; BPS Telephone Company; Bellsouth Telecommunications, L.L.C., doing business as AT&T Alabama; Big Bend Telephone Company, Incorporated; Blue Ridge Telephone Company; Brazoria Telephone Company; Camden Telephone & Telegraph Company, Incorporated; Chariton Valley Telecom Corporation; Chariton Valley Telephone Corporation; Choctaw Telephone Company; Citizens Telephone Company of Higginsville, Missouri; Concord Telephone Exchange, Incorporated; Craw–Kan Telephone Cooperative, Incorporated; Eastex Telephone Cooperative, Incorporated; Electra Telephone Company, Incorporated; Ellington Telephone Company; Farber Telephone Company; Fidelity Communication Services I, Incorporated; Fidelity Communication Services II, Incorporated; Fidelity Telephone Company; Five Area Telephone Cooperative, Incorporated; Ganado Telephone Company; Goodman Telephone Company; Granby Telephone Company; Grand River Mutual Telephone Company; Green Hills Area Cellular; Green Hills Telephone Corporation; Hill Country Telephone Cooperative, Incorporated; Holway Telephone Company; Humphreys County Telephone Company; Iamo Telephone Company; Illinois Bell Telephone Company, doing business as AT&T Illinois; Indiana Bell Telephone Company, Inc., doing business as AT&T Indiana; Industry Telephone Company; K.L.M. Telephone Company; Kingdom Telephone Company; Lake Livingston Telephone Company, Incorporated; Lathrop Telephone Company; Le–Ru Telephone Company; Livingston Telephone Company; Mark Twain Communication Company; Mark Twain Rural Telephone Company; McDonald County Telephone Company; Michigan Bell Telephone Company, doing business as AT&T Michigan; Mid–Missouri Telephone Company; Mid–Plains Rural Telephone Cooperative, Incorporated; Miller Telephone Company; Mokan Dial, Incorporated; Nelson–Ball Ground Telephone Company; Nevada Bell Telephone Company, doing business as AT&T Nevada; New Florence Telephone Company; New London Telephone Company; Nortex Communications Company; North Texas Telephone Company; Orchard Farm Telephone Company; Ozark Telephone Company; Pacific Bell Telephone Company, doing business as AT&T California; Peace Valley Telephone Company, Incorporated; Peoples Telephone Cooperative, Incorporated; Quincy Telephone Company; Rivera Telephone Company, Incorporated; Rock Port Telephone Company; Santa Rosa Telephone Cooperative, Incorporated; Seneca Telephone Company; Southwest Texas Telephone Company; Southwestern Bell Telephone Company, doing business as AT&T Arkansas; Steelville Telephone Exchange, Incorporated; Stoutland Telephone Company; Tatum Telephone Company; Tellico Telephone Company; Tennessee Telephone Company; Missouri Public Service Commission; Ohio Bell Telephone Company, doing business as AT&T Ohio; Totelcom Communications, L.L.C.; Valley Telephone Cooperative, Inc.; West Plains Telecommunications, Incorporated; Wisconsin Bell Telephone, Incorporated, doing business as AT&T Wisconsin; AT&T Kansas; AT&T Missouri; AT&T Oklahoma; AT&T Texas; AT&T Florida; AT&T Georgia; AT&T Kentucky; AT&T Louisiana; AT&T Mississippi; AT&T North Carolina; AT&T South Carolina; AT&T Tennessee; TDS Telecommunications Corporation; Crockett Telephone Co.; West Tennessee Telephone Company, Inc.; North Central Telephone Coop., Incorporated; Highland Telephone Cooperative, Incorporated; Guadalupe Valley Telephone Cooperative, Incorporated; Northeast Missouri Rural Telephone Company; Peoples Telephone Company, Incorporated, Appellees.

No. 12–40122.

United States Court of Appeals, Fifth Circuit.

June 18, 2012.

Sidney Katherine Powell (argued), Edwin Paul Keiffer, Wight Ginsberg Brusilow, Steven H. Thomas, McGuire, Craddock & Strother, P.C., Dallas, TX, Torrence Evans Lewis, Sidney Powell, P.C., Chicago, IL, William Scott McCollough, McColloughHenry, P.C., West Lake Hills, TX, for Appellant.

Richard D. Milvenan (argued), Brook Bennett Brown, Michael Edward Kabat, McGinnis, Lochridge & Kilgore, L.L.P., Austin, TX, Craig S. Johnson, Johnson & Sporleder, L.L.P., W.R. England, III, Brydon, Swearengen & England, P.C., Jennifer Leigh Heintz (argued), Missouri Pub. Serv. Com'n, Jefferson City, MO, Toby L. Gerber (argued), Mark Alan Platt, Oscar Rey Rodriguez, Ben Taylor, Fulbright & Jaworski L.L.P., David Mark Bennett (argued), Katherine Battaia Clark, Richard Barrett Phillips, Jr., Cassandra Ann Sepanik, Thompson & Knight, L.L.P., Dallas, TX, Jay Tyson Covey, Mayer Brown, L.L.P., Chicago, IL, for Appellees.

Appeal from the United States Bankruptcy Court for the Eastern District of Texas.

Before JOLLY, BENAVIDES and DENNIS, Circuit Judges.

BENAVIDES, Circuit Judge:

This case involves disputes between Halo Wireless, Inc. and the Texas and Missouri Telephone Companies (“TMT Companies”), TDS Communications Corp., and the AT&T Companies.¹ The local telephone companies initiated twenty separate suits against Halo before ten state public utility commissions (“PUCs”).² Halo filed for bankruptcy as a result of this collective action. The telephone companies requested that the bankruptcy court determine that the various PUC actions are not subject to the automatic stay provided by the Bankruptcy Code at 11 U.S.C. § 362(a), because they are excepted under § 362(b)(4), or that the bankruptcy court modify the automatic stay for cause, pursuant to § 362(d)(1). The bankruptcy court held that the exception to the automatic stay in § 362(b)(4) applies to the state commission proceedings, allowing the telephone companies to proceed with their litigation in the PUCs, but held that the state adjudicative bodies could not issue any ruling or order to liquidate the amount of any claim against Halo, and that the bodies could not take any action that affects the debtor-creditor relationship between Halo and any creditor or potential creditor. Halo now appeals this ruling, contending that because the PUC actions were brought by private parties, they should be subject to the automatic stay. We agree with the bankruptcy court that the PUC proceedings are exempt from the automatic stay, and we thus AFFIRM.

I. Factual and Procedural Background

Halo states that it is a small telecommunications company that provides wireless phone and data service to its customers pursuant to a license from the Federal Communications Commission (“FCC”). According to Halo, it provides wireless Commercial Mobile Radio Service (“CMRS”), as defined by Section 332(d)(1) of the Federal Telecommunications Act, 47 U.S.C. § 151 et seq. (“FTA” or “Act”). The Appellees are all privately-owned local telephone companies. Their disputes with Halo center around the type of service Halo actually provides, and whether or not Halo is properly compensating local companies for the call traffic it transfers to them.³

Starting with the TMT Companies in May 2011, the Appellees have all filed actions against Halo in state PUCs. The TMT Companies claim that Halo is not a CMRS carrier, and that it was improperly using the TMT Companies' networks without an interconnection agreement (“ICA”) or payment of access fees. The TDS Companies allege that Halo has used service to Transcom (which Halo calls a “customer,” but the TDS Companies allege is a related entity) to avoid state regulation and the payment of access charges to the TDS Companies. The AT&T companies all claim that Halo is violating its ICAs with them, and they have asked the PUCs to determine that Halo's traffic is not wireless. As summarized by the bankruptcy court, “[t]he complainants contend that the debtor is involved in an arbitrage scheme and that the debtor owes them fees under applicable law and regulations. And more generally, that the debtor is subject to the authority of the Public Utility Commission[s]. The debtor contends that it is regulated by the FCC, not the Public Utility Commissions and denies that it is engaged in an arbitrage scheme.”

Because of the numerous suits filed against Halo by the Appellees, Halo filed a voluntary petition under Chapter 11 of the Bankruptcy Code on August 8, 2011. Halo also removed the various PUC actions to federal court, pursuant to 28 U.S.C. § 1452, and it then filed motions to have those actions transferred to the bankruptcy court. In response to Halo's declaration of bankruptcy, the Appellees filed motions requesting that the state PUC proceedings be exempt from the automatic stay under § 362(b)(4) of the Bankruptcy Code.

The bankruptcy court held an initial hearing on September 30, 2011 to consider the Appellees' motions, and it then made its findings of fact and conclusions of law on the record on October 7, 2011. The bankruptcy court found that “[i]t is the nature of the action[, not] the identity of the parties which initially precipitat[e] the action[,] that determines whether Section 362(b)(4) applies.” Despite the fact that the PUC actions had been initiated by private parties, because they were all state regulatory proceedings, the court ruled that they were excepted from the automatic stay under § 362(b)(4). The bankruptcy court then incorporated its findings of fact and conclusions of law in Stay Exception Orders entered for each Appellee on October 26, 2011. On that same day, Halo filed notices of appeal.⁴ The bankruptcy court certified the appeal directly to this Court on November 7, 2011, stating that “[t]he judgment, order or decree involves a question of law as to which there is no controlling decision of the court of appeals for this circuit or of the Supreme Court of the United States,” pursuant to 28 U.S.C. § 158(d)(2). Since the bankruptcy court's ruling, sixteen (of twenty total) of the Appellees' motions to remand their actions from federal courts back to the state PUCs have been granted.

II. Standard of Review

“When directly reviewing an order of the bankruptcy...