In re Megan-Racine Associates, Inc.
| Decision Date | 24 March 1995 |
| Docket Number | Bankruptcy No. 92-00860. Adv. No. 94-70113. |
| Citation | 180 BR 375 |
| Parties | In re MEGAN-RACINE ASSOCIATES, INC., Debtor. NIAGARA MOHAWK POWER CORPORATION, Plaintiff, v. MEGAN RACINE ASSOCIATES, INC. and The Federal Deposit Insurance Corporation, as Receiver for the New Bank of New England, N.A., Defendants. |
| Court | U.S. Bankruptcy Court — Northern District of New York |
COPYRIGHT MATERIAL OMITTED
Menter, Rudin & Trivelpiece, P.C. (Jeffrey Dove, Mitchell Katz, of counsel), Syracuse, NY, for Megan-Racine Associates, Inc.
Swidler & Berlin, Chartered (Michael L. Shor, William J. Mertens, of counsel), Washington, DC, and Brian Billinson, Niagara Mohawk Power Corp., Law Dept., Syracuse, NY, for Niagara Mohawk Power Corp.
Bingham, Dana & Gould (Sabin Willett, of counsel), Boston, MA, for F.D.I.C.
House, Golden, Kingsmill & Reiss (Marguerite Kingsmill, of counsel), New Orleans, LA, Bond, Schoeneck & King (James Dati, of counsel), Syracuse, NY, for Hudson Engineering.
Goldberg & Fabiano (Harold Goldberg, of counsel), Syracuse, NY, for Creditors Committee.
Hancock & Estabrook (Stephen Donato, of counsel), Syracuse, NY, for Kraft.
Melvin & Melvin (Louis Levine, of counsel), Syracuse, NY, for Western Gas.
Michael Collins, Office of U.S. Trustee, Utica, NY.
MEMORANDUM-DECISION, FINDINGS OF FACT, CONCLUSIONS OF LAW AND ORDER
This matter comes before the Court on motions by Megan Racine Associates, Inc. ("Debtor") and Federal Deposit Insurance Corporation ("FDIC"), as receiver for the New Bank of New England, in the adversary proceeding commenced by Niagara Mohawk Power Corporation ("NIMO") against Debtor and FDIC. On or about February 28, 1995, Debtor filed a motion for partial summary judgment on NIMO's complaint under Federal Rule of Bankruptcy Procedure ("Fed. R.Bankr.P.") 7056(d) which incorporates by reference Federal Rule of Civil Procedure ("Fed.R.Civ.P.") 56(d). FDIC and Hudson Engineering Corporation, as amicus curiae, filed memoranda of law in support of Debtor's motion and NIMO filed a memorandum of law in opposition.
On March 13, 1995, Debtor's motion was orally argued on the Court's regular motion term in Binghamton, New York. At oral argument, FDIC acknowledged that its memoranda of law in support of summary judgment asserted arguments not present in Debtor's motion. The Debtor's motion for summary judgment was submitted for decision on March 13, 1995.
Thereafter, FDIC submitted an application for an order for a hearing to be held on shortened notice on FDIC's motion for summary judgment under Fed.R.Bankr.P. 7056. On or about March 14, 1995, the Court granted an order reducing time for a hearing on FDIC's motion for summary judgment on each count of NIMO's complaint and on FDIC's counterclaim.
FDIC submitted a skeletal motion for summary judgment which incorporated by reference FDIC's memorandum of law in support of Debtor's motion. NIMO submitted a memorandum of law in opposition to FDIC's motion and on March 21, 1995, it was orally argued at the Court's regular motion term in Syracuse, New York. FDIC's summary judgment motion was submitted for decision as of that date. The Court consolidates Debtor's and FDIC's motions for summary judgment pursuant to Fed.R.Bankr.P. 7042(a) which incorporates by reference Fed. R.Civ.P. 42(a).
The Court has core jurisdiction over this adversary proceeding pursuant to 28 U.S.C. §§ 1334(b) and 157(a), (b)(1), (b)(2)(B), (C), (H), and (O).
Congress enacted the Public Utility Regulatory Policies Act of 1978 ("PURPA") for the purpose of encouraging the development of alternate energy sources. 16 U.S.C. § 2601 et seq., Pursuant to regulations promulgated by the Federal Energy Regulatory Commission ("FERC") and PURPA, public utilities are required to purchase electric energy from qualifying cogeneration facilities ("QF"). Thus, an artificial market is established whereby public utilities purchase electric energy at a certain rate from QFs pursuant to a power purchase agreement. The standards that a cogeneration facility must satisfy in order to be a QF are left to the discretion of FERC.
Debtor was formed on March 31, 1987, for the purpose of developing and owning a cogeneration facility ("Facility"). The Facility is a gas fired, topping cycle cogeneration facility and was designed with an initial annual capacity of approximately 48.3 megawatts, and an expected annual production of approximately 400,000 megawatt-hours.
On November 21, 1987, Debtor and NIMO entered into an agreement ("PPA") for the sale and purchase of electric power produced by the Facility. On November 22, 1988, Debtor filed with FERC an Application for Commission Certification of Qualifying Status of A Cogeneration Facility pursuant to 18 C.F.R. § 292.207. On January 27, 1989, FERC issued an Order Granting Application for Certification as a Qualifying Status of A Cogeneration Facility.
The original construction financing for the Facility was provided for by the Bank of New England. As collateral security for that financing, Debtor assigned the PPA to the Bank of New England. On or about August 8, 1989, NIMO executed a certain Consent in favor of the Bank of New England. Thereafter, on September 7, 1989, Debtor and the Bank of New England entered into a Credit Agreement and appurtenant documents ("Loan") whereby the Bank of New England ultimately agreed to lend approximately $53,500,000 to Debtor principally for construction of the Facility. The FDIC succeeded to, and currently holds, all right, title, and interest, formerly held by the Bank of New England in and to the Loan documents, including the PPA and Consent.
On March 17, 1992, Debtor filed a voluntary petition for reorganization under Chapter 11 of the Bankruptcy Code (11 U.S.C. §§ 101-1330) ("Code"). The instant adversary proceeding was commenced by NIMO on or about August 1, 1994. Issue was joined by the service of an Answer on behalf of Debtor on or about August 30, 1994, and by the service of an Answer with Counter-claims on behalf of FDIC on or about September 1, 1994. Debtor filed an amended answer with counterclaims on or about November 1, 1994. NIMO, on or about September 27, 1994 and November 28, 1994, served Replies to FDIC's and Debtor's respective counterclaims.
The parties entered into a Joint Stipulated Order of Consolidation and Pretrial Order ("Pretrial Order") on October 28, 1994. The parties agreed to amend the Pretrial Order on January 6, 1995 ("First Amended Pretrial Order"). The First Amended Pretrial Order incorporated and set forth, among other things, a discovery schedule and that trial shall commence on March 30, 1995. Discovery proceedings are presently pending before this Court.
NIMO seeks to declare the PPA null and void because the Facility failed to meet QF standards as required by PURPA and FERC regulations. NIMO argues that the FERC certification granted to Debtor was conditional on the Facility meeting certain requirements. Because the Facility did not meet these standards, Debtor and FDIC cannot rely on the FERC certification. NIMO also argues that the PPA, at Paragraph First, allows either party to nullify the contract if the Facility fails to meet QF standards.
NIMO also alleges that Debtor and FDIC fraudulently concealed from FERC and NIMO that the Facility was not maintaining QF status. As such, the fraudulent concealment vitiates the PPA and the Consent agreement.
In its motion for summary judgment, Debtor argues that the Facility's QF status has been and can only be determined by FERC. Further, there is no dispute that FERC has not revoked QF status. Thus, NIMO's argument that there was an event of default under the PPA is unfounded. Even assuming that the Facility lost QF status, a review of the PPA demonstrates that loss of QF is only one of three conditions precedent to the right to exercise the termination remedy. NIMO has not even pleaded that the other two conditions were met.
FDIC largely echoes Debtor's arguments. FDIC also argues that the terms of the Consent agreement prohibit NIMO from declaring the PPA null and void.
Under the appropriate circumstances, summary judgment is a useful tool to expeditiously conclude litigation. See Quinn v. Syracuse Model Neighborhood Corporation, 613 F.2d 438, 455 (2d Cir.1980). However, summary judgment is also a drastic procedural weapon whose prophylactic function serves to cut off a party's right to present its case. See Heyman v. Commerce and Industry Insurance Co., 524 F.2d 1317, 1320 (2d Cir.1975) (citing Donnelly v. Guion, 467 F.2d 290, 291 (2d Cir.1972)). Thus, courts should grant summary judgment motions cautiously so that a litigant is not improperly denied a trial on the issues. See Johnson Foils, Inc. v. Huyck Corporation, 61 F.R.D. 405, 407 (N.D.N.Y.1973).
For purposes of a summary judgment motion, the movant has the burden of showing that there does not exist a genuine issue as to any material fact. See Securities Exchange Commission v. Research Automation Corp., 585 F.2d 31, 33 (2d Cir.1978); Berns v. Civil Service Commission, 417 F.Supp. 17, 20 (S.D.N.Y.1975), aff'd in part and rev'd in part on other grounds, 537 F.2d 714 (2d Cir.1976), cert. denied, 430 U.S. 930, 97 S.Ct. 1549, 51 L.Ed.2d 774 (1977); Jaroslawicz v. Seedman, 528 F.2d 727, 731 (2d Cir.1975). In addition, the Court must view the evidence in the light most favorable to the opposing party and indulge all inferences in favor of the opponent. Id. Thus, the movants must demonstrate that they are entitled to summary judgment because `it is quite clear what the truth is.' See Sartor v. Arkansas Natural Gas Corporation, 321 U.S. 620, 627, 64 S.Ct. 724, 728, 88 L.Ed. 967 (1944); Poller v. Columbia Broadcasting System, Inc., 368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962).
The disposition of a summary judgment motion is left to the sound discretion of the trial court. See United...
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