In Re Midlands Utility, Inc.
| Citation | 253 BR 683 |
| Decision Date | 27 September 2000 |
| Docket Number | No. 94-72521-W-W.,94-72521-W-W. |
| Court | United States Bankruptcy Courts. Fourth Circuit. U.S. Bankruptcy Court — District of South Carolina |
| Parties | In re MIDLANDS UTILITY, INC., Debtor. |
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Frank Rogers Ellerbe, III, Columbia, SC, William F. Halligan, Lydia A. Eloff, Robinson, McFadden, Moore, PC, Columbia, SC, for Debtor.
Based upon the Findings of Fact and Conclusions of Law as recited in the attached Order of the Court, Midlands Utility, Inc.'s Motion to Amend Order of Confirmation Pursuant to Bankruptcy Rule 9024 is denied.
THIS MATTER comes before the Court upon Midlands Utility, Inc.'s ("Debtor") Motion to Amend Order of Confirmation Pursuant to Bankruptcy Rule 9024 (the "Motion"), filed with the Court on May 5, 2000. Debtor seeks relief from a specific provision of the Order of Confirmation, entered by the Court on February 1, 1995, on the grounds that it is no longer equitable that the provision should have prospective application. The specific relief requested is that the Court modify the Order of Confirmation, and more specifically the Attachment to Confirmation Order (the "Attachment"), to eliminate the minimum utility rate provisions which bind the Debtor and the City of Cayce in any future arbitration proceeding. The City of Cayce filed an Objection to Debtor's Motion to Amend Confirmation Order (the "Objection") on the grounds that there has not been a sufficient change of circumstances, either factual or in the applicable law, which justifies modification of the Order. After considering the pleadings, the arguments of counsel at the hearing on the Motion, and the evidence introduced, the Court makes the following Findings of Fact and Conclusions of Law pursuant to Fed.R.Civ.P. 52, made applicable in bankruptcy proceedings by Fed.R.Bankr.P. 7052.1
1. Debtor is a regulated utility company which provides sewer service to certain specified geographical areas in the midlands of South Carolina. The rates that Debtor may charge to its customers are regulated by the South Carolina Public Service Commission (the "PSC"). Debtor is also regulated by the South Carolina Department of Health and Environmental Control ("DHEC").
2. Pursuant to the federal Clean Water Act and regulations promulgated under the Act, Debtor was required to close a number of its sewage treatment facilities and to interconnect with larger regional treatment facilities. One of the regional treatment facilities with which Debtor has connected is operated by the City of Cayce.
3. Debtor originally filed for relief under Chapter 11 of the Bankruptcy Code on May 26, 1994. Debtor's contractual relationship with the City of Cayce was a central focus of its Chapter 11 filing. The confirmed Plan, in fact, provided for repayment by Debtor to the City of Cayce of $158,479.00 in debts arising from tap fees which the City of Cayce had financed for several years prior to the bankruptcy filing.
4. On August 23, 1994, Debtor filed its first proposed Disclosure Statement and Plan of Reorganization; however, on October 13, 1994, the City of Cayce filed an Objection to Plan of Reorganization.
5. Debtor filed its First Plan Modification on October 28, 1994, followed by a Second Plan Modification filed on November 7, 1994.
6. It was not until February 1, 1995 that the Confirmation Order was entered. The Confirmation Order was supplemented by the Attachment which resolved the objections of the City of Cayce and DHEC.2
7. The Attachment was the result of a negotiated agreement among Debtor, the City of Cayce, and DHEC.
8. The Order of Confirmation contained provisions which control the continuing relationship between Debtor and the City of Cayce regarding the latter's treatment of waste generated by Debtor's customers. In particular, Section 4 of the Attachment to the Order of Confirmation includes a series of provisions regarding this continuing contractual relationship. Section 6.03 of the Attachment provides that, for a period of two years not to extend beyond December 31, 1996, the City of Cayce would charge Debtor a measured treatment rate equal to the City of Cayce's "Inside Sewer Customer" rate. The Attachment also provides, under Section 6.06, that for a period of three years after the initial period, the City of Cayce would charge Debtor "150% (one hundred fifty percent) of the then current rate for an `Inside Sewer Customer.'" The three-year period specified in Section 6.06 was not to extend beyond December 31, 1999. Finally, Section 6.08 of the Attachment provides:
Following the three year period detailed in Section 6.06 above, the City of Cayce and the Reorganized Debtor will negotiate in good faith the terms of an agreement governing the rates to be charged for treatment of sewage waste water. If the parties are unable to reach an agreement in this regard, the issue of the sewage treatment rate and whether there is reasonable justification for the treatment rate to be increased from 150% of the Inside Sewer Customer rate shall be subject to binding arbitration between the parties. Such arbitration shall be governed by the rules and regulations of the American Arbitration Association. However, the decision by the arbitration panel governing the sewage treatment rate shall not extend beyond an additional five year period and in no event after December 31, 2004, and the arbitrated rate shall not be less than 150% of the Inside Sewer Customer rate unless the City of Cayce specifically agrees otherwise. These conditions are specific limitations on any arbitration, if such arbitration becomes necessary. Nothing in this paragraph obligates the City of Cayce in any manner whatsoever to allow additional sewer taps to be added to the system of the Reorganized Debtor or the City of Cayce other than the obligation of the City of Cayce to negotiate in good faith with the Reorganized Debtor pursuant to paragraph 6.07 above.
(Emphasis added).
9. The City of Cayce and Debtor have not been able to negotiate a new wastewater treatment contract within the parameter of Section 6.08 of the Attachment for the five year period beginning January 1, 2000 through December 31, 2004. While Debtor is willing to proceed to arbitration with the City of Cayce on a new sewer treatment rate, it believes that it is no longer equitable that it be barred from seeking a rate lower than 150% of the Inside Sewer Customer rate.
10. Debtor met its obligations to other creditors under the Plan; and, on September 22, 1995, Debtor filed its Application for Final Decree, Final Report and Certification of Substantial Consummation. A Final Decree and Order Closing Case was entered on January 4, 1996.
11. Subsequent to the entry of the Order of Confirmation, the City of Cayce entered into two other Wholesale Sewer Treatment Agreements by which it has agreed to provide treatment services at rates below the 150% of the Inside Sewer Customer rate which it currently charges Debtor. On April 11, 1995, the City of Cayce entered into a contract with Lexington County Joint Municipal Water and Sewer System. On June 20, 1996, the City of Cayce also entered into a contract with the Town of Lexington (collectively "Lexington Contracts"). The actual treatment rate charged in these agreements is contained in a formula, which Debtor believes produces a rate of $.61 per thousand gallons of waste, compared to the $2.20 per thousand gallons presently charged to Debtor. As a result, Debtor argues that members of the public served by it pay a higher charge for such services than do their neighbors who are served by different entities who have contracted with the City of Cayce.
12. Prior to filing the Motion presently before this Court; on December 30, 1999, Debtor filed a Motion to Reopen Case and to Waive Filing Fee. On February 3, 2000, the Court entered an Order denying Debtor's request to waive payment of the reopening fee, and the fee was paid on that same date. Subsequently, on May 2, 2000, the Court entered an Order granting Debtor's Motion to Reopen Case for the purpose of considering this Motion.
Debtor moves to amend prospectively the Order of Confirmation entered on February 1, 1995 on the grounds that the provisions of that Order, relating to the minimum rate to be charged to Debtor by the City of Cayce, are no longer equitable in light of the subsequent contracts that the City of Cayce has entered into. Debtor argues that it is entitled to a rate comparable to that charged by the City of Cayce for other wholesale sewage treatment customers and further asserts that if the Motion were granted, Debtor would then have the ability to undergo arbitration to seek such a comparable rate. Debtor seeks an amendment of the Order of Confirmation pursuant to Fed. R.Bankr.P. 9024, which incorporates Fed. R.Civ.P. 60(b). More specifically, Debtor seeks to amend provisions in the Attachment, which was incorporated by reference in the Order of Confirmation, pursuant to Fed.R.Civ.P. 60(b)(5) which provides:
On motion and upon such terms as are just, the court may relieve a party or a party\'s legal representative from a final judgment, order, or proceeding for the following reasons: . . . (5) the judgment has been satisfied, released, or discharged, or a prior judgment upon which it is based has been reversed or otherwise vacated, or it is no longer equitable that the judgment should have prospective application.
(Emphasis added).
The Attachment in question was negotiated and agreed upon by Debtor, the City of Cayce, and DHEC and was later incorporated by reference at the request of these parties in the Order of Confirmation of February 1, 1995. The Attachment specifically states that it was entered into for the purpose of resolving the objections by DHEC and the City of Cayce to Plan confirmation and specifies that its provisions only bind the parties to the agreement;...
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