In re One Stop Realtour Place, Inc., Bankruptcy No. 00-3234KJC. Adversary No. 00-825.
| Decision Date | 17 October 2001 |
| Docket Number | Bankruptcy No. 00-3234KJC. Adversary No. 00-825. |
| Citation | 268 BR 430 |
| Parties | In re ONE STOP REALTOUR PLACE, INC. Debtor. One Stop Realtour Place, Inc., Plaintiff, v. Allegiance Telecom, Inc. and Allegiance Telecom of Pennsylvania, Inc., Defendants. |
| Court | U.S. Bankruptcy Court — Eastern District of Pennsylvania |
David A. Scholl, Media, PA, for debtor/plaintiff.
John F. Cahill, Carter, Ledyard, & Milburn, Washington, DC, for defendants.
Frederic J. Baker, Sr., Philadelphia, PA, Assistant United States Trustee.
On November 1, 2000, the debtor filed a complaint against Allegiance Telecom, Inc.1 asking the Court to order the defendant to restore telephone service to the debtor and establish a reasonable adequate assurance payment pursuant to 11 U.S.C. § 366. The debtor also sought the award of actual and punitive damages, including costs and attorney fees, against the defendant pursuant to 11 U.S.C. § 362(h). The defendant filed its answer to the complaint on November 17, 2000. On May 17, 2001, the parties filed a Joint Pretrial Statement and, on the same date, trial was held on the issue of liability, at which the parties presented evidence and argued this matter.2 The debtor filed its post-trial memorandum of law on May 30, 2001 and Allegiance filed its post-trial memorandum of law and proposed findings of facts on June 15, 2001. Allegiance supplemented its post-trial memorandum of law on June 22, 2001.
One Stop Realtour Place, Inc. ("One Stop" or the "debtor") is a Pennsylvania corporation which was engaged in the business of real estate, insurance and mortgage brokerage. One Stop's president and sole shareholder is Ms. Alfreda Bradford.
Allegiance Pennsylvania is a Local Exchange Carrier4 and provides local telephone service to commercial customers in Pennsylvania in accordance with tariffs filed with the Federal Communications Commission ("FCC") and the Pennsylvania Public Utility Commission ("PUC"). The parties stipulated that other companies, including Verizon, the Incumbent Local Exchange Carrier, provide the same or equivalent service.
In December 1999, the debtor entered into a Voice Service Order (the "Agreement") with Allegiance for certain telephone services, including local service, calling card and voice mail.5 Allegiance subsequently provided the debtor with the telephone services described in the Agreement and invoiced the debtor for those services beginning March 2000 and continuing monthly thereafter. However, the debtor made no payments to Allegiance between March 2000 and August 2000.
On June 29, 2000, Allegiance sent One Stop a notice advising that its service would be suspended unless full payment was received by July 9, 2000.6 However, no action was taken in July 2000. Allegiance contacted the debtor on August 1, 2000 and, as a result, the debtor tendered a check in the amount of $1,250.00 to Allegiance for a partial payment of the total amount that was due. On August 31, 2000, the debtor's check was returned by the bank to Allegiance because it had been issued on a closed account. Thereafter, the debtor issued a new check to Allegiance in the amount of $1,500.00. The second check in the amount of $1,500.00 was also returned by the bank since it was drawn on the same closed account. On September 1, 2000, Allegiance contacted the debtor about the returned checks. On September 6, 2000, after Allegiance contacted the debtor and advised that service would be suspended unless payment was made by 4 p.m. that day,7 One Stop used a third party's credit card to pay Allegiance the amount of $2,066.31.
On September 20, 2000, Allegiance suspended the debtor's telephone service.8 At that time, the debtor owed Allegiance approximately $4,237.37 for telephone service.
On or about September 12, 2000, Ms. Bradford filed a personal chapter 7 bankruptcy petition. On September 25, 2000, Mr. Saline, who was a personal friend of Ms. Bradford, contacted Allegiance regarding Ms. Bradford's chapter 7 bankruptcy filing and faxed Allegiance a copy of the chapter 7 petition.9 After learning that her personal chapter 7 bankruptcy filing would not result in the restoration of debtor's telephone service, Ms. Bradford filed a pro se chapter 11 bankruptcy petition for One Stop on October 2, 2000.10 Ms. Bradford testified that she called Allegiance immediately and left a voice mail message for Ms. Shelton regarding the chapter 11 filing.11 Ms. Bradford also testified that she faxed a copy of the chapter 11 petition to Allegiance.12 However, the Allegiance employees who testified said that they were not told about One Stop's chapter 11 filing and never received a fax copy of the chapter 11 petition.13 Ms. Shelton's written account record noted a contact from Mr. Saline and Ms. Bradford on October 3, 2000, but does not mention notice of a chapter 11 bankruptcy filing.14 Ms. Shelton's notes show that Ms. Bradford requested that service be restored and that Ms. Shelton asked for a deposit of $2,300.00, equivalent to three months of One Stop's average monthly bills, to restore the service. Ms. Shelton also asked to speak to One Stop's legal counsel, but was told that One Stop did not have counsel. The electronic account record ends with the statement "we will NOT RESTORE SERVICE WITHOUT CASH DEPOSIT OF $2300."15 No deposit was made and Allegiance did not restore One Stop's telephone service at that time.
On October 24, 2000, Mr. David Scholl, One Stop's present counsel, contacted Ms. Bridges on behalf of One Stop and was referred to Ms. Latia Black, an administrative assistant in the Allegiance legal department. Mr. Scholl advised Ms. Black that One Stop had filed a chapter 11 bankruptcy petition and requested that telephone service be restored. On November 2, 2000, Mr. Scholl provided Allegiance with a copy of the complaint in this adversary proceeding. On November 3, 2000, in accordance with an agreement between counsel, Allegiance restored telephone service to One Stop, pending receipt by Allegiance of adequate assurances.16
On February 7, 2001, One Stop's chapter 11 bankruptcy case was converted to a chapter 7 case.17 Also on February 7, 2001, Allegiance suspended One Stop's telephone service based on the debtor's failure to make post-petition payments and adequate assurance payments to Allegiance.
The parties have stipulated to the following facts: One Stop was aware that alternative telephone service providers were available during the period of time when Allegiance suspended service. One Stop contacted Verizon for telephone service, but did not enter into any contract for alternative service. During the period that telephone service was suspended by Allegiance, Ms. Bradford had access to her cellular telephone and her residential telephone service.
In its complaint, the debtor argues that Allegiance wrongly refused to restore telephone service upon the filing of debtor's chapter 11 petition as required by Section 366 of the Bankruptcy Code, 11 U.S.C. § 366, and that this refusal was a willful violation of the automatic stay of Sections 362(a)(1) and (a)(6) of the Bankruptcy Code, 11 U.S.C. § 362(a)(1) and (6). To resolve the issues raised by the debtor's complaint, I must decide: (1) whether Allegiance is a "utility" that is subject to Section 366 of the Bankruptcy Code; (2) if Allegiance is a "utility," whether Allegiance was required to restore service to the debtor even before the debtor provided Allegiance with an adequate protection payment; and (3) whether Allegiance's failure to restore service upon the debtor's filing of a chapter 11 bankruptcy petition was a willful violation of Section 362 of the Bankruptcy Code.
Section 366 of the Bankruptcy Code provides:
(a) Except as provided in subsection (b) of this section, a utility may not alter, refuse, or discontinue service to, or discriminate against, the trustee or the debtor solely on the basis of the commencement of a case under this title or that a debt owed by the debtor to such utility for service rendered before the order for relief was not paid when due. (b) Such utility may alter, refuse, or discontinue service if neither the trustee nor the debtor, within 20 days after the date of the order for relief, furnishes adequate assurance of payment, in the form of a deposit or other security, for service after such date. On request of a party in interest and after notice and a hearing, the court may order reasonable modification of the amount of the deposit or other security necessary to provide adequate assurance of payment.
11 U.S.C. § 366. The term "utility" is not defined in the Bankruptcy Code, but its ordinary meaning is "a service (such as light, power, or water) provided by a public utility."18 The term "public utility" is defined as "a business organization (as an electric company) performing a public service and subject to special governmental regulation."19
When Congress enacted Section 366 as part of the Bankruptcy Code in 1978, it wrote: "this section is intended to cover utilities that have some special position with respect to the debtor, such as an electric company, gas supplier, or telephone company that is a monopoly in the area so that the debtor cannot easily obtain comparable service from another utility." House Report No. 95-595, 95th Cong., 1st Sess, p. 350 (1977), U.S.Code Cong. & Admin.News, 1978, pp. 5787, 6306. Allegiance relies upon this language in the legislative history to argue that it cannot be a "utility" within the meaning of Section 366 because it is not a "monopoly;" the debtor had alternate telephone service available to it. Some courts, after reviewing this legislative history, have recognized that Section 366 treated utility services differently from other creditors because debtors often had only one source from which they could obtain certain...
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