In re Public Service Co. of New Hampshire
| Decision Date | 05 April 1989 |
| Docket Number | Bankruptcy No. 88-00043,Adv. No. 89-08. |
| Citation | 99 BR 506 |
| Parties | In re PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE, Debtor. PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE, Plaintiff, v. STATE OF NEW HAMPSHIRE and State of New Hampshire Public Utilities Commission, Defendants. |
| Court | U.S. Bankruptcy Court — District of New Hampshire |
Isaac M. Pachulski, Don Willenburg, Kevin J. Burke, for Public Service Co.
Geoffrey B. Kalmus, J. Michael Deasy, for the Unsecured Creditors Committee.
Richard Tilton, for the Equity Committee.
Larry M. Smukler, Sr. Asst. Atty. Gen., Daniel J. Callaghan, for the State of N.H.
William B. Gundling, Asst. Atty. Gen., for the State of Conn.
Susan Keely, for the U.S. trustee.
George J. Wade, Barbara J. Gould, David J. Dunfey, for Citicorp and Consol. Utilities & Communications, Inc. (CUC).
Peter V. Doyle, for First Fidelity Bank and Amoskeag Bank.
Jeffrey G. Grody, for Northeast Utilities Service Co.
Ted A. Berkowitz, for First Fidelity Bank.
Robert Drain, for Shearson, Lehman, Hutton, Inc.
Peter Nils Baylor, for Bank of New England and Maryland Nat. Bank.
David W. Marshall, for NEES.
John M. Mutkoski, for Small Power Producers and Alexandria Power Bio Energy.
Sallie H. Helm, for Spear, Leeds & Kellogg.
Noel E. Hanf, for the United Illuminating Co.
PRETRIAL ORDER RE DECLARATORY RELIEF ON § 1123(a)(5) PREEMPTION ISSUE
This adversary proceeding was commenced by the filing of a Complaint for Declaratory Judgment by the chapter 11 debtor on February 7, 1989. The Declaratory relief requested concerns the jurisdiction of the New Hampshire Public Utilities Commission ("NHPUC") over certain transactions provided for in the debtor's chapter 11 plan of reorganization filed with this court on December 27, 1988. The debtor notes that its plan provides for various transactions in its implementation that ordinarily would be subject to NHPUC regulatory control and approval, citing inter alia, New Hampshire Revised Statutes, RSA 374:30, 374:31 (); RSA 369:2 (mortgaging of property); RSA 369:1, 369:7 (); and RSA 366:5 (contracts with affiliates).
The plan filed by the debtor expressly states that PSNH need not seek, and does not intend to seek, approval from NHPUC as to the foregoing transactions normally within the approval authority of that regulatory agency, based upon the confirmation standards and powers included in § 1129 of the Bankruptcy Code, together with the authorization for providing for adequate means for implementation of a reorganization plan included within § 1123(a)(5) of the Bankruptcy Code. The complaint concludes by requesting judgment by this court "declaring the rights and obligations of Public Service and the Defendants regarding the regulatory approvals of the NHPUC, if any, required for confirmation under § 1129 of the Bankruptcy Code and implementation of the Plan or of any other plan to be filed in this chapter 11 case."
The State of New Hampshire (hereinafter "State") and the NHPUC filed their answer to the declaratory judgment complaint on February 21, 1989, in which they request that the court issue judgment "declaring that § 1123 of the Bankruptcy Code does not permit a regulated electric utility debtor to disregard State and Federal regulatory law in the formation and implementation of its plan of reorganization."1
The debtor in a Motion for Summary Judgment Court Paper No. 1634 has asserted that there is no genuine dispute as to any material fact and has requested summary adjudication as prayed for, as a matter of law, and states further: "Section 1123(a)(5) of the Bankruptcy Code, coupled with the grant of plenary jurisdiction of the property of the debtor and the property of the estate under 28 U.S.C. § 1334(e), vests power in this Court to confirm and implement a chapter 11 plan (and specifically the plan filed by Public Service on December 27, 1988) without compliance with otherwise applicable nonbankruptcy law restricting or conditioning the transactions contemplated under such a chapter 11 plan."
The aforesaid Motion was originally filed prior to the commencement of these adversary proceedings as a "Motion for Summary Adjudication of Preemption of State law requirements" on February 1, 1989. That Motion was denied, without prejudice to the filing of an appropriate adversary complaint, by this court's Order entered February 3, 1989. At the last pretrial conference in this adversary proceeding, the parties agreed that, if this matter is to go forward for determination, the aforesaid Motion shall be deemed to be a Motion for Summary Judgment in the adversary proceeding and will be treated as such. Likewise, the memorandum in support of the Motion Court Paper No. 1636 will be deemed to be refiled in the adversary proceeding in support of the request for summary judgment by the plaintiff.
The court itself raised a question at a series of pretrial conferences as to the existence of an "actual controversy" under the Declaratory Judgment Act, 28 U.S.C. § 2201, which would justify declaratory relief in the circumstances. At hearings on February 22, and 28, 1989 the court directed briefing of the question by the plaintiff and defendants, and invited briefing by other interested entities concerned with these reorganization proceedings. The court then heard argument on the question at the final pretrial conference hearing held on March 31, 1989.
The question was extensively briefed and was well-argued at the final pretrial conference. The question really breaks down into two separate questions, i.e., (1) Is there an actual controversy between the parties that satisfies Article III constitutional concerns deriving from the grant of federal court jurisdiction; and (2) if an actual controversy is presented should the court as a matter of discretion entertain the request for declaratory relief in this case.
On the first aspect of the question, it seems clear that there is in fact an actual controversy within the contemplation of 28 U.S.C. § 2201 existing between the plaintiff and the defendants in the circumstances of this case. The debtor's filed plan of reorganization contemplates various transactions resulting in a complete restructuring of its corporate entity and changes in its operational format in a manner designed to bring the reorganized company, or some portions thereof, within the regulatory authority of the Federal Energy Regulatory Commission ("FERC") rather than the jurisdiction of NHPUC. The defendants have made it abundantly clear during throughout the fourteen months that have elapsed during this reorganization proceeding that they are adamantly opposed to any such attempt to transfer regulatory jurisdiction from state to federal control; that they do not think that it can be accomplished as a matter of law under the Bankruptcy Code; and that they will oppose any such plan in this case by all means legally available.
The only arguable issue about the existence of an actual controversy between the plaintiffs and defendants is the fact that the debtor is currently engaged in further negotiations aimed at trying to achieve a consensual plan of reorganization—including a hoped-for resolution of the dispute with the State of New Hampshire as to agreeable rate levels for the reorganized company. Under FERC standards the debtor believes it could obtain much greater rate relief than the State currently has proposed. However, the possibility of a settlement always exists with regard to any litigated matter. That possibility alone in my judgment cannot destroy the existence of an actual controversy for declaratory judgment purposes. It is clear in the present instance that the debtor fully intends to pursue its "FERC plan" in the event that its further negotiations with the State of New Hampshire prove fruitless.
A more difficult aspect of the declaratory relief issue in the present case is the question of exercise of discretion to grant such relief. Is is well-established that even if an actual controversy exists a federal court is not required to grant such relief. Eccles v. Peoples Bank, 333 U.S. 426, 431, 68 S.Ct. 641, 644, 92 L.Ed. 784 (1948); In re Combustion Equipment Associates, Inc., 838 F.2d 35, 37 (2nd Cir. 1988).
Arguing against the exercise of discretion in granting declaratory relief in the present case are the following factors: (1) Chapter 11 reorganization proceedings are intended to involve extended negotiations toward a consensual plan rather than...
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