Public Service Co. of New Hampshire, In re

• Decision Date: 04 February 1992
• Docket Number: No. 91-2039,91-2039
• Citation: 963 F.2d 469
• Parties: Bankr. L. Rep. P 74,609 In re PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE, Debtor. Martin ROCHMAN, et al., Appellants, v. NORTHEAST UTILITIES SERVICE GROUP, et al., Appellees. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 469

963 F.2d 469

Bankr. L. Rep. P 74,609

In re PUBLIC SERVICE COMPANY OF NEW HAMPSHIRE, DebtorMartin ROCHMAN, et al., Appellants, v.NORTHEAST UTILITIES SERVICE GROUP, et al., Appellees.

No. 91-2039.

United States Court of Appeals First Circuit.

Heard Feb. 4, 1992.

Decided May 6, 1992.

Robert C. Richards, for appellants.

John B. Nolan with whom Allan B. Taylor, Lorenzo Mendizabal, Theodore C. Morris, Day, Berry & Howard, Hartford, Conn., Geoffrey M. Kalmus, Kramer, Levin, Nessen, Kamin & Frankel, Howard J. Berman, and Whitman & Ranson, New York City, were on brief, for appellees.

Before SELYA, Circuit Judge, BOWNES, Senior Circuit Judge, and CYR, Circuit Judge.

CYR, Circuit Judge.

Three shareholders of Public Service Company of New Hampshire contend on appeal that the order confirming the Public Service Company of New Hampshire (hereinafter "PSNH")chapter 11 reorganization plan represents an abuse of discretion and violates their constitutional right to just compensation under the Fifth and Fourteenth Amendments to the United States Constitution.As the appeal from the district court judgment affirming the order of confirmation must be dismissed for mootness, we do not reach the merits of their appellate claims.

IBACKGROUND¹

PSNH filed its chapter 11 petition in the United States Bankruptcy Court for the District of New Hampshire on January 28, 1988, seeking relief from the severe financial difficulties it encountered as the principal owner of the controversial nuclear power facility under construction at Seabrook, New Hampshire, since 1972.Due to the fact that the State of New Hampshire had banned Seabrook construction cost recoveries through PSNH rate increases until after the facility was brought on line, seeN.H.Rev.Stat.Ann. § 378:30-a, PSNH had been forced to borrow the huge sums required to complete construction of the Seabrook facility.Meanwhile, construction delays, and problems in obtaining operating authority from the Nuclear Regulatory Commission, had escalated construction costs to $6.5 billion by January 1, 1990, $2.9 billion having been invested by PSNH which then owned a 35.6 percent share in Seabrook.Consequently, even though one Seabrook unit had been completed by October 1986, PSNH was forced to seek chapter 11 protection prior to the completion of the second unit.

During November 1989, Northeast Utilities Service Company(hereinafter "NUSC")² entered into an agreement with the Governor and Attorney General of New Hampshire for the establishment of an electricity rate structure which would allow PSNH to raise retail customer rates by 5.5% in each of seven successive years and enable PSNH to recoup some, but not all, of its Seabrook investment.On December 18, 1989, the New Hampshire Legislature empowered the New Hampshire Public Utilities Commission("NHPUC")"to determine whether implementation of the [rate] agreement would be consistent with the public good."N.H.Rev.Stat.Ann. § 362-C:3(Supp.1990).The NHPUC approved the rate agreement on July 20, 1990.Re Northeast Utilities/Public Service Company of New Hampshire, 114 PUR 4th 385(N.H.P.U.C.1990).The NHPUC order was affirmed by the Supreme Court of New Hampshire on April 24, 1991.Appeal of Richards, 134 N.H. 148, 590 A.2d 586, cert. denied, --- U.S. ----, 112 S.Ct. 275, 116 L.Ed.2d 227(1991).

Appellants objected to confirmation of the reorganization plan on the grounds that the approved rate agreement on which the reorganization was based would deprive PSNH of its prudent investment in Seabrook and that the proposed reorganization therefore was not in the best interests of appellants, as equity interest holders, since a litigated rate case allegedly would provide a greater return.The bankruptcy court conducted a six-day confirmation hearing, during which proponents of the reorganization plan presented several expert witnesses, who were cross-examined by appellants.AppellantRobert Richards testified in opposition to confirmation.

On April 20, 1990, Bankruptcy Judge James A. Yacos entered the order of confirmation, accompanied by a comprehensive and well-reasoned memorandum opinion overruling appellants' objections.SeeIn re Public Service Co., 114 B.R. 820(Bankr.D.N.H.1990).Judge Yacos found the reorganization plan "fair and equitable,"seeBankruptcy Code § 1129(b)(1) & (2),11 U.S.C. § 1129(b)(1) & (2), since the rate agreement was within the range of results reasonably expectable in a litigated rate case.Judge Yacos further found that the class of common stock holders to which appellants belong would realize no greater recovery in a litigated rate case and, therefore, that the reorganization plan met the requirements of Bankruptcy Code § 1129(a)(7)(A)(ii).³Appellants filed a motion to stay execution of the confirmation order pending appeal, which was denied by the bankruptcy judge after hearing.SeeIn re Public Service Co., 116 B.R. 347(Bankr.D.N.H.1990).No appeal was taken from the order denying the stay.

Appellants filed a notice of appeal from the order of confirmation with the United States District Court on May 18, 1990.Appellants' motion to stay execution of the confirmation order pending appeal was rejected by the district court on July 23, 1990.Once again, no appeal was taken.More than six months later, on February 8, 1991, appellants again moved for a stay in the district court, which was never acted on.During early August 1991, appellants requested a writ of mandamus to compel the district court to act on the merits of their appeal.The court of appeals dismissed the mandamus petition as moot.On August 21, 1991, the district court affirmed the order of confirmation entered by the bankruptcy court on April 20, 1990.

IIDISCUSSION

Mootness in bankruptcy appellate proceedings, as elsewhere, is premised on jurisdictional and equitable considerations stemming from the impracticability of fashioning fair and effective judicial relief.See, e.g., In re Stadium Management Corp., 895 F.2d 845, 847(1st Cir.1990);In re AOV Industries, Inc., 792 F.2d 1140, 1147-48(D.C.Cir.1986), vacated in part on other grounds, 797 F.2d 1004(D.C.Cir.1986)(mootness involves "constitutional" and "equitable" aspects);In re Texaco, Inc., 92 B.R. 38, 45(S.D.N.Y.1988)(same).Jurisdictional concerns may arise from the constitutional limitations imposed on the exercise of Article III judicial power in circumstances where no effective remedy can be provided, ⁴ or from a loss of jurisdiction over the res or the parties, before or during the appeal, which renders the appellate court powerless to grant the requested relief.⁵

The equitable component to the mootness doctrine is rooted in the "court's discretion in matters of remedy and judicial administration" not to determine a case on its merits.In re AOV, 792 F.2d at 1147(quotingChamber of Commerce v. United States Dep't of Energy, 627 F.2d 289, 291(D.C.Cir.1980));In re Texaco, 92 B.R. at 45(same).In bankruptcy proceedings, the equitable component centers on the important public policy favoring orderly reorganization and settlement of debtor estates by "affording finality to the judgments of the bankruptcy court."Id.(quotingIn re Revere Copper & Brass, Inc., 78 B.R. 17, 23(S.D.N.Y.1987));In re Information Dialogues, Inc., 662 F.2d 475, 477("mootness doctrine promotes an important policy of bankruptcy law--that court-approved reorganizations be able to go forward in reliance on such approval unless a stay has been obtained");Algeran, Inc. v. Advance Ross Corp., 759 F.2d 1421, 1424(9th Cir.1985)(mootness doctrine recognizes "particular need for finality in orders regarding stays in bankruptcy");In re AOV, 792 F.2d at 1149(refusing to overturn plan, in part because of "virtues of finality").

Moreover, the equitable and jurisdictional considerations underlying the mootness doctrine are interactive, as "the finality rule limits the remedies a court can offer."In re Stadium Management, 895 F.2d at 847-48.Although in bankruptcy cases these concerns most often coincide in the context of transfers to good faith purchasers, seeBankruptcy Code § 363,11 U.S.C. § 363, we have acknowledged that the same principles "pervade the Bankruptcy Code,"In re Stadium Management, 895 F.2d at 848(citing cases).

Appellants sought to stay the execution of the order of confirmation in the bankruptcy court, yet no attempt was made to appeal the denial of a stay.⁶Moreover, although stays were sought in the district court, ⁷ no appellate or mandamus relief was ever requested from the court of appeals relating to a stay of the confirmation order.Consequently, implementation of the confirmed plan proceeded apace.SeeIn re Roberts Farms, Inc., 652 F.2d 793, 798(9th Cir.1981)(case moot, as appellants"failed and neglected diligently to pursue their available remedies to obtain a stay" of the confirmation order, letting transactions in reliance on the confirmed plan proceed which it would be inequitable, as well as impracticable, to undo).

In the meantime, the rate agreement had been approved by NHPUC on July 20, 1990, and the New Hampshire Supreme Court affirmed the NHPUC action on April 24, 1991, fulfilling the final unmet requirement for implementation of the reorganization plan.See11 U.S.C. § 1129(a)(6).⁸At this time, by its own terms the reorganization plan was to go into effect within thirty days.Nevertheless, appellants took no steps either to request a prompt ruling on their motion for stay before the district court, or to obtain a stay-related writ of mandamus from, or file an interlocutory appeal with, the court of appeals.SeeConnecticut Nat'l Bank v. Germain, --- U.S. ----, 112 S.Ct. 1146, 117 L.Ed.2d 391(1992)(28 U.S.C. § 1292 confers discretionary jurisdiction on court of appeals to entertain appeal from interlocutory district court order entered in bankruptcy appeal).⁹Instead, appellants allowed the reorganization to go into...