Wilson v. Valley Elec. Membership Corp., Civ. A. No. 89-4846.

• Decision Date: 20 May 1992
• Docket Number: Civ. A. No. 89-4846.
• Parties: Durwood WILSON, et al. v. VALLEY ELECTRIC MEMBERSHIP CORP., et al.
• Court: U.S. District Court — Eastern District of Louisiana

141 B.R. 309 (1992)

Durwood WILSON, et al. v. VALLEY ELECTRIC MEMBERSHIP CORP., et al.

Civ. A. No. 89-4846.

United States District Court, E.D. Louisiana.

May 20, 1992.

John Robert Martzell, Lead Counsel, Scott R. Bickford, Regina O. Matthews, Martzell, Thomas & Bickford, New Orleans, La., Donald G. Kelly, Kelly & Salim, John Clifton Conine, Luster, Conine & Brunon, Jeffrey H. Thomas, Kelly, Townsend & Thomas, Natchitoches, La., for plaintiffs.

Henry C. Gahagan, Jr., Gahagan & Conlay, Natchitoches, La., for Valley Elec. Membership Corp.

Carl H. Hanchey, Jones, Tete, Nolen, Hanchey, Swift & Spears, Lake Charles, La., for Beauregard Elec. Co-op., Inc.

Ford E. Stinson, Benton, La., for Bossier Rural Elec. Membership Corp.

William M. Shaw, Shaw & Shaw, Homer, La., for Claiborne Elec. Co-op., Inc.

Thurmand Leo Boothe, Smith, Taliaferro, Seibert, Boothe & Purvis, Jonesville, La., for Concordia Elec. Co-op., Inc.

James J. Davidson, III, Lead Counsel, Theodore G. Edwards, IV, Davidson, Meaux, Sonnier, McElligott & Swift, Lafayette, La., for Dixie Elec. Membership Corp., Pointe Coupee Elec. Membership Corp.

Wendell R. Miller, Jennings, La., for Jefferson Davis Elec. Co-op. Inc.

Edwin R. McIntyre, McIntyre & McIntyre, Winnboro, La., for Northeast La. Power Co-op., Inc.

James J. Davidson, III, Lead Counsel, Theodore G. Edwards, IV, Davidson, Meaux, Lafayette, La., James M. Funderburk, Duval, Funderburk, Sundbery & Lokell, Houma, La., for Southwest Louisiana Elec. Membership Corp.

Joseph Ernest Friend, Deborah Weisler Hayes, Friend, Wilson & Draper, New Orleans, La., William J. Burris, William J. Knight, Law Office of William J. Knight, Franklinton, La., for Washington-St. Tammany Elec. Co-op. Inc.

James B. Supple, Bauer, Darnall & Boudreaux, Franklin, La., for Teche Elec. Co-op. Inc.

William H. Patrick, III, Baton Rouge, La., Franklin Michael Adkins, Jan Marie Hayden, Bronfin, Heller, Steinberg & Berins, New Orleans, La., for Cajun Elec. Power Co-op. Inc.

MEMORANDUM AND ORDER

SEAR, District Judge.

This is a proposed class action. The putative class is comprised of customers, shareholders, and members of the thirteen defendants, rural electric cooperatives ("RECs"). The proposed representatives for the class are six individuals who are each members, shareholders or customers of the defendants, Valley Electric Membership Corporation ("VEMCO") or Bossier Rural Electric Membership Corporation ("BREMCO").

Plaintiffs seek to recover all rate increases instituted by the RECs without approval of the Louisiana Public Service Commission ("LPSC") between 1978 and 1989. La.Rev. Stat.Ann. § 45:1163, enacted in 1978, provided that REC rate schedules did not require LPSC approval "if the schedule previously was approved by the board of directors of the electric cooperative and by the federal government or any agency thereof." In 1989, the Louisiana Supreme Court declared this statute unconstitutional in light of the Louisiana Constitution of 1974. Cajun Electric Power Coop., Inc. v. La. Public Service Commission, 544 So.2d 362 (La.1989) (Cajun II), rev'ing on rehearing, 532 So.2d 1372 (La.1989) (Cajun I). Accordingly, plaintiffs allege that rate increases instituted by the RECs without the approval of the LPSC are unconstitutional and invalid and must be refunded. Jurisdiction is asserted under 28 U.S.C. §§ 1334(b) and 1452(a).

This action originally was filed in the 10th Judicial District Court for the Parish of Natchitoches, Louisiana. Defendants removed it to the United States District Court for the Western District of Louisiana. It was transferred here, where the Chapter 11 bankruptcy proceeding involving Washington-St. Tammany Electric Co-operative ("WST") was pending.

Defendant, Claiborne Electric Cooperative, Inc. ("Claiborne") has filed a motion to (1) dismiss suit for failure of complainant to comply with bankruptcy procedures regulating the filing of class proofs of claims in a bankruptcy proceeding; (2) deny certification of the purported class action under rule 23(c)(1); and (3) to classify the purported class action as a claim under rule 23(b)(3). Plaintiffs oppose this motion.

Failure to Comply with the Requirements for Filing Class Proofs

Claiborne contends that this action should be dismissed for the plaintiffs' failure to comply with bankruptcy procedures regulating the filing of class proofs of claims in a bankruptcy proceeding. Claiborne initially challenges the propriety of bringing a class action in a bankruptcy proceeding when one proof of claim is filed on behalf of the purported class (referred to as "class proofs of claim"), rather than each claimant individually filing his/her proof of claim, after which the claims obtain class treatment.

Because the Fifth Circuit has yet to address this issue, I have considered the decisions of those circuits that have.¹ In particular, I find the reasoning employed by Judge Easterbrook of the Seventh Circuit persuasive and adopt his analysis.

We start with the Bankruptcy Rules. Bankruptcy Rule 7023 provides: "Rule 23 F.R.Civ.P. applies in adversary proceedings." Bankruptcy Rule 9014, which applies to "a contested matter in a case . . . not otherwise governed by these rules" states that "the court may at any stage in a particular matter direct that one or more of the other rules in Part VII shall apply." Rule 9014 thus allows bankruptcy judges to apply Rule 7023 — and thereby Fed.R.Civ.P. 23, the class action rule — to "any stage" in contested matters. Filing a proof of claim is a "stage." All disputes in bankruptcy are either adversary proceedings or contested matters, so Rule 23 may apply throughout a bankruptcy case at the bankruptcy judge\'s discretion. Rule 23 provides for filing by a representative, not just prosecution by a representative of claims already pending. So the right to file a proof of claim on behalf of a class seems secure, at least if the bankruptcy judge elects to incorporate Rule 23 via Rule 7023 via Rule 9014. . . . ²

I elect to incorporate Rule 23 of the Federal Rules of Civil Procedure into this proceeding and find, as did the Seventh Circuit, that a representative may file a proof of claim on behalf of a class.

In this action, a representative filed a proof of claim on behalf of the purported class within the bar date for filing proofs of claim.³ I note that the proof of claim was filed in the bankruptcy court, whereas the Notice of Bar Date to File Proofs of Claim instructed that proofs of claim should be filed with the clerk of court for the district court.⁴ This error in filing is not fatal. Bankruptcy Rule 5005 provides that proofs of claim erroneously filed shall be transmitted to the clerk of the proper court⁵ and that, "in the interest of justice, the court may order that the paper shall be deemed filed as of the date of its original delivery." Accordingly, I find that the proof of claim was timely filed.

The proof of claim was filed by the attorney for the plaintiffs, John Clifton Conine. Claiborne suggests that it is improper for an attorney to execute a proof of claim filed on behalf of a group of creditors. Bankruptcy Rule 3001 provides that "a proof of claim shall be executed by the creditor or the creditor's authorized agent. . . ." An attorney representing a creditor can execute a proof of claim on behalf of the creditor without filing any documentation evidencing his authority to act on behalf of his client. Rule 9010(a), subtitled "Authority to Act Personally or by Attorney," provides:

A debtor, creditor, equity security holder, indenture trustee, committee or other party may (1) appear in a case under the Code and act either in the entity\'s own behalf or by an attorney authorized to practice in the court, and (2) perform any act not constituting the practice of law, by an authorized agent, attorney in fact, or proxy.

The Rule is certainly not a model of clarity and seems to have escaped the critical and watchful eye of the Bankruptcy Committee on Rules of Practice and Procedure.⁶ The Rule was obviously meant to read:

A debtor, creditor, equity security holder, indenture trustee, committee or other party may (1) appear in a case under the Code and act in the entity\'s own behalf, (2) appear in a case under the Code through an attorney authorized to practice in the court, (3) appear in a case under the Code through an authorized agent or attorney in fact, who may perform any act not constituting the practice of law, or (4) appear in a case under the Code by proxy.

The Rule permits a creditor to "appear" through an attorney authorized to practice in the court and/or through an agent, attorney in fact, or by proxy. The distinction between attorney as used in the Rule from attorney in fact and the limits of authority of each to "appear" on behalf of a creditor is significant.

In a bankruptcy proceeding, an attorney possesses the same authority as in other proceedings.⁷ The attorney may appear in the proceeding on behalf of his client in any manner constituting the practice of law.⁸ Preparing a proof of claim and presenting it to the court to have it allowed constitutes the practice of law.⁹ Moreover, a proof of claim is akin to a demand in a complaint for a money judgment in that each seeks to collect money allegedly owed by the named person or entity. An attorney unquestionably can file a complaint on behalf of a client.¹⁰ Similarly, an attorney can file a proof of claim on behalf of a client.¹¹

An attorney in fact, on the other hand, cannot engage in the practice of law. Additionally, unlike an attorney, an attorney in fact is an agent for his client or principal and the power of attorney executed by the client defines the limits of his authority.¹² For instance, the power of attorney most often confers upon the attorney in fact the power to vote on behalf of his principal/creditor at the election of the trustee,¹³ whereas an attorney at law does not possess this authority.¹⁴ Additionally, the power...