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Bonneville Power Admin. v. Mirant Corp. (In re Mirant Corp.)

United States Court of Appeals for the Fifth Circuit

February 13, 2006, Filed

No. 04-11264

Opinion

 [*240]  DeMOSS, Circuit Judge:

Bonneville Power Administration ("BPA") appeals the district court's affirmance of two orders entered by the bankruptcy court. Debtor Mirant Corporation and related entities filed a petition under Chapter 11 of the Bankruptcy Code, triggering a dispute between the parties regarding the ability of BPA to terminate an executory contract for the future purchase of electric power. On the one hand, the Bankruptcy Code's automatic stay, effective upon the filing of a Chapter 11 petition, precludes any act to obtain possession of or exercise control over property of the estate. See 11 U.S.C. § 362(a). On the other hand, in an executory contract related to the future call of energy purchase [**2]  by BPA, see generally § 365, the parties agreed to an ipso facto clause that provided for default and a termination payment in the event of a bankruptcy filing, see § 365(e). 1 BPA argues that the Bankruptcy Code (or the "Code") permits it to terminate the executory contract pursuant to the contract's ipso facto clause. See § 365(e)(2)(A). The parties now dispute the priority of the two Chapter 11 provisions: the automatic stay and the termination arguably permitted by the combined effect of the ipso facto clause and § 365(e)(2)(A).

 [*241]  This appeal requires us to address the intersection of three relevant statutory provisions: 11 U.S.C. § 362(a) (the automatic bankruptcy stay); 11 U.S.C. § 365(e)(2)(A) (permitting a nondebtor party to an executory contract to terminate or modify such contract [**3]  when applicable law excuses the nondebtor from accepting or rendering performance to the trustee or an assignee); and the Anti-Assignment Act (or "the Act"), 41 U.S.C. § 15 (prohibiting transfer of contracts to which the United States is a party).

Concluding that the bankruptcy stay precedes any termination permitted by either the Anti-Assignment Act or the agreement of the parties, we affirm the district court's order declaring BPA to have violated the automatic stay. Finding no abuse of discretion in the court's determination that cause was not shown where the Anti-Assignment Act is not an applicable law under § 365(e)(2)(A), we affirm also the denial of BPA's motion to lift or modify the stay.

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440 F.3d 238 *; 2006 U.S. App. LEXIS 3438 **; 55 Collier Bankr. Cas. 2d (MB) 1050; 46 Bankr. Ct. Dec. 13; Bankr. L. Rep. (CCH) P80,453

IN THE MATTER OF: MIRANT CORPORATION, Debtor, BONNEVILLE POWER ADMINISTRATION, Appellant, VERSUS MIRANT CORPORATION, Appellee.

Prior History:  [**1]  Appeal from the United States District Court For the Northern District of Texas.

CORE TERMS

termination, bankruptcy court, Anti-Assignment Act, ipso facto, executory contract, automatic stay, applicable law, nondebtor, hypothetical, parties, contracts, automatic, assignee, argues, modify, modification, precede, trading, energy, lease, lift, assign, forward contract, district court, no assignment, applicability, prepetition, triggered, default, excuses

Bankruptcy Law, Reorganizations, Debtors in Possession, Powers & Rights, General Overview, Automatic Stay, Scope of Stay, Claims Against Estate Property, Exceptions to Stay, Administrative Powers, Executory Contracts & Unexpired Leases, Powers to Assume & Reject, Exceptions to Stay, Judicial Review, Standards of Review, Clear Error Review, Civil Procedure, Appeals, Clearly Erroneous Review, De Novo Standard of Review, De Novo Review, Abuse of Discretion, Judicial Review, Termination Clauses, Assignments, Public Contracts Law, Contract Performance, Assignment & Novation, Contract Terminations, Unassumable Contracts, Bankruptcy, Estate Property, Contents of Estate, Relief From Stay, Procedural Matters, Relief for Cause, Time Limitations, Rejections