Not a Lexis Advance subscriber? Try it out for free.

FERC v. FirstEnergy Sols., Corp. (In re FirstEnergy Sols., Corp.)

United States Court of Appeals for the Sixth Circuit

June 26, 2019, Argued; December 12, 2019, Decided; December 12, 2019, Filed

File Name: 19a0294p.06

Nos. 18-3787/3788/4095/4097/4107/4110

Opinion

 [*436]  [***2]   ALICE M. BATCHELDER, Circuit Judge. FirstEnergy Solutions Corp. (FES) and a subsidiary filed Chapter 11 bankruptcy and initiated an adversary proceeding to enjoin the Federal Energy Regulatory Commission (FERC) from interfering with its plan to reject certain electricity-purchase contracts that FERC had previously approved under the authority of the Federal Power Act (FPA), 16 U.S.C. § 791a, et seq., and/or the Public Utilities Regulatory Policies Act (PURPA), 16 U.S.C. § 2601, et seq. FERC opposed the action. Several other  [***3]  parties intervened to oppose the action as well, including three counterparties to those contracts (Ohio Valley Electric Corp. (OVEC), Duke Energy, and Maryland Solar Holdings Inc.) and the Ohio Consumers' Counsel.

The bankruptcy court decided that it had exclusive and unlimited jurisdiction, while FERC had no jurisdiction, and enjoined FERC from taking any action relating to the contracts. The bankruptcy court then applied the ordinary business-judgment [**4]  rule and found that the contracts were financially burdensome to FES, so it permitted FES to reject them, rendering the contracts "breached" and the counterparties unsecured creditors to the bankruptcy estate. Each of the opponents appealed  [*437]  and sought leave to appeal directly to the Sixth Circuit, which we granted. We consolidated the appeals, which arise from both the injunction and contract-rejection orders.

The questions here concern the status of these federal-agency-endorsed contracts in bankruptcy proceedings, the nature and extent of jurisdiction as between the bankruptcy court and the federal agency (FERC), and the proper standard for deciding a Chapter 11 debtor's request to reject such contracts. We conclude that the bankruptcy court has jurisdiction to decide whether FES may reject the contracts, but that its injunction of FERC in this case was overly broad (beyond its jurisdiction), and its standard for deciding rejection was too limited. Therefore, we AFFIRM in part, REVERSE in part, and REMAND to the bankruptcy court for further consideration.

FES distributes electricity, buying it from its fossil-fuel and nuclear electricity-generating subsidiaries and selling it to [**5]  retail clients, corporate affiliates, and in the PJM1 spot market. FES has 1.3 million customers in six states and a total capacity of 10,000 megawatts (MW).

Read The Full CaseNot a Lexis Advance subscriber? Try it out for free.

Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.

945 F.3d 431 *; 2019 U.S. App. LEXIS 36730 **; 2019 FED App. 0294P (6th Cir.) ***; 68 Bankr. Ct. Dec. 30; 2019 WL 6767004

IN RE: FIRSTENERGY SOLUTIONS CORP., et al., Debtors.FEDERAL ENERGY REGULATORY COMMISSION (18-3787); OHIO VALLEY ELECTRIC CORPORATION (18-3788 & 18-4095); DUKE ENERGY OHIO, INC. (18-4097); OFFICE OF THE OHIO CONSUMERS' COUNSEL (18-4107); MARYLAND SOLAR HOLDINGS, INC. (18-4110), Appellants, v. FIRSTENERGY SOLUTIONS CORP.; FIRSTENERGY GENERATION, LLC; OFFICIAL COMMITTEE OF UNSECURED CREDITORS; AD HOC NOTEHOLDERS GROUP; PASS-THROUGH CERTIFICATEHOLDERS, Appellees.

Subsequent History: Rehearing denied by, En banc Fed. Energy Reg. Com. v. FirstEnergy Sols. Corp. (In re FirstEnergy Sols. Corp.), 2020 U.S. App. LEXIS 8208 (6th Cir., Mar. 13, 2020)

Prior History:  [**1] Appeal from the United States Bankruptcy Court for the Northern District of Ohio at Akron. Nos. 5:18-bk-50757; 5:18-ap-05021—Alan M. Koschik, Judge.

FirstEnergy Sols. Corp. v. Fed. Energy Regulatory Comm'n, 2018 Bankr. LEXIS 1488 (Bankr. N.D. Ohio, May 18, 2018)

CORE TERMS

bankruptcy court, contracts, electricity, rates, enjoin, public interest, obligations, regulation, energy, exclusive jurisdiction, injunction, counterparties, abrogate, orders, courts, wholesale, private contract, district court, filed-rate, business-judgment, parties, marks, public necessity, proceedings, consumers, tariffs, cases, terms, majority opinion, automatic stay

Civil Procedure, Appeals, Standards of Review, De Novo Review, Questions of Fact & Law, Energy & Utilities Law, Regulators, US Federal Energy Regulatory Commission, Authorities & Powers, Business & Corporate Compliance, Electric Power Industry, Federal Power Act, Federal Rate Regulation, Electric Power Rates, Filed Rate Doctrine, Civil Actions, Jurisdiction, Bankruptcy Law, Procedural Matters, Subject Matter Jurisdiction, Jurisdiction Over Actions, Concurrent Jurisdiction, Jurisdiction, Core Proceedings, Administrative Powers, Executory Contracts & Unexpired Leases, Rejections, Automatic Stay, Scope of Stay, Claims Against Debtors, Scope of Stay, Exceptions to Stay, Police & Regulatory Actions, Bankruptcy, Case Administration, Bankruptcy Court Powers