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LYNCH v. CALIFORNIA PUBLIC UTILITIES COMMISSION

July 15, 2004.

LORETTA M LYNCH and CARL WOOD, Commissioners for the California Public Utilities Commission, Appellants,
v.
CALIFORNIA PUBLIC UTILITIES COMMISSION, OFFICIAL COMMITTEE OF UNSECURED CREDITORS and PACIFIC GAS & ELECTRIC COMPANY, Appellees.



The opinion of the court was delivered by: VAUGHN WALKER, District Judge

ORDER

The instant appeal arises from the high-profile bankruptcy of appellee Pacific Gas and Electric Company (PG & E). PG & E filed for Chapter 11 bankruptcy on April 6, 2001. On December 18, 2003, after extensive settlement negotiations, appellee California Public Utilities Commission (CPUC) voted 3-2 to approve a modified settlement agreement (MSA) between the CPUC and PG & E. Appellants Loretta Lynch and Carl Wood, who are CPUC commissioners, cast the two dissenting votes. On January 5, 2004, the United States Bankruptcy Court entered a confirmation order implementing the MSA. This appeal followed.

Several months ago, the court denied appellants' motion to stay the January 5 confirmation order. Doc # 77. In that order, the court expressed its view that appellants' standing to bring this appeal was highly questionable. 4/19/04 Ord (Doc # 77) at 5:7-11. Unsurprisingly, PG & E, the Official Committee of Unsecured Creditors (OCUC) and the CPUC have filed motions to dismiss this appeal on that very ground. Docs ## 16, 42, 82, 83. Having considered the parties' arguments, the court is persuaded that its initial assessment of appellants' standing is correct. Accordingly, the court GRANTS appellees' motions to dismiss this appeal (Docs ## 16, 42, 82, 83).

  I

  A

  PG & E filed for Chapter 11 bankruptcy on April 6, 2001. Decl James L Lopes (Lopes Decl; Docs ## 49, 51-53) at 1 ¶ 2. PG & E and the CPUC then filed competing plans of reorganization. Id at 1 ¶ 4. On November 18, 2002, the Bankruptcy Court commenced a hearing on the competing plans. Id at 2 ¶ 5. In March 2003, the Bankruptcy Court ordered that the parties participate in a judicial settlement conference and subsequently stayed all proceedings with respect to confirmation of the competing plans. Id at 2 ¶ 6. The bankruptcy settlement judge issued a gag order limiting the number and identity of participants and restricting communications between participants and nonparticipants. See Decl Loretta Lynch (Lynch Decl; Decl Alan Mansfield (Mansfield Decl; Doc # 68) at 2 ¶ 1, Exh 3) at 1-2 ¶¶ 3-5. Only the CPUC's president, and not the other four CPUC commissioners, was allowed to participate. See id.

  On June 19, 2003, PG & E and the CPUC's staff announced that they had reached agreement on a proposed settlement that would resolve disputes relating to the competing reorganization plans, certain litigation and certain pending CPUC proceedings. Lopes Decl at 2 ¶ 7. On July 31, 2003, PG & E filed the proposed settlement agreement (PSA), which incorporated the terms of the proposed agreement and was contingent upon approval by the CPUC. Id at 2 ¶ 7, Exh C.

  Shortly afterward, on August 8, 2003, the Bankruptcy Court issued a discovery and trial setting order. Id at 2 ¶ 8, Exh D. In that order, the Bankruptcy Court set September 2, 2003, as the deadline for filing objections to confirmation of the plan. Id. The bankruptcy court gave further notice of that deadline through its notice of: (A) voting record date and voting deadline; (B) hearing to consider confirmation of plan; and (C) deadline for filing objections to confirmation. Id at 2-3 ¶ 10, Exh F. The notice was served on both the CPUC itself and the CPUC's counsel. Id at 3 ¶ 11. The notice was also published in multiple national and local newspapers. Decl Anton H Hadjivassiliou (Hadjivassiliou Decl; Doc # 50) at 1-2 ¶¶ 2-15, Exhs A-L. The gag order, however, remained in effect, preventing appellants from learning about the substance of the settlement negotiations or the reasoning behind the PSA. Lynch Decl at 2 ¶ 5.

  After the disclosure statement had been approved and distributed and the creditors and equity interest holders voted to approve the PSA, the Bankruptcy Court commenced a confirmation hearing on November 10, 2003. Lopes Decl at 3 ¶ 12. Neither of the appellants appeared at the hearing or objected to any portion of the PSA at that time. Id. The Bankruptcy Court heard closing arguments on November 24, 2003. Id.

  Also in November 2003, the settlement judge proposed a decision that would reject the PSA as contrary to law. Lynch Decl at 2 ¶ 7. The CPUC president issued two alternate decisions that proposed approving the PSA. Id. Appellants, along with CPUC Commissioner Brown, each issued separate alternative decisions rejecting the PSA. Id. At that time, given Commissioner Brown's disapproval of the PSA, appellants believed that the PSA would not be approved at the upcoming December 18, 2003, CPUC meeting. Opp Mots Dism (Doc # 85) at 4:5-7; see Lynch Decl at 3 ¶ 9.

  On December 12, 2003, the Bankruptcy Court issued an order approving the PSA and overruling the objections to its confirmation. Lopes Decl at 3 ¶ 14, Exh H. The approval order was conditioned on approval by the CPUC. Id. On December 15, 2003, Commissioner Brown apparently changed his position on the PSA based on a deal that had been struck between PG & E and certain consumer groups. See Lynch Decl at 2-3 ¶ 8. The PSA was modified to reflect this change, and the modified settlement agreement (MSA) was then given to the CPUC. See id. The CPUC approved the MSA on December 18, 2003, by a vote of 3-2. Lopes Decl at 3 ¶ 15, Exh I. Appellants cast the two dissenting votes. See id. The CPUC and PG & E signed the MSA on that same day. Id at 4 ¶ 16, Exh J.

  On December 22, 2003, appellant Lynch made her first appearance in the Bankruptcy Court. Id at 4 ¶ 17. Appellant Wood, however, did not appear. Id. Lynch's lawyer objected to the Bankruptcy Court's confirming the MSA on the ground that a confirmation order could not be entered unless the CPUC itself, and not its lawyers, approved the order's form and substance. Id at 4 ¶¶ 17, 18, Exh K. Appellant Lynch raised no other objections. See id. The Bankruptcy Court overruled Lynch's objection and entered the confirmation order that same day. Id at Exh K. Shortly afterward, the CPUC met and approved the confirmation order's form and substance. Id at 4 ¶ 19, Exh L.

  After the confirmation order was entered, the City of Palo Alto filed a motion to stay the effect of the confirmation order, with which appellants joined. Id at 4 ¶¶ 20, 21, Exhs M, N. The Bankruptcy Court denied the motion to stay on January 5, 2004. Id at 5 ¶¶ 23, 25, Exhs P, R. At the January 5 hearing, the Bankruptcy Court commented that the objection that appellant Lynch had made at the December 22 hearing probably could not have been raised until after the CPUC's December 18 decision. See id, Exh P at 35:7-11. The Bankruptcy Court also recognized that, in the context of asking for a stay, it did not appear that the appellants had preserved the issues raised in support of the stay. See id at 60:7-61:3. On that same date, the ...


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