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