In Re: Buffets Holdings, Inc. v. ( 2010 )

NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 09-1889
In re: BUFFETS HOLDINGS, INC., et al.,
Debtors
DELMARVA POWER & LIGHT COMPANY;
ATLANTIC CITY ELECTRIC COMPANY;
POTOMAC ELECTRIC POWER COMPANY;
FLORIDA POWER AND LIGHT COMPANY;
SACRAMENTO MUNICIPAL UTILITY DISTRICT,
Appellants
On Appeal from the United States District Court
for the District of Delaware
D.C. Civil Action Nos. 1-08-cv-00187 & 1-08-cv-00188
District Judge: Honorable Sue L. Robinson
Submitted Pursuant to Third Circuit LAR 34.1(a)
April 20, 2010
Before: SCIRICA and AMBRO, Circuit Judges, and JONES*, District Judge.
(Filed: September 8, 2010)
OPINION OF THE COURT
*
The Honorable John E. Jones, III, United States District Judge for the Middle District
of Pennsylvania, sitting by designation.
SCIRICA, Circuit Judge.
This is an appeal from the District Court’s dismissal as moot of the appeal of the
Bankruptcy Court’s order. Because this appeal presents no actual case or controversy, we
will dismiss it as moot.
I.
On January 22, 2008, Buffets Holdings, Inc. and its affiliates (the “Debtors”), the
operators of numerous buffet-style restaurants, filed for Chapter 11 bankruptcy protection
in the United States Bankruptcy Court for the District of Delaware. On the same date, the
Debtors filed a Utility Motion under § 366 of the Bankruptcy Code,1 seeking an order (1)
1
11 U.S.C. § 366 provides:
(a) Except as provided in subsections (b) and (c) of this section, a utility may not
alter, refuse, or discontinue service to, or discriminate against, the trustee or the
debtor solely on the basis of the commencement of a case under this title or that a
debt owed by the debtor to such utility for service rendered before the order for
relief was not paid when due.
(b) Such utility may alter, refuse, or discontinue service if neither the trustee nor
the debtor, within 20 days after the date of the order for relief, furnishes adequate
assurance of payment, in the form of a deposit or other security, for service after
such date. On request of a party in interest and after notice and a hearing, the court
may order reasonable modification of the amount of the deposit or other security
necessary to provide adequate assurance of payment.
(c)(1)(A) For purposes of this subsection, the term “assurance of payment” means–
(i) a cash deposit;
(ii) a letter of credit;
(iii) a certificate of deposit;
(iv) a surety bond;
(v) a prepayment of utility consumption; or
(continued...)
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prohibiting the Debtors’ utility providers from altering, refusing, or discontinuing utility
services on account of pre-petition invoices; (2) determining that the Debtors’ utility
providers were adequately assured of post-petition payment for utility services based on
the Debtors’ establishment of a segregated escrow account containing an amount equal to
50% of the Debtors’ estimated monthly cost of utility service (the “Utility Deposit
Account”); and (3) establishing the procedures for determining additional adequate
1
(...continued)
(vi) another form of security that is mutually agreed on between the
utility and the debtor or the trustee.
(B) For purposes of this subsection an administrative expense priority shall
not constitute an assurance of payment.
(2) Subject to paragraphs (3) and (4), with respect to a case filed under chapter 11,
a utility referred to in subsection (a) may alter, refuse, or discontinue utility
service, if during the 30-day period beginning on the date of the filing of the
petition, the utility does not receive from the debtor or the trustee adequate
assurance of payment for utility service that is satisfactory to the utility.
(3)(A) On request of a party in interest and after notice and a hearing, the court
may order modification of the amount of an assurance of payment under paragraph
(2).
(B) In making a determination under this paragraph whether an assurance of
payment is adequate, the court may not consider--
(i) the absence of security before the date of the filing of the petition;
(ii) the payment by the debtor of charges for utility service in a
timely manner before the date of the filing of the petition; or
(iii) the availability of an administrative expense priority.
(4) Notwithstanding any other provision of law, with respect to a case subject to
this subsection, a utility may recover or set off against a security deposit provided
to the utility by the debtor before the date of the filing of the petition without
notice or order of the court.
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assurance of future payment to the Debtors’ utility service providers. Under the proposed
procedures, any unsatisfied utility provider would need to serve the Debtors with a
request for additional assurance of payment. The Debtors, at their discretion, could agree
to additional assurance, or could file a motion with the court within 30 days of receiving a
request, seeking a determination that the assurance provided was adequate. The
Bankruptcy Court entered an order that approved the Utility Motion on an interim basis
(the “Interim Utility Order”), and scheduled a final hearing on the Utility Motion.
Subsequently, several of the utility companies (the “Utilities”) filed an objection to
approval of the Utility Motion.2 They contended the proposed escrow account was not a
form of assurance permitted under § 366, and requested the Bankruptcy Court to order the
Debtors to provide them with a deposit equal to two months of utility service. They also
asserted the proposed procedures for requesting additional assurance were inconsistent
with § 366. Finally, they argued the Utilities Motion improperly sought injunctive relief
without the benefit of proper service or the commencement of an adversary proceeding.
At the final hearing, the Bankruptcy Court approved the relief requested in the
Utility Motion subject to the oral rulings made on the record. Two weeks later, the court
entered the final order granting the Utility Motion (“Final Utility Order”). Consistent
2
The Debors had over 4,400 utility accounts with numerous utility companies
nationwide. The objection at issue was made by Delmarva Power & Light Company,
Atlantic City Electric Company, Potomac Electric Power Company, Florida Power &
Light Company, Sacramento Municipal Utility District, and Gexa Energy. Gexa Energy
withdrew from participating in the appeal to the District Court, and is not an appellant in
this case.
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with the Interim Utility Order, the Final Utility Order approved the Utility Deposit
Account as security for the utility companies, and outlined similar procedures for
requesting additional assurance.
On March 10, 2008, the Utilities filed their Notice of Appeal to the District Court.
On September 3, 2008, after the Utilities filed their opening brief in the District Court, the
Debtors mailed checks to each of the Utilities in the amounts of adequate assurance
previously determined by the Bankruptcy Court. But the Utilities refused the payments.
The Debtors moved to dismiss the appeal on the ground that the Utilities’ challenge had
been mooted by the voluntary payments made by the Debtors. The Utilities opposed the
motion. After hearing oral argument on the Debtors’ Motion, together with the argument
on the merits of the appeal, the District Court granted the Motion and dismissed the
appeal as moot.
The Utilities timely filed the instant appeal.
II.
“[I]t is axiomatic that this court has a special obligation to satisfy itself of its own
jurisdiction.” United States v. Touby, 909 F.2d 759, 763 (3d Cir. 1990) (internal
quotation marks omitted); see also Rendell v. Rumsfeld, 484 F.3d 236, 240 (“We have an
independent obligation at the threshold to examine whether we have appellate
jurisdiction.” (internal citations omitted)) . The exercise of judicial power under Article
III of the Constitution “depends upon the existence of a case or controversy.” In re
Surrick, 338 F.3d 224, 229 (3d Cir. 2003) (internal quotation marks omitted). “This case-
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or-controversy requirement subsists through all stages of federal judicial proceedings,
trial and appellate. . . . The parties must continue to have a personal stake in the outcome
of the lawsuit.” Spencer v. Kemna, 523 U.S. 1, 7 (1998) (internal quotation marks
omitted). “The existence of a case or controversy, in turn, requires (1) a legal controversy
that is real and not hypothetical, (2) a legal controversy that affects an individual in a
concrete manner so as to provide the factual predicate for reasoned adjudication, and (3) a
legal controversy with sufficiently adverse parties so as to sharpen the issues for judicial
resolution.” Rendell, 484 F.3d at 240 (internal quotation marks omitted). In other words,
the plaintiff “must have suffered, or be threatened with, an actual injury traceable to the
defendant and likely to be redressed by a favorable judicial decision.” Spencer, 523 U.S.
at 7. “A case will be considered moot, and therefore nonjusticiable as involving no case
or controversy, if the issues presented are no longer ‘live’ or the parties lack a legally
cognizable interest in the outcome.” Surrick, 338 F.3d at 229 (3d Cir. 2003) (internal
quotation marks omitted). “Accordingly, the central question of all mootness problems is
whether changes in circumstances that prevailed at the beginning of the litigation have
forestalled any occasion for meaningful relief.” Id. at 230 (internal quotation marks
omitted).
Here, we cannot provide any effectual relief with respect to this appeal. The
underlying controversy in this case concerns the Bankruptcy Court’s Interim and Final
Utility Orders granting the Debtors’ Utility Motion. See Appellant’s Br. 2–4 (stating the
issues presented). But after this appeal was filed, the Bankruptcy Court entered the
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Confirmation Order approving the Debtors’ Reorganization Plan.3 Pursuant to Article IX
of the Plan, “[a]ll injunctions or stays . . . , in existence on the Confirmation Date, shall
remain in full force and effect until the Effective Date.” Debtors’ Third Amended Joint
Plan Of Reorganization Under Chapter 11 Of The Bankruptcy Code at 44, In re Buffets
Holdings, Inc., No. 08-10141 (Bankr. D. Del. Mar. 11, 2009). The Plan became effective
on April 28, 2009. Therefore, the Bankruptcy Court’s orders pertaining to Debtors’
Utility Motion are no longer in effect, and any decision we issue regarding those orders
would be purely an advisory opinion.
Furthermore, the essence of the Utilities’ objections had been that Debtors did not
provide the Utilities with the adequate assurance of payment, as required by § 366, when
3
On May 19, 2009, following the Bankruptcy Court’s March 26, 2009 Confirmation
Order approving the Debtor’s Bankruptcy Plan, the Debtors filed a Motion To (I) Expand
The Record On Appeal; (II) Dismiss The Instant Appeal As Moot; (III) In The
Alternative, Strike Issues Three Through Ten In Appellants’ Statement Of Issues On
Appeal; And (IV) Suspend Briefing Until A Ruling On The Motion. We ordered the
Motion to be referred to the merits panel and instructed the parties to brief the issues
raised. The essence of the Motion is to expand the record to include the Confirmation
Plan. “[F]acts bearing on the issue of mootness can be raised at any time during the
judicial proceedings.” In re Cantwell, 639 F.2d 1050, 1053 n.4 (3d Cir. 1981); see also
Accumed LLC v. Advanced Surgical Servs., Inc., 561 F.3d 199, 226 n.25 (3d Cir. 2009);
Clark v. K-Mart Corp., 979 F.2d 965, 967 (3d Cir. 1992). Furthermore, we can consider
facts and issues pertinent to the motions filed. See Fed. R. App. P. 27. Therefore, we will
consider the Confirmation Plan, Debtors’ Third Amended Joint Plan Of Reorganization
Under Chapter 11 Of The Bankruptcy Code, In re Buffets Holdings, Inc., No. 08-10141
(Bankr. D. Del. Mar. 11, 2009), and the order confirming it, Findings Of Fact,
Conclusions Of Law, And Order Under Section 1129 Of The Bankruptcy Code And Rule
3020 Of The Bankruptcy Rules Confirming Debtors’ Third Amended Joint Plan Of
Reorganization Under Chapter 11 Of The Bankruptcy Code, In re Buffets Holdings, Inc.,
No. 08-10141 (Bankr. D. Del. Apr. 17, 2009), for the purpose of our jurisdiction inquiry.
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the funds were deposited in a segregated escrow account under the Debtors’ control. But
as soon as the Debtors tendered checks to the Utilities, this controversy necessarily
became moot because the Utilities received the relief they were seeking. Therefore, the
District Court was correct in dismissing the Utilities’ appeal from the Bankruptcy Court’s
orders on the Debtors’ Utility Motion as moot even before the Bankruptcy Plan was
confirmed.4
III.
The Utilities argue that even if the case is moot, we should still reach its merits
because the issues presented are “capable of repetition, yet evading review.” Appellant’s
Br. 39. Under the capable-of-repetition exception, “a court may consider the merits of a
case that would otherwise be deemed moot when ‘(1) the challenged action is in its
duration too short to be fully litigated prior to cessation or expiration; and (2) there is a
reasonable expectation that the same complaining party will be subject to the same action
again.’” Rendell, 484 F.3d at 241 (quoting Spencer, 523 U.S. at 17). “The exception
from the mootness doctrine for cases that are technically moot but ‘capable of repetition,
4
The Utilities assert we can provide them “‘effective relief’ by issuing a definitive
ruling on all of the issues on appeal raised by the Utility Order, Appellant’s Br. 36, and
“by setting forth the correct legal standards under [§] 366,” id. at 37. In other words, the
Utilities ask us to render an advisory opinion. See id. at 35 (“Appellants are entitled to
have a declaration of their procedural and substantive rights under [§] 366.”). That we
cannot do. See Sutton v. Rasheed, 323 F.3d 236, 248 (3d Cir. 2003) (“‘[A] federal court
has neither the power to render advisory opinions nor to decide questions that cannot
affect the rights of litigants in the case before them.’” (quoting Preiser v. Newkirk, 422
U.S. 395, 401 (1975))).
8
yet evading review’ is narrow and available ‘only in exceptional situations.’” Id. (quoting
City of Los Angeles v. Lyons, 461 U.S. 95, 109 (1983), and Weinstein v. Bradford, 423
U.S. 147, 148–149 (1975)).
The issue presented here, even if capable of repetition, does not evade review. To
evade review, the challenged action must be “by its very nature short in duration, so that
it could not, or probably would not, be able to be adjudicated while fully alive.” Finberg
v. Sullivan, 634 F.2d 50, 55 (3d Cir. 1980) (quoting Dow Chem. Co. v. EPA, 605 F.2d
673, 678 n.12 (3d Cir. 1979) (internal quotation marks omitted)).
The bankruptcy proceedings are not in their nature so short as to cause bankruptcy
courts’ orders to evade review. Although here the controversy has been mooted by the
Bankruptcy Court’s confirmation of the Bankruptcy Plan, generally a creditor has the
ability to seek a stay and an expedited appeal. Therefore, it is not inevitable that an
appeal of an order under § 366 would lapse into mootness prior to review.
IV.
For the reasons set forth above, we will dismiss this appeal as moot.
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