Halo Wireless, Inc. v. Alenco Communications, Inc. (In Re Halo Wireless, Inc.) , 684 F.3d 581 ( 2012 )

Case: 12-40122 Document: 00511889658 Page: 1 Date Filed: 06/18/2012
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
June 18, 2012
No. 12-40122 Lyle W. Cayce
Clerk
IN THE MATTER OF: HALO WIRELESS, INCORPORATED,
Debtor
--------------------------------------------------------------------------------------
HALO WIRELESS, INCORPORATED,
Appellant
v.
ALENCO COMMUNICATIONS INCORPORATED; ALMA
COMMUNICATIONS COMPANY; BPS TELEPHONE
COMPANY;BELLSOUTH TELECOMMUNICATIONS, L.L.C., doing
business as AT&T Alabama; BIG BEND TELEPHONE COMPANY,
INCORPORATED; BLUE RIDGE TELEPHONE COMPANY; BRAZORIA
TELEPHONE COMPANY; CAMDEN TELEPHONE & TELEGRAPH
COMPANY, INCORPORATED; CHARITON VALLEY TELECOM
CORPORATION; CHARITON VALLEY TELEPHONE CORPORATION;
CHOCTAW TELEPHONE COMPANY; CITIZENS TELEPHONE COMPANY
OF HIGGINSVILLE, MISSOURI; CONCORD TELEPHONE EXCHANGE,
INCORPORATED; CRAW-KAN TELEPHONE COOPERATIVE,
INCORPORATED; EASTEX TELEPHONE COOPERATIVE,
INCORPORATED; ELECTRA TELEPHONE COMPANY, INCORPORATED;
ELLINGTON TELEPHONE COMPANY; FARBER TELEPHONE
COMPANY; FIDELITY COMMUNICATION SERVICES I,
INCORPORATED; FIDELITY COMMUNICATION SERVICES II,
INCORPORATED; FIDELITY TELEPHONE COMPANY; FIVE AREA
TELEPHONE COOPERATIVE, INCORPORATED; GANADO TELEPHONE
COMPANY; GOODMAN TELEPHONE COMPANY; GRANBY TELEPHONE
COMPANY; GRAND RIVER MUTUAL TELEPHONE COMPANY; GREEN
HILLS AREA CELLULAR; GREEN HILLS TELEPHONE CORPORATION;
Case: 12-40122 Document: 00511889658 Page: 2 Date Filed: 06/18/2012
No. 12-40122
HILL COUNTRY TELEPHONE COOPERATIVE, INCORPORATED;
HOLWAY TELEPHONE COMPANY; HUMPHREYS COUNTY
TELEPHONE COMPANY; IAMO TELEPHONE COMPANY; ILLINOIS
BELL TELEPHONE COMPANY, doing business as AT&T Illinois; INDIANA
BELL TELEPHONE COMPANY, INC., doing business as AT&T Indiana;
INDUSTRY TELEPHONE COMPANY; K.L.M. TELEPHONE COMPANY;
KINGDOM TELEPHONE COMPANY; LAKE LIVINGSTON TELEPHONE
COMPANY, INCORPORATED; LATHROP TELEPHONE COMPANY;
LE-RU TELEPHONE COMPANY; LIVINGSTON TELEPHONE COMPANY;
MARK TWAIN COMMUNICATION COMPANY; MARK TWAIN RURAL
TELEPHONE COMPANY; MCDONALD COUNTY TELEPHONE
COMPANY; MICHIGAN BELL TELEPHONE COMPANY, doing business as
AT&T Michigan; MID-MISSOURI TELEPHONE COMPANY; MID-PLAINS
RURAL TELEPHONE COOPERATIVE, INCORPORATED; MILLER
TELEPHONE COMPANY; MOKAN DIAL, INCORPORATED;
NELSON-BALL GROUND TELEPHONE COMPANY; NEVADA BELL
TELEPHONE COMPANY, doing business as AT&T Nevada; NEW
FLORENCE TELEPHONE COMPANY; NEW LONDON TELEPHONE
COMPANY; NORTEX COMMUNICATIONS COMPANY; NORTH TEXAS
TELEPHONE COMPANY; ORCHARD FARM TELEPHONE COMPANY;
OZARK TELEPHONE COMPANY; PACIFIC BELL TELEPHONE
COMPANY, doing business as AT&T California; PEACE VALLEY
TELEPHONE COMPANY, INCORPORATED; PEOPLES TELEPHONE
COOPERATIVE, INCORPORATED; QUINCY TELEPHONE COMPANY;
RIVERA TELEPHONE COMPANY, INCORPORATED; ROCK PORT
TELEPHONE COMPANY; SANTA ROSA TELEPHONE COOPERATIVE,
INCORPORATED; SENECA TELEPHONE COMPANY; SOUTHWEST
TEXAS TELEPHONE COMPANY; SOUTHWESTERN BELL TELEPHONE
COMPANY, doing business as AT&T Arkansas; STEELVILLE TELEPHONE
EXCHANGE, INCORPORATED; STOUTLAND TELEPHONE COMPANY;
TATUM TELEPHONE COMPANY; TELLICO TELEPHONE COMPANY;
TENNESSEE TELEPHONE COMPANY; MISSOURI PUBLIC SERVICE
COMMISSION; OHIO BELL TELEPHONE COMPANY, doing business as
AT&T Ohio; TOTELCOM COMMUNICATIONS, L.L.C.; VALLEY
TELEPHONE COOPERATIVE INC; WEST PLAINS
TELECOMMUNICATIONS, INCORPORATED; WISCONSIN BELL
TELEPHONE, INCORPORATED, doing business as AT&T Wisconsin; AT&T
KANSAS; AT&T MISSOURI; AT&T OKLAHOMA; AT&T TEXAS; AT&T
FLORIDA; AT&T GEORGIA; AT&T KENTUCKY; AT&T LOUISIANA;
AT&T MISSISSIPPI; AT&T NORTH CAROLINA; AT&T SOUTH
CAROLINA; AT&T TENNESSEE; TDS TELECOMMUNICATIONS
2
Case: 12-40122 Document: 00511889658 Page: 3 Date Filed: 06/18/2012
No. 12-40122
CORPORATION; CROCKETT TELEPHONE CO; WEST TENNESSEE
TELEPHONE COMPANY INC; NORTH CENTRAL TELEPHONE COOP,
INCORPORATED; HIGHLAND TELEPHONE COOPERATIVE,
INCORPORATED; GUADALUPE VALLEY TELEPHONE COOPERATIVE,
INCORPORATED; NORTHEAST MISSOURI RURAL TELEPHONE
COMPANY; PEOPLES TELEPHONE COMPANY, INCORPORATED,
Appellees
Appeal from the United States Bankruptcy Court
for the Eastern District of Texas,
Before JOLLY, BENAVIDES, and DENNIS, Circuit Judges.
BENAVIDES, Circuit Judge:
This case involves disputes between Halo Wireless, Inc. and the Texas and
Missouri Telephone Companies (“TMT Companies”), TDS Communications
Corp., and the AT&T Companies.1 The local telephone companies initiated
twenty separate suits against Halo before ten state public utility commissions
(“PUCs”).2 Halo filed for bankruptcy as a result of this collective action. The
telephone companies requested that the bankruptcy court determine that the
various PUC actions are not subject to the automatic stay provided by the
Bankruptcy Code at 11 U.S.C. § 362(a), because they are excepted under
§ 362(b)(4), or that the bankruptcy court modify the automatic stay for cause,
1
TDS Telecommunications Corp. operates in various states, and it has filed complaints
against Halo in public utility commissions in Georgia and Tennessee. The AT&T Companies
also operate in various states, and have filed complaints against Halo in Alabama, Florida,
Kentucky, Mississippi, North Carolina, South Carolina, and Tennessee. After the bankruptcy
court exempted PUC proceedings from the automatic stay, AT&T also filed actions in
Louisiana and California. The TMT Companies filed actions against Halo in Texas and
Missouri.
2
The total number of actions now appear to be more than twenty, taking place in
thirteen jurisdictions.
3
Case: 12-40122 Document: 00511889658 Page: 4 Date Filed: 06/18/2012
No. 12-40122
pursuant to § 362(d)(1). The bankruptcy court held that the exception to the
automatic stay in § 362(b)(4) applies to the state commission proceedings,
allowing the telephone companies to proceed with their litigation in the PUCs,
but held that the state adjudicative bodies could not issue any ruling or order to
liquidate the amount of any claim against Halo, and that the bodies could not
take any action that affects the debtor-creditor relationship between Halo and
any creditor or potential creditor. Halo now appeals this ruling, contending that
because the PUC actions were brought by private parties, they should be subject
to the automatic stay. We agree with the bankruptcy court that the PUC
proceedings are exempt from the automatic stay, and we thus AFFIRM.
I. FACTUAL AND PROCEDURAL BACKGROUND
Halo states that it is a small telecommunications company that provides
wireless phone and data service to its customers pursuant to a license from the
Federal Communications Commission (“FCC”). According to Halo, it provides
wireless Commercial Mobile Radio Service (“CMRS”), as defined by Section
332(d)(1) of the Federal Telecommunications Act, 47 U.S.C. §§ 151 et seq. (“FTA”
or “Act”). The Appellees are all privately-owned local telephone companies.
Their disputes with Halo center around the type of service Halo actually
provides, and whether or not Halo is properly compensating local companies for
the call traffic it transfers to them.3
Starting with the TMT Companies in May 2011, the Appellees have all
filed actions against Halo in state PUCs. The TMT Companies claim that Halo
is not a CMRS carrier, and that it was improperly using the TMT Companies’
networks without an interconnection agreement (“ICA”) or payment of access
fees. The TDS Companies allege that Halo has used service to Transcom (which
3
The allegations against Halo differ slightly among the Appellee phone companies.
In each situation, however, the local telephone companies have brought their grievances to
state PUCs, which is where they find commonality.
4
Case: 12-40122 Document: 00511889658 Page: 5 Date Filed: 06/18/2012
No. 12-40122
Halo calls a “customer,” but the TDS Companies allege is a related entity) to
avoid state regulation and the payment of access charges to the TDS Companies.
The AT&T companies all claim that Halo is violating its ICAs with them, and
they have asked the PUCs to determine that Halo’s traffic is not wireless. As
summarized by the bankruptcy court, “[t]he complainants contend that the
debtor is involved in an arbitrage scheme and that the debtor owes them fees
under applicable law and regulations. And more generally, that the debtor is
subject to the authority of the Public Utility Commission[s]. The debtor
contends that it is regulated by the FCC, not the Public Utility Commissions and
denies that it is engaged in an arbitrage scheme.”
Because of the numerous suits filed against Halo by the Appellees, Halo
filed a voluntary petition under Chapter 11 of the Bankruptcy Code on August
8, 2011. Halo also removed the various PUC actions to federal court, pursuant
to 28 U.S.C. § 1452, and it then filed motions to have those actions transferred
to the bankruptcy court. In response to Halo’s declaration of bankruptcy, the
Appellees filed motions requesting that the state PUC proceedings be exempt
from the automatic stay under § 362(b)(4) of the Bankruptcy Code.
The bankruptcy court held an initial hearing on September 30, 2011 to
consider the Appellees’ motions, and it then made its findings of fact and
conclusions of law on the record on October 7, 2011. The bankruptcy court found
that “[i]t is the nature of the action[, not] the identity of the parties which
initially precipitat[e] the action[,] that determines whether Section 362(b)(4)
applies.” Despite the fact that the PUC actions had been initiated by private
parties, because they were all state regulatory proceedings, the court ruled that
they were excepted from the automatic stay under § 362(b)(4). The bankruptcy
court then incorporated its findings of fact and conclusions of law in Stay
Exception Orders entered for each Appellee on October 26, 2011. On that same
5
Case: 12-40122 Document: 00511889658 Page: 6 Date Filed: 06/18/2012
No. 12-40122
day, Halo filed notices of appeal.4 The bankruptcy court certified the appeal
directly to this Court on November 7, 2011, stating that “[t]he judgment, order
or decree involves a question of law as to which there is no controlling decision
of the court of appeals for this circuit or of the Supreme Court of the United
States,” pursuant to 28 U.S.C. § 158(d)(2). Since the bankruptcy court’s ruling,
sixteen (of twenty total) of the Appellees’ motions to remand their actions from
federal courts back to the state PUCs have been granted.
II. STANDARD OF REVIEW
“When directly reviewing an order of the bankruptcy court, we apply the
same standard of review that would have been used by the district court.
Findings of fact are reviewed for clear error, and conclusions of law are reviewed
de novo.” Drive Fin. Servs., L.P. v. Jordan, 521 F.3d 343, 346 (5th Cir. 2008)
(citing Fed. R. Bankr. P. 8013).
III. ANALYSIS
Normally, when a party declares Chapter 11 bankruptcy, an automatic
stay is imposed on any other pending or future actions against the party. Under
the Bankruptcy Code,
[e]xcept as provided in subsection (b) of this section, a
petition filed under section 301, 302, or 303 of this
title . . . operates as a stay, applicable to all entities, of
the commencement or continuation, including the
issuance or employment of process, of a judicial,
administrative, or other action or proceeding against
the debtor that was or could have been commenced
4
Halo also filed a motion for stay pending appeal, which the bankruptcy court denied.
The bankruptcy court found that Halo had failed to meet the four criteria for a stay pending
appeal, relying on In re First South Savings Association, 820 F.2d 700, 709 (5th Cir. 1987).
Specifically, the court held that Halo had “not made a showing of irreparable injury absent a
stay,” while “the granting of a stay would substantially harm other parties by interfering with
the state utility commissions’ ability to regulate public utilities and by requiring creditors to
continue providing services to the debtor in the future.” The court further found that granting
a stay pending appeal would not further the public interest, and that Halo had not established
a substantial likelihood of success on the merits.
6
Case: 12-40122 Document: 00511889658 Page: 7 Date Filed: 06/18/2012
No. 12-40122
before the commencement of the case under this title, or
to recover a claim against the debtor that arose before
the commencement of the case under this title[.]
11 U.S.C. § 362(a). “The purposes of the bankruptcy stay under 11 U.S.C. § 362are to protect the debtor’s assets, provide temporary relief from creditors, and
further equity of distribution among the creditors by forestalling a race to the
courthouse.” Reliant Energy Servs., Inc. v. Enron Canada Corp., 349 F.3d 816,
825 (5th Cir. 2003) (internal quotation marks and citation omitted); see also
Matter of Commonwealth Oil Refining Co., Inc., 805 F.2d 1175, 1182 (5th Cir.
1986) (“The purpose of the automatic stay is to give the debtor a ‘breathing spell’
from his creditors, and also, to protect creditors by preventing a race for the
debtor’s assets.” (quoting H.R. Rep. No. 95-595, at 340 (1977), reprinted in 1978
U.S.C.C.A.N. 5963, 6296-97)); Hunt v. Bankers Trust Co., 799 F.2d 1060, 1069
(5th Cir. 1986) (“The purpose of the automatic stay is to protect creditors in a
manner consistent with the bankruptcy goal of equal treatment.”). Thus,
Congress considered the automatic stay “one of the fundamental debtor
protections provided by the bankruptcy laws” when it was instituted. H.R. Rep.
No. 95-595, at 340, reprinted in 1978 U.S.C.C.A.N. 5963, 6296.
As noted in the text of § 362(a), however, there are exceptions to the stay
found in subsection (b) of the statute. The exception at issue here allows
the commencement or continuation of an action or
proceeding by a governmental unit . . . to enforce such
governmental unit’s or organization’s police and
regulatory power, including the enforcement of a
judgment other than a money judgment, obtained in an
action or proceeding by the governmental unit to
enforce such governmental unit’s or organization’s
police or regulatory power.
11 U.S.C. § 362(b)(4). The statute further defines a “governmental unit” as:
7
Case: 12-40122 Document: 00511889658 Page: 8 Date Filed: 06/18/2012
No. 12-40122
United States; State; Commonwealth; District;
Territory; municipality; foreign state; department,
agency, or instrumentality of the United States (but not
a United States trustee while serving as a trustee in a
case under this title), a State, a Commonwealth, a
District, a Territory, a municipality, or a foreign state;
or other foreign or domestic government.
11 U.S.C. § 101(27). As stated in the accompanying House Report, “where a
governmental unit is suing a debtor to prevent or stop violation of fraud,
environmental protection, consumer protection, safety, or similar police or
regulatory laws, or attempting to fix damages for violation of such a law, the
action or proceeding is not stayed under the automatic stay.” H.R. Rep. No.
95–595, at 343, reprinted in 1978 U.S.C.C.A.N. 5963, 6299. “This exception
discourages debtors from submitting bankruptcy petitions either primarily or
solely for the purpose of evading impending governmental efforts to invoke the
governmental police powers to enjoin or deter ongoing debtor conduct which
would seriously threaten the public safety and welfare.” In re McMullen, 386
F.3d 320, 324-35 (1st Cir. 2004); see also In re Commonwealth Cos., Inc., 913
F.2d 518, 527 (8th Cir. 1990) (stating that “a fundamental policy behind the
police or regulatory power exception . . . is to prevent the bankruptcy court from
becoming a haven for wrongdoers” (internal quotation marks and citation
omitted)); In re Nortel Networks, Inc., 669 F.3d 128, 137 (3d Cir. 2011) (same);
S.E.C. v. Brennan, 230 F.3d 65, 71 (2d Cir. 2000) (same); CFTC v. Co Petro Mktg.
Grp., Inc., 700 F.2d 1279, 1283 (9th Cir. 1983) (same). The exception does not
allow enforcement of a money judgment against the debtor, however; at most,
a money judgment may be entered. Brennan, 230 F.3d at 71 (“It is well
established that the governmental unit exception of § 362(b)(4) permits the entry
of a money judgment against a debtor so long as the proceeding in which such
a judgment is entered is one to enforce the governmental unit’s police or
8
Case: 12-40122 Document: 00511889658 Page: 9 Date Filed: 06/18/2012
No. 12-40122
regulatory power. . . . However, . . . anything beyond the mere entry of a money
judgment against a debtor is prohibited by the automatic stay.” (citations
omitted)).5
Therefore, the automatic stay and its exception present two different, and
at times competing, policies. On the one hand, the stay aims to protect debtors
and creditors during the pendency of a bankruptcy proceeding to ensure that
debtors get appropriate relief and that creditors receive payment in a fair and
orderly manner. See Commonwealth Oil, 805 F.2d at 1182. On the other hand,
the exception to the stay helps to ensure that debtors do not use a declaration
of bankruptcy to avoid the consequences of their actions that threaten the public
interest. See Brennan, 230 F.3d at 71 (stating that the purpose of the exception
is to “prevent a debtor from frustrating necessary governmental functions by
seeking refuge in bankruptcy court.” (quotation marks and citation omitted)).
5
The court in Brennan cited other cases where courts allowed the entry of a money
judgment against the debtor, so long as there was no effort to collect on the judgment. See,
e.g., N.L.R.B. v. 15th Ave. Iron Works, Inc., 964 F.2d 1336, 1337 (2d Cir. 1992) (per curiam)
(“The ‘enforcement’ of the NLRB order that we command pursuant to 29 U.S.C. § 160(e) allows
the entry of this aspect of the NLRB’s order as, in effect, a ‘money judgment’ against 15th
Avenue. The collection of that judgment after entry, on the other hand, is not authorized by
this ‘enforcement’ proceeding, and requires a separate application to the bankruptcy court.”
(citations omitted)); N.L.R.B. v. Edward Cooper Painting, Inc., 804 F.2d 934, 942-43 (6th Cir.
1986) (“[O]nce proceedings are excepted from the stay by section 362(b)(4), courts have allowed
governmental units to fix the amount of penalties, up to and including entry of a money
judgment.” (citation omitted)); E.E.O.C. v. Rath Packing Co., 787 F.2d 318, 326 (8th Cir. 1986)
(“The entry of a judgment for injunctive relief and backpay is permitted under § 362(b)(5), but
the actual enforcement of the backpay judgment is not permitted.”); Penn Terra Ltd. v. Dep’t
of Env. Res., Com. of Pa., 733 F.2d 267, 275 (3d Cir. 1984) (“As the legislative history explicitly
notes, the mere entry of a money judgment by a governmental unit is not affected by the
automatic stay, provided of course that such proceedings are related to that government’s
police or regulatory powers.”). The reasoning in some of these cases was based on the now-
repealed § 362(b)(5), which stated: “[t]he filing of a petition under section 301, 302, or 303 of
this title does not operate as a stay under subsection (a)(2) of this section, of the enforcement
of a judgment, other than a money judgment. . . .” That subsection was repealed in 1998;
however, as evidenced by the Second Circuit’s decision in Brennan, rendered in 2000, courts
still find the reasoning of those cases persuasive and applicable under current law.
9
Case: 12-40122 Document: 00511889658 Page: 10 Date Filed: 06/18/2012
No. 12-40122
To determine whether proceedings fall within the police or regulatory
power exception to the automatic stay, “courts have applied two ‘related, and
somewhat overlapping’ tests: the pecuniary purpose test and the public policy
test.” Nortel, 669 F.3d at 139 (quoting Lockyer v. Mirant Corp., 398 F.3d 1098,
1108 (9th Cir. 2005)); see also Chao v. Hosp. Staffing Servs., Inc., 270 F.3d 374,
385 (6th Cir. 2001); In re Spookyworld, Inc., 346 F.3d 1, 9 (1st Cir. 2003); Chao
v. Mike & Charlie’s Inc., No. H-05-1780, 2006 WL 18467, at *1 (S.D. Tex. Jan.
4, 2006).
“The pecuniary purpose test asks whether the government primarily seeks
to protect a pecuniary governmental interest in the debtor’s property, as opposed
to protecting the public safety and health.” Nortel, 669 F.3d at 139-40. “The
public policy test asks whether the government is effectuating public policy
rather than adjudicating private rights.” Id. at 140. Thus, “[i]f the purpose of
the law is to promote public safety and welfare or to effectuate public policy,
then the exception to the automatic stay applies. If, on the other hand, the
purpose of the law is to protect the government’s pecuniary interest in the
debtor’s property or primarily to adjudicate private rights, then the exception is
inapplicable.” Id.; see also Lockyer, 398 F.3d at 1109; Eddleman v. U.S. Dep’t of
Labor, 923 F.2d 782, 791 (10th Cir. 1991), overruled in part on other grounds by
Temex Energy, Inc. v. Underwood, Wilson, Berry, Stein & Johnson, 968 F.2d
1003, 1005 n.3 (10th Cir. 1992); In re Gandy, 327 B.R. 796, 803 (Bankr. S.D. Tex.
2005). The pecuniary purpose and public policy tests both “contemplate that the
bankruptcy court, after assessing the totality of the circumstances, [will]
determine whether the particular regulatory proceeding at issue is designed
primarily to protect the public safety and welfare, or represents a governmental
attempt to recover from property of the debtor estate, whether on its own claim,
or on the nongovernmental debts of private parties.” McMullen, 386 F.3d at 325;
see also Hosp. Staffing, 270 F.3d at 389 (stating that the tests “are designed to
10
Case: 12-40122 Document: 00511889658 Page: 11 Date Filed: 06/18/2012
No. 12-40122
sort out cases in which the government is bringing suit in furtherance of either
its own or certain private parties’ interest in obtaining a pecuniary advantage
over other creditors”).
There are two main issues of contention between Halo and the Appellee
telephone companies on appeal: (a) whether the PUC proceedings are being
“continued by” a governmental unit, (b) and whether those proceedings are in
furtherance of the states’ police and regulatory powers.
A. “Continued by”
Halo argues that none of the PUC proceedings should be exempted from
the automatic stay because an action must be prosecuted by and in the name of
a governmental unit in order to be excepted from the automatic stay. Halo bases
its claim on the statutory text, as well as court decisions that have applied the
exception to the stay only where the proceeding is advanced by a governmental
unit that sued or prosecuted the debtor to enforce the governmental unit’s own
police or regulatory powers. It notes that, while in some cases an action may
have originated with a private party complaint to a governmental unit, that unit
then conducted an investigation and adopted the role of the plaintiff or
prosecutor.
The Appellees respond that the bankruptcy court’s ruling was correct
because the private party-initiated proceedings are essentially identical to
proceedings initiated by PUCs. Therefore, these actions should be excepted in
the same manner as those instituted by the state. The Appellees also argue that
Halo focuses on only one part of the statutory language when it states that an
action must be initiated by the government, because the exception applies to “the
commencement or continuation of an action or proceeding by a governmental
unit . . . to enforce such governmental unit’s or organization’s police and
regulatory power.” § 362(b)(4) (emphasis added). According to the Appellees, all
of the state PUC actions are being continued by governmental units because
11
Case: 12-40122 Document: 00511889658 Page: 12 Date Filed: 06/18/2012
No. 12-40122
they are ongoing, and they thus fall within the exception to the automatic stay.
In support of their argument, the Appellees point to cases where a complaint
was initially filed by a private party, but then prosecuted or continued by a state
agency.
Halo waxes hyperbolic when it states that “every reported case that has
applied the exception to the automatic stay has involved an independent
proceeding advanced by a governmental unit that sued or prosecuted the debtor
to enforce the governmental unit’s own police or regulatory powers.” While most
cases do involve actions pursued by a governmental unit in its own name, the
circumstances vary. As the Appellees make clear, many cases are initiated by
the filing of a complaint by a private party. This is especially true in actions
seeking to vindicate workers’ rights. See, e.g., NLRB v. Evans Plumbing, 639
F.2d 291, 292 (5th Cir. Unit B 1981) (two employees filed a charge of unfair
labor practices with the National Labor Relations Board, and the charge was set
for a hearing when the employer filed for bankruptcy; the hearing was held, and
the NLRB then filed a petition in this Court to enforce its decision ordering the
employer to reinstate the employees with backpay, which petition the Court
granted).6 Courts have recognized that though these actions may have
similarities to private litigation, they also promote the public interest by
6
See generally In re Mohawk Greenfield Motel Corp., 239 B.R. 1 (Bankr. D. Mass. 1999)
(two former employees filed complaints with the Massachusetts Commission Against
Discrimination, and after conducting hearings, the Commission found for them and sought to
enforce a monetary judgment; the bankruptcy court held that the hearings and the entry of
a monetary judgment were excepted from the automatic stay, largely due to the state’s public
policy against discrimination, but that any effort to enforce the award would not be allowed);
In re Ngan Gung Restaurant, Inc., 183 B.R. 689 (Bankr. S.D.N.Y. 1995) (private individuals
complained to the Attorney General about a restaurant’s labor practices; the Attorney General
investigated and then filed a Notice of Petition against the restaurant in state court, which
action the bankruptcy court held was exempt from the automatic stay); In re SSS of Ky., Inc.,
29 B.R. 19 (Bankr. W.D. Ky. 1983) (where private parties filed an opposition to the sale of a
broadcast license with the FCC, the bankruptcy court ruled that the proceedings before the
FCC were exempt from the automatic stay).
12
Case: 12-40122 Document: 00511889658 Page: 13 Date Filed: 06/18/2012
No. 12-40122
enforcing state laws and regulations. See, e.g., In re D. M. Barber, Inc., 13 B.R.
962, 963 (Bankr. N.D. Tex. 1981) (“Proceedings before the National Labor
Relations Board are commenced by the initiative of aggrieved individual persons
and thus have some characteristics of private litigation. However the case law
reflects that the proceedings by the Board are not to adjudicate private rights
but to effectuate public policy.” (citations omitted)).
There are some cases in which courts have ruled that an action must be
brought by the governmental unit in order for it to be exempt from the automatic
stay under § 362(b)(4). In In re Reyes, for example, a private party filed a
complaint with the Texas Real Estate Commission (“TREC”) against a debtor
after she had declared bankruptcy. See No. 10–52366–C, 2011 WL 1522337, at
*1 (Bankr. W.D. Tex. Apr. 20, 2011). The bankruptcy court held that the action
before the TREC was not exempt from the automatic stay. Id. at *7. The court
relied, in part, on the fact that once a complaint was filed, “the TREC would be
obligated to investigate the allegations if the complaint, together with any
evidence submitted with the complaint, provided reasonable cause for an
investigation.” Id. at *4.7 Thus, “[t]he Commission has no discretion in deciding
whether to investigate if the complaint provides sufficient grounds for an
investigation.” Id. The court also found that the action was not in furtherance
of the public interest, but rather to benefit the pecuniary interests of the
complainant. Id. at *6. The court therefore held that § 362(b)(4) should be
“narrowly construed” and “applied only when an action against the debtor has
been brought by the government.” Id. at *7; see also Nortel, 669 F.3d at 139
7
The court in Reyes also noted that the complainant and her attorney filed the
complaint against the debtor in the TREC in order to collect on a money judgment rendered
against the debtor prior to her filing for bankruptcy: “[The plaintiff’s attorney] had also
warned the debtor . . . after [he] had obtained the judgment for his client that, if the debtor
filed for bankruptcy, he would make sure that she lost her real estate license.” 2011 WL
1522447, at *4.
13
Case: 12-40122 Document: 00511889658 Page: 14 Date Filed: 06/18/2012
No. 12-40122
(stating that though the U.K. Pensions Regulator is a governmental entity, and
though it initiated a regulatory procedure, it “is not a party to the pending
bankruptcy proceedings . . . [and] did not file a claim and therefore cannot
assert the police power exception”); Gandy, 327 B.R. at 802 (stating that “the
court must determine whether the plaintiff in the state court action is a
‘governmental unit’” (emphasis added)); City of New York v. Exxon Corp., 932
F.2d 1020, 1025 (2d Cir. 1991) (“11 U.S.C. § 362(b)(4) . . . requires that such suits
be brought by governmental units, not private persons.”).
The court in Reyes relied in part on United States International Trade
Commission v. Jaffe, 433 B.R. 538 (E.D. Va. 2010), in making its decision. In
Jaffe, a proceeding before the International Trade Commission (“ITC”) was
initiated by a private party’s complaint, but the court found it “noteworthy that
the filing of the complaint does not initiate a formal ITC § 337 investigation;
rather, the action simply results in a ‘preinstitution proceeding,’ in which the
ITC ‘examine[s] the complaint for sufficiency and compliance,’ and performs a
preliminary investigation.” Id. at 541 (quoting 19 C.F.R. § 210.8). Once the ITC
does the preinvestigation and determines that a complaint was properly filed,
it institutes an investigation and provides official notice by publication.8 Id. The
matter is then referred to an administrative law judge, who determines, through
an adversarial process, whether or not the respondent has violated the Tariff
Act. Id. Therefore, even though the suit at issue was brought by private parties,
the court found that it “fits squarely within the § 362(b)(4) statutory exception
to the automatic stay” because “the ITC took affirmative steps to order the
commencement of a § 337 investigation.” Id. at 543. In Jaffe, then, though the
suit was commenced and pursued by a private party, the court held that it still
8
It was on this basis that the court in Reyes distinguished its case, because the TREC
had no “preinstitution proceeding,” nor did it have discretion in determining whether a
complaint was validly filed and thus should go forward. See 2011 WL 1522337, at *5.
14
Case: 12-40122 Document: 00511889658 Page: 15 Date Filed: 06/18/2012
No. 12-40122
met the two requirements of § 362(b)(4): “(i) the action is brought by the
government, and (ii) the action seeks to vindicate the public interest, as opposed
to a specific individual’s or entity’s rights.” Id.
Similarly, in McMullen, a couple filed a complaint against a realtor with
the Massachusetts Division of Registration for Real Estate Agents after the
realtor had declared bankruptcy. 386 F.3d at 323. The court held that
submitting a complaint after the filing of bankruptcy, which the Division then
investigated, was excepted from the stay, notwithstanding the fact that the
action was initiated by a private party. Id. at 327-28.
While the court in Jaffe took pains to point out the discretion the
government agency had in allowing an action to proceed, other courts have held
that actions brought by private parties are excepted from the automatic stay
without going into such an analysis. For instance, in Alpern v. Lieb, 11 F.3d 689(7th Cir. 1993), the Seventh Circuit held that a proceeding to impose sanctions
under Rule 11 was exempt from the automatic stay. The court stated:
[t]he Rule 11 sanction is meted out by a governmental
unit, the court, though typically sought by a private
individual or organization–a nongovernmental litigant,
the opponent of the litigant to be sanctioned. There is
no anomaly, given the long history of private
enforcement of penal and regulatory law. The private
enforcer, sometimes called a ‘private attorney general,’
can be viewed as an agent of the ‘governmental unit,’
the federal judiciary, that promulgated Rule 11 in order
to punish unprofessional behavior.
Id. at 690. In In re Berg, 230 F.3d 1165 (9th Cir. 2000), the Ninth Circuit held
that an award of attorneys’ fees imposed as a sanction for unprofessional conduct
was exempted from the automatic stay. The court stated that “it is clear that the
purpose of such sanctions is to effectuate public policy, not to protect private
rights or the government’s interest in the sanctioned person’s property.” Id. at
1168. Both the Seventh and Ninth Circuits focused on the fact that the
15
Case: 12-40122 Document: 00511889658 Page: 16 Date Filed: 06/18/2012
No. 12-40122
sanctions at issue would help to promote the public policy of the state, in the
same way that the Jaffe court found that “ITC § 337 investigations plainly
evidence an objective purpose of protecting the public interest at each stage of
the ITC investigation.” 433 B.R. at 545.9
In this case, the bankruptcy court did not make any findings as to the
specific procedures in each state PUC, which would aid us in determining
whether the individual commissions conduct preinvestigation proceedings, or
have discretion over whether an action goes forward, as the courts in Jaffe and
Reyes did. According to AT&T, there is no real difference between proceedings
initiated by private parties and those initiated by the State Commissions
themselves. As an example, AT&T points to a recent action commenced by the
Wisconsin Public Service Commission, investigating the actions of Halo and
Transcom, among other companies, which it says is “substantively identical” to
the proceedings at issue in this case. Similarly, the TDS Appellees state that the
Georgia Public Interest Advocacy Staff and the consumer’s utility counsel
division become parties to the proceedings once a private party files a complaint.
When a representative of the Missouri Public Service Commission (“MoPSC”)
appeared to give testimony at the hearing before the bankruptcy court, she
stated that the MoPSC becomes a party when a complaint is filed with it. See
MO. ANN. STAT. § 386.390(1) (West 2012). Thus, there is evidence that at least
some of the PUC actions at issue here are similar to any action that a state
9
It has been held that qui tam actions are excepted from the automatic stay, as well.
In United States ex rel. Doe v. X, Inc., 246 B.R. 817 (E.D. Va. 2000), a private party brought
a qui tam False Claims action, and the federal government had not yet decided whether or not
to intervene. The court held that the exception to the automatic stay applied because “the
United States is the real party in interest in all qui tam suits,” such that “the instant qui tam
suit is ‘brought by a governmental unit’ for the purposes of § 362(b)(4)’s police powers
exception, even though the United States has not yet made its intervention election.” Id. at
820.
16
Case: 12-40122 Document: 00511889658 Page: 17 Date Filed: 06/18/2012
No. 12-40122
regulatory commission might take itself, and that in some instances, a
“governmental unit” actually becomes a party to the action.
Perhaps more importantly, as the Appellees note, the statutory language
directs that “the commencement or continuation of an action or proceeding by a
governmental unit” is excepted from the automatic stay. § 362(b)(4) (emphasis
added). It neither ignores nor twists the words of the statute to interpret this
phrase as excepting suits continued by a governmental unit, without regard to
who initially filed the complaint. Accordingly, we find that the PUC actions
meet the first requirement of the exception to the automatic stay, because they
are being continued by governmental units.
B. The State’s Police and Regulatory Power
Halo next argues that the various PUC proceedings are private contract
actions brought by the telephone company Appellees in their own pecuniary
interest, so they do not meet the second statutory requirement that an excepted
action be intended “to enforce such governmental unit’s or organization’s police
and regulatory power.” § 362(b)(4). In both its briefs and at oral argument, Halo
also stated that many of the Appellees’ claims are federal questions. For
instance, according to Halo, Transcom’s status as either an enhanced service
provider or an end user “is a federal question that several federal courts have
decided without prior regulatory input.” Halo also argues that whether or not
it provides CMRS is a question that is not within the state commissions’
jurisdiction, and but rather must be resolved by the FCC.
According to the Appellees, the bankruptcy court’s order does effectuate
the policies of the Bankruptcy Code because it prevents Halo from using
bankruptcy to frustrate governmental functions and to avoid the states’ police
and regulatory powers. The telephone companies argue that the order protects
important state regulatory powers, as well as public policies underlying
telecommunications statutes, regulations, and tariffs, including maintaining the
17
Case: 12-40122 Document: 00511889658 Page: 18 Date Filed: 06/18/2012
No. 12-40122
proper balance of federal and state authority in telecommunications law. In
addition, the Appellees note that since ICAs must be approved by the state
commissions, they are not merely private contract disputes, but rather are an
aspect of the states’ regulation and enforcement of intra-state
telecommunications. Finally, the Appellees state that the fact that the PUCs
may determine whether Halo owes the Appellee companies fees or enter money
judgments does not preclude application of § 362(b)(4), because the bankruptcy
court’s order requires that the parties return to that court before the
enforcement of any money judgment can occur.
Halo may be correct that some of the claims made by the Appellees in the
PUCs will ultimately need to be decided by a federal court. However, as this
Court has noted before, the FTA envisions a “carefully crafted federal-state
balance” that “erects a scheme of ‘cooperative federalism.’” Budget Prepay, Inc.
v. AT&T Corp., 605 F.3d 273, 281 (5th Cir. 2010) (quoting Core Commc’ns, Inc.
v. Verizon Pa., Inc., 493 F.3d 333, 335 (3d Cir. 2007)). Under this arrangement,
“responsibility for complex regulatory schemes [is divided] between states and
the federal government, with the federal government setting general standards
and ensuring overall compliance, while state agencies are given latitude to
proceed in any number of fashions, provided that they are not inconsistent with
the Act and FCC regulations.” Id. (internal quotation marks and citation
omitted). The Appellees have brought claims under both federal and state
telecommunications laws, and further, interpretation and enforcement of ICAs
is entrusted in the first instance to state commissions. See 47 U.S.C. § 252;
Budget Prepay, 605 F.3d at 279 (stating that “interpretation of the terms of an
ICA, even if the ICA terms are intertwined with federal law, is a claim governed
by and arising under state law” (citing Sw. Bell Tel. Co. v. Pub. Utility Comm’n
of Tex., 208 F.3d 475 (5th Cir. 2000)).
18
Case: 12-40122 Document: 00511889658 Page: 19 Date Filed: 06/18/2012
No. 12-40122
Furthermore, state PUC rulings are subject to federal court review. See
47 U.S.C. §§ 251, 252; Sw. Bell, 208 F.3d at 480 (“We also hold that the district
courts have jurisdiction to review such interpretation and enforcement decisions
of the state commissions.”). We have held that this federal review encompasses
not only commission decisions regarding compliance with the requirements of
the FTA, but also permits courts to review “the PUC’s state law determinations
. . . under the . . . arbitrary-and-capricious standard.” Sw. Bell, 208 F.3d at 482.
Thus, Halo is not being denied a federal forum by the requirement that it first
submit to the jurisdiction of the state PUCs. While Halo may feel that it would
be more expedient and efficient to have all of these actions heard in one court,10
we responded to a similar argument in Budget Prepay by noting that “the
potential for inconsistent results” that arises from litigating in multiple state
commissions “[is] part and parcel of cooperative federalism,” and this result is
consistent with congressional intent. 605 F.3d at 281. By choosing to conduct
business in a number of different states, Halo has consented to such a system.
We also find that the PUC actions at issue here pass both the pecuniary
purpose and public policy tests outlined above, and are thus in furtherance of the
states’ regulatory and police powers. Through these proceedings, the states do
not “primarily see[k] to protect a pecuniary governmental interest in the debtor’s
property, as opposed to protecting the public safety and health.” Nortel, 669
F.3d at 139-40. None of the PUC proceedings would give the states access to
Halo’s property. In addition, the bankruptcy court’s order ensures that if a PUC
rules that Halo owes fees to one of the Appellees, no enforcement of any money
judgment may take place without first going back to the bankruptcy court.
Thus, the suits are not strictly in the pecuniary interest of the Appellees, either.
10
While we need not delve further into this issue here, we note that even if it were
appropriate to consolidate all of these actions in one federal forum, we do not agree with Halo
that it necessarily follows that a federal bankruptcy court is the most fitting choice.
19
Case: 12-40122 Document: 00511889658 Page: 20 Date Filed: 06/18/2012
No. 12-40122
Instead, they will aid in determining what kind of telecommunications provider
Halo is, how it should interact with the local telephone companies with which it
deals, and whether its interactions with them thus far have followed the
applicable rules and regulations. The fact that Halo must expend money in
defending these multiple actions does not mean that the exception should not
apply. As this Circuit has recognized, “in contemporary times, almost
everything costs something.” Commonwealth Oil, 805 F.2d at 1186 (quoting
Penn Terra, 733 F.2d at 278). Even if a PUC enters a money judgment against
Halo, as long as it does not seek to enforce that judgment, the action still falls
under the exception to the automatic stay. Brennan, 230 F.3d at 71. This fact
seriously weakens Halo’s argument that the bankruptcy court’s ruling will
undermine “the ordered administration or re-organization of [its] estate or
business.”
Moreover, the FTA indicates that regulation of telecommunications
carriers serves the public interest. The Act was passed in part to ensure that
“all the people of the United States, without discrimination on the basis of race,
color, religion, national origin, or sex, [have available] a rapid, efficient,
Nation-wide, and world-wide wire and radio communication service with
adequate facilities at reasonable charges.” 47 U.S.C. § 151. This demonstrates
a clear public purpose to federal regulation of telecommunications. The Act
requires that “[a]ny interconnection agreement adopted by negotiation or
arbitration shall be submitted for approval to the State commission. ” 47 U.S.C.
§ 252(e)(1). Thus, the Act contemplates a public purpose to state regulation of
telecommunications, as well. Furthermore, even ICAs between two private
companies, such as those in dispute between AT&T and Halo (what Halo calls
“private contracts”), have a public nature, as they must be approved by the
applicable State commission.
20
Case: 12-40122 Document: 00511889658 Page: 21 Date Filed: 06/18/2012
No. 12-40122
Halo argues that “[t]he facts underlying the parties’ disputes involve
commercial competition and compensation–not government enforcement in the
public interest.” However, state case law and statutes regarding PUCs
demonstrate their public purpose. For instance, the Missouri Public Service
Commission Act “was the result of growing feeling that such competition, as
existed in this field, was inadequate to protect the public.” May Dep’t Stores Co.
v. Union Elec. Light & Power Co., 341 Mo. 299, 316 (1937). The Missouri Act
uses the “police power of the state,” id. at 316, in order “to secure equality in
service and in rates for all who needed or desired these services and who were
similarly situated,” id. at 317. In Georgia, the Public Service Commission
“clearly has enforcement and regulatory powers. It not only has the power to
conduct hearings and render decisions, it also has the power to act on those
decisions, such as granting or denying licenses and rate increases.” Campaign
for a Prosperous Ga. v. Ga. Power Co., 174 Ga. App. 263, 264 (Ct. App. 1985). It
is the policy of Texas “to protect the public interest in having adequate and
efficient telecommunications service available to each resident of this state at
just, fair, and reasonable rates.” V.T.C.A., Util. Code § 52.001(a). This policy is
effected through the Texas PUC, which “has the general power to regulate and
supervise the business of each public utility within its jurisdiction and to do
anything specifically designated or implied by this title that is necessary and
convenient to the exercise of that power and jurisdiction.” Id. § 14.001. When
resolving disputes, the Texas PUC is directed to consider the effect on
“(1) consumers, (2) competitors; and (3) the incumbent local exchange company.”
Id. § 60.003(c). These cases and statutes provide examples of state PUCs’
mandate to protect the public interest, and show that they utilize the police and
regulatory powers of the states in doing so.
Under the pecuniary purpose and public policy tests, a bankruptcy court
must “determine whether the particular regulatory proceeding at issue is
21
Case: 12-40122 Document: 00511889658 Page: 22 Date Filed: 06/18/2012
No. 12-40122
designed primarily to protect the public safety and welfare[.]” McMullen, 386
F.3d at 325. The bankruptcy court here recognized that “the actions of the
Public Utilities Commission . . . are aimed at effectuating public policies[.] [T]he
Public Utility Commissions are seeking to enforce regulatory statutes, including
their tariffs and rules.” The bankruptcy judge’s order limiting the effect of any
monetary judgments issued by the PUCs ensures that the actions at issue pass
the pecuniary purpose test; federal and state regulations and case law
demonstrate that telecommunications regulation is intended to serve the public
interest. Consequently, we find that the PUC proceedings meet the requirement
of § 362(b)(4) that the governmental unit be enforcing its police or regulatory
powers, and they were properly excepted from the automatic bankruptcy stay.
C. Motion to Strike
The Missouri Public Service Commission (“MoPSC”) filed a brief at the
same time as the telephone company Appellees. Halo then filed a motion to
strike the MoPSC’s brief and to remove it from the caption of the case, on the
grounds that the MoPSC is not a party to this action, the bankruptcy judge did
not grant the MoPSC’s motion to intervene, and that the MoPSC had not
requested permission to file an amicus brief from this Court. The MoPSC
responded to the motion, asking the Court to accept its brief as the brief of an
amicus curiae under Federal Rule of Appellate Procedure 29(a) or (b) if the Court
does not recognize it as an intervenor. Halo opposes the MoPSC’s request for
alternative relief.
The MoPSC first argues that the bankruptcy judge granted its motion to
intervene. However, while the record shows that on October 7, 2011, a motion
to intervene was granted, the record does not reveal any court order associated
with that docket entry. According to Halo, the entry “reflects only the electronic
submission of a proposed order by the MoPSC.” The bankruptcy court did allow
the MoPSC to appear at the October 7, 2011 hearing in which it made its
22
Case: 12-40122 Document: 00511889658 Page: 23 Date Filed: 06/18/2012
No. 12-40122
findings of fact and conclusions of law, and any testimony by a representative of
the MoPSC there is now part of the record. However, it does not appear that the
MoPSC was ever formally made a party to this action.
Halo opposes the MoPSC’s alternative request that its brief be considered
that of an amicus, arguing that the MoPSC has not met the requirements of Rule
29. Under that rule, “[t]he United States or its officer or agency or a state may
file an amicus-curiae brief without the consent of the parties or leave of court.
Any other amicus curiae may file a brief only by leave of court or if the brief
states that all parties have consented to its filing.” Fed. R. App. P. 29(a). We
agree that the MoPSC’s brief does not fall within the parameters of Rule 29.
However, it would still be within our discretion to accept the brief. See Fry v.
Exelon Corp. Cash Balance Pension Plan, 576 F.3d 723, 725 (7th Cir. 2009) (“The
court has discretion to accept an untimely filing when the value of the potential
amicus brief justifies the inconvenience of requiring the judges to review a case
multiple times . . . .”).
More fundamentally, Halo contends that the MoPSC’s brief “adds nothing
to this appeal.” The MoPSC counters that “[t]he other appellees in this case do
not adequately represent the interests of the MoPSC[,]” because they are
“regulated telephone companies” with “different interests than the MoPSC has
as a regulator.” As Judge Posner has written,
[a]n amicus brief should normally be allowed when a
party is not represented competently or is not
represented at all, when the amicus has an interest in
some other case that may be affected by the decision in
the present case (though not enough affected to entitle
the amicus to intervene and become a party in the
present case), or when the amicus has unique
information or perspective that can help the court
beyond the help that the lawyers for the parties are
able to provide.
23
Case: 12-40122 Document: 00511889658 Page: 24 Date Filed: 06/18/2012
No. 12-40122
Ryan v. CFTC, 125 F.3d 1062, 1063 (7th Cir. 1997); see also New England
Patriots Football Club, Inc. v. Univ. of Colo., 592 F.2d 1196, 1198 n.3 (1st Cir.
1979) (stating that an amicus is one who “for the assistance of the court gives
information of some matter of law in regard to which the court is doubtful or
mistaken” (quotation marks and citation omitted)). Here, there is no evidence
that any of the Appellees are poorly represented, or that there is a case outside
of those between Halo and these Appellees in which the MoPSC has an interest.
While the MoPSC may have a “unique perspective,” due to its status as a
regulator, its brief in fact contains no information or arguments that the
Appellees did not already provide to the Court. Furthermore, because the
bankruptcy judge permitted a representative of the MoPSC to testify at the
October 7, 2011 hearing, this Court is already aware of the MoPSC’s concerns.
“Whether to permit a nonparty to submit a brief, as amicus curiae, is, with
immaterial exceptions, a matter of judicial grace.” Nat’l Org. for Women, Inc. v.
Scheidler, 223 F.3d 615, 616 (7th Cir. 2000). Because the MoPSC’s brief does not
meet the requirements of Rule 29, and we do not find that it adds anything
consequential to our consideration of this case, Halo’s motion to strike is
granted. See Ysleta Del Sur Pueblo v. El Paso Cnty. Water Improvement Dist.
No. 1, 222 F.3d 208, 209 (5th Cir. 2000) (per curiam) (“We find that
Southwestern Bell’s motion is untimely, that the issue Southwestern Bell seeks
to address has been adequately briefed by the Pueblo and the District, and that
granting Southwestern Bell’s motion would result in the needless delay of this
case’s disposition. Accordingly, Southwestern Bell’s motion is denied.” (citation
omitted)).
D. Motion to Take Judicial Notice
AT&T has filed a motion for the Court to take judicial notice of federal
court and state commission proceedings and orders that have been referenced
and/or discussed in the parties’ briefing in this appeal. Halo opposes AT&T’s
24
Case: 12-40122 Document: 00511889658 Page: 25 Date Filed: 06/18/2012
No. 12-40122
motion, arguing that all but two of the matters come from outside the record and
were not considered by the bankruptcy court. Halo also contends that AT&T is
simply attempting to circumvent judicial rules regarding record excerpts and
record supplementation.
Halo cites case law for the premise that judicial notice cannot be used as
“an impermissible attempt to supplement the record on appeal” with evidence
not before the district court. United States v. Okoronkwo, 46 F.3d 426, 435 (5th
Cir. 1995). However, “[a]lthough a court of appeals will not ordinarily enlarge
the record to include material not before the district court, it is clear that the
authority to do so exists.” Gibson v. Blackburn, 744 F.2d 403, 405 n.3 (5th Cir.
1984). In addition, it is within the Court’s discretion to take judicial notice of
information “capable of accurate and ready determination by resort to a source
whose accuracy on the matter cannot reasonably be questioned.” Kitty Hawk
Aircargo, Inc. v. Chao, 418 F.3d 453, 457 (5th Cir. 2005); see also Bauer v. Texas,
341 F.3d 352, 362 n.8 (5th Cir. 2003). As AT&T has filed copies of publicly-
available orders and proceedings, it is within our discretion to take judicial
notice of them.
Ultimately, AT&T’s filing does not add anything to the record that assists
us in deciding this case. The reasoning of a federal court in remanding an action
by AT&T against Halo to a PUC, or a notice of proceedings by a state PUC not
involved in the present dispute, do not help us to determine whether the state
PUC proceedings should be excepted from the automatic bankruptcy stay. While
the remand orders may give more detail regarding federal and state
telecommunications law and how the two interact, they do not answer the
central question: whether the state PUC actions are “commence[d] or continu[ed]
. . . by a governmental unit” in the enforcement of its “police or regulatory
power.” 362(b)(4). Therefore, while we grant AT&T’s motion to supplement the
25
Case: 12-40122 Document: 00511889658 Page: 26 Date Filed: 06/18/2012
No. 12-40122
record, we do so with the understanding that these documents are not especially
helpful to the Court.
IV. CONCLUSION
“It is well to remember that section 362(b)(4) embodies a fundamental
judgment of Congress: that protecting the public welfare and safety trumps the
concerns that underlie the automatic stay, a provision whose main purpose is to
prevent some private creditors from gaining priority on other creditors.”
Spookyworld, 346 F.3d at 10. In addition, “a fundamental policy behind the
police or regulatory power exception . . . is to prevent the bankruptcy court from
becoming a haven for wrongdoers.” Commonwealth Cos., 913 F.2d at 527(internal quotation marks and citation omitted). If Halo is permitted to stay all
of the PUC proceedings, it will have used its bankruptcy filing to avoid the
potential consequences of a business model it freely chose and pursued. A
finding that the state PUC actions are being continued by governmental units
does not run afoul of the statutory language of § 362(b)(4), and is in keeping with
the policy animating the exception. The PUC proceedings are also being used
to enforce the police and regulatory power of the states. Accordingly, the
bankruptcy court’s order was not in error, and the judgment of the bankruptcy
court is AFFIRMED.
Halo’s motion to strike the brief submitted by the Missouri Public Service
Commission and to remove the Missouri Public Service Commission from the
caption of the case is GRANTED. AT&T’s motion to take judicial notice is also
GRANTED.
26