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Bankruptcy Litigation

Sixth Circuit Considers Rejection of a Filed Power Purchase Agreement

The provisions of the Bankruptcy Code sometimes conflict with other federal laws and regulations. The Sixth Circuit Court recently considered whether an energy company debtor could reject a power purchase agreement as an executory contract that had been filed with the Federal Energy Regulatory Commission (FERC)

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The provisions of the Bankruptcy Code sometimes conflict with other federal laws and regulations. A debtor that operates in a highly regulated industry often faces additional hurdles in administering its bankruptcy case that would be routine in other Chapter 11 proceedings. Conversely, a regulated debtor might find the Bankruptcy Code enables it to avoid an otherwise inevitable regulatory consequence. The U.S. Court of Appeals for the Sixth Circuit Court recently considered whether an energy company debtor could reject a power purchase agreement as an executory contract that had been filed with the Federal Energy Regulatory Commission (FERC). Outside of bankruptcy, the debtor’s ability to address the contract would fall under FERC’s exclusive jurisdiction. Here, the bankruptcy court ruled that FERC had no jurisdiction, and the bankruptcy court had exclusive jurisdiction to adjudicate the matter. The Sixth Circuit court rejected that position, and ruled that the bankruptcy court and FERC have concurrent jurisdiction. The opinion was issued on Dec. 12, 2019, in the case of In re FirstEnergy Solutions, Case Nos. 18-3787/3788/4095/4097/4107/4110.

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