440 B.R. 791
W.D. Wis.2010Background
- GFI Wisconsin, Inc. filed a chapter 11 bankruptcy on June 30, 2009, with electricity supplied by the Reedsburg Utility Commission and Wisconsin Electric Power Company to be delivered in the 20 days before filing.
- September 25, 2009, appellees sought administrative priority under 11 U.S.C. § 503(b)(9) for electricity provided during the 20-day period; GFI objected arguing electricity is not a 'good'.
- The parties submitted stipulated facts, including that electricity was metered at GFI's premises as it was drawn and consumed, and that charges would be pro rata estimated for the Twenty-Day Period.
- GFI argued electricity is not movable or identifiable as a good under UCC § 2-105 and questioned reclaimability under § 546(c); appellees argued electricity is movable and identifiable when metered.
- Bankruptcy Judge denied the objections on June 1, 2010, ruling electricity qualifies as a 'good' under the UCC and the Bankruptcy Code for § 503(b)(9) priority.
- The district court held that electricity is a movable, identifiable good under § 503(b)(9) and rejected arguments about predominant purpose and bundling of services; the opinion affirms the bankruptcy court’s decision.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does electricity qualify as a 'good' under § 503(b)(9)? | GFI argues electricity is not a movable good and thus not within § 503(b)(9). | Appellees contend electricity is movable, identifiable at metering, and thus qualifies as a good under UCC § 2-105 and § 503(b)(9). | Yes, electricity is a good under § 503(b)(9). |
| If electricity is a good, should the predominant purpose test apply to § 503(b)(9) claims? | The contract includes services; application of predominant purpose would exclude some or all claims. | Predominant purpose is irrelevant to § 503(b)(9) priority for goods; it should not bar claims for the value of goods. | Predominant purpose test does not apply to § 503(b)(9) claims. |
| Can appellees recover the value of bundled services accompanying electricity in the 20-day pre-petition period? | Bundled services (transmission, metering, etc.) should be unbundled; only the energy charge qualifies for § 503(b)(9). | Bundling does not defeat the 503(b)(9) claim for the goods delivered; services do not preclude priority for the goods. | Electricity (goods) qualify for § 503(b)(9) priority; bundling does not defeat the claim. |
Key Cases Cited
- In re Smith, 582 F.3d 767 (7th Cir. 2009) (finality of bankruptcy-order appeal standards cited)
- In re Ross-Tousey, 549 F.3d 1148 (7th Cir. 2008) (definitive adjudication may be appealed immediately)
- In re Erving Industries, Inc., 432 B.R. 354 (Bankr.D. Mass. 2010) (electricity may be treated as a 'good' for § 503(b)(9))
- In re Plastech Engineered Products, Inc., 397 B.R. 828 (Bankr.E.D. Mich. 2008) (unbundling goods vs. services under § 503(b)(9))
- In re Pilgrim's Pride Corp., 421 B.R. 231 (Bankr.N.D. Tex. 2009) (electricity not 'good' under § 503(b)(9) in some analyses)
- In re Circuit City Stores, Inc., 416 B.R. 531 (Bankr.E.D.Va. 2009) (predominant purpose disputes; Article 2 applicability)
- In re Plastech, 397 B.R. 828 (Bankr.E.D.Mich. 2008) (goods-based priority despite bundled services)
- Lamie v. United States Trustee, 540 U.S. 526 (2004) (plain-language statutory interpretation rule)
- In re Brown & Cole Stores LLC, 375 B.R. 873 (9th Cir. BAP 2007) (recovery of goods under § 503(b)(9) not limited to reclaimable items)