501 B.R. 233
Bankr. D. Del.2013Background
- Debtors filed Chapter 11 on June 10, 2013; Westfield Gas & Electric (a municipal utility) sought an administrative expense under 11 U.S.C. § 503(b)(9) for electricity and natural gas provided within the 20 days before the petition.
- Westfield claimed $93,262.55 for electricity and gas delivered in the 20-day window; Debtors objected mainly on the ground that § 503(b)(9) covers only “goods,” not services.
- The parties agreed natural gas is a “good” under the U.C.C.; the dispute centered on whether electricity qualifies as a “good” and, for natural gas, whether billed line items (supply vs. transportation/distribution/customer charges) are entitled to § 503(b)(9) priority.
- Westfield’s 20-day claim was assembled from two billing cycles; one bill (May 29–June 10) showed meter readings adequate to value gas supply; the other (May 22–May 28) lacked sufficient detail for apportionment.
- Court adopted the U.C.C. definition of “goods” and chose the apportionment approach (value of goods vs. services) rather than the predominance test; it allowed $78.08 as an administrative expense for natural gas supplied May 29–June 10 and denied administrative priority for electricity.
Issues
| Issue | Westfield’s Argument | Debtors’ Argument | Held |
|---|---|---|---|
| Is electricity a “good” under § 503(b)(9) (U.C.C. § 2-105)? | Electricity is tangible, measurable, movable and metered; identification at the meter makes it a good. | Electricity is consumed essentially simultaneously with metering; the infinitesimal gap cannot satisfy the movability-at-identification requirement. | Electricity is not a good; the delay between identification and consumption is not meaningfully separable. |
| Are natural gas charges within 20 days entitled to § 503(b)(9) priority? | Natural gas is expressly a U.C.C. good; all gas-related billed items should be allowed. | Only the gas supply (commodity) portion is a good; transportation/distribution/customer charges are services. | Natural gas is a good; only the gas-supply line item is a § 503(b)(9) priority (apportionment adopted). |
| Method to resolve hybrid bills (goods + services): predominance test vs. apportionment | Predominant purpose of the transaction should control and, if goods predominate, the entire claim gets priority. | Each bill should be parsed item-by-item so only the value attributable to goods gets priority. | Adopted apportionment: allocate administrative priority to the portion of the bill that is for goods. |
| Should allowed § 503(b)(9) claim be paid immediately? | Immediate payment necessary because administrative claims may not be paid in full. | Debtor would be prejudiced; immediate payment unnecessary absent hardship or necessity. | Discretionary denial of immediate payment: no evidence of necessity or hardship from Westfield; payment not ordered now. |
Key Cases Cited
- In re Erving Indus., 432 B.R. 354 (Bankr. D. Mass. 2010) (electricity held a good based on movability/identification analysis)
- GFI Wisconsin, Inc. v. Reedsburg Util. Comm’n, 440 B.R. 791 (W.D. Wis. 2010) (electricity treated as a good; meter satisfies identification)
- In re Great Atl. & Pac. Tea Co., Inc., 498 B.R. 19 (S.D.N.Y. 2013) (recognized split; remanded for evidentiary development on electricity’s characterization)
- In re Pilgrim’s Pride Corp., 421 B.R. 231 (Bankr. N.D. Tex. 2009) (electricity held not a good; interpretive/textual limits on U.C.C. definition)
- In re Plastech Engineered Prods., Inc., 397 B.R. 828 (Bankr. E.D. Mich. 2008) (supports apportionment approach for hybrid transactions under § 503(b)(9))
- In re PMC Mktg. Corp., 501 B.R. 17 (Bankr. D. P.R. 2013) (treated electricity as utility service under § 366; case‑specific analysis)
- In re Goody’s Family Clothing Inc., 401 B.R. 131 (Bankr. D. Del. 2009) (adopted U.C.C. definition of “goods” for § 503(b)(9) purposes)