Summary:
Halo entered into interconnection agreements (together referred to as the “ICA”) with BellSouth for the transmission of Halo’s wireless data over AT&T networks. A dispute arose between BellSouth and Halo regarding the ICA, with Halo first filing a complaint against BellSouth (among others) in federal District Court in the Eastern District of Texas seeking to limit BellSouth (and others) from having the ICA dispute in any other forum than the FCC. BellSouth subsequently brought suit against Halo before North Carolina Utilities Commission (“NCUC”) for breach of the ICA seeking monetary damages and injunctive relief. Halo then filed Chapter 11 in the Eastern District of Texas, eventually bringing an Adversary Proceeding containing allegations similar to positions asserted by Halo in the NCUC proceeding. Halo then filed, pursuant to 28 U.S.C.§ 1452(a), a Notice of Removal of the NCUC proceeding to the Eastern District of North Carolina Bankruptcy Court. In the Texas bankruptcy proceeding, the stay was lifted allowing the NCUC (and other state regulatory agencies) to continue their proceeding, with the liquidation of claims reserved for the Texas bankruptcy court. Halo appealed, losing at the district court, with the matter pending appeal at the 5th Circuit.
BellSouth filed a Motion to Strike the Removal of the NCUC matter, arguing both that removal was improper because:
1. A claim or cause of action may only be removed if a court has jurisdiction over the subject matter of the cause of action (and that this matter is a non-core “related to” proceeding); and
2. Only a cause of action in a civil action may be removed and the NCUC Proceeding is a regulatory proceeding that implicates a governmental unit’s regulatory powers, rather than civil actions between private parties.
Even if jurisdiction is proper, BellSouth urges that, under notions of cooperative federalism ICA disputes must first be addressed by state commissions because construction and enforcement of ICAs are within their sole and original jurisdiction. Halo asserted that the bankruptcy court had “related to” jurisdiction and contested that the matter was not between private parties. Halo also disputed that the NCUC had jurisdiction over the ICA dispute, arguing that it instead lay with the FCC. Further, if Halo was successful in its appeal before the 5th Circuit, review by the NCUC would be moot and an inefficient use of the resources of the parties and the NCUC.
The bankruptcy court found that since BellSouth was seeking monetary damages and injunctive relief against Halo in the NCUC proceeding, it was in fact a civil action under 28 U.S.C. § 1452(a). Further, as it involves BellSouth seeking damages from the debtor, the NCUC Proceeding sounds in claim determination and thus is at least “related to” Halo’s bankruptcy case. Accordingly, removal of the action was proper.
Pursuant to § 1452(b), however, the court may remand on any equitable ground, including:
1. The effect on the efficient administration of the bankruptcy estate;
2. The extent to which issues of state law predominate;
3. The difficulty or unsettled nature of applicable state law;
4. Comity;
5. The degree of relatedness or remoteness to the proceeding in the main bankruptcy case;
6. The existence of a right to a jury trial; and
7. Prejudice to the involuntarily removed defendants.
The court here held that the state utility laws predominate greatly in this case. Additionally, the Texas Bankruptcy Court had lifted the stay to allow regulatory determinations, reserving liquidation. Third, the matters before the NCUC are not within the conventional experience of the bankruptcy judge. Lastly, the remands by numerous other bankruptcy courts to other state regulatory agencies, already eliminated any efficiencies that might have otherwise been obtained by a consolidated ruling from the FCC. Accordingly, remand to the NCUC was granted.
For a copy of the opinion, please see:
BellSouth v. Halo Wireless- Removal and Remand of Matters from Regulatory Agency.pdf
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