BEFORE THE
PENNSYLVANIA PUBLIC UTILITY COMMISSION
GEORGE MORRIS, et al. :
:
V. : Docket No. C-00923820
:
ONEIDA WATER COMPANY :
__________________________________
THE OFFICE OF CONSUMER ADVOCATE'S
SUPPLEMENTARY MEMORAINDUM OF LAW
__________________________________
The Office of Consumer Advocate ("OCA") hereby submits
this Supplementary Memorandum of Law in response to the Interim
Order of Administrative Law Judge Richard M. Lovenwirth ("ALJ")
dated September 10, 1992.
I. INTRODUCTION
This proceeding involves a consolidation of various
complaints filed against Oneida Water Company ("Oneida" or
"Company"). The Company filed for bankruptcy on April 7, 1992. On
January 27, 1992, prior to the filing of the bankruptcy petition,
George Morris filed a complaint against Oneida on behalf of himself
and other customers of the Company. Subsequent to the filing of
the bankruptcy petition, other customers of Oneida also filed
complaints. On June 26, 1992, Oneida Water Company ("Oneida" or
"Company") filed a preliminary motion and a memorandum of law in
support of its position that the Company's filing of a bankruptcy
petition operates to stay proceedings before the PubLic Utility
Commission. On July 15, 1992, the OCA filed a memorandum of law
asserting, inter alia, that the PUC proceeding is an exception to
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asserting, Lnter alia, that the PUC proceeding is an exception to
the automatic stay provision of the Bankruptcy Code because it
involves the public's health and safety and not the debtor's
pecuniary interest. OCA Memorandum at 3-7. The OCA argued,
further, that actions which do not fall under the automatic stay
provision of the Bankruptcy Code may be brought by other than the
regulatory power. OCA Memorandum at 8-12. Finally, the OCA
asserted that the Public Utility Commission is empowered under the
Bankruptcy Code to provide certain types of relief even if the
relief involves an exchange of money. OCA Memorandum at 12-15.
On September 9, 1992 at the third preheating conference
in the instant proceeding, ALJ Lovenwirth requested that the
parties submit a further memorandum of law addressing the
jurisdiction of the Commission over administrative actions against
the debtor that were commenced after the filing of a Petition of
Bankruptcy. As set forth in its initial memorandum of law, the OCA
noted that Section 362(a)(1) of the Bankruptcy Code stays
proceedings against the debtor that were or could have been
commenced before the bankruptcy filing. The OCA submits this
supplementary memorandum of law to further clarify this issue.
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II. THE PUC PROCEEDING INVOLVING ONEIDA WATER COMPANY DOES NOT
FALL UNDER THE AUTCMATIC STAY PROVISION OF THE BANKRUPTCY
CODE.
As set forth in detail in the OCA's initial Memorandum of
Law, the PUC proceeding is an exception to automatic stay provision
found in Section 362 of the Bankruptcy Code. OCA Memorandum at 3.
Section 362 (a) (1) of the Bankruptcy Code states in
relevant part:
(a) Except 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 -
(1) the commencement or
continuation... of a judicial,
administrative, or other action or
proceeding against the debtor that
was or could have been commenced
before the commencement of the case
under this title.
11 U.S.C. § 362(a)(1).
Clearly, proceedings which were or could have been
commenced before the bankruptcy filing fall under the purview of
Section 362(a)(1) of the Bankruptcy Code. However, actions which
were or could have been commenced before the bankruptcy filing may
not be stayed by Section 362. As discussed at length in the OCA's
initial Memorandum of Law, Section 362 does not operate as a stay
with regard to an action or proceeding by a governmental unit to
enforce such governmental unit's police or regulatory power. 11
U.S. Code § 362(b)(4), OCA Memorandum at 4.
In its Initial Memorandum, the OCA has demonstrated that
subsection 362(b) (4) is applicable to the case at hand. In
particular, the OCA submits that the PUC action involving Oneida
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falls within this exception because it was commenced in the
interest of public health, safety or welfare. The case before the
Commission involves an alleged violation of the Public Utility Code
which requires the utility company to provide safe and adequate
service. 66 Pa. C.S.A. § 1501. Specifically, the customer
complainants of Oneida allege frequent water outages and low water
pressure. It follows, therefore that the remedy sought entails the
Commission's police and regulatory power in order to rectify an
alleged inadequate and unsafe condition. OCA Memorandum at 7.
Furthermore, the OCA addressed the fact that the
exception prevails even though a customer of Oneida, and not the
regulatory power itself, initiated the action against the Company.
OCA Memorandum at 8-12. Finally, the OCA submitted that the
exception remains applicable to this case even though the remedy
may involve the exchange of money. OCA Memorandum at 12-15.
To shed light on the scope of the automatic stay, the OCA
cited the case In re Grynberg, 113 Bankr. 709, 711-712 (Bankr.
D.Colo. 1990) in its initial Memorandum of Law. In re Grynberg
involved a pre-petition judgment entered against the debtors which
the debtors subsequently appealed after filing a petition in
bankruptcy. The parties to whom the debtors were indebted,
hereinafter "applicants," by motion requested both pre-petition and
post-petition costs related to the judgment.
Of key importance in Grynberg was the fact that the
bankruptcy court began its analysis by defining pre-petition claims
which would fall under Section 362(b) (4) of the Bankruptcy Code.
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The court in Grynberg determined that the automatic stay
encompassed pre-petition claims given the broadest possible
definition. Id. at 711. The court determined, however, that there
was at least one restriction upon this expansive definition. In
order for a claim to be discharged under the automatic stay
provision of the Bankruptcy Code, "[the] triggering act which
constitutes the basis for the cause of action must have occurred
prior to filing the petition in bankruptcy." Id. at 713. For
example, citing Accord In re Pettibone Corp., 90 Bankr. 918 (Bankr.
N.D. Ill. 1988), the Grynberg court noted that in cases of pre-
petition exoosure to harmful chemicals, there is a presumption that
a bodily injury was sustained at the time of exposure and the
result which is manifested post-petition in no way depended upon
further acts of the debtor.
Thus, Grynberg sheds light on which actions constitute
pre-petition proceedings that are discharged by the automatic stay
provision of the Bankruptcy Code. As the OCA has argued in its
initial Memorandum of Law, this case falls within the exception
provided in Section 362 (b) (4) of the Bankruptcy Code and therefore,
the PUC should proceed with the complaint.
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II. THE AUTOMATIC STAY PROVISION OF THE BANKRUPTCY CODE IS NOT
APPLICABLE TO POST-PETITION PROCEEDINGS AGAINST THE DEBTOR.
As discussed above, it is the OCA's position as reflected
in its initial Memorandum of Law, that the automatic stay provision
of the Bankruptcy Code is inapplicable to the PUC proceeding
because it involves the enforcement of a governmental unit's police
or regulatory power. In particular, this matter before the Public
Utility Commission involves an alleged deficiency in quality of
service provided by the debtor, Oneida Water Company and not a
matter of the debtor's pecuniary or financial interest. It is the
OCA's position, therefore, that the PUC does have jurisdiction over
this proceeding and that this case should continue on its merits.
The threshold issue presented here in the OCA's Supplementary
Memorandum, however, involves whether the complaints filed after
the bankruptcy petition was filed should proceed before the Public
Utility Commission. In this case, the ALJ has consolidated the
various complaint cases initiated both prior to and subsequent to
Oneida's bankruptcy filing.
The OCA submits that while Section 362 discharges pre-
petition obligations and claims of the debtor except as discussed,
supra: "The automatic stay has no effect whatsoever upon claim
which arose after the petition was filed." OCA Memorandum at 3,
citing Grynberg at 712.
The court in Grynberg addressed the legislative
justification for providing a debtor relief from pre-petition
actions against it and, hence, also addressed the issue of
excluding post-petition actions from the automatic stay. The goal
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of bankruptcy is to provide the debtor with reasonable exemptions
to enable it to begin anew. The court citing Matter of Hadden, 57
B.R. 187 (Bankr. W.D. Wis. 1986) noted, however, that
dischargeability depends upon the particular facts which give rise
to the obligation. The Hadden court held that the debtor is
afforded a fresh start through the bankruptcy filing but remains
responsible for the post-petition costs it incurs. Of key
importance is preventing the debtor from taking post-petition
actions with "impunity." Id. Therefore, the automatic stay does
not afford protection from post-petition actions or proceedings
which are commenced against the debtor. An exception to this rule
is a claim that could have been brought prior to the bankruptcy
petition.
The proceeding involving Oneida Water Company differs in
nature from claims arising out of judgments against the debtor. As
discussed in detail in its initial memorandum of law, it is the
OCA's position that the PUC proceeding is not stayed by the filing
of the petition for bankruptcy because it involves a govermental
unit's enforcement of its police or regulatory power. Here, the
PUC proceeding involves health and safety considerations and not a
financial or pecuniary claim against the debtor. As such, the PUC
does, therefore, have jurisdiction over this matter involving
Oneida Water Company.
Secondly, the OCA submits that the harm or liability that
is alleged in the PUC proceeding does not involve a triggering act
per se since the quality of service provided by Oneida is
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continuing in nature. The CCA would note that the Grynberg court
did not specifically address the type of claim involved in the
instant case, wherein there is an alleged continuing harm to health
and safety of the Company's customers which encapsulates both pre-
petition and post-petition causes of action. One event, pre-
petition or post-petition, did not serve to cause the injury or
incur the liability alleged. Rather, the OCA submits, a matter of
a utility's quality of service involves ongoing health and safety
considerations. Whether a complainant could have initiated the PUC
proceeding against Oneida pre-petition or post-petition is not
relevant since the harm alleged is continuing in nature. Applying
the standard set forth in the Grynberg case, the OCA submits that
the basis of the action before the PUC is not an incident that
occurred prior to the bankruptcy filing but, rather, a recurring
condition of inadequate water pressure on Oneida's system.
Therefore, the PUC properly has jurisdiction over this matter.
Together, the OCA submits, these factors bring the instant PUC
proceeding outside the automatic stay provision of Section
362(a)(1) of the Bankruptcy Code.
Moreover, the post-petition complaints are properly
before the PUC since the nature of the service being provided by
the Company is continuing in nature. In addition, although the
same quality problem may have been present before the bankruptcy
petition was filed, it also may have occurred after the bankruutcy
was filed. For these reasons, the OCA submits that the PUC
proceeding is not stayed and should be considered on its merits.
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III. CONCLUSION
For the foregoing reasons, the Office of Consumer
Advocate respectfully submits this supplementary brief in support
of its request that Oneida Water Company's Preliminary Motion be
denied and that the instant proceeding go forward on its merits.
Respectfully submitted,
/s/
____________________________
Susan Jin Davis
Christine Maloni Hoover
Assistant Consumer Advocate
FOR: Irwin A. Popowsky
Consumer Advocate
Office of Consumer Advocate
1425 Strawberry Square
Harrisburg, PA 17120
(717) 783-5048
DATEID: September 30, 1992
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