IN THE UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF TEXAS

FORT WORTH DIVISION

IN RE: §

§

MIRANT CORPORATION, ET AL., §

§

Debtors. §

______________________________ §

§

CITY OF VERNON, §

§

Appellant, §

§

VS. § NO. 4:05-CV-060-A

§ (Consolidated with No. 

MIRANT AMERICAS ENERGY § 4:05-CV-061-A)

MARKETING, L.P., §

§

Appellee. §

MEMORANDUM OPINION

and

ORDER

These actions come before the court as appeals from a

partial judgment and a final judgment of the United States

Bankruptcy Court for the Northern District of Texas, Fort Worth

Division, the Honorable Dennis Michael Lynn presiding. The

court, having considered the briefs of appellant, City of Vernon,

and appellee, Mirant Americas Energy Marketing, L.P., the record

on appeal, and applicable authorities, finds that the bankruptcy

court's partial and final judgments should be affirmed.

I.

Jurisdiction

These are appeals from a partial judgment as to liability

and a final judgment awarding damages to appellee. The court's

jurisdiction exists pursuant to 28 U.S.C. § 158. 

 

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2

II.

Underlying Proceedings

Appellant and appellee were parties to a transaction

confirmation (the "contract") under the Western Systems Power

Pool Agreement ("WSPPA") dated July 1, 2000. Pursuant to the

contract, appellant agreed to purchase, and appellee (when named

"Southern Company Energy Marketing, L.P.") agreed to sell, from

October 1, 2000, to December 31, 2006, twenty-five megawatts of

power for $59.45 per megawatt hour, Monday through Saturday on

peak hours, excluding certain holidays.

In December 2001, appellant became concerned about the

creditworthiness of appellee and made demand on appellee for

assurance of performance and creditworthiness pursuant to section

27 of the WSPPA. Because appellant was not satisfied with the

response made by appellee, by letter dated January 25, 2002,

appellant refused to accept appellee's delivery of power and

stated that it was terminating the contract. Appellee, in turn,

purported to terminate the contract by letter dated February 1,

2002. 

In July 2003, appellee, its parent company, and numerous

affiliates commenced Chapter 11 proceedings. On October 23,

2003, appellee filed an adversary proceeding seeking to recover

damages from appellant under the contract. Appellant and

appellee each filed motions for summary judgment. Appellant's

motion was ultimately withdrawn. By partial judgment signed

September 14, 2004, the bankruptcy court granted in part

 

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appellee's motion, holding appellant liable to appellee for

damages under the contract. On November 15, 2004, the bankruptcy

court held a hearing on the issue of the amount of damages to be

awarded. By final judgment signed November 30, 2004, the

bankruptcy court awarded appellee the sum of $13,983,781.99, plus

accrued interest and post-judgment interest. From the partial

and final judgments, appellant appeals.

III.

Issues on Appeal

Appellant sets forth five issues on appeal. However, the

dispositive issues are whether the bankruptcy court properly

construed the WSPPA and properly calculated the damages to be

awarded by relying on a certain exhibit entered into evidence

over appellant's objection.

IV.

Standard of Review

To the extent the appeal presents questions of law, the

bankruptcy court's judgment is subject to de novo review. 

Pierson & Gaylen v. Creel & Atwood (In re Consolidated

Bancshares, Inc.), 785 F.2d 1249, 1252 (5th Cir. 1986). Findings

of fact, however, will not be set aside unless clearly erroneous. 

Bankr. R. 8013; Memphis-Shelby County Airport Authority v.

Braniff Airways, Inc. (In re Braniff Airways, Inc.), 783 F.2d

1283, 1287 (5th Cir. 1986). A finding is clearly erroneous,

although there is evidence to support it, when the reviewing

court on the entire evidence is left with a definite and firm

 

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1

But for a termination, damages would have been calculated under

section 21.3 of the contract, which requires mitigation, and thus,

the potential for lower damages. 

4

conviction that a mistake has been committed. Id. The mere fact

that this court would have weighed the evidence differently if

sitting as the trier of fact is not sufficient to set aside the

bankruptcy court's order if that court's account of the evidence

is plausible in light of the record viewed in its entirety. 

Anderson v. City of Bessemer City, 470 U.S. 564, 573-74 (1985).

V.

Discussion

Much of appellant's brief is devoted to arguments that do

not further its cause. It is obvious that appellant decided it

had made a bad deal and decided to terminate the contract,

knowing that it would nevertheless be liable for damages. See R.

at 3064 (appellant admits that it knew that by terminating the

contract it would be stuck with a "great big fat damage

payment."). Sometime during the litigation, perhaps after the

cross-motions for summary judgment had been filed, appellant

realized that it had made a mistake in terminating the contract

(or at least in arguing that it had terminated the contract) and

that its liability would not have been as great if it had simply

refused to accept power from appellee. Appellant strategically

withdrew its own motion for summary judgment in order to make the

argument that appellee could not prove that the contract had been

properly terminated.1 Appellant argues, in effect, that the

bankruptcy court could not find the true facts, i.e., that

 

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The record would support a finding that the contract was

terminated by appellant on January 25, 2002. See R. at 2824.

3

Appellant argues that the "termination payment" can only follow

termination of the contract as a result of an event of default and

that because appellee cannot prove that the contract terminated as a

result of an event of default, no such payment can be due. Assuming

that a "termination payment" can only follow termination as a result

of an event of default, the record reflects, and the bankruptcy court

implicitly found, that such a termination occurred.

5

appellant terminated the contract, because appellee had only

pleaded that it, rather than appellant, had terminated the

contract.

As the bankruptcy court found, the record establishes that

by February 1, 2002, at the latest, the parties recognized that

their contract was terminated.2 Appellant argues that damages

should have been calculated under section 21.3, rather than

section 22.3. Section 21.3 concerns the failure to deliver or

receive quantities of electric power or energy due under the

contract. R. at 876. Section 22.3 addresses calculation of a

termination payment when the contract has been terminated. 

According to section 22.2, the payment associated with

termination of the contract is to be calculated in accordance

with sections 22.2 and 22.3. R. at 880. The so-called

"termination payment" is the sole and exclusive remedy for

termination of a contract.3 Id. The remedies under section 21.3

are available only up until the time the notice of termination is

received. Id. Thus, appellant is incorrect when it argues that

damages must be calculated under section 21.3. 

 

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The remainder of appellant's argument is devoted to an

attack on the calculation of damages. Appellant has not shown,

however, that the market price for the electricity as determined

by appellee was not calculated in a commercially reasonable

manner. Bankruptcy courts are ordinarily accorded wide latitude

and discretion in making evidentiary rulings. Greener v. Cadle

Co., 298 B.R. 82, 90 (N.D. Tex. 2003).

Steve Brown ("Brown"), the witness who sponsored exhibit 18,

about which appellant complains, explained how the underlying

data had been compiled. The data was of a type he and the office

staff he supervised prepared and relied upon on a daily basis. 

Brown prepared the exhibit himself based on data that had been

compiled by his office. His testimony was based entirely on his

perceptions and activities in the course of his role as director

of credit and counter-party risk for appellee. R. at 3075. 

Thus, it was admissible under Fed. R. Evid. 701. Bank of China

v. NBM, LLC, 359 F.3d 171, 181-82 (2d Cir. 2004). And, even if

it was not, appellant has not shown that its admission was not

harmless error. Id. at 183 (citing U.S. v. Griffin, 324 F.3d

330, 347-48 (5th Cir. 2003)).

One of Brown's activities in the ordinary course of his

duties was to prepare exhibit 18. Brown testified that the

numbers used were reliable, and in fact relied upon by him in his

day-to-day activities. Though he did not know if the underlying

records could still be printed out at the time of the hearing, R.

at 3102, there is no reason to believe that the numbers generated

 

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4Exhibit 18 includes numbers generated by other brokers in

the same market. These numbers were not admitted for their

truthfulness, but merely to show that appellee's calculations

were remarkably similar.

7

by appellee included in exhibit 18 were not reliable or generated

in the ordinary course of appellee's business.4 See U.S. v.

Sanders, 749 F.2d 195, 198 (5th Cir. 1984). Appellant has not

shown that the bankruptcy court abused its discretion in

accepting appellee's proof of damages under the contract. 

Greener, 298 B.R. at 90. 

VI.

Order

For the reasons discussed herein,

The court ORDERS that the partial and final judgments from

which appeals are taken be, and are hereby, affirmed.

SIGNED May 17 , 2005.

 /s/ John McBryde 

JOHN McBRYDE

United States District Judge

 

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