National Energy & Gas Transmission, Inc.

IN THE UNITED STATES BANKRUPTCY COURT
FOR THE DISTRICT OF MARYLAND
at Greenbelt
In re: 	Chapter 11
NATIONAL ENERGY & GAS 	Case No.: 03-30459 (PM) and 03-30461 (PM)
TRANSMISSION, INC. (f/k/a PG&E 	through 03-30464 (PM) and 03-30686 (PM)
NATIONAL ENERGY GROUP, INC.), et al., 	through 03-30687 (PM)
Debtors. 	(Jt. Admin. under Case No.: 03-30459 (PM))
NEGT Energy Trading – Power, L.P.,
Movant,
vs.
Southaven Power, LLC,
Respondent.
MEMORANDUM OF DECISION
This case came before the court on January 8, 2008, on the Liquidating Debtor’s, NEGT
Energy Trading – Power L.P. (“ET”), Motion for Order Authorizing Plan Distribution to Southaven
Power, LLC (“Southaven”) and Southaven’s Limited Objection to the Motion. Because the issue
for decision has been sharply focused and thoroughly briefed by the parties, the court will likewise
focus and expedite its decision secure in the knowledge that this court is the first stop on the path of
resolution of the single issue presented involving $16 million.
Each party filed a bankruptcy case under Chapter 11 – Southaven in the Western District of
North Carolina on May 5, 2005, and ET in this court on July 8, 2003 (Case No. 03-30461PM).
Each held a claim against the other. Southaven’s claim against ET is in the sum of $395,513,731.15
Date signed January 14, 2008
Entered: January 15, 2008 Case 03-30459 Doc 4095 Filed 01/15/08 Page 1 of 5

1 The ET Debtors consist of: NEGT Energy Trading Holdings Corporation f/k/a PG&E Energy Trading
Holdings Corporation; NEGT Energy Trading - Gas Corporation f/k/a PG&E Energy Trading - Gas
Corporation; NEGT ET Investments Corporation f/k/a PG&E ET Investments Corporation; and NEGT
Energy Trading - Power, L.P. f/k/a PG&E Energy Trading - Power, L.P. The Quantum Debtors consist of:
Quantum Ventures; and Energy Services Ventures, Inc. f/k/a PG&E Energy Services Ventures, Inc.
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and was allowed by this court by order entered March 28, 2007, confirming an arbitral award. ET’s
claim against Southaven was allowed in the sum of $91,727,510.56 by an order of the North
Carolina court entered on November 20, 2007. Both orders are final.
In a nutshell, this dispute involves conflicting interpretations of Paragraph 8.2 of the First
Amended Plan of Liquidation for the ET Debtors and the Quantum Debtors1 (“Plan”) that was
confirmed by this court’s order entered April 19, 2005. That confirmed Plan is the governing
document for this dispute. Paragraph 8.2 of the Plan provides:
Setoffs. The Liquidating Debtors may, but shall not be required to, set off or
recoup, in accordance with applicable law, against any Allowed Claim and the
distributions to be made pursuant to the Plan on account of such Claim, claims of
any nature that the Liquidating Debtors may have against the holder of such Allowed
Claim; provided, however, that neither the failure to effect such a setoff or
recoupment nor the allowance of any Claim against the Liquidating Debtors shall
constitute a waiver or release by the Liquidating Debtors of any claim that the
Debtors or the Liquidating Debtors may possess against such holders.
ET argues that this paragraph enables it to setoff it pre-petition claim against Southaven
against its post-confirmation distribution payable to it and that it may delay any payment to
Southaven until it has its setoff claim paid in full. It attaches great weight to the fact that Southaven
was one of three members of the Official Committee of Unsecured Creditors of ET and, therefore,
intimately involved with the process of formation and confirmation of the confirmed Plan.
Southaven argues that this is an apples to apples situation and that its claim, and not its distribution,
is subject to setoff.
Case 03-30459 Doc 4095 Filed 01/15/08 Page 2 of 5

2 Four conditions are required for setoff under 11 U.S.C. § 553(a):
(1) The creditor holds a “claim” against the debtor that arose before the commencement of the case;
(2) The creditor owes a “debt” to the debtor that also arose before the commencement of the case;
(3) The claim and debt are “mutual”; and
(4) the claim and debt are each valid and enforceable.
5 C OLLIER ON B ANKRUPTCY ¶553.01[1](15th ed. revised 2007).
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The right of setoff by ET under 11 U.S.C. § 553(a) 2 is undisputed. It is only the manner of
how that setoff is effectuated that is in issue. Section 553 “[s]imply acknowledges the set-off right
which may exist under non-bankruptcy law, and which is commonplace and pervasive either by
contract, by common law or by statute.” R. I. AARON , BANKRUPTCY LAW FUNDAMENTALS , § 10:17
(2007). The principle of setoff has a long history. WILLIAM BLACKSTONE , COMMENTARIES ON
THE LAWS OF ENGLAND 499 (West Pub. Co. 1897).
The court finds the position asserted by Southaven the result compelled by the controlling
paragraph of the Plan. The critical language of Paragraph 8.2 governs.
The Liquidating Debtors may, but shall not be required to, set off or
recoup, . . ., against any Allowed Claim and the distributions to be made pursuant to
the Plan on account of such Claim, claims of any nature that the Liquidating Debtors
may have against the holder of such Allowed Claim[.] (Emphasis added.)
Just as with statutory interpretation where the court has the duty to give effect to every word
of a statute and should be reluctant to “treat statutory terms as surplusage,” so should the court treat
a Plan in a bankruptcy case. See Etape v. Chertoff, 497 F.3d 379, 384 (CA4 2007)(quoting Duncan
v. Walker, 533 U.S. 167, 174 (2001)). This doctrine is particularly compelling in a case of this
magnitude where tens of millions of dollars have been devoted to professional fees. U.S. v. Mills,
485 F.3d 219, 223-4 (CA4 2007)(citing United States v. Robertson, 474 F.3d 538, 540 n. 2 (CA8
2007)(quoting United States v. Nordic Vill., Inc., 503 U.S. 30, 36 (1992))(“[E]very word has some
operative effect.”)
When ET argues that the provisions of Paragraph 8.2 operate as to allow setting off its claim
against Southaven’s distribution, it wants to modify its confirmed Plan by making the words “any
Allowed Claim” disappear. The court finds this action impermissible.
Southaven shall submit an appropriate order on notice.
Case 03-30459 Doc 4095 Filed 01/15/08 Page 3 of 5

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cc: 	WHITEFORD, TAYLOR & PRESTON, L.L.P.
Paul M. Nussbaum
William F. Ryan
Martin T. Fletcher
Dennis J. Shaffer
Seven Saint Paul Street, Suite 1400
Baltimore, Maryland 21202-1626
NEUBERGER, QUINN, GIELEN, RUBIN & GIBBER, P.A.
Deborah Hunt Devan
One South Street, 27th Floor
Baltimore, Maryland 21202
LATHAM & WATKINS LLP
Mark A. Broude
Henry P. Baer, Jr.
885 Third Avenue, Suite 1000
New York, New York 10022-4834
MOORE & VAN ALLEN PLLC
Ben Hawfield
Hillary B. Crabtree
100 North Tryon Street, Floor 47
Charlotte, North Carolina 28202
US Trustee
W. Clarkson McDow, Jr., United States Tr
6305 Ivy Lane
Suite 600
Greenbelt, MD 20770
Southaven Power, LLC
c/o Cogentrix Southaven Holdings, Inc.
Thomas J. Bonner, Vice President
9405 Arrowpoint Blvd.
Charlotte, NC 28273-8167
Case 03-30459 Doc 4095 Filed 01/15/08 Page 4 of 5

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NEGT Energy Trading - Power, L.P.
19805 Executive Park Circle
P.O. Box 2350
Germantown, MD 20875-2350
All parties appearing on the limited service list
All parties requesting notice
End of Memorandum of Decision
Case 03-30459 Doc 4095 Filed 01/15/08 Page 5 of 5