Pacific Gas and Electric Co.

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UNITED STATES BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
In re 	) Bankruptcy Case
) No. 01-30923DM
PACIFIC GAS & ELECTRIC COMPANY, 	)
) Chapter 11
Debtor. 	)
___________________________________)
MEMORANDUM DECISION ON MOTION TO
VACATE ENFORCEMENT ORDER
I. 	Introduction
The City of Oakland (“City”) filed a motion (the “Motion To
Vacate”) for an order vacating the Order Enforcing Order
Confirming PG&E’s Plan of Reorganization (the “Enforcement Order”)
entered on September 3, 2004. 	Debtor, Pacific Gas & Electric
Company (“PG&E”), opposed the Motion To Vacate. 	The court held a
hearing on April 25, 2005, and appearances were noted on the
record. 	During the course of that hearing the court indicated to
counsel for City that its complaint in the Motion To Vacate about
PG&E’s failure to serve its Omnibus Motion To Enforce Order
Confirming PG&E’s Plan of Reorganization (“Motion To Enforce”)
filed on July 29, 2004, was well taken and that the court would
grant the Motion To Vacate as long as City could show that it had
a meritorious defense to the Motion To Enforce.
City was given time to submit proof that its failure to file
Signed and Filed: June 01, 2005
________________________________________
DENNIS MONTALI
U.S. Bankruptcy Judge
________________________________________
Entered on Docket
June 02, 2005
GLORIA L. FRANKLIN, CLERK
U.S BANKRUPTCY COURT
NORTHERN DISTRICT OF CALIFORNIA
Case: 01-30923 Doc# 16056 Filed: 06/01/05 Entered: 06/02/05 10:05:13 Page 1
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a proof of claim based upon its cross-complaint for indemnity and
contribution against PG&E in Dickinson, et al. v. PG&E, et al.,
Alameda County Superior Court No. 830495-5 (the “State Court
Action”), was the result of excusable neglect. 	On May 9, 2005,
City filed declarations of Barbara Parker, Latonda Simmons and a
supplemental declaration of Jannie L. Wong. 	On May 23, 2005, PG&E
filed its supplemental opposition to City’s Motion To Vacate,
submitting the matter for decision.
After reviewing all of the papers presented and the arguments
of counsel, the court has determined that the Motion To Vacate
should be denied because City has not shown excusable neglect for
its failure to file a proof of claim based upon the State Court
Action by the October 3, 2001, deadline for the filing of proofs
of claim by governmental entities. 	Thus it would be unable to
defeat the Motion To Enforce.
II. 	Discussion
When PG&E filed and served its Motion To Enforce it did not
comply with the requirements of Fed. R. Bankr. P. 7004(b)(6),
which provides as follows:
(b) Service by first class mail. 	Except as
provided in subdivision (h) ... service may be made
within the United States by first class mail postage
pre-paid as follows:
* 	* 	*
(6) Upon a state or municipal corporation or other
governmental organization thereof subject to suit, by
mailing a copy of the summons and complaint to the
person or office upon whom process is prescribed to be
served by the law of the state in which service is made
when an action is brought against such a defendant in
the courts of general jurisdiction of that state, or in
the absence of designation of any such person or office
by state law, then to the chief executive office
thereof.
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Under California law, service on a governmental and municipal
entity is controlled by California Code of Civil Procedure
§416.50, which provides as follows:
(a) A summons may be served on a public entity by
delivering a copy of the summons and complaint to the
clerk, the secretary, president, presiding officer or
other head of its governing body.
PG&E served the Motion To Enforce addressed to the attention
of Jannie Wong, Esq., the attorney representing the City in the
State Court Action, incorrectly identifying her as “Attorneys
(sic) for Mark Dickinson.” 	There was, therefore, no compliance
with Fed. R. Bankr. P. 7004(b)(6). 	This failure by PG&E would
normally entitle City to the granting of the Motion To Vacate and
relief from the Enforcement Order if it could show how it would
defeat the Motion To Enforce. 	See Beneficial California, Inc. v.
Villar (In re Villar) 317 B.R. 88 (9th Cir. BAP 2004).
In the Motion To Vacate, City argues that even if the Motion
To Vacate was properly served (which it was not), Fed. R. Bankr.
P. 9024, incorporating Fed. R. Civ. P. 60(b), provides a basis for
relief, subject to three important considerations, the first two
of which are not relevant. 	The final one, supporting relief from
a default, presumes that the movant has a meritorious defense.
City cites Fed. R. Civ. P 60(b)(1) and (6), but the court will
focus only on the former subsection, recognizing that the latter
is not a catchall to suffice where other subsections cannot be
satisfied. 	LaFarge Conseils Et Etudes, S.A. v. Kaiser Cement &
Gypsum Corp., 791 F.2d 1334, 1338 (9th Cir. 1986).
The inquiry thus turns on whether City really has a
meritorious defense to the Motion To Enforce. 	The Motion To
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Vacate is construed as a motion for relief from the Enforcement
Order and is based on excusable neglect pursuant to Fed. R. Civ.
p. 60(b)(1). 	Fed. R. Civ. P. 60(b)(1) provides:
On Motion and upon such terms as are just, the court may
relieve a party ... from a final ... order for the following
reasons:
(1) mistake, inadvertence, surprise, or excusable neglect ...
... The motion shall be made within a reasonable time, and
for reasons (1), (2), and (3) not more than one year after
the ... order ..., was entered or taken.
The test for determining “excusable neglect” is well
established: it is “at bottom, an equitable one, taking account of
all relevant circumstances surrounding the party’s omission.”
Pioneer Investment Servs. Co. v. Brunswick Assocs. Ltd. P’ship,
507 U.S. 380, 395 (1993). 	Such an analysis requires the weighing
or balancing of relevant factors, including the following four:
(1) 	the danger of prejudice to the debtor,
(2) 	the length of the delay and its potential impact on
judicial proceedings,
(3) 	the reason for the delay, including whether it was
within the reasonable control of the movant, and
(4) 	whether the movant acted in good faith.
Id. at 395; Pincay v. Andrews, 389 F.3d 853, 855 (9th Cir. 2004).
The non-exclusive factors discussed in the above quotation provide
a framework for determining whether City has demonstrated
“excusable neglect” in this case.
In the Ninth Circuit “excusable neglect” is construed
liberally under Fed. R. Civ. P. 60(b). 	Fasson v. Magourik (In re
Magourik), 693 F.2d 948 (9th Cir. 1982). 	In Pincay an en banc
panel of the Ninth Circuit rejected the concept that certain types
of culpable conduct (such as an attorney relying on a paralegal to
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interpret and abide by a court rule instead of reading and
complying with the rule himself) are “per se” not excusable
neglect. 	In so holding, the panel noted that the “real question”
is “whether there [is] enough in the context of [the] case to
bring a determination of excusable neglect within the [trial]
court’s discretion.” 	Pincay, 389 F.3d at 859.
Applying the Pioneer factors to the present case, the court
concludes that the first factor, danger of prejudice to PG&E,
weighs ever-so-slightly in favor of PG&E since it is entitled to
finality and to be able to rely on the fact that City did not
timely file a proof of claim based upon the State Court Action.
The second factor, the length of the delay, weighs only
slightly in favor of City. 	While it moved promptly on the Motion
To Vacate, the time that has gone by since the governmental claims
bar date is quite significant and cannot be ignored.
The fourth factor, good faith, is weighed in favor of City.
It has a mechanism in place to process incoming legal matters and
there is no evidence to suggest that it intentionally disregarded
those procedures to lead to the current state of affairs on this
dispute.
Finally, the reason for the delay, the third factor, tips in
favor of PG&E and against City because its very mechanisms in
place to process incoming legal matters should have been
sufficient to lead to a filing of a proof of claim based upon the
State Court Action.
The declaration of Robert L. Berger establishes that City was
served with the original notice of the Chapter 11 filing at
various addresses, including the very same address used for
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service of process, namely One Frank Ogawa Plaza, Oakland,
California. 	While it is true that Mr. Berger’s declaration does
not establish that the notice of the Chapter 11 filing was
addressed to the attention of a clerk, secretary, president,
presiding officer, or head of any governing body for City, Fed. R.
Civ. P. 7004 is not applicable to notice given under Fed. R.
Bankr. P. 2002. 	Thus, unlike the creditor who was improperly
served in Villar, here service of the original notice of the
Chapter 11 case was proper. 	More importantly, City filed four
unrelated proofs of claim in a timely fashion. 	This suggests that
notice of the Chapter 11 filing was timely received by City. 	No
explanation has been offered why Ms. Wong, the attorney
responsible for City’s prosecution of the State Court Action, did
not receive the notice in time to file the proof of claim. 	On
balance, therefore, this factor weighs in favor of PG&E and
against City.
Balancing these factors is not a mathematical test, and the
court is not obligated to give equal weight to them. 	Rather, it
is to balance the factors together and to determine whether the
neglect should be excused.
Given the adequacy of the notice of the Chapter 11 filing to
cause the City to file other proofs of claim, the court concludes
in its discretion that City’s neglect in failing to file a timely
proof of claim in connection with the State Court Action was not
excusable. 	For this reason, while the Motion To Enforce was not
properly served, no purpose would be served by granting the Motion
To Vacate since the Motion To Enforce, had it been properly
served, could not have been successfully defended. 	The Motion To
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Vacate must be denied.
III. 	Disposition
Counsel for PG&E should submit a form of order denying the
Motion To Vacate for the reasons stated in this Memorandum
Decision.
*END OF MEMORANDUM DECISION*
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