Recent Development by Kerry J. Miller
Cajun Electric Power Cooperative, Incorporated (Cajun) became financially unstable after a large and unsuccessful investment in a nuclear power plant. Its board of directors was comprised of representatives from its twelve member companies, which bought all of their electricity from Cajun. Cajun's financial instability was exacerbated when its regulator, the Louisiana Public Service Commission (LPSC), ordered Cajun to lower its rates. When Cajun's board was faced with the decision of whether to appeal the LPSC's order to lower its rates, conflicts of interest surfaced. If the board voted to appeal the order, they would, in effect, be appealing an order to lower the price of electricity charged to the member-customers for whom they also worked. Lower rates, however, would make it more difficult for Cajun to pay its creditors. Several of Cajun's board members resigned because of this conflict. Ultimately, the board decided to appeal the order. The appeal, however, was unsuccessful. Cajun then filed for bankruptcy under Chapter 11 of the Bankruptcy Code on the same day that the rate reduction became effective; it could not meet its obligations to its creditors under the lower rates.
Because of the conflict of interest, several of Cajun's creditors moved for an appointment of a trustee in bankruptcy. The United States District Court for the Middle District of Louisiana, sitting as a bankruptcy court, granted the motion. The court held that, first, there was cause to appoint a trustee under § 1104(a)(1) of the Bankruptcy Code, and second, that the appointment of a trustee was in the best interest of the parties under § 1104(a)(2). Subsequently, Cajun appealed the appointment of the trustee. The United States Court of Appeals for the Fifth Circuit vacated the appointment of the trustee and held that the appointment of a trustee in a Chapter-11 bankruptcy is an immediately appealable final order, that Cajun had standing to bring the appeal, and that the conflict of interest between Cajun's member-customers and creditors was insufficient to justify appointment of a trustee. Cajun Electric Power Cooperative, Incorporated v. Central Louisiana Electric Company, Incorporated, 69 F.3d 746 (5th Cir. 1995), withdrawn in part on reh'g by 74 F.3d 599 (5th Cir. 1996).
About the Author
Kerry J. Miller.
Citation
70 Tul. L. Rev. 1645 (1996)