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In re Energy Future Holdings Corp.

United States District Court, D. Delaware

March 27, 2018



         Pending before the Court is apro se appeal from a December 13, 2016 Order (B.D.I. 10380)[1] entered by the United States Bankruptcy Court for the District of Delaware, disallowing Appellant's proof of claim. The Court has considered the parties' briefing (D.I. 16, 17, 19) and supplemental letters (D.I. 21, 22, 25). For the reasons that follow, the Order is affirmed.

         I. BACKGROUND On April 29, 2014, Texas Competitive Electric Holdings, its parent Energy Future Holding Competitive Holdings, and certain affiliates ("Debtors") filed voluntary petitions for relief under Chapter 11 of the Bankruptcy Code.

         Appellant is a pro se individual who, in 2010, purchased $100, 000 in aggregate principal amount of 6.55% Series R Bonds, issued by Energy Future's predecessor, TXU Corporation.

         In September 2014, Appellant sold the bonds for $75, 420. Appellant subsequently filed a proof of claim in connection with those bonds for $24, 580-that is, the difference between the face amount of the bonds and the price for which Appellant sold them.

         Debtors objected to Appellant's proof of claim on the basis that it was not valid. (B.D.I. 4784). On December 13, 2016, the Bankruptcy Court held an evidentiary hearing on Debtors' objection, at which time the parties presented evidence and argument in support of their positions. (B.D.I. 10393).

         At the hearing, Appellant essentially argued that his proof of claim was valid because, although he sold his TXU bonds, he did so after Debtors filed for relief under Chapter 11. (See Id. at 66:3-8, 67:22-68:1). In other words, Debtors owed $100, 000 to Appellant at the time they filed for Chapter 11 bankruptcy. (See Id. at 68:2). Appellant further argued that, pursuant to Texas law, he had properly mitigated his damages by selling the bonds for seventy-five cents on the dollar, at a time when the price of the bonds was fluctuating. (See Id. at 66:5-7, 68:3-11).

         Following argument, the Bankruptcy Court ruled from the bench. It sustained Debtors' objection. (Id. at 70:20-21). The court explained that "the bond[s], although contractual in nature and subject to a contractual indenture, are securities. And under the indenture and under the securities laws, the obligations run[] with the bond. And once the bond is sold, you no longer hold the bond or no longer are a creditor of the debtors." (Id. at 70:22-71:3). In other words, "once the bond is sold, there is no longer a right to payment." (Id. at 71:8-9). In rejecting Appellant's mitigation of damages argument, the court explained, "Mitigation of damages does not apply in a purchase and sale of securities because damages don't apply in the purchase and sale of securities." (Id. at 71:10-12). The court stated further, "Mitigation of damages is completely inapplicable because we're talking about the purchase or sale of a security and damages, contract damages, simply don't arise." (Id. at 73:3-5).

         Following the hearing, the Bankruptcy Court entered an order disallowing Appellant's proof of claim. (B.D.I. 10380). Appellant now appeals from that order.


         The Court has appellate jurisdiction over all final orders and judgments from the Bankruptcy Court. See 28 U.S.C. § 158(a)(1).

         Bankruptcy Rule 8002(a)(1) provides: "Except as provided in subdivisions (b) and (c), a notice of appeal must be filed with the bankruptcy clerk within 14 days after entry of the judgment, order, or decree being appealed." Fed.R.Bankr.P. 8002(a)(1).[2] The Third Circuit has held that the failure to appeal a bankruptcy court's ruling to the district court within the time period established by Bankruptcy Rule 8002 deprives the district court of jurisdiction to hear the appeal. See In re Caterbone, 640 F.3d 108, 113 (3d Cir. 2011).

         On appeal from an order issued by the Bankruptcy Court, the Court "review[s] the bankruptcy court's legal determinations de novo, its factual findings for clear error and its exercise of discretion for abuse thereof." In re Trans World Airlines, Inc., 145 F.3d 124, 131 (3d Cir. 1998). Abuse of discretion is found where a "court's decision rests upon a clearly erroneous finding of fact, an errant conclusion of law, or an improper application of law to fact." Int 7 Union, United Auto., Aerospace & Agr. Implement Workers of Am., UAW v. Mack Trucks, Inc., 820 F.2d 91, 95 (3d Cir. 1987). Because the matter being reviewed involves the Bankruptcy Court's determination regarding the validity of Appellant's proof of claim, review is de novo.


         Appellant raises two principal issues on appeal.[3] I think they can be characterized as follows: (1) whether the Bankruptcy Court erred in sustaining Debtors' objection to Appellant's proof of claim, [4] and (2) whether Debtors' Omnibus Objection to Appellant's proof of claim complied with Federal Rule of Bankruptcy Procedure 3007. Appellant did not raise the second issue in the Bankruptcy Court. Accordingly, it is deemed waived, and I may not ...

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