In re: Energy Future Holdings Corp., No. 19-3492 (3d Cir. 2021)Annotate this Case
The Debtors’ most valuable asset was an economic interest in Texas’s largest power transmission and distribution company, which NextEra agreed to buy through a Merger Agreement. The sale was not approved by the Public Utility Commission and did not go through. NextEra sought a $275 million Termination Fee. The Bankruptcy Court and Third Circuit rejected that claim.
NextEra then sought to recover approximately $60 million in administrative fees under 11 U.S.C. 503(b)(1)(A), arguing that the Merger Agreement required the parties to bear their own expenses. The district court affirmed the Bankruptcy Court’s dismissal, finding that NextEra failed to benefit the estate.
The Third Circuit reversed.NextEra plausibly alleged that through a post-petition transaction, the Merger Agreement, it benefitted the estate by providing valuable information, and accepting certain risks, that paved the way for a later deal. The precise monetary value of this benefit and the costs imposed on the estate cannot be distilled from pleadings alone. NextEra plausibly alleged that it is not foreclosed from receiving administrative expenses under Section 503(b)(1)(A). Although NextEra and the Debtors entered into an agreement that generally provided each party would bear its own costs, the agreement exempted from that general rule expenses addressed in the Plan of Reorganization, which unambiguously provides for the recovery of administrative claims under Section 503(b).