ML021500244
| ML021500244 | |
| Person / Time | |
|---|---|
| Site: | Diablo Canyon  |
| Issue date: | 05/30/2002 |
| From: | Schenker M Cooley Godward, LLP, Pacific Gas & Electric Co |
| To: | Office of Nuclear Reactor Regulation, US Federal Judiciary, Bankruptcy Court, Northern District of California |
| References | |
| 94-074260, Case No. 01-30923 DM | |
| Download: ML021500244 (9) | |
Text
1 COOLEY GODWARD LLP MARTIN S. SCHENKER (109828) 2 LINDA F. CALLISON (167785)
One Maritime Plaza 3 20th Floor San Francisco, CA 94111-3580 4 Telephone: (415) 693-2000 Facsimile: (415) 951-3699 5
JAMES L. LOPES (63678) 6 WILLIAM J. LAFFERTY (120814)
JULIE B. LANDAU (162038) 7 HOWARD, RICE, NRMEROVSKI, CANADY, FALK & RABKIN 8 A Professional Corporation Three Embarcadero Center, 7th Floor 9 San Francisco, CA 94111-4065 Telephone: (415) 434-1600 10 Facsimile: (415) 217-5910 11 PACIFIC GAS AND ELECTRIC COMPANY ROGER PETERS (77743) 12 DAVID FLEISIG (99669)
P.O. Box 7442 13 San Francisco, CA 94120 Telephone: (415) 973-6695 14 Facsimile: (415) 972-5220 15 Attorneys for Debtor and Debtor in Possession PACIFIC GAS AND ELECTRIC COMPANY 16 17 UNITED STATES BANKRUPTCY COURT 18 NORTHERN DISTRICT OF CALIFORNIA 19 SAN FRANCISCO DIVISION 20 In re Case No. 01-30923 DM 21 Chapter 11 Case PACIFIC GAS AND ELECTRIC COMPANY, 22 a California Corporation, NOTICE OF MOTION AND MOTION OF Debtor. DEBTOR TO AUTHORIZE THE RETENTION 23 OF EXPERTS WITHOUT FURTHER ORDER OF THE COURT 24 Federal I.D. No. 94-074260 Date: May 30, 2002 25 Time: 1:30 p.m.
Place: 235 Pine Street, 22nd Floor 26 San Francisco, California Judge: Hon. Dennis Montali .,C 27 28 COOLEY GoDDWARD LLP 748377 vl/SF pý 0ý ATTORNEYS AT LAW GIG901 .DOC SAN FRANCISCO tkoo\
1 NOTICE OF MOTION AND MOTION 2 PLEASE TAKE NOTICE that on May 30, 2002, at 1:30 p.m., or as soon thereafter as the Pine 3 matter may be heard, in the Courtroom of the Honorable Dennis Montali, located at 235 and 4 Street, 22nd Floor, San Francisco, California, Pacific Gas and Electric Company, the debtor 5 debtor in possession in the above-captioned Chapter 11 case ("PG&E"), will and hereby does 6 move the Court for entry of an Order Authorizing the Retention of Experts (the "Motion").
.7 This Motion is based on this Notice of Motion and Motion, the accompanying at or 8 Memorandum of Points and Authorities, the record of this case, and any evidence presented 9 prior to the hearing on this Motion.
10 PLEASE TAKE FURTHER NOTICE that pursuant to Rule 9014-1(c)(2) of the the 11 Bankruptcy Local Rules for the Northern District of California, any written opposition to upon 12 Motion and the relief requested herein must be filed with the Bankruptcy Court and served 13 appropriate parties (including counsel for PG&E, the Office of the United States Trustee, and the 14 Official Committee of Unsecured Creditors) at least five (5) days prior to the scheduled hearing granting 15 date. If there is no timely objection to the requested relief, the Court may enter an order 16 such relief without further hearing.
17 18 19 20 21 22 23 24 25 26 27 28 COOLEY GODWARD LLP 1 MOTION TO AUTHORIZE THE RETENTION OF ATTORNEYS AT LAW 748377 vI/SF EXPERTS 1..........U SAN FRANCISCO GI (901 !.DOTS
1 MEMORANDUM OF POINTS AND AUTHORITIES 2 The above-captioned debtor hereby moves this Court for the entry of an order authorizing 3 the retention of certain experts without further order of the Court on the basis that such experts 4 are not "professionals" under section 327 of the Bankruptcy Code, 11 U.S.C. §§ 101-1330.
5 I. INTRODUCTION.
6 In connection with the upcoming confirmation hearing on its plan of reorganization, the 7 Debtor anticipates that upon the advice of its counsel it will need to retain certain experts, 8 primarily with regard to regulatory, feasibility, and financial issues raised by its plan of 9 reorganization (the "Experts"). Initially, the Experts are expected to act solely in a consulting 10 capacity. At some point, however, certain of the Experts may offer opinion testimony in 11 proceedings before this Court, at which time their identities will be disclosed in accordance with 12 this Court's procedure. The great weight of authority holds that persons hired as experts in 13 litigation are not "professionals" whose retention must be approved by order of the Court. Out of 14 an abundance of caution, however, the Debtor requests that the Court specifically authorize the 15 Debtor to retain the Experts without requiring a separate application for each such Expert.
16 H. DISCUSSION.
17 A. The Experts Are Not "Professionals" Under Section 327 of the Bankruptcy Code.
18 19 Section 327 states:
20 The trustee, with the court's approval, may employ one or more attorneys, accountants, appraisers, auctioneers, or other professional persons . . . to 21 represent or assist the trustee in carrying out the trustee's duties under this title.
22 It is well established that persons hired to provide expert opinion and/or testimony are not 23 "professionals" under section 327. See, e.g., In re That's EntertainmentMarketing Group, Inc.,
24 168 B.R. 226, 229-231; In re Babcock Dairy Co. of Ohio, Inc., 70 B.R. 691, 692-94. If an 25 individual is determined to be a "professional" within the meaning of section 327, the individual 26 may not be hired until application is made to this Court demonstrating, among other things, that 27 his or her employment is necessary to the estate. See id. at 229. In determining whether an 28 individual is a "professional" and thus is subject to these requirements, courts generally employ COOLEY GoDWARD LLP 748377 vl/SF 2. MOTION TO AUTHORIZE THE RETENTION OF ATTORNEYS AT LAW EXPERTS SAN FRANCISCO GIG901 !.DOC
1 either a "quantitative" or "qualitative" test to determine whether a prospective employee in a 2 bankruptcy case is a "professional" within the meaning of section 327.
3 Under the quantitative test, an individual must play a "central role" in the administration 4 of the estate to be a professional under section 327. See, e.g., In re That's Entertainment, 168 5 B.R. at 230 (only the retention of professionals whose duties are central to the administration of 6 the estate require prior court approval under section 327); In re Sieling Assoc. Ltd. Partnership, 7 128 B.R. 721, 723 (Bankr. E.D. Va. 1991) (same); In re Johns-Manville Corp., 60 B.R. 612, 620 8 (Bankr. S.D.N.Y. 1986) (same). Similarly, under the qualitative test, an individual is considered 9 professional only if he or she is permitted to exercise discretion and autonomy in addressing the 10 administration of the estate. See, e.g., In re Fretheim, 102 B.R. 298, 299 (Bankr. D. Conn. 1989).
11 Under either test, courts uniformly hold that experts hired to assist in litigation are not 12 professionals within the meaning of section 327.
13 1. The Experts Are Not "Professionals" Under Section 327 Because They Do Not Play a Central Role in the Administration of the Estate.
14 15 In this case, the Debtor is not seeking to retain experts who will play a 16 central role in the administration of the estate. Instead, the Experts will be retained for the limited 17 purpose of consulting with the Debtor regarding discrete topics relating to financial and/or 18 regulatory issues. If necessary, some of the Experts may be asked to provide opinion testimony 19 regarding these topics in a proceeding before this Court. As such, the Experts are not 20 "professionals" under section 327.
21 The case law is in accord. In In re That's Entertainment,the court determined that an 22 accountant hired as an expert witness was not a "professional" within the meaning of section 327.
23 In reaching that conclusion, the court analyzed the following factors:
24 (1) Whether "the duties involved are central to the administration of the estate;"
25 (2) Whether the expert would be "in a position to formulate strategy or to manage the 26 estate and the liabilities of the estate; and 27 (3) Whether the expert's duties would include any of the following:
28 (a) Assisting in the negotiation of the debtor's plan; COOLEY GODWARD LLP ATTORNEYS AT LAW 748377 vl/SF 3. MOTION TO AUTHORIZE THE RETENTION OF SAN FRANCISCO GIG901 .DOC EXPERTS
1 (b) Assisting in the adjustment of the debtor/creditor relationship; 2 (c) Disposing of the assets of the estate; or 3 (e) Acquiring assets on behalf of the estate.
4 In re That's Entertainment, 168 B.R. at 230 (citing Matter of D'Lites of America, Inc., 108 B.R.
5 352 (Bankr. N.D. Ga. 1989); In re SielingAssociates, 128 B.R. at 723.
6 Applying the same analysis, the Experts are not "professionals" under section 327.
7 Although the Experts will play a tangential role in proceedings to evaluate the plan of 8 reorganization, they will not play any role whatsoever in the administrationor management of the 9 estate; in fact, they will not be involved in any such administration or management at all.
10 Moreover, the Experts will be in no position to formulate strategy regarding the reorganization 11 plan. Finally, the duties of the Experts will not even remotely include the type of professionals' 12 duties listed above, such as plan negotiations, acquiring and disposing assets, or adjusting creditor 13 relationships.
14 2. The Experts Are Not Professionals Under Section 327 Because They Do Not Exercise Autonomy or Independent Discretion.
15 16 Courts that employ a qualitative analysis focus on whether the individual 17 "is to be given discretion or autonomy in some part of the administration of the debtor's estate."
18 In re Fretheim, 102 B.R. 298, 299 (Bankr. D. Conn. 1989). In In re Fretheim, the court noted 19 that the purpose of section 327 is to "prevent conflicts which 'erode the confidence of other 20 parties in the administration of. . . [the] estate to say nothing of public confidence in the 21 administration of justice in bankruptcy courts."' Id. (citing In re Intech Capital Corp, 87 B.R.
22 232, 236 (Bankr. D. Conn. 1988). Accordingly, because experts do not act with autonomy or 23 discretion, they are not subject to the types of conflicts that might result in an unjust situation. Id.
24 Likewise, here, the Experts will exercise no autonomy or independent discretion regarding 25 the administration of PG&E's estate. In fact, courts have held that because the attorneys who 26 employ experts are themselves subject to approval under section 327, requiring further approval 27 of experts would unnecessarily and impermissibly meddle in those attorneys' strategy 28 considerations. As the court stated in In re Argus Group 1700, Inc.:
COOLEY GODWARD LLP 748377 vl/SF 4 MOTION TO AUTHORIZE THE RETENTION OF ATTORNEYS A? LAW EXPERTS SAN FRANCISCO G1G901 !.DOC
1 This Court should not and will not impose its judgment on the strategy and tactics to be employed to defend the Debtors . ... They are determined by 2 counsel who has been approved by the Court as disinterested and free of conflict and whose compensation and cost reimbursements are tied to its proper exercise 3 of discretion and responsibility in managing that litigation.
4 199 B.R. 525, 533 n. 17 (Bankr. E.D. Penn. 1996) (accord In re Babcock, 70 B.R. at 693 ("The 5 trustee and the attorney for the trustee are in a better position" to evaluate the hiring of experts).
6 Accordingly, because the attorneys - and not the Experts themselves - will exercise discretion 7 and autonomy in the conduct of these proceedings, the Experts are not professionals within the 8 meaning of section 327.
9 Moreover, other courts examining this issue have concluded that experts are not 10 professionals under section 327. See, e.g., In re Ponce Marine Farm, Inc., 259 B.R. 484, 494 11 (Bankr. D.P.R. 2001) (wetlands expert not a professional); In re Napoleon, 233 B.R. 910, 913 12 (Bankr. D.N.J. 1999) (experts used in malpractice litigation not professionals); In re First 13 American Health Care of Georgia, Inc., 208 B.R. 996, 998 (Bankr. S.D. Ga. 1996) (accountant 14 retained as expert witness); In re Sieling, 128 B.R. at 723 (toxicology consultant); In re Babcock, 15 70 B.R. at 691 (Bankr. N.D. Ohio 1987) (expert witnesses are tangential to the administration of 16 the estate).
17 Although the cases cited above involved experts hired for litigation collateral to the 18 reorganization proceedings, the result should be no different here.' The policies expressed in 19 those cases apply with as much force to experts hired for the purpose of providing testimony 20 during the reorganization proceedings as those whose testimony is limited to collateral 21 proceedings. Whether retained for collateral litigation or for the reorganization proceeding itself, 22 an expert witness "is not in the position to formulate strategy or to manage the estate and the 23 liabilities of the estate." In re That's Entertainment,168 B.R. at 230.2 Moreover, this Court has 24 already approved the retention of the debtor's attorneys, and those attorneys must be allowed to 25 26 Research has uncovered no cases in which, like here, the expert to be retained was offering opinion testimony in connection with a contested plan of reorganization.
27 2In re That's Entertainmentstates that an expert "who is retained solely to testify as an expert witness in 28 collateral. litigation" does not qualify as a "professional" under 327. Nothing in the case, however, COOLEY GODWARD LLP indicates that its holding or logic are limited to experts retained for collateral litigation.
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1 exercise their best judgment by retaining the experts they believe best represent the debtor. This 2 district has stated:
3 Although the litigation itself could be considered central to the administration of the estate, the attorney controls the litigation - the expert witness merely offers 4 evidence in that case. Further, the attorneys are required to be approved by the court under § 327. Such approval is required in part because the position carries 5 with it responsibility and discretion to effectively carry out the necessary litigation. These responsibilities include engaging necessary expert witnesses for 6 the litigation.
7 Id. at 230 n.4. In sum, the Experts' roles could not be more clear or more limited: they will be 8 retained for the purpose of offering opinion testimony on discrete topics into evidence. The 9 Experts will have no autonomy, discretion, or responsibility with regard to the administration of 3
10 the estate.
1111 III. CONCLUSION.
12 The great weight of authority dictates that persons hired as experts in litigation are not 13 "professionals" under section 327 of the Bankruptcy Code. Accordingly, the Debtor respectfully 14 requests that this Court issue an order authorizing the retention of experts without further order of 15 the Court.
16 17 18 19 20 21 22 23 3 If this Court determines that the Debtor must seek advance approval of its experts, it should, at a minimum, exercise its discretion under section 105 and allow the Debtor to file the identities of 24 those experts under seal. Otherwise, the Debtor will be forced to reveal the identities of its experts even if they are not selected to testify at trial. This would be prejudicial, as the identities 25 of a party's non-testifying expert consultants are protected under the work product doctrine. See 8 Charles Alan Wright, et al., Federal Practice and Procedure § 2032 (Civil 2d 1994) (the 26 "prevailing view" is that the identity of consulting experts is protected); Ager v. Jane C. Stormont Hosp. & Training School for Nurses, 622 F.2d 496, 503 (10th Cir. 1980); United States v. Bell, 27 1994 WL 665295 at *4 (N.D. Cal. 1994); In re Pizza Time Theatre Securities Litigation, 113 F.R.D. 94 (N.D. Cal. 1986) ("a lawyer's decision about which experts to consult, but not to call as 28 a witness, also is a matter that implicates values that the work product doctrine was designed to protect.").
COOLEYGO0DWARD LUP ATTORNEYS AT LAW 748377 vl/SF 6. MoTION TO AUTHORIZE THE RETENTION OF SAN FRANCISCO GIG901 !.DOC EXPERTS
1 Dated: May_, 2002 2 COOLEY GODWARD LLP MARTIN S. SCHENKER (109828) 3 LINDA F. CALLISON (167785) 4 5 By:
Martr S. Schenker"
/ 6_9 6
Attorneys for Debtor 7 PACIFIC GAS AND ELECTRIC COMPANY 8
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- 7. EXPERTS