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Rock Airport of Pittsburgh, LLC v. Management Science Associates, Inc.

United States District Court, W.D. Pennsylvania

April 11, 2014

ROCK AIRPORT OF PITTSBURGH, LLC, ET AL., Appellant,
v.
MANAGEMENT SCIENCE ASSOCIATES, INC., Appellee

Page 747

For ROCK AIRPORT OF PITTSBURGH, LLC, RPP, LLC, Appellants: Elliott J. Schuchardt, LEAD ATTORNEY, Pittsburgh, PA; Robert O. Lampl, LEAD ATTORNEY, Pittsburgh, PA; Thomas E. Reilly, LEAD ATTORNEY, Thomas E. Reilly, P.C., Sewickley, PA.

For MANAGEMENT SCIENCE ASSOCIATES, INC., Appellee: David K. Rudov, LEAD ATTORNEY, Rudov & Stein, Pittsburgh, PA; Rodger L. Puz, LEAD ATTORNEY, Gregory C. Michaels, Dickie McCamey & Chilcote, P.C., Pittsburgh, PA.

OPINION

Page 748

MEMORANDUM OPINION

Arthur J. Schwab, United States District Judge.

Appellants, Rock Airport of Pittsburgh, LLC, and RPP, LLC (hereinafter, " Rock Airport" and " RPP," respectively) filed an Appeal from the Bankruptcy Court's December 3, 2013 Order claiming the Bankruptcy Court abused its discretion in several ways and made clearly erroneous findings of fact. Appellee, Management Science Associates, Inc. (hereinafter " MSA" ), disputes that the Bankruptcy Court made clearly erroneous factual findings and contends the Court did not abuse its discretion in any way. This matter has been fully briefed by the parties and is now ripe for adjudication.

I. Jurisdiction and Standard of Review

This Court has jurisdiction over this appeal pursuant to 28 U.S.C. § 158(a). A district court sits as an appellate court in bankruptcy proceedings. In re Michael, 699 F.3d 305, 308 n.2 (3d Cir. 2012).

Page 749

The standards of review which apply to this case are as follows:

First, this Court cannot disturb the factual findings of a bankruptcy court unless they are clearly erroneous. In re Gray, 558 Fed.Appx. 163 , 2014 WL 889355 at *3 (3d Cir. March 7, 2014); see also Accardi v. IT Litig. Trust (In re IT Group, Inc.) , 448 F.3d 661, 667 (3d Cir. 2006). A factual finding is " clearly erroneous" if the reviewing court is " left with a definite and firm conviction that a mistake has been committed." In re W.R. Grace & Co. , 729 F.3d 311, 319, n.14 (3d Cir. 2011); see also Gordon v. Lewistown Hosp. , 423 F.3d 184, 201 (3d Cir. 2005). Under the clearly erroneous standard, it is the responsibility of an appellate court to accept the ultimate factual determinations of the fact-finder unless that determination is either (1) completely devoid of minimum evidentiary support displaying some hue of credibility or (2) bears no rational relationship to the supportive evidentiary data." DiFederico v. Rolm Co. , 201 F.3d 200, 208 (3d Cir. 2000) (citations omitted).

Second, this Court exercises plenary, or de novo , review over any legal conclusions reached by the bankruptcy court. In re Ruitenberg , 745 F.3d 647, 2014 WL 959485 at *2 (3d Cir. March 13, 2014); see also Am. Flint Glass Workers Union v. Anchor Resolution Corp. , 197 F.3d 76, 80 (3d Cir. 1999).

Third, if the Bankruptcy Court's decision is a mixed question of law and fact, this Court must break down the determination and apply the appropriate standard of review to each. In re Montgomery Ward Holding Corp. , 326 F.3d 383, 387 (3d Cir. 2003). The Court should " apply a clearly erroneous standard to integral facts, but exercise plenary review of the court's interpretation and application of those facts to legal precepts." In re Nortel Networks, Inc. , 669 F.3d 128, 137 (3d Cir. 2011) (citation omitted).

Finally, this Court reviews a bankruptcy court's exercise of discretion for abuse. In re Friedman's Inc., 738 F.3d 547, 552 (3d Cir. 2013). A bankruptcy court abuses its discretion when its ruling rests upon an error of law or a misapplication of law to the facts. In re O'Brien Environmental Energy, Inc. , 188 F.3d 116, 122 (3d Cir. 1999).

II. Factual and Procedural History

A. Summary of the Facts

In a nutshell, the issues raised by Rock Airport and RPP in this appeal arise from the following facts: (1) MSA purchased property from Rock Airport and utilized RPP for its electrical needs with respect to that property; (2) MSA's electrical needs were such that, over time, RPP either could not or would not accommodate MSA's needs, and on several occasions (and at least once in violation of a Court Order), RPP cut off MSA's electrical power; and (3) there came a time when the parties agreed that MSA should migrate from RPP's electrical system to West Penn Power's system, but RPP contends that this migration did not occur in a timely fashion and was in contravention of a Court Order. Ultimately, the Bankruptcy Court required Rock Airport to grant an easement to MSA so that a power line from MSA's building(s) to West Penn Power's electrical system could be installed thereby enabling MSA's electrical migration from RPP to West Penn Power to occur.

B. Factual and Procedural History

This Court has detailed below the procedural history (which emanated from Orders entered in both the Court of Common Pleas of Allegheny County (" State Court" )

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and the Bankruptcy Court for the Western District of Pennsylvania (" Bankruptcy Court" )) from which the above-mentioned relevant facts were born.

Rock Airport was acquired in the late 1990s by Mr. Rock Ferrone. After acquiring the airport, Ferrone developed a business park (" Rockpointe Business Airpark" ) and in September of 2000, sold some the property within Rockpointe Business Airpark to MSA. MSA purchased this property for the purpose of constructing a data center. MSA used the property purchased from Ferrone to construct a 42,000 square-foot data center which operates on a 24/7/365 schedule. MSA's data center provides back-up support and services to the computer information systems of its clients, in the event of its clients' own system failures.

Around the time that MSA purchased this property from Ferrone, Ferrone created RPP which, in 2002, became MSA's sole supplier of electricity. RPP also supplied electricity to other tenants and owners at Rockpointe Business Airpark. After connecting to the RPP electrical system in 2002, MSA increased its electrical needs in 2004, and again in 2008.

1. Electrical/Power Loss - 2008

Because of the increasing amount of electricity MSA needed, in 2008, RPP either could not or would not supply power to MSA and terminated MSA's power. MSA filed a lawsuit seeking injunctive relief in the Court of Common Pleas of Allegheny County (docket no. GD 08-8520, hereinafter " State Court" ) against Rock Airport and RPP. On April 30, 2008, the State Court granted MSA preliminary injunctive relief, thereby requiring RPP to restore electrical power to MSA. MSA v. Rock Airport , Court of Common Pleas of Allegheny County, Pennsylvania, GD 08-8520, doc. no. 4.

On July 11, 2008, the parties in the State Court case entered into a Consent Order which, inter alia, required RPP to continue to provide MSA with electrical power, but MSA was to limit its consumption and migrate off RPP's system to West Penn Power's [f/k/a Allegheny Power] system, " as commercially soon as possible." Id. , doc. no. 13. This Consent Order further indicated the " parties acknowledge that to migrate to Allegheny Power may require an easement from [Rock Airport]. [Rock Airport] will grant such easement to Allegheny Power . . . provided they are consistent with the overall development of the [Rockpointe Business] Airpark . . . ." Id. , doc. no. 13.

On April 30, 2009, Rock Airport filed for Chapter 11 bankruptcy, automatically staying the aforementioned State Court proceedings. MSA's migration from RPP to West Penn Power did not occur before Rock Airport filed for bankruptcy.

2. Electrical/Power Loss - 2011

In July of 2011, RPP shut off the electrical power to MSA. MSA filed an adversary proceeding in the bankruptcy case on July 15, 2011 to restore its power. MSA v. Rock Airport , United States Bankruptcy Court, Western District of Pennsylvania, no. 11-02361, doc. no. 1. On October 14, 2011, a Consent Order was reached in the adversary bankruptcy case dismissing the adversary proceeding, but granting MSA relief from the automatic stay in the State Court case, thereby allowing litigation to resume in State Court. Id., doc. no. 18.

3. Electrical/Power Losses -- 2012

Starting on February 17, 2012, and continuing throughout much of 2012, while the State Court litigation was still proceeding, MSA experienced interruptions in its electrical power supplied by RPP. On April 2, 2012, the State Court ordered, inter alia , Rock Airport and RPP to immediately restore MSA's power. MSA v. Rock Airport ,

Page 751

Court of Common Pleas of Allegheny County, Pennsylvania, GD 08-8520, doc. no. 37. On April 3, 2008, Rock Airport and RPP filed a Notice of Appeal of the April 2, 2012 Court Order. Id. , doc. no. 38.

Rock Airport and RPP throughout the litigation in 2012 claimed that MSA's operation of one of its transformers was unlawful and/or unsafe, and filed an emergency motion to that effect. Id. , doc. no. 64. The State Court denied Rock Airport's and RPP's emergency motion. Id. , doc. no. 72. In addition to Rock Airport and RPP's emergency motion, MSA filed its own emergency motion, seeking a Court Order precluding Rock Airport and RPP from terminating its electrical service, claiming that RPP was charging MSA $30,000 in " administrative/legal/equipment rental" fees for which there was no substantiation. Id. , doc. no. 94. On November 28, 2012, the State Court barred Rock Airport and RPP from terminating electricity without a Court Order. Id. , doc. no. 97.

On December 28, 2012, Rock Airport and RPP filed a Motion in State Court seeking authorization to terminate MSA's electrical power, claiming MSA had not fully paid its prior electrical invoices.[1] On February 28, 2013, the State Court entered two Orders: one granted MSA's motion to compel the deposition of Ferrone, Rock Airport, and RPP; the other denied Rock Airport's motion for recusal of Judge Ward.

4. Electrical/Power Losses -- 2013

Shortly after entry of these Orders on February 28, 2013, RPP terminated electrical service to MSA without first obtaining a Court Order in contravention of the November 28, 2012, State Court Order.

As a result of the February 28, 2013 interruption of power, on March 1, 2013, MSA initiated a new adversary proceeding (docket no. 13-02078) in Bankruptcy Court. The Bankruptcy Court entered an Order dated March 2, 2013, requiring, inter alia, RPP to reconnect electrical service within 24 hours in accordance with the July 11, 2008 State Court Consent Order, and MSA to " complete the transfer of electric service from RPP to [West Penn] Power" within 90 days from March 2, 2013. MSA v. RPP, LLC , United States Bankruptcy Court, Western District of Pennsylvania, no. 13-02078, doc. no. 6. On March 4, 2013, RPP filed a Motion asking the Bankruptcy Court to reconsider its March 2, 2013 Order and/or terminate the July 11, 2008 State Court Consent Order. Id. , doc. no. 5. Throughout the month of March, 2013 the parties fought over how much MSA owed RPP for power versus " administrative fees" and whether the migration was occurring.

On April 24, 2013, the Bankruptcy Court entered a Consent Order: (1) staying two ongoing adversary proceedings (nos. 13-02078 and 13-02158); (2) staying the 90-day electricity migration time frame established by the Court's prior March 2, 2013 Order; (3) requiring the parties to comply with the July 11, 2008 State Court Order; and (4) instructing the Trustee to work with MSA to utilize the DQE easement for the installation of MSA's line to a new electrical system RPP to pay West Penn Power a fee to commission a design study for the placement of the electrical system to MSA's facility. Id. , doc. no. 59. On May 31, 2013, the Bankruptcy Court modified the April 24, 2013 Consent Order, which ordered in relevant part: (1) RPP was ordered to pay the $10,000 fee sought to be charged by West Penn Power for a design study regarding placement for MSA's electrical system; (2) the completed

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design study was to be filed in the main bankruptcy case by the trustee; and (3) the parties were to agree to one of the designs established by the West Penn Power study for the migration, but if the parties could not agree then Order ...


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