Southern District of Texas
ERCOT Gets Final, Take-Nothing Judgment in Uri Case
U.S. Bankruptcy Judge Marvin Isgur sided with the Electric Reliability Council of Texas recently in an adversary proceeding brought by the trustee of the Entrust Energy Liquidating Trust in litigation over 2021’s Winter Storm Uri.
Entrust filed for Chapter 11 bankruptcy protection in the days after Uri hit. The trustee, Anna Phillips, filed this adversary proceeding in February 2022, seeking $296 million in damages and alleging ERCOT’s actions transferring 90,000 of its Texas customers to a so-called provider of last resort, or POLR as it is referred to in court documents, constituted a taking for which it is entitled to be compensated.
Judge Isgur rejected the takings claim in a December ruling, leaving only Entrust’s claim that ERCOT was grossly negligent in preparing for the storm and via actions it took during and after the storm affecting the price of power.
ERCOT argued it is immune from liability and that it is therefore entitled to summary judgment.
In an order issued March 11, Judge Isgur found Entrust should take nothing in the case and that ERCOT is entitled to “all costs incurred in connection with this adversary proceeding.”
“The Trustee’s position confuses the concepts of constitutional sovereign immunity from suit in federal court with state-law immunity from liability under Texas law. … The decision in this case turns upon ERCOT’s immunity from liability under Texas law — not whether ERCOT has sovereign immunity from suit under the Constitution,” Judge Isgur wrote.
Judge Isgur explained that while Texas lawmakers have created a limited waiver of sovereign immunity, these claims against ERCOT do not fall within the confines of that.
“Thus, because ERCOT is immune from liability on the trustee’s gross negligence claim under Texas law, the trustee’s claim fails as a matter of law,” Judge Isgur wrote. “The Court notes that this case presented complex issues of state-law immunities and it commends counsel from both the Trustee and ERCOT for their efforts.”
ERCOT is represented by Jamil N. Alibhai and Kevin M. Lippman of Munsch Hardt Kopf & Harr.
Entrust is represented by Charles R. Gibbs, Debbie E. Green and Darren Azman of McDermott Will & Schulte.
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