MEMORANDUM OPINION AND ORDER

HAYDEN HEAD, Senior District Judge.

Southern California Edison appeals from the Order of the Bankruptcy Court that denied its Motion for Entry of an Order Authorizing Termination of Forward Contracts Pursuant to 11 U.S.C. § 556. The Court reverses the judgment of the bankruptcy court that Southern California Edison waived its right to terminate the contract.

I. BACKGROUND

Linn Energy, LLC and Berry Petroleum Company, LLC (Berry) filed Chapter 11 bankruptcy on May 11, 2016. Previously, Berry entered into two electricity supply and capacity agreements (Agreements) with Southern California Edison (SCE) in July 2012 and April 2014.1 The Agreements provided that Berry would supply SCE with electricity and capacity from its cogeneration plants in California for a term of 84 months each.

Both Agreements provided Termination Rights of the parties for an event of default that included either party becoming bankrupt,2 and provided a process of early termination.3 Both contracts also recited that the "Agreement and transactions contemplated by this Agreement constitute a `forward contract' within the meaning of the United States Bankruptcy Code and that Buyer and Seller are each `forward contract merchants' within the meaning of the United States Bankruptcy Code." § 9.08(m).

Berry provided notice of its bankruptcy filing to SCE on May 27, 2016.4 SCE filed its motion for authorization to terminate the Agreements on July 22, 2016, 56 days after service. Berry filed its objections to SCE's motions on August 12, 2016. The Official Committee of Unsecured Debtors joined in Berry's objections. On August 15, 2016, SCE filed its reply to the objections.

The bankruptcy court held an evidentiary hearing August 16, 2016,5 on SCE's motion. The parties presented testimony from Marci Palmstrom, from SCE,6 and from Thomas Cruz, a Linn employee.7 Ms. Palmstrom testified that after SCE learned of the Linn bankruptcy through a press release, SCE looked at the Agreements to determine whether bankruptcy qualified as an event of default. Although SCE was aware that Linn owned Berry, the Agreements only provided an event of default if Berry became bankrupt.8 D.E. 2-2, pp. 6423-24. In mid-June 2016, SCE performed an analysis of the Agreements and determined that the Agreements were out of the money "upwards of $30,000,000." Id., pp. 6424, 6426. After consulting with counsel, SCE determined that it should seek relief in the bankruptcy court rather than unilaterally terminate the Agreements. Ms. Palmstrom testified that Berry continued to perform under the Agreements; SCE did not seek emergency relief from the bankruptcy court, and the only reason SCE wanted to terminate the contracts was that SCE was out of the money.

Mr. Cruz testified that the two cogeneration plants continued to supply electricity to SCE without interruption and SCE continued to accept the electricity in the same quantities as before. Id., pp. 97-98. According to Mr. Cruz, if SCE were permitted to terminate the Agreements Berry would have to make a choice between three options, 1) to replace the contract with SCE with another similar contract, 2) sell electricity on the spot market, or 3) to install conventional steam equipment at both locations to replace the cogeneration facilities at a cost of approximately $10 million. Id., pp. 99-102.

Counsel for Berry argued that Berry began negotiating with SCE over the Agreements after July 22, 2016, and the negotiations continued until the week before the hearing. D.E. 2-2, p. 6395-96. The parties' positions regarding the negotiations, as set forth in Berry's response and objection, and SCE's reply, conflict. There is no evidence regarding the negotiations, other than a brief mention by Berry's witness that he participated in two phone calls in which negotiations were briefly discussed. Id. at 6510. Berry's counsel further argued that Berry did not know for certain that SCE intended to terminate the Agreements until SCE filed its reply on August 15, 2016.

At the conclusion of the hearing, the Bankruptcy Court found that SCE waived its right to terminate and declined to decide whether the contracts were forward contracts. SCE appeals from that Order (D.E. 2-1, pp. 6502-03).

II. STANDARD OF REVIEW

"The district courts of the United States shall have jurisdiction to hear appeals (1) from final judgments, orders, and decrees" of a bankruptcy court. 28 U.S.C. § 158(a)(1). This Court reviews the bankruptcy court's findings of fact for clear error; its conclusions of law de novo, and mixed questions of law and fact de novo. In re TMT Procurement Corp., 764 F.3d 512, 519 (5th Cir. 2014) (per curiam). "As to all findings of fact, however, a reviewing court of a bankruptcy decision must accept the findings as found, unless they are clearly erroneous." Matter of Missionary Baptist Foundation of' Am., 818 F.2d 1135, 1142 (5th Cir. 1987). "A finding of fact is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Id. (internal citations omitted). "However, when a finding of fact is premised on an improper legal standard, or a proper one improperly applied, that finding loses the insulation of the clearly erroneous rule." In re Friedheim, 277 Fed. App'x 485, 488 (5th Cir. 2008) (per curiam) (unpublished).

III. ANALYSIS

A. Waiver9

This appeal requires the Court to determine whether a party waives application of an ipso facto clause by delay of less than 90 days after notice of the counterparty's bankruptcy before asserting its desire to terminate, even in the absence of language in the statute regarding time limitations or evidence in the record regarding business circumstances.

SEC argued that the Agreements constituted forward contracts, SCE and Berry were forward contract merchants, and SCE was entitled to terminate the Agreements based upon Berry's default. In response, Berry argued that if SCE had the right to terminate under the Agreements, SCE waived that right because SCE failed to act promptly. Berry further argued that the legislative history required that the remedies afforded by § 556 to be exercised promptly and relied upon bench rulings by Bankruptcy Judge Peck in In re Lehman Bros-Holdings Inc., No. 08-13555 (Bankr. S.D.N.Y. June 15, 2009) (Docket No. 5621).

At the conclusion of the hearing, the bankruptcy court made the following findings and conclusions:

D.E. 2-2, pp. 06484-486. The bankruptcy court found that SCE waived its right to terminate the Agreement, without deciding whether the Agreements were forward contracts.

Section 556 and other safe harbor provisions provide exceptions to other portions of the Bankruptcy Code that protect debtors from discrimination due to their bankruptcy, such as § 365(e)(1).10 If SCE qualifies as a forward contract merchant and the Agreements qualify as forward contracts,11 § 556 allows SCE to terminate the Agreements notwithstanding subsection 365(e)(1).

The text of § 556 does not include a time limitation on the right to terminate:

11 U.S.C. § 556.

In Toibb v. Radloff 501 U.S. 157 (1991), the Court enforced the plain language of the bankruptcy statute defining the class of debtors permitted to file under Chapter 11, reversing the lower courts. The lower courts relied on the legislative history, policy considerations, and the structure of the Code to engraft an "ongoing business" requirement for debtors who sought to file under Chapter 11. The Court stated: when "the resolution of a question of federal law turns on a statute and the intention of Congress[,] we look first to the statutory language and then to the legislative history if the statutory language is unclear." Id. at 162; In re Village at Camp Bowie, La., 710 F.3d 239, 246 (5th Cir. 2013) ("the Bankruptcy Code must be read literally, and congressional intent is relevant only when the statutory language is ambiguous.") (emphasis in original);12 Enron Creditors Recovery Corp. v. Alfa, S.A.B. de C. V.., 651 F.3d 329, 339 (2d Cir. 2011) (rejecting Enron's arguments regarding the use of legislative history to modify the plain terms of the bankruptcy statute). Berry relied heavily on Judge Peck's oral findings in In re Lehman Brothers Holdings Inc., that a counterparty waived its rights under the safe harbor provisions. However, that case differs in two important respects from the case before the Court. In Lehman Brothers, the counterparty both refused to perform and refused to terminate for a year during which time the market changed in the counterparty's favor, according to Berry's recital of the facts. See D.E. 2-2, p. 6320-21. Here, both Berry and SCE have continued to perform. SCE filed its motion no later than 72 days after Berry filed its bankruptcy petition and 57 days after Berry gave notice of its filing.

In another case on which Berry relied, the Mirant/Kern case, Bankruptcy Judge Lynn found that a counterparty that waited seven weeks to terminate a swap agreement with a debtor was entitled to terminate under a safe harbor provision based upon an ipso facto clause. See In re Mirant Corp., 314 B.R. 347 (N.D. Tex. 2004) (re § 560 swap). Judge Lynn also rejected the Debtor's waiver argument, in part due to inequitable conduct by the Debtor.

The bankruptcy court in this case relied on a single factor, promptness, to determine waiver. However, the Bankruptcy Code prohibits a court from engrafting barriers to the use of an ipso facto clause in certain kinds of contracts. Moreover, the Supreme Court also prohibits courts from engrafting requirements onto the Code. See Toth, 501 U.S. at 162.

The Court finds that the statutory language does not mention the timing of termination of a contract subject to section 556. There is also no Fifth Circuit or United States Supreme Court ruling that reads a promptness requirement into the statute. As a result, SCE could not have known that it was required to move "quick[ly]" after its counterparty filed bankruptcy to avoid waiver. The Court finds that the bankruptcy court's reading of the statute erected a court imposed barrier to the plain language of § 556. Accordingly, the Court reverses the bankruptcy court's finding of waiver based on the court's erroneous inclusion of an extra-statutory promptness requirement in § 556.

B. Equitable Mootness

Berry further argues that if Southern California Edison prevails on appeal and is authorized to terminate the contracts at issue, that termination would threaten the success of the confirmation plan. Because the appeal was taken before confirmation, this Court has no factual record from which to determine whether Berry's claim is correct. The Court remands this matter for fact findings on the issue of whether the relief requested would affect the rights of parties not before the court or the success of the plan.

CONCLUSION

The court REVERSES the bankruptcy court's finding that SCE waived its right to terminate the Agreements and DENIES Appellee Beny Petroleum Company, LLC's Motion to Dismiss Appeal (D.E. 12).

ORDERED.