In a January 5, 2023 opinion from the United States Court of Appeals for the Fifth Circuit, the panel held the Just Energy bankruptcy court erred in exercising jurisdiction over the debtor’s suit to recover Winter Storm Uri payments made to ERCOT. The Fifth Circuit found the underlying issue—i.e., the propriety of ERCOT and PUCT’s pricing—to be precisely the type of controversy that should be decided in the manner carefully prescribed by the Texas legislature, and not be second-guessed by the bankruptcy court. Therefore, the Fifth Circuit held that the Travis County, Texas district court is the appropriate forum to consider the merits of the debtor’s clawback claims. Following the opinion, federal courts must carefully consider whether to abstain from deciding controversies that would unduly interfere with the complex utility regulatory scheme established by the Texas legislature.
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