Cable Service is not a Utility Under Section 366
In In re Darby, No. 05-20931 (5th Cir. Nov. 14, 2006), a Chapter 13 debtor tried to use the Bankruptcy Code to require the local cable television company to continue providing service. After the debtor filed bankruptcy, the cable provider disconnected his service. The debtor then invoked Bankruptcy Code § 366, which states that a utility may not "alter, refuse, or discontinue service" solely because of the commencement of a bankruptcy case. That same section also provides that the utility can refuse to continue service unless the debtor gives adequate assurance of future payment.
The word “utility” as it is used in section 366 is not defined in the bankruptcy code. The court then looked to the House Judiciary Report and Senate Report on the provision. The report provides that section 366 gives debtors protection from a cut-off of service by the utility because of a bankruptcy filing. The report goes on to state that “this section is intended to cover utilities that have some special position with respect to the debtor, such as an electric company, gas supplier, or telephone company that is a monopoly in the area so that the debtor cannot easily obtain comparable service from another utility.”
In applying this language, the court reasoned that the necessity of the service underlies this provision. The court held that the necessity of the service is what creates the “special” relationship between the debtor and the utility referenced in the Congressional report. The court concluded that cable television is not a necessity. The debtor testified that cable television is only a convenience, not a necessity. Accordingly, the court held that cable service is not a utility covered by section 366 of the Bankruptcy Code.
Bob Lawless at The Credit Slips Blog discusses this case in detail and offers an interesting analysis as to why the court got it right, but for the wrong reason.
