• Fifth Circuit Rules in Mirant on Rejection of Contracts Subject to FERC Regulation
  • August 27, 2004 | Authors: Mark A. Speiser; Harold A. Olsen
  • Law Firm: Stroock & Stroock & Lavan LLP - New York Office
  • In an August 4, 2004, decision in the Mirant bankruptcy, the Fifth Circuit Court of Appeals has affirmed the right of a debtor, under certain circumstances, to reject an executory contract subject to FERC regulation. The decision points up the tension between competing federal policies -- in this case the policies reflected in the Bankruptcy Code and the Federal Power Act -- and suggests that the rationale supporting rejection will be carefully scrutinized, applying a more rigorous standard than the lenient "business judgment" standard typically applied in approving a debtor's executory contract decisions.