In re Santa Clara Circuits W., 27 B.R. 680 (Bankr.D.Utah)
PUBLISHED
Debtor's gas utility notified it that a new account had been set up for debtor as of the date its chapter 11 petition was filed, and that debtor must provide a deposit to the utility in order to continue service. Debtor objected to the charging of a deposit, contending that it violated the 11 U.S.C. § 362(a) stay, and further alleged that the utility's deposit requirement discriminated against it for filing bankruptcy, in violation of 11 U.S.C. § 525. The court determined that, although § 362(a)(3) might be read to prohibit utility's deposit demand, such a demand is specifically authorized by 11 U.S.C. § 366(b), and was therefore lawful. The court ruled that it need not address debtor's discrimination claim because, even if utility is assumed to be a governmental unit, acts that are permitted by § 362 are not prohibited by § 525. Next, the court considered what constitutes "adequate assurance of payment" under § 366(b), concluding that it was a fact question that depends on the circumstances of each case. The court found that the administrative expense priority of utility's claim would not be adequate to assure payment, and that a cash deposit was necessary since, even though debtor's unpaid balance when it filed its petition was only $29, its unpaid balance had been as high as $950 a few months earlier. Debtor's claim that utility was adequately protected by guarantees was rejected, as the guarantees were from a corporation whose president was also an officer of debtor, and had not been shown to be reliable. Finally, the court ruled that the maximum cash deposit that may be charged for adequate assurance of payment would be the amount of an average billing period charge. plus an amount to cover services from the end of the billing period to the date on which payment for that period is due.