“Goods” vs. “Services” – When Technical Depth Is Needed To Win The Day

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Extreme technical depth is one of the reasons clients choose Kolisch Hartwell. Our team includes attorneys and patent agents with PhDs in Physics, Biology, Chemistry and Biophysics. This technical depth recently won the day when bankruptcy law and theoretical physics overlapped in court.

Kolisch Hartwell shareholder Shawn Kolitch, Ph.D., appeared in Colorado federal bankruptcy court on behalf of PacifiCorp, and argued as a physics expert that electricity should be considered a “good” rather than a “service” due to its fundamental properties. For purposes of Chapter 11 bankruptcy, this is important because providers of goods, but not services, are likely to get paid for what they provided to the bankrupt company within 20 days before the company files for bankruptcy. This means that electric utility companies would generally like electricity to be viewed as a “good” rather than as a “service.”  However, federal bankruptcy courts around the United States are evenly split on this question.

In the PacifiCorp case, Dr. Kolitch argued that (unlike in previous cases where the court addressed the question) the Court should consider “electrical energy” rather than “electricity” when analyzing the issue.  He said that one way to frame the question about the nature of electrical energy is to consider whether it is “identifiable” and “movable at the time of its identification,” which is the definition of “goods” found in the Uniform Commercial Code.  Using hand-held generators and macroscopic circuits, he demonstrated and explained to the Court how electrical energy satisfies this definition.

After hearing Shawn’s expert testimony, the Court concluded:
There really can be no doubt electrical energy falls within the ambit of “goods” under typical usage definitions. In fact, the question is not even close. . . . In the Court’s assessment, the metered electrical energy delivered by PacifiCorp to the Debtor constitutes “goods” under the unambiguous text of Section 503(b)(9).

This case ended in a win for PacifiCorp, and hopefully the Court’s comprehensive opinion will help to unify the federal bankruptcy courts about this issue.

For more details about the case, please visit: