## Facts

- Mirant Corporation and affiliates filed chapter 11; trading and marketing activities were conducted through Mirant Americas Energy Marketing, L.P. (MAEM).
- MAEM traded commodity derivatives, including non-energy swap agreements.
- MAEM and MediaNews Group, Inc. (MNG) entered a newsprint price swap on March 17, 1998, exchanging cash flows tied to the market price of newsprint for a term running from May 1, 1998, through April 2005.
- When MAEM filed for bankruptcy on July 14, 2003, market newsprint prices were below the fixed swap price, making MAEM entitled to net payments from MNG.
- Post-petition, the parties negotiated for several weeks.
- On September 4, 2003, MNG gave notice electing to terminate the swap under the agreement.
- On September 16, 2003, MNG notified MAEM that the net termination amount due to MAEM was $1,135,578.
- MAEM asserted MNG’s termination violated the automatic stay and that MNG waived any termination right by delaying termination while negotiating.

## Issues

1. Whether MNG’s post-petition termination of the newsprint swap was barred by the automatic stay under 11 U.S.C. § 362(a), or permitted under the swap safe-harbor provisions, including 11 U.S.C. § 362(b)(6).
2. Whether MNG waived its contractual and statutory termination rights by negotiating and delaying termination after the bankruptcy filing, such that the court should enjoin termination or impose sanctions.

## Decision

- The court denied MAEM’s motion to enforce the automatic stay against MNG.
- The court held the newsprint contract qualified as a swap agreement and MNG’s termination fell within Bankruptcy Code safe-harbor protections, so it was not prohibited by the automatic stay.
- The court rejected MAEM’s waiver argument, finding that negotiations and delay did not show intentional relinquishment of termination rights.
- The court declined to impose sanctions or other relief, concluding it would be inequitable on these facts to penalize MNG, particularly where the debtor sought to use the stay offensively.

## Legal Principles

- The automatic stay under § 362(a) protects the debtor but should not be used offensively to obtain leverage over counterparties.
- Section 362(b)(6) and related safe-harbor provisions allow a protected counterparty to terminate, liquidate, or accelerate a qualifying swap agreement post-petition without violating the stay.
- Waiver requires clear evidence of an intentional relinquishment of a known right; negotiation and delayed exercise of termination rights, without more, is insufficient.
- Bankruptcy courts may deny stay-based relief or sanctions on equitable grounds when enforcement would create an unfair advantage inconsistent with the stay’s protective function.

## Conclusion

The court refused to use the automatic stay to block or punish a counterparty’s termination of a qualifying swap agreement, holding the Bankruptcy Code’s swap safe harbors applied and that the counterparty’s delay and negotiations did not waive termination rights.


In re Mirant Corp., 314 B.R. 347 (Bankr. N.D. Tex. 2004)