Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_20-cv-01493/USCOURTS-cand-4_20-cv-01493-16/pdf.json

Nature of Suit Code: 422
Nature of Suit: Bankruptcy Appeals Rule 28 USC 158
Cause of Action: 11:101 Bankruptcy

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

AD HOC COMMITTEE OF HOLDERS OF 

TRADE CLAIMS,

Appellant,

v.

PG&E CORPORATION, et al.,

Appellees.

Case No. 20-cv-01493-HSG 

ORDER DENYING MOTION FOR 

LEAVE TO APPEAL

Re: Dkt. No. 3

Pending before the Court is the motion of the Ad Hoc Committee of Holders of Trade 

Claims (“Trade Committee”) for leave to appeal (Dkt. No. 3-2, “Motion for Leave”), pursuant to 

28 U.S.C. Section 158(a)(3) and Federal Rule of Bankruptcy Procedure 8004(a), the Interlocutory 

Order Regarding Postpetition Interest (BR Dkt. No. 5669)1entered on February 6, 2020 (“PPI 

Order”) and Memorandum Decision entered on December 30, 2019 (BR Dkt. No. 5226) (“PPI 

Memorandum”) (together “PPI Memorandum and Order”). Having carefully considered the

briefs2and the PPI Memorandum and Order, the Court DENIES the Motion for Leave.

BACKGROUND

A. The Bankruptcy Filing

On January 29, 2019 (“Petition Date”), PG&E Corporation (“PG&E Corp.”) and its 

primary operating subsidiary, Pacific Gas and Electric Company (“Utility,” and together with 

PG&E Corp., “Debtors”), commenced the Chapter 11 cases. This was due to “a confluence of 

factors resulting from the catastrophic and tragic wildfires that occurred in Northern California in 

1

“BR Dkt. No.” references are to the Bankruptcy Court’s docket, Case No. 19-30088 (DM) 

(Bankr. N.D. Cal.). “Dkt. No.” references are to this Court’s docket. 

2

Including Dkt. No. 31 (“AHC Opp.”); Dkt. No. 32 (“Debtors’ Opp.”); Dkt. No. 48 (“Reply”).

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2017 and 2018, and [the Debtors’] potential liabilities arising therefrom.” See Amended 

Declaration of Jason P. Wells (BR Dkt. No. 263, “Wells Decl.”) at 3. In addition to liability 

arising from the wildfires, the Debtors had “approximately $22 billion in outstanding funded debt 

obligations” under prepetition lending facilities. See [Proposed] Disclosure Statement for 

Debtors’ and Shareholder Proponents’ Joint Chapter 11 Plan of Reorganization (BR Dkt. No. 

5700, “Proposed Disclosure Statement”) at 6.

The timeline of the Debtors’ Chapter 11 cases and confirmation of a chapter 11 plan is 

dictated in part by the terms of Assembly Bill 1054 (“AB 1054”), a California statute that 

“established a statewide fund that participating utilities may access to pay for liabilities arising in 

connecti[on] with future wildfires occurring after July 12, 2019 (the ‘Go-Forward Wildfire 

Fund’).” See Proposed Disclosure Statement at 7. Debtor Utility intends to participate in the GoForward Wildfire Fund, and in order to do so, “the Utility’s Chapter 11 Case [must be] resolved 

pursuant to a plan of reorganization or similar document not subject to stay” by June 30, 2020. Id.

B. The Debtors’ Plan

On September 9, 2019, the Debtors filed the Debtors’ Joint Chapter 11 Plan of 

Reorganization. BR Dkt. No. 3841. The Debtors have since filed amended and revised versions 

of a chapter 11 plan, with the most recent dated January 31, 2020. BR Dkt. No. 5590 (the 

“Debtors’ Plan”). Relevant to this dispute, the Debtors’ Plan assumes that the Debtors’ estates are 

solvent. As a result, holders of allowed “General Unsecured Claims” are to be paid in full in cash 

on the effective date of the Debtors’ Plan. See id. §§ 4.4(a), 4.21(a). The Debtors’ Plan further 

provides for payment of postpetition interest accruing from the Petition Date through the effective 

date “at the Federal Judgment Rate,” which is calculated at 2.59%. Id. § 1.73. General Unsecured 

Claims are “Unimpaired,” and not permitted to vote on the Debtors’ Plan. Id. §§ 4.4(b), 4.21(b).

C. The Postpetition Interest Dispute

Out of recognition of the need to confirm a chapter 11 plan before the June 30, 2020 

deadline under AB 1054, the parties began focusing on plan-related issues that could be litigated 

prior to the ultimate hearing on confirmation of the Debtors’ Plan. The parties identified one such 

issue as the dispute over whether any plan must pay postpetition interest at the “Federal Judgment 

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Rate,” as the Debtors proposed, or pursuant to state law, as several creditor groups contended, 

including the Trade Committee. See, e.g., Sept. 24, 2019 Hr’g Tr. at 26:8–20; Oct. 23, 2019 Hr’g 

Tr. at 32:10–14, 33:1–3 (statement by Judge Montali that “I would like to break the confirmation 

issues into discrete things, like these, that they are confirmation issues.”). Part of the Bankruptcy 

Court’s rationale for resolving the issue early was to also address any appeal on postpetition 

interest at an early stage. See Sep. 24, 2019 Hr’g Tr. at 40:6–9 (“If I make a ruling, that’s my job. 

If my ruling is appealed on an interlocutory basis, that’s an option for the parties and something 

else to deal with. But we can’t even get there if we don’t start by teeing it up here.”).

On October 31, 2019, the Bankruptcy Court entered an order (BR Dkt. No. 4540,

“Scheduling Order”) setting a schedule for addressing “whether the postpetition interest rate 

applicable to unsecured claims under any chapter 11 plan of reorganization is the Federal 

Judgment Rate or some other rate, such as the rate of interest under the applicable contract and/or 

other applicable state law” (the “PPI Dispute”). The Scheduling Order also contemplated a 

potential appeal of a decision on the issue:

When the court does issue the orders on these questions there are 

several alternatives. First, any aggrieved party may seek interlocutory 

review under Fed. R. Bankr. P. 8004. Second, the court on its own or 

upon request of a party, may certify direct appeal under Fed. R. Bankr. 

P. 8006, as it did earlier in these cases in AP 19-3003. Finally, the 

court will be able to consider a request for certification under Fed. R. 

Bankr. P. 7054(b) of the discrete contested matter posed by the issue 

presented. 

Scheduling Order at 6 (emphasis added). 

Relying on the Ninth Circuit’s decision in In re Cardelucci, 285 F.3d 1231 (9th Cir. 2002), 

the Debtors argued that the Federal Judgment Rate is the appropriate rate in calculating 

postpetition interest on allowed unsecured claims in a solvent debtor case under chapter 11 of the 

Bankruptcy Code. See BR Dkt. No. 4624 at 1 (“Cardelucci is dispositive, and the creditors’ 

arguments for higher rates of interest cannot overcome this controlling precedent.”). Certain 

creditor groups, including the Official Committee of Unsecured Creditors, the Ad Hoc Committee 

of Senior Secured Noteholders of Pacific Gas and Electric Company (the “AHC”), and the Trade 

Committee, argued that under California law, contract-based claims accrue interest at a contractual

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rate, and in the absence of such a rate, at the statutory rate of 10%. See Cal. Civ. Code § 3289.

On December 30, 2019, the Bankruptcy Court ruled in the PPI Memorandum that “the 

Debtors are correct, that Cardelucci controls and that the Federal Interest Rate applies to any 

Plan.” PPI Memorandum at 2. The Bankruptcy Court, however, did not immediately enter the 

PPI Order. Instead, the Bankruptcy Court stated that “[b]ecause of the close relationship between 

the postpetition interest question and the issues presented in the forthcoming Make-Whole dispute, 

orders disposing of them both at the same time seem[] appropriate and efficient,” and that 

“[w]hether either or both questions should be certified for direct appeal or [be] treated as final for 

purposes of Fed. R. Bankr. P. 7054, can be visited later.”3Id. at 17. 

On January 27, 2020, the Debtors sought approval of a Restructuring Support Agreement 

entered into with the AHC (“Noteholder RSA”). Under Section 2(a)(i) of the Noteholder RSA, 

each “Consenting Noteholder” is deemed to “consent to deferral of the entry of a final order on the 

Bankruptcy Court’s decision on the post-petition interest issues to the entry of the Confirmation 

Order . . . .” In response, the Trade Committee filed a letter (BR Dkt. No. 5517), requesting that 

the Bankruptcy Court certify the PPI Memorandum as a final order under Fed. R. Civ. P. 54(b), 

and for direct appeal to the Ninth Circuit pursuant to 28 U.S.C. § 158(d)(2)(A). 

The Bankruptcy Court expressed doubt that certification would be proper. On February 4, 

2020, the Bankruptcy Court ruled that it could not “just decree that [the PPI Order is] a final order, 

when it isn’t a final order. But it’s clearly an interlocutory order.” Feb. 4, 2020 Hr’g Tr. at 

48:20–22, 50:6–8 (emphasis added). The Bankruptcy Court noted that the purpose of the PPI 

Memorandum was to provide guidance for a confirmable plan and that, once a confirmation order 

was entered, all parties would have the right to appeal. See Feb. 4, 2020 Hr’g Tr. at 49:18–21.

On February 6, 2020, the Bankruptcy Court entered the PPI Order. In the PPI Order, the 

Bankruptcy Court again “conclude[d] that the Debtors are correct, that In re Cardelucci, 285 F.3d 

1231 (9th Cir. 2002) controls and that the Federal Interest Rate applies to the postpetition 

treatment of unsecured creditors under any Chapter 11 Plan of Reorganization proposed by 

3 Pursuant to the Scheduling Order, the Bankruptcy Court scheduled the dispute regarding the

make-whole issue on a similar schedule as the PPI Dispute. See Scheduling Order ¶ 7

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Debtors.” PPI Order at 2. In the PPI Order, the Bankruptcy Court left “the question of dealing 

with an interlocutory order for another court if there is an appeal.” Id.

LEGAL STANDARD

A determination of whether an order is final or interlocutory is jurisdictional and thus can 

be raised sua sponte and reviewed de novo by an appellate court. See In re Bonham, 229 F.3d 

750, 760–61 (9th Cir. 2000); In re TV, LLC, Nos. CC–11–1263–HKiMk, CC–11–1264–HKiMk, 

11–141562012 WL 1521633, at *3 (B.A.P. 9th Cir. Apr. 30, 2012) (“Questions of our own 

jurisdiction, such as whether an order is final, may be raised sua sponte, and are reviewed de novo. 

. . . Whether a bankruptcy court’s decision is final is a question of law reviewed de novo.”) (citing 

Silver Sage Partners, Ltd. v. City of Desert Hot Springs (In re City of Desert Hot Springs), 339 

F.3d 782, 787 (9th Cir. 2003)). Denial of leave to appeal is left to the sound discretion of the 

Court. See City of Desert Hot Springs, 339 F.3d at 787. While the Court applies a flexible 

standard in considering whether to hear interlocutory appeals in the bankruptcy process, 

“traditional finality concerns still ‘dictate that we avoid having a case make two complete trips 

through the appellate process.’” Id. at 787 (citation omitted). 

A. Final Orders

Ordinarily, a “final decision” is one which “‘ends the litigation on the merits and leaves 

nothing for the court to do but execute the judgment.’” Ritzen Grp., Inc. v. Jackson Masonry, 

LLC, 140 S. Ct. 582, 586 (2020) (quotations and citation omitted). “In bankruptcy proceedings, 

[the Ninth Circuit] has cautioned against applying with ‘blind adherence’ the rules of finality 

developed under the general grant of appellate jurisdiction contained in 28 U.S.C. § 1291” and 

instead “has adopted a pragmatic approach to deciding whether a bankruptcy court’s order is final, 

recognizing that ‘certain proceedings in a bankruptcy case are so distinct and conclusive either to 

the rights of individual parties or the ultimate outcome of the case that final decisions as to them 

should be appealable as of right.’” In re Technical Knockout Graphics, Inc., 833 F.2d 797, 800

(9th Cir. 1987) (quoting In re Mason, 709 F.2d 1313, 1316–17 (9th Cir. 1983)).

Under this “pragmatic approach” to finality, a party may appeal an order as of right where 

the order: “1) resolves and seriously affects substantive rights and 2) finally determines the 

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discrete issue to which it is addressed.” In re Frontier Properties, Inc., 979 F.2d 1358, 1363 (9th 

Cir. 1992) (citing In re Allen, 896 F.2d 416, 418–19 (9th Cir. 1990)). If “further proceedings in 

the bankruptcy court will affect the scope of the order, the order is not subject to review.” 

Technical Knockout, 833 F.2d at 800 (quotation and citation omitted). 

As the Supreme Court recently noted, “[c]orrect delineation of the dimensions of a 

bankruptcy ‘proceeding’ is a matter of considerable importance’” because “[a]n erroneous 

identification of an interlocutory order as a final decision may yield an appeal over which the 

appellate forum lacks jurisdiction.” Ritzen, 140 S.Ct. at 587. “An order in a bankruptcy 

proceeding is final and thus appealable” within the meaning of Section 158(a)(1) only “if it ‘alters 

the status quo and fixes the rights and obligations of the parties ... [or] alters the legal 

relationships among the parties.’” Ocwen Loan Servicing, LLC v. Marino (In re Marino), 949 

F.3d 483, 487 (9th Cir. 2020) (ellipses and alteration in original) (quoting Gugliuzza v. FTC (In re 

Gugliuzza), 852 F.3d 884, 893 (9th Cir. 2017)).

B. Interlocutory Orders

If an order is not final, the Court has jurisdiction to hear an appeal of an interlocutory order 

of a bankruptcy court if it grants leave to appeal. See 28 U.S.C. § 158(a); Fed. R. Bankr. P. 8002, 

8004(a)(2)(b). Leave to appeal an interlocutory order is appropriate where (1) there is a 

controlling question of law, (2) as to which a substantial ground for a difference of opinion exists,

and (3) an immediate appeal could materially advance the ultimate termination of the litigation.

See In re Cement Antitrust Litig. (MDL No. 296), 673 F.2d 1020, 1026 (9th Cir. 1981) (under 

Section 1292(b), an interlocutory appeal is within court’s discretion where there is a controlling 

question of law, substantial grounds for difference of opinion, and the appeal may materially 

advance the ultimate termination of the litigation, as well as under “exceptional circumstances”). 

In deciding whether to grant leave to appeal under Section 158(a)(3), courts look to the analogous 

provisions of 28 U.S.C. Section 1292(b) governing review of interlocutory district court orders by 

the courts of appeal. See Belli v. Temkin (In re Belli), 268 B.R. 851, 858 (B.A.P. 9th Cir. 2001); 

In re Wilson, No. BR 13-11374 AJ, 2014 WL 122074, at *1 (N.D. Cal. Jan. 10, 2014). 

First, a question of law is “controlling” if its resolution on appeal could “materially affect 

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the outcome of the litigation in district court.” Cement, 673 F.2d at 1026; Helman v. Alcoa Global 

Fasteners, Inc., 637 F3d 986, 990-992 (9th Cir. 2011) (permission to appeal under 1292(b) 

granted where issue of definition of “high seas” in federal statute was determinative of the 

viability of the complaint). On the second factor, substantial grounds for a difference of opinion 

on a legal question are generally found to exist where (1) the relevant circuit court has not spoken 

on the point and other circuits are in dispute, (2) complicated questions of foreign law are 

involved, or (3) the issue presents novel and difficult questions of first impression. See Couch v. 

Telescope Inc., 611 F.3d 629, 633 (9th Cir. 2010). The fact that an issue is novel, or that there is a 

disagreement about which authority is controlling does not, by itself, constitute a substantial 

difference of opinion to support an interlocutory appeal. See id. On the third factor, appeal of an 

interlocutory order must serve judicial economy by materially advancing the ultimate termination 

of the litigation. See In re Travers, 202 B.R. 624, 626 (9th Cir. B.A.P. 1996). This factor is met 

when resolution of the controlling question of law “may appreciably shorten the time, effort, or 

expense of conducting a lawsuit.” Cement, 673 F.2d at 1027. 

DISCUSSION

A. Appeal as of Right

The Bankruptcy Court recognized that, were its interlocutory rulings on plan issues 

deemed final and subject to immediate appeal, every aggrieved party could appeal each discrete 

issue in piecemeal fashion. See Feb. 4, 2020 Hr’g Tr. at 40:13–24 (“And I know, from my 

experience both as a trial judge but also an appellate judge on the Bankruptcy Appellate Panel, 

that appellate courts don’t like to have piecemeal appeals; it doesn’t make sense; it’s not 

efficient.”). The piecemeal appellate structure that would necessarily ensue if rulings like the PPI 

Memorandum and Order were final orders is strongly disfavored, and would not promote judicial 

economy. See In re Marino, 949 F.3d at 487 (“The Supreme Court has discouraged this type of 

piecemeal litigation for its inefficiency.”) (citing explanation in Bullard v. Blue Hills Bank, 135 S. 

Ct. 1686, 1693 (2015), that the “rule of finality” exists to avoid “climb[s] up the appellate ladder 

and slide[s] down the chute” and the “delays and inefficiencies” that result).

Under Supreme Court precedent, an order entered in connection with the process of 

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negotiating and obtaining approval of a plan becomes a final and appealable order only when (or 

if) a bankruptcy court enters a confirmation order fixing the rights and obligation of the parties. In 

Bullard, the Supreme Court held that a bankruptcy court’s order rejecting a proposed plan was not 

final because it did not conclusively resolve the relevant “proceeding” within the bankruptcy case. 

135 S. Ct. at 1692. The Supreme Court held that the relevant proceeding for determining finality 

was not any individual plan proposal, but rather “the process of attempting to arrive at an 

approved plan that would allow the bankruptcy to move forward.” Id. The Supreme Court 

reasoned that, unlike an order denying plan confirmation, “only plan confirmation—or case

dismissal—alters the status quo and fixes the rights and obligations of the parties” to the degree 

necessary for a final order. Id. (emphasis added).

Put differently, the Supreme Court has recognized three confirmation scenarios: (1) plan 

confirmation, (2) confirmation denial and case dismissal, and (3) denial of confirmation with leave 

to amend. Id. at 1692-93. The first two scenarios provide measures of finality, and fix certain 

rights and legal obligations, whereas denial of confirmation with leave to amend “changes little.” 

Id. at 1693. The Supreme Court also rejected the argument that an order denying confirmation 

was final because it foreclosed the possibility of confirmation of the specific plan at issue. Id.

(“An order denying confirmation does rule out the specific arrangement of relief embodied in a 

particular plan. But that alone does not make the denial final any more than, say, a car buyer’s 

declining to pay the sticker price is viewed as a ‘final’ purchasing decision by either the buyer or 

seller. ‘It ain’t over till it’s over.’”).4

And it is not over for the Trade Committee. The Trade Committee asserts that “the PPI 

Order is not like an order denying summary judgment or confirmation in that it does not 

contemplate any further proceedings on the topic to which it is addressed.” Reply at 5. But that is 

not accurate. The issue is not whether the Trade Committee will have “further proceedings on the 

topic;” rather, the issue is whether the Trade Committee will have further proceedings on the 

confirmation of the Debtors’ (current or future) Plan. The Plan is highly likely to be amended—

4 Similarly, in Ritzen, the Supreme Court recently held that “the issue of appealability” should “be 

determined for the entire category to which a claim belongs.” 140 S. Ct. at 591. 

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possibly materially—several times before confirmation, and will not be “over” until the

confirmation order is entered. See In re 405 N. Bedford Dr. Corp., 778 F.2d 1374, 1377 (9th Cir. 

1985) (“[If] further proceedings in the bankruptcy court will affect the scope of the order, the 

order is not subject to review.”) (internal quotation marks omitted). 

The fact that the PPI Memorandum and Order has some connection to the confirmation of 

the Plan does not render it a final decision. That is precisely why the Ninth Circuit deems, for 

example, orders concerning disclosure statements to be interlocutory. See Everett v. Perez (In re 

Perez), 30 F.3d 1209, 1216 (9th Cir. 1994) (“[R]eviewing approval of a disclosure statement 

immediately is not merely unnecessary, it is premature.”). Upon plan confirmation, the “entire 

category” of confirmation issues will be resolved and the treatment of the claims held by members 

of the Trade Committee will be “definitively dispose[d] of.” See Ritzen, 140 S. Ct. at 586. 

The Trade Committee will have the opportunity to be heard at the confirmation hearing, 

then appeal any adverse confirmation order, if one is entered. The PPI Memorandum and Order is 

only one piece of a (very) large confirmation puzzle, and depending on what transpires at the 

confirmation hearing, it may no longer be relevant if the Plan is not confirmed. The PPI 

Memorandum and Order is not a final order.5 

B. Interlocutory Order

Because the PPI Memorandum and Order is not final, it necessarily follows that it is an 

interlocutory order, and the Court may only entertain an appeal if it grants leave. See 28 U.S.C. § 

158(a), Fed. R. Bankr. P. 8002, 8004(a)(2)(b). Leave to appeal an interlocutory order of a

bankruptcy court is appropriate where: (1) there is a controlling question of law, (2) as to which a 

substantial ground for a difference of opinion exists, and (3) an immediate appeal could materially 

advance the ultimate termination of the litigation. Cement, 673 F.2d at 1026.

5 The Debtors and the AHC incorrectly assert that the Bankruptcy Court’s decision not to certify 

the PPI Memorandum and Order as a final order under Rule 54(b) has some impact on this Court’s 

ability to consider this appeal of the PPI Memorandum and Order. Debtors’ Opp. at 9, n.6; AHC

Opp. at 10–11. Rule 54(b) has no bearing on whether the PPI Memorandum and Order is a final 

order appealable as of right under Section 158(a) because that section already provides for appeals 

of final orders as to discrete “proceedings,” not just “cases.” See Ritzen, 140 S. Ct. at 587.

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i. Controlling Question of Law

In the Ninth Circuit, “for a question to be ‘controlling’ [it must be shown] that resolution 

of the issue on appeal could materially affect the outcome of litigation.” Id. (citation omitted). In 

the Trade Committee’s view, this appeal involves a “controlling question of law” because it may 

open the door to the exercise of voting and other rights under Section 1129 at the confirmation

hearing. Mot. at 13. Ninth Circuit precedent is clear that the focus of the “controlling question of 

law” inquiry must be the connection that the interlocutory appeal has to the underlying case, not 

whether the resolution of the question on appeal will resolve the portion of the case implicated by 

the appeal. See Cement, 673 F.2d at 1027 (explaining that if question is “separable from and 

collateral to the merits of [the] lawsuit,” it is not controlling). 

According to the Trade Committee, its members hold $308 million in trade claims (Mot. at 

1, n. 1), and seek payment of approximately $34 million in postpetition interest.6 While that sum 

is not small, the Plan addresses over $50 billion in liabilities, including more than $2 billion in 

trade payables. See Debtors’ Opp. at 12. The issue regarding the appropriate rate of postpetition 

interest to be paid on the claims of members of the Trade Committee is not so critical that its 

determination now will have a material impact on the confirmation proceedings. In fact, the 

Debtors are on record that “if we lose . . . , we will amend the plan to unimpair [the affected 

creditors]” by paying the postpetition interest rate to which those creditors are entitled. See AHC 

Opp. at 12 (quoting Sept. 24, 2019 Hr’g Tr. at 28:13-15).

The Trade Committee has not shown that an appeal now, rather than (potentially) later,

would materially affect plan confirmation beyond making conclusory statements such as “[i]f 

holders of General Unsecured Claims are entitled to postpetition interest consistent with state law, 

rather than limited to the Federal Judgment Rate, then they would in fact be impaired by the 

Debtors’ Plan because the Debtors’ Plan will be depriving holders of General Unsecured Claims 

of their ‘legal, equitable, and contractual rights’ to postpetition interest at potentially higher rates.” 

6 The Debtors calculate this by noting that “[t]he Trade Committee seeks interest at the state 

statutory rate of 10%, which is 7.41% higher than the Federal Judgment Rate of 2.59% to be paid 

under the Plan. Eighteen months of interest on $308 million at 7.41% is roughly $34.2 million.” 

Debtors’ Opp. at 12, n. 7.

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Mot. at 13. Under these circumstances, the issue on appeal is not a controlling question of law.

ii. Substantial Grounds for a Difference of Opinion

Even if the issue is a “controlling question of law,” the Trade Committee does not show 

substantial grounds for a difference of opinion. The true center of the dispute is whether the Ninth 

Circuit’s decision in Cardelucci is controlling and dispositive on the issue. While “courts must 

examine to what extent the controlling law is unclear,” the Court need not certify an appeal if the 

law of the circuit supports the Bankruptcy Court’s ruling, even though there may be a difference 

of opinion between the circuits on the question at issue. See Couch, 611 F.3d at 633. In the Ninth 

Circuit, the “threshold showing is high” for the “substantial ground for difference of opinion” 

prong of the analysis. In re ThinkFilm, LLC, Nos. CV 12-9795, et al., 2013 WL 654010, at *2 

(C.D. Cal. Feb. 21, 2013) (citation omitted). 

a. Cardelucci is Controlling Ninth Circuit Precedent

The Bankruptcy Court held that Cardelucci “controls” the issue of postpetition interest 

payable under the Plan. See PPI Order at 2; PPI Memorandum at 2. This Court agrees. In 

Cardelucci, the Ninth Circuit framed the issue as “present[ing] the narrow but important issue of 

whether such post-petition interest is to be calculated using the federal judgment interest rate or is 

determined by the parties’ contract or state law.” 285 F.3d at 1233. The Ninth Circuit’s holding 

in Cardelucci is clear: “Where a debtor in bankruptcy is solvent, an unsecured creditor is entitled 

to ‘payment of interest at the legal rate,’” and “Congress intended ‘interest at the legal rate’ in 11 

U.S.C. § 726(a)(5) to mean interest at the federal statutory rate pursuant to 28 U.S.C. § 1961(a).” 

Id. at 1234. In so holding, the Ninth Circuit observed that application of the lower federal 

judgment rate did not violate an unsecured creditor’s substantive due process rights, id. at 1236,

and that using that rate for all claims was “rationally related to legitimate interests in efficiency, 

fairness, predictability, and uniformity within the bankruptcy system.” Id. 

The Trade Committee attempts to distinguish Cardelucci by contending that the plan in 

that case involved impaired claims, while the Debtors’ Plan here proposes to leave general 

unsecured claims unimpaired, such that Section 726(a)(5) of the Bankruptcy Code—the section 

cited in Cardelucci to derive the “legal rate” for postpetition interest—is inapplicable. Mot. at 15-

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16. The Trade Committee also contends that “Cardelucci is substantially narrower than the 

interpretation given to it by the Bankruptcy Court.” Reply at 11.

The Trade Committee’s contention that the Ninth Circuit’s decision in Cardelucci is not 

controlling authority—and only applicable to a narrow set of facts—is unavailing. To the extent 

that the Trade Committee believes that the Ninth Circuit never intended its ruling to apply to 

unimpaired claims, Cardelucci certainly does not say that. While the Ninth Circuit pinpointed a 

“narrow but important issue,” it did not narrow the application of its holding. The “narrow but 

important issue” Cardelucci resolved is what “legal rate” applies to postpetition interest in a 

solvent debtor case. Id. at 1234 (“Where a debtor in bankruptcy is solvent, an unsecured creditor

is entitled to ‘payment of interest at the legal rate from the date of the filing of the petition’ prior 

to any distribution of remaining assets to the debtor.”) (emphasis added) (citation omitted). That 

is precisely the issue resolved in the PPI Memorandum and Order.

b. The Appeal Does Not Require Resolution of Conflicting Authority

Because the Ninth Circuit’s decision in Cardelucci is controlling and clear, this appeal 

does not require the resolution of conflicting Ninth Circuit authority. Couch, 611 F.3d at 633-34. 

Moreover, even if the application of Cardelucci to this case hypothetically were somehow unclear, 

other Ninth Circuit decisions are not in conflict with Cardelucci or the Bankruptcy Court’s PPI 

Memorandum and Order. For example, the Trade Committee contends that In re L & J Anaheim 

Assocs., 995 F.2d 940 (9th Cir. 1993)—a decision that predates Cardelucci—conflicts with 

Cardelucci and the PPI Memorandum and Order. See Mot at 22. But L & J Anaheim did not 

involve postpetition interest. L & J Anaheim only interpreted Section 1124 of the Bankruptcy 

Code to mean that “‘Congress define[d] impairment in the broadest possible terms,’” and that

“‘any alteration of [a creditor’s] rights constitutes impairment even if the value of the rights is 

enhanced.’” Id. at 942. The Trade Committee contends that L & J Anaheim is conflicting 

authority because the claims of its members will be impaired by the Plan unless postpetition 

interest is paid at the contractual or state statutory rate, and any alteration of nonbankruptcy rights 

constitutes impairment. Mot. at 17.

However, “[c]reditors’ entitlements in bankruptcy arise in the first instance from the 

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underlying substantive law creating the debtor’s obligation, subject to any qualifying or contrary 

provisions of the Bankruptcy Code.” Travelers Cas. & Sur. Co. of Am. v. Pac. Gas & Elec. Co., 

549 U.S. 443, 444 (2007) (quoting Raleigh v. Ill. Dept. of Revenue, 530 U.S. 15, 20 (2000)). 

Accordingly, there is no impairment where the Bankruptcy Code—and not the Debtors’ Plan—

modifies alleged non-bankruptcy contractual rights. Put differently, “a creditor’s claim outside of 

bankruptcy is not the relevant barometer for impairment; we must examine whether the plan itself 

is a source of limitation on a creditor’s legal, equitable, or contractual rights.” In re PPI Enters. 

(U.S.), Inc., 324 F.3d 197, 204 (3d Cir. 2003).

Section 502(b)(2) of the Bankruptcy Code disallows unsecured claims for postpetition 

interest. And so ordinarily, holders of unsecured claims (like members of the Trade Committee) 

have no right under the Bankruptcy Code to include such interest as part of their allowed claims. 

However, because the Debtors are presumed to be solvent, Cardelucci directs that the Debtors pay 

postpetition interest on allowed unsecured claims (at the “Federal Judgment Rate”). 285 F.3d at 

1234. And like the Plan here, the plan in Cardelucci “provided for payment in full” of the 

unsecured claims at issue by using the “Federal Judgment Rate.” Id. at 1233.7

The Trade Committee also contends that other circuits “have held that postpetition interest 

on unsecured claims in a solvent debtor case need not accrue at the Federal Judgment Rate.” Mot. 

at 18. However, because the Ninth Circuit has directly decided the issue in Cardelucci, the cited 

out-of-circuit authority does not give rise to a substantial ground for difference of opinion 

justifying an interlocutory appeal. Couch, 611 F.3d at 634 (noting that the presence of a

nonbinding opinion would not be a substantial ground for disagreement as to controlling law); 

ThinkFilm, 2013 WL 654010, at *2 (finding that a nonbinding case directly opposed to the 

7 The Trade Committee’s contention that In re Sylmar Plaza, L.P., 314 F.3d 1070, 1073 (9th Cir. 

2002) gives rise to a conflict is also misplaced. Mot. at 17-18. Like L & J Anaheim, Sylmar Plaza

did not address the appropriate rate of postpetition interest on an unsecured claim in a solvent 

debtor case. The Ninth Circuit held only that it was appropriate for a debtor to take advantage of 

the Bankruptcy Code’s reinstatement provisions, even if doing so would adversely impact the 

creditor’s contractual or nonbankruptcy rights. Sylmar Plaza, 314 F.3d at 1075 (rejecting the 

argument “that a plan intended to nullify the consequences of a default (thereby avoiding the 

higher post-default interest rate) does not meet the purposes of the Bankruptcy Code”). 

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decision on appeal does not meet the threshold for substantial ground for difference of opinion).8

iii. Materially Advance the Chapter 11 Cases

No party truly disputes that, if the Trade Committee prevails on its appeal, the Debtors’ 

Plan in its current form will be unconfirmable. Yet, no party can know whether the Plan is 

confirmable until after the confirmation hearing. Far from materially impacting the course of plan 

confirmation, allowing the present appeal to go forward on discrete issues that are only

components of the Plan as proposed—and that have yet to be ruled upon—could create procedural 

chaos. An immediate, interlocutory appeal raises the specter of piecemeal appeals, which will not 

materially advance the Chapter 11 cases. See United States v. Woodbury, 263 F.2d 784, 788 n.11 

(9th Cir. 1959) (“[I]n passing [Section 1292(b)] Congress did not intend that the courts abandon 

the final judgment doctrine and embrace the principle of piecemeal appeals.”).

The Trade Committee contends that appealing the PPI Memorandum and Order now, 

rather than after confirmation, could provide clarity as to potential additional liabilities. Reply at 

2. That may be. But the true “litigation” here is the plan confirmation process, of which the 

postpetition interest issue is just one piece of the puzzle. See Piper Jaffray & Co. v. Mktg. Grp., 

USA, Inc., No. 06-CV-2478H, 2007 WL 2316996, at *1 (S.D. Cal. Aug. 9, 2007) (“[T]he Court 

concludes that the determination of these issues would not materially advance the ultimate 

termination of the litigation since other issues would have to be determined in order to resolve 

Plaintiff’s claims.”). No time, effort, or expense in litigating this issue will be saved by allowing 

the Trade Committee’s appeal sooner rather than later. A confirmation order that permits the 

8 Even were this not the case, the cases cited by the Trade Committee are inapposite or 

distinguishable. For example, in In re Ultra Petroleum Corp., 943 F.3d 758 (5th Cir. 2019), the 

Fifth Circuit expressed “no view” on the postpetition interest rate payable to unsecured creditors 

and affirmed the principle that a debtor’s plan does not impair a creditor’s rights where those 

rights do not exist under the Bankruptcy Code in the first instance. See id. at 766, n.2. And the 

Third Circuit’s decision in PPI Enterprises does not conflict with the PPI Memorandum and Order 

because PPI Enterprises held only that a claim is impaired if the plan, and not the Bankruptcy 

Code, impairs the creditor’s rights. See 324 F.3d at 204; PPI Memorandum at 14-16. That is not 

inconsistent with the PPI Memorandum and Order, and does not create a conflicting decision that 

justifies an interlocutory appeal, because nothing in the Third Circuit’s holding addressed the 

appropriate rate of postpetition interest on an unimpaired claim in a solvent debtor case. 

Similarly, the question in In re Dow Corning Corp., 456 F.3d 668 (6th Cir. 2006), involved which 

contractual interest rate was to be applied under a plan, and no party argued that the Federal 

Judgment Rate should apply.

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Trade Committee (and numerous other parties) to raise potential confirmation issues on appeal is 

either on the horizon, or the Plan as proposed will be rejected and this appeal will become

unnecessary. There is no judicial economy in allowing the appeal to move forward now.

In a bankruptcy case this massive and complex, there inevitably will be a long list of other 

post-confirmation issues that will require the Court’s review at the appropriate time. Many of 

these issues will be presented to the Bankruptcy Court at the confirmation hearing, at which time 

the Trade Committee can object, and thereafter file its appeal as of right to a final order 

confirming the Plan, should one be entered. 

CONCLUSION

The PPI Memorandum and Order are not final, and the Trade Committee’s request for 

leave to appeal is denied. 

IT IS SO ORDERED.

Dated:

______________________________________

HAYWOOD S. GILLIAM, JR.

United States District Judge

4/14/2020

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