FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

In re: INTERNATIONAL FIBERCOM, 

INC., Debtor.

ZURICH AMERICAN INSURANCE No. 05-16358

COMPANY,

D.C. No. Appellant,  CV-04-02100-DGC

v. OPINION

INTERNATIONAL FIBERCOM, INC., an

Arizona corporation; MAUREEN

GAUGHAN,

Appellees. 

Appeal from the United States District Court

for the District of Arizona

David G. Campbell, District Judge, Presiding

Argued and Submitted

July 11, 2007—San Francisco, California

Filed September 12, 2007

Before: Procter Hug, Jr., Pamela Ann Rymer, and

Raymond C. Fisher, Circuit Judges.

Opinion by Judge Hug

12337
COUNSEL

Karen Lee Turner, Eckert Seamans Cherin & Mellott, LLC,

Philadelphia, Pennsylvania, for the appellant. 

Steven J. Brown, Steve Brown & Associates, LLC, Phoenix,

Arizona, for the appellees. 

OPINION

HUG, Circuit Judge: 

This case presents the question of whether a bankruptcy

court may limit a prior order where the prior order granted

relief not permitted by the Bankruptcy Code. Here, the bankruptcy court issued an order approving the assumption of a

workers’ compensation insurance policy under § 365 of the

Bankruptcy Code, 11 U.S.C. § 365. The bankruptcy court

later concluded that the assumption order violated § 365

because it allowed the assumption of a non-executory contract. Relying on Federal Rule of Civil Procedure 60(b)(6),

applied to bankruptcy proceedings by Federal Rule of Bankruptcy Procedure 9024, the bankruptcy court interpreted the

assumption order to comply with § 365. We hold that the

bankruptcy court properly relied upon Federal Rule of Civil

12340 IN RE: INTERNATIONAL FIBERCOM
Procedure 60(b)(6) in limiting its prior order to ensure that the

order complied with the Bankruptcy Code. Accordingly, we

affirm. 

I.

International FiberCom, Inc. (“IFCI” or “Debtor”) filed for

bankruptcy under Chapter 11 of the Bankruptcy Code1 on

February 13, 2002. At that time, IFCI had a workers’ compensation insurance policy with Zurich American Insurance Co.

(“Zurich”), but the policy was set to expire on February 28,

2002. Weeks earlier, Zurich expressed its intent not to renew

the policy upon expiration. Applicable non-bankruptcy laws

required IFCI to maintain workers’ compensation insurance in

order to continue operating. Consequently, IFCI needed to

replace Zurich’s policy in order to continue operating until it

could sell its business as a going concern. Although IFCI

attempted to find another insurer prior to the petition date, it

was unable to do so because other insurance companies had

no interest in doing business with an ailing telecommunications company whose financial weakness was known throughout the industry. As a result, IFCI requested that Zurich renew

the policy and eventually negotiated an extension of the policy until IFCI could sell its business. 

Under IFCI’s original workers’ compensation insurance

policy with Zurich, IFCI paid an annual premium of

$927,952, which had already been paid before the petition

date. The policy also required IFCI to pay a $100,000 deductible on any workers’ compensation claim paid by Zurich. In

addition, IFCI set aside $500,000 in “initial collateral” to

secure its reimbursement obligations in case of default. 

As required by Arizona law2 and similar state statutes, the

original workers’ compensation insurance policy contained

1

11 U.S.C. §§ 101-1330. 

2

IFCI was incorporated in Arizona. 

IN RE: INTERNATIONAL FIBERCOM 12341
the following provision: “Your [IFCI’s] default or the bankruptcy or insolvency of you or your estate will not relieve us

[Zurich] of our duties under this insurance after an injury

occurs.” 

IFCI and Zurich eventually agreed to assume the policy

pursuant to § 365 of the Bankruptcy Code, effectively extending the policy from February 28 to July 1, 2002. In consideration, IFCI agreed to pay an additional $294,523 premium for

the 9-week extension. IFCI also agreed to provide an additional $750,000 in “additional collateral” to secure its obligation to reimburse Zurich for deductibles arising under the

assumed policy. Zurich would have a first priority lien on the

additional collateral. If the initial collateral and additional collateral were insufficient to provide full reimbursement of the

deductible amounts due to Zurich, Zurich would be entitled to

an administrative claim under 11 U.S.C. § 507(a)(1). IFCI and

Zurich also agreed to a brief extension of the original policy

until March 14 so that the bankruptcy court could approve

IFCI’s request to assume the policy.

II.

IFCI filed a motion for entry of an order approving assumption of the policy on March 8, 2002.3

 In its assumption

motion, IFCI requested the bankruptcy court’s approval of the

assumption of its workers’ compensation insurance policy, as

required by § 365(a). At the same time, IFCI also filed a

motion for an emergency hearing on the assumption motion.

Notice of the assumption motion and motion for emergency

hearing was served on counsel for the Official Committee of

Unsecured Creditors (“Creditors Committee”), which the U.S.

Trustee appointed approximately two weeks before the

assumption motion was filed. Notice was also served on the

U.S. Trustee and three creditors. The bankruptcy court ini3At that time, IFCI was the debtor-in-possession and was authorized to

continue operating its business pursuant to 11 U.S.C. §§ 1107-08. 

12342 IN RE: INTERNATIONAL FIBERCOM
tially scheduled the emergency hearing for March 13, 2002,

but, because no objections to the assumption motion were

filed, the bankruptcy court did not hold a hearing. 

On March 14, 2002, the bankruptcy court issued an order

granting IFCI’s request for approval of the assumption of the

workers’ compensation insurance policy. The bankruptcy

court’s assumption order approved the terms and conditions

presented in IFCI’s assumption motion and extended the policy through July 1, 2002.4

 The assumption order also required

IFCI to “immediately establish a segregated account . . . and

deposit into such account the sum of $750,000.” The bankruptcy court further provided Zurich a first priority lien on the

funds in the additional collateral account for the purpose of

securing Zurich’s entitlement to reimbursement for disbursements made to workers’ compensation claimants up to the

deductible amount provided for under the policy. 

IFCI never in fact established the additional collateral

account after the bankruptcy court issued the assumption

order. Not only did IFCI fail to set aside the additional collateral, IFCI also failed to pay deductibles due to Zurich under

the policy. In response, Zurich filed motions for allowance of

administrative expense and relief from the automatic stay in

October 2002. Discovery and briefing on the motions continued until the bankruptcy court granted IFCI’s motion to convert its bankruptcy petition from Chapter 11 to Chapter 7 on

August 25, 2003. At that time, the bankruptcy court appointed

Maureen Gaughan as Trustee for IFCI’s estate. Shortly thereafter, the bankruptcy court vacated the scheduling order and

the motions were never decided. 

Zurich later filed a motion for summary judgment on

March 24, 2004, in which it requested release of the additional collateral in order to cover IFCI’s unpaid reimburse4

IFCI sold its assets in April 2002, rendering the remaining portion of

the extension period null. 

IN RE: INTERNATIONAL FIBERCOM 12343
ment obligations. By the time Zurich filed its summary

judgment motion, deductibles accrued under the initial and

extended terms of the policy amounted to nearly $2 million,

exceeding the total of both the initial collateral of $500,000

and the $750,000 in additional collateral. In its summary

judgment motion, Zurich requested that the bankruptcy court

order IFCI to establish the additional collateral account out of

the proceeds of the sale of its assets (i.e., the assets of the

estate) and then permit Zurich to exercise its rights to the

funds in the account. Importantly, Zurich did not reveal in its

summary judgment motion that virtually all of the claims for

which it sought reimbursement arose from injuries that

occurred prior to the petition date. 

Opposing Zurich’s motion for summary judgment, the

Trustee filed a motion to clarify or partially vacate the bankruptcy court’s assumption order, pursuant to Federal Rule of

Civil Procedure 60(b)(6) and Federal Rule of Bankruptcy Procedure 9024, on May 6, 2004. According to the Trustee,

Zurich was not entitled to have any of the deductibles resulting from injuries that arose prior to the petition date reimbursed as administrative expenses because the policy was not

an executory contract and, therefore, could not be assumed

pursuant to § 365. The only legally permissible effect of the

assumption order, according to the Trustee, was to approve an

extension of the policy and authorize payment of post-petition

claims as secured administrative expenses. 

According to Zurich’s own data, only about 15 of the

nearly 200 individual workers’ compensation claims for

which Zurich seeks reimbursement arose from injuries that

occurred after the petition date. Those 15 claims add up to

only approximately $59,000 of the nearly $2 million sought

by Zurich. If the Trustee were ordered to pay Zurich $750,000

out of IFCI’s estate, nearly half of the estate’s total assets

would be removed, thus adversely affecting other creditors.

As a result, the Trustee requested that the bankruptcy court

either “clarify” ambiguous language in the assumption order

12344 IN RE: INTERNATIONAL FIBERCOM
to limit the assumption order to post-petition claims or partially vacate the assumption order. 

The bankruptcy court issued an order on July 26, 2004, in

which it granted the Trustee’s motion to clarify the assumption order. See Zurich Am. Ins. Co. v. Int’l FiberCom, Inc. (In

re Int’l FiberCom, Inc.), 311 B.R. 862 (Bankr. D. Ariz. 2004).

In that order, the bankruptcy court concluded that the policy

was not an executory contract and, consequently, could not be

assumed under § 365. Id. at 866. The bankruptcy court further

found that IFCI’s assumption motion failed to comply with

the notice and conspicuousness requirements of the bankruptcy court’s General Order 82. Id. at 866-67. For those reasons, the bankruptcy court interpreted its prior assumption

order “so that it does not do violence to the [Bankruptcy]

Code’s priority scheme, and General Order 82.” Id. at 868. In

doing so, the bankruptcy court pointed to ambiguous language

in the assumption order regarding which claims were covered

by the extended policy.

The Order merely provides that Zurich “is hereby

granted a first priority lien on the funds on deposit

in the [additional collateral] Account, for the purpose

of securing Zurich’s entitlement to reimbursement

for disbursements made to workers compensation

claimants up to the deductible amount provided for

under the WC Insurance Policy.” This does not make

clear whether the security is only for claims arising

during the extended, postpetition period of the policy, or whether it also secures claims that arose prepetition. 

Id. Because IFCI stated in its assumption motion that it was

current on its reimbursement obligations to Zurich, the bankruptcy court found that “the parties believed, and the Court

would have been justified in concluding, that there were no

prepetition obligations to be secured.” Id. Therefore, the

bankruptcy court interpreted the assumption order “to secure

IN RE: INTERNATIONAL FIBERCOM 12345
only those deductible reimbursement obligations that pertain

to claims that accrued postpetition, i.e., with respect to workers whose injury occurred on or after February 13, 2002.” Id.

at 869. As a result of the bankruptcy court’s order, only the

approximately $59,000 in claims stemming from post-petition

injuries would be secured administrative expense claims.5 The

rest of the claims would be unsecured claims.6

After the bankruptcy court issued its order clarifying the

assumption order, Zurich moved pursuant to Federal Rule of

Civil Procedure 59(a) to alter or amend the order, for rehearing, and for a full evidentiary hearing. The bankruptcy court

denied that motion. Zurich then appealed the bankruptcy

court’s clarification of the assumption order and denial of an

evidentiary hearing to the district court, which affirmed the

bankruptcy court’s decision on June 16, 2005. Zurich timely

appealed the district court’s affirmance to this court. 

III.

We review a bankruptcy court’s grant of a motion for relief

from an order under Federal Rule of Civil Procedure 60(b) for

an abuse of discretion. See Casey v. Albertson’s Inc., 362 F.3d

1254, 1257 (9th Cir. 2004); Hammer v. Drago (In re Hammer), 940 F.2d 524, 525 (9th Cir. 1991). A court’s decision

whether to hold an evidentiary hearing is also reviewed for an

abuse of discretion. See Murphy v. Schneider Nat’l, Inc., 362

F.3d 1133, 1139 (9th Cir. 2004); Defenders of Wildlife v. Bernal, 204 F.3d 920, 928-29 (9th Cir. 2000). In an appeal from

5

See 11 U.S.C. § 503(b)(1)(A)(i) (defining “administrative expenses” as

“the actual, necessary costs and expenses of preserving the estate including . . . wages, salaries, and commissions for services rendered after the

commencement of the case”) (emphasis added). The Trustee concedes that

Zurich’s post-petition claims deserve administrative expense status. 

6

See Christian Life Ctr. Litig. Def. Comm. v. Silva (In re Christian Life

Ctr.), 821 F.2d 1370, 1373-74 (9th Cir. 1987) (“Claims that arise from a

creditor’s pre-petition services to the debtor are not entitled to administrative expense treatment.”). 

12346 IN RE: INTERNATIONAL FIBERCOM
a bankruptcy court, we review the bankruptcy court’s decision

independently, without deference to the district court. See

Suncrest Healthcare Ctr. v. Omega Healthcare Investors, Inc.

(In re Raintree Healthcare Corp.), 431 F.3d 685, 687 (9th

Cir. 2005). The bankruptcy court’s conclusions of law,

including its interpretation of the Bankruptcy Code, are

reviewed de novo and its factual findings are reviewed for

clear error. Salazar v. McDonald (In re Salazar), 430 F.3d

992, 994 (9th Cir. 2005). 

IV.

At issue in this appeal is whether a bankruptcy court may

grant relief from a prior order under Federal Rule of Civil

Procedure 60(b)(6) due to legal error and procedural violations. Rule 60(b), incorporated to bankruptcy proceedings by

Federal Rule of Bankruptcy Procedure 9024, provides in pertinent part:

On motion and upon such terms as are just, the court

may relieve a party or a party’s legal representative

from a final judgment, order, or proceeding for the

following reasons: (1) mistake, inadvertence, surprise, or excusable neglect; . . . (4) the judgment is

void; . . . or (6) any other reason justifying relief

from the operation of the judgment. The motion shall

be made within a reasonable time, and for reasons

(1), (2), and (3) not more than one year after the

judgment, order, or proceeding was entered or taken.

. . . This rule does not limit the power of a court to

entertain an independent action to relieve a party

from a judgment, order, or proceeding, . . . or to set

aside a judgment for fraud upon the court. 

Fed R. Civ. P. 60(b). Rule 60(b) compliments the discretionary power that bankruptcy courts have as courts of equity “to

reconsider, modify or vacate their previous orders so long as

no intervening rights have become vested in reliance on the

IN RE: INTERNATIONAL FIBERCOM 12347
orders.” Meyer v. Lenox (In re Lenox), 902 F.2d 737, 740 (9th

Cir. 1990) (citing Chinichian v. Campolongo (In re

Chinichian), 784 F.2d 1440, 1443 (9th Cir. 1986); Taylor v.

Lake (In re CADA Invs., Inc.), 664 F.2d 1158, 1161 (9th Cir.

1981)). That equitable power is established by § 105(a) of the

Bankruptcy Code, which provides that a bankruptcy court

may, “sua sponte, tak[e] any action or mak[e] any determination necessary or appropriate to enforce or implement court

orders or rules, or to prevent an abuse of process.” 11 U.S.C.

§ 105(a); see also In re Superior Toy & Mfg. Co., 78 F.3d

1169, 1175 (7th Cir. 1996) (“In addition to the court’s discretionary power, trustees may seek relief pursuant to Federal

Rule of Civil Procedure 60(b).”). 

[1] In limiting its prior order, the bankruptcy court pointed

to legal error as the basis for its clarification of the assumption order. The catch-all provision of Rule 60(b)(6) provides

that a bankruptcy court may relieve a party from an order for

“any other reason justifying relief from the operation of the

judgment.” Fed. R. Civ. P. 60(b)(6). And “errors of law are

cognizable under Rule 60(b).”

7 Liberty Mut. Ins. Co. v.

EEOC, 691 F.2d 438, 441 (9th Cir. 1982). 

7Zurich contends that legal error is cognizable under Rule 60(b)(1)

(mistake), not Rule 60(b)(6), and is therefore subject to the one-year time

limitation. Yet the case Zurich cites, Liberty Mutual Insurance Co. v.

EEOC, 691 F.2d 438 (9th Cir. 1982), does not actually support that proposition. In that case, this court stated: “The law in this circuit is that errors

of law are cognizable under Rule 60(b).” Id. at 441. The court then went

on to analyze a district court’s reconsideration of its award of costs under

Rule 60(b)(1). Id. The court’s reliance on subsection 1 instead of subsection 6 in that case was appropriate because the district court mistakenly

issued an order that conflicted with a decision of this court in the same

case. That is, in that case the district court made a mistake under the law

of the case doctrine. See id. at 440. But here, the assumption motion

involved far more than a mere mistake. Rather, the relief granted by the

assumption order constituted a statutory violation. Furthermore, unlike

Liberty Mutual, this case also involves procedural violations that affected

the outcome of the proceeding and gave rise to the legal error. 

12348 IN RE: INTERNATIONAL FIBERCOM
[2] We have stated in the past that Rule 60(b)(6) should be

“liberally applied,” Hammer, 940 F.2d at 525, “to accomplish

justice.” Yanow v. Weyerhaeuser S.S. Co., 274 F.2d 274, 284

(9th Cir. 1959) (quoting Klapprott v. United States, 335 U.S.

601, 615 (1949)). At the same time, “[j]udgments are not

often set aside under Rule 60(b)(6).” Latshaw v. Trainer

Wortham & Co., 452 F.3d 1097, 1103 (9th Cir. 2006). Rather,

Rule 60(b)(6) should be “ ‘used sparingly as an equitable remedy to prevent manifest injustice’ and ‘is to be utilized only

where extraordinary circumstances prevented a party from

taking timely action to prevent or correct an erroneous judgment.’ ” United States v. Washington, 394 F.3d 1152, 1157

(9th Cir. 2005) (quoting United States v. Alpine Land & Reservoir Co., 984 F.2d 1047, 1049 (9th Cir. 1993)). Accordingly, a party who moves for such relief “must demonstrate

both injury and circumstances beyond his control that prevented him from proceeding with . . . the action in a proper

fashion.” Community Dental Servs. v. Tani, 282 F.3d 1164,

1168 (9th Cir. 2002). 

[3] The bankruptcy court correctly found that extraordinary

circumstances justified reconsidering the assumption order

because the order erroneously granted assumption of a nonassumable contract, thereby violating § 365 of the Bankruptcy

Code. Under § 365, a debtor may assume the obligations of

any executory contract, subject to the bankruptcy court’s

approval. 11 U.S.C. § 365(a). A contract is executory, and

therefore assumable under § 365, only if one party’s failure to

perform its obligation would excuse the other party’s performance. Commercial Union Ins. Co. v. Texscan Corp. (In re

Texscan Corp.), 976 F.2d 1269, 1272 (9th Cir. 1992); Pac.

Express, Inc. v. Teknekron Infoswitch Corp. (In re Pac.

Express, Inc.), 780 F.2d 1482, 1487 (9th Cir. 1986) (quoting

Vern Countryman, Executory Contracts in Bankruptcy: Part

I, 57 Minn. L. Rev. 439, 460 (1973)). In Texscan, we held that

a workers’ compensation insurance policy was not executory

under § 365 because, pursuant to Arizona law, the insurance

company was required to continue processing claims despite

IN RE: INTERNATIONAL FIBERCOM 12349
the debtor’s bankruptcy petition. Texscan, 976 F.2d at 1273

(quoting Ariz. Rev. Stat. § 23-963). Even if the debtor in Texscan failed to pay its premiums or otherwise breached the

contract, the insurance company would be obligated to continue covering workers’ compensation claims that arose prior

to the policy’s expiration. Id.

[4] The workers’ compensation insurance policy between

Zurich and IFCI contained a provision based on the same Arizona statute involved in Texscan. Specifically, the policy contained the following qualification: “Your default or the

bankruptcy or insolvency of you or your estate will not relieve

us of our duties under this insurance after an injury occurs.”

That provision was mandated by Arizona Revised Statute

§ 23-963(4).8 Consequently, if IFCI failed to pay its premiums

or failed to reimburse Zurich for deductibles, Zurich would be

contractually and legally obligated to continue performing

under the contract by covering workers’ compensation claims,

despite IFCI’s breach. Therefore, the workers’ compensation

insurance policy in this case is clearly not executory under

Texscan. The bankruptcy court thus correctly concluded that

its assumption order granted relief inconsistent with § 365. 

[5] Zurich’s arguments to the contrary are unpersuasive.

First, Zurich attempts to distinguish Texscan on the ground

8Section 23-963 provides, in relevant part: 

Every policy of insurance covering the liability of the employer

for workers’ compensation . . . shall cover the entire liability of

the employer to his employees covered by the policy or contract,

and be deemed to contain the following provisions: 

. . .

4. That the insolvency or bankruptcy of the employer and his

discharge therein shall not relieve the insurance carrier or workers’ compensation pool from payment of compensation for injuries or death sustained by an employee during the life of the

policy or contract. 

Ariz. Rev. Stat. § 23-963.

12350 IN RE: INTERNATIONAL FIBERCOM
that the case involved a policy that had already expired prior

to the petition date, whereas the policy in this case was still

in effect at the time of the bankruptcy petition but would have

expired if not for the assumption order. Zurich fails to explain

why that distinction is meaningful. A policy’s pending expiration does not transform it from non-executory to executory,

and Zurich provides no reason to believe that the expiration

date is relevant to whether a contract is assumable under

§ 365. Second, Zurich attempts to distinguish this case from

Texscan by arguing that “renewal of the policy required both

Debtor and Zurich to undertake additional material obligations, none of which had yet been performed and which were

therefore executory.” Zurich does not state which material

obligations in particular made the renewal of the policy executory. Presumably, such obligations would include IFCI’s

payment of the additional premium, establishment of the additional collateral account, and reimbursement of deductibles.

The facts of this case demonstrate, however, that those material obligations did not render the policy executory. After all,

IFCI failed to establish the additional collateral account, but

Zurich does not contend that IFCI’s failure would have

excused its performance. Additionally, Zurich continued to

pay workers’ compensation claims and advance IFCI’s

deductibles, as it was contractually and legally required to do,

even after IFCI stopped reimbursing Zurich. Thus, the policy

was not executory despite those additional obligations.

Finally, Zurich argues that the Arizona statute does not render

the policy non-executory because the statute allows an insurer

to refuse to cover claims from injuries arising after the insured

files for bankruptcy. According to Zurich, filing for bankruptcy would excuse the insurer’s performance going forward,

such that claims arising from injuries that occur after the petition date would not be covered by the policy. The text of the

statute does not support Zurich’s argument. In fact, the statute

states that “bankruptcy of the employer . . . shall not relieve

the insurance carrier . . . from payment of compensation for

IN RE: INTERNATIONAL FIBERCOM 12351
injuries or death sustained by an employee during the life of

the policy.” Ariz. Rev. Stat. § 23-963(4) (emphasis added). As

such, the language of the statute expressly prohibits such postpetition termination of coverage. Similarly, nothing in our

opinion in Texscan supports such a reading of the statute.

Even the text of the policy in this case does not support

Zurich’s interpretation. Therefore, we reject Zurich’s attempt

to characterize its workers’ compensation insurance policy

with IFCI as executory. Because the workers’ compensation

insurance policy was non-executory and, therefore, nonassumable under § 365, there was no legal basis on which

Zurich could obtain a lien on IFCI’s post-petition assets to

secure pre-petition claims arising under the policy. 

[6] In addition to requesting relief not permitted by the

Bankruptcy Code, IFCI’s assumption motion also violated the

bankruptcy court’s notice and conspicuousness requirements.

General Order 82 requires that any “first day motion” must

“conspicuously state” in the first or second paragraph whether

the bankruptcy court’s approval would result in: “1. Granting

a prepetition creditor a lien or security interest in postpetition

assets in which the creditor would not otherwise have a security interest by virtue of its prepetition security agreement and

applicable law . . . (sometimes known as ‘crosscollateralization’).” General Order 82 also provides that such

relief will not be granted unless an official creditors committee has had sufficient time to organize, engage professionals,

and investigate the requested relief. A “first day motion” is

defined as “any motion for which an accelerated hearing is

sought within the first 30 days after the filing of a Chapter 11

petition.” Zurich does not dispute that IFCI’s assumption

motion was filed within the first 30 days and was accompanied by a motion for an emergency hearing. Consequently, the

district court correctly found that General Order 82 applied on

its face to the assumption motion. 

Nevertheless, Zurich argues that General Order 82 does not

apply to any assumption motion whatsoever. General Order

12352 IN RE: INTERNATIONAL FIBERCOM
82 applies only to a lien on post-petition assets that “the creditor would not otherwise have . . . by virtue of its prepetition

security agreement and applicable law.” (Emphasis added.)

According to Zurich, its lien on the additional collateral was

created by virtue of applicable law when the contract was

assumed under § 365. Zurich’s argument is misguided for two

reasons. First, General Order 82 uses “and” as a connector,

not “or.” For General Order 82 not to apply, the original, prepetition workers’ compensation insurance policy would also

have to grant Zurich a lien on IFCI’s post-petition assets. It

doesn’t. Second, even if § 365 constitutes the “applicable

law” referred to in General Order 82, § 365 does not grant

Zurich a lien on the additional collateral because the workers’

compensation insurance policy was non-executory and nonassumable. Therefore, contrary to Zurich’s assertions, General

Order 82 applied to the assumption motion. 

[7] The assumption motion failed to comply with General

Order 82 because the motion was granted before the Creditors

Committee’s professionals had sufficient time to review it.9

More importantly, at no point did the motion state that the

requested relief would result in cross-collateralization. The

motion did state that Zurich would have a first priority lien on

the additional collateral, but it also stated that IFCI was current on its reimbursement obligations to Zurich. Consequently, the motion facially appears to request a lien on the

additional collateral only for workers’ compensation claims

arising post-petition. Both the bankruptcy court and the district court found that statement misled the bankruptcy court

into believing that IFCI had satisfied all of its pre-petition

obligations to Zurich and, as a result, that no pre-petition

claims would be elevated to post-petition secured claims.10 In

fact, the bankruptcy court went so far as to state that

9The Creditors Committee was appointed on February 21, 2002, and its

employment of counsel was approved on February 27, just nine days

before IFCI moved to assume the policy. 

10Zurich responds by pointing out that IFCI’s reimbursement obligations were paid quarterly, and that IFCI had paid all of its obligations for

that particular quarter. Again, Zurich misses the point. The assumption

motion failed to state that the effect of the bankruptcy court’s approval

would be to create a cross-collateralization, and Zurich does not dispute

that fact. 

IN RE: INTERNATIONAL FIBERCOM 12353
“[c]learly, . . . if it had been brought to the Court’s attention

that the contract was not executory and that the effect of

granting the Debtor’s motion would be to secure the Debtor’s

prepetition obligation to reimburse Zurich for the deductibles

incurred on claims arising prepetition, . . . this Court would

not have granted the motion.” Int’l FiberCom, 311 B.R. at

866. Thus, not only did the assumption motion fail to comply

with General Order 82, but that failure affected the outcome

of the proceeding. As a result, the bankruptcy court properly

clarified the assumption order under Rule 60(b)(6) so that it

would comply with General Order 82. 

Zurich argues that the Trustee, as IFCI’s successor in interest, is not legally permitted to challenge the actions of IFCI

as the debtor-in-possession.11 In general, “[a]s the successor in

interest, the trustee is bound by all authorized acts of the

debtor in possession.” Nicholas v. United States, 384 U.S.

678, 693 n.27 (1966). The purpose for such a rule, as correctly highlighted by Zurich, is that “[c]reditors must be able

to deal freely with debtors-in-possession, within the confines

of the bankruptcy laws, without fear of retribution or reversal

at the hands of a later appointed trustee.” Armstrong v. Norwest Bank, 964 F.2d 797, 801 (8th Cir. 1992). Zurich’s argument misses the mark, however, because it implies that a

11Zurich relies heavily on Jonas v. U.S. Small Bus. Admin. (In re Southland Supply, Inc.), 657 F.2d 1076 (9th Cir. 1981), and In re Teligent, Inc.,

306 B.R. 752 (Bankr. S.D.N.Y. 2004). Both cases are distinguishable. In

Southland Supply, we found that a trustee could not object to a lien on certain lawsuit proceeds granted earlier by the debtor-in-possession. 657 F.2d

at 1080. Importantly, we also found that the debtor-in-possession in Southland Supply had the authority to grant such a lien pursuant to state law.

Id. In this case, the debtor-in-possession did not have the authority to

assume a non-executory contract. Teligent involved an employee medical

insurance policy that was assumed by the debtor-in-possession, and the

court in Teligent relied on equitable estoppel to hold that a trustee was

barred from arguing that the bankruptcy court erred in entering the

assumption order. 306 B.R. at 759-60. But the trustee in Teligent did not

argue that the contract was non-executory and therefore erroneously

assumed. 

12354 IN RE: INTERNATIONAL FIBERCOM
trustee is bound by the earlier actions of a debtor-inpossession even if those actions are inconsistent with the

Bankruptcy Code. But a trustee may challenge a debtor-inpossession’s actions in extraordinary circumstances, such as

where a debtor-in-possession acted outside the confines of the

bankruptcy laws. See Superior toy, 78 F.3d at 1175. Where,

as here, the bankruptcy court unknowingly approved an

assumption order that unlawfully assumed a non-executory

contract, the trustee may seek relief pursuant to Rule 60(b).

See id. 

Zurich also asserts that the bankruptcy court could not alter,

amend, or reinterpret the assumption order once Zurich had

detrimentally relied. In Lenox, we held that, in the absence of

“vested” rights, bankruptcy courts have broad discretion

under Rule 60(b) to revisit past orders. Lenox, 902 F.3d at

739-40. In this case, there was no detrimental reliance

because, absent the extension, Zurich was still required to pay

claims even if IFCI stopped performing. Zurich’s suggestion

that it extended the policy only because the assumption order

secured IFCI’s pre-petition claims is misplaced; the extension

had no impact on Zurich’s prior rights or obligations under

the policy. What the assumption order, as interpreted by the

bankruptcy court, did do was provide security for claims that

arose after the extension. Zurich was under no obligation to

extend the policy and it was entitled to seek guarantees for

doing so. But Zurich was not entitled to cut in line in front of

other unsecured creditors. While the bankruptcy court’s clarification prevented Zurich from doing this, it did not interfere

with any vested rights. 

[8] Because the assumption order granted relief not permitted by the Bankruptcy Code and IFCI’s assumption motion

violated the bankruptcy court’s notice and conspicuousness

requirements, there were sufficient grounds for clarifying the

assumption order pursuant to the catch-all provision of Rule

60(b)(6).12 Aside from Rule 60(b)(6), the bankruptcy court

12In affirming the bankruptcy court, the district court also found that the

procedural failures amounted to a violation of the creditors’ due process

IN RE: INTERNATIONAL FIBERCOM 12355
also had the discretionary power to reconsider its order. See

11 U.S.C. § 105(a); see also Lenox, 902 F.2d at 739-40.

Therefore, the bankruptcy court did not abuse its discretion.

V.

Zurich further objects to the bankruptcy court’s clarification of the assumption order by arguing that the two-year gap

between the original order and the Trustee’s motion violated

the timeliness requirement of Rule 60(b). Rule 60(b) requires

that reconsideration under the catch-all provision be requested

“within a reasonable time.” Fed. R. Civ. P. 60(b). What qualifies as a reasonable time “ ‘depends on the facts of each

case.’ ” United States v. Wyle (In re Pac. Far East Lines,

Inc.), 889 F.2d 242, 249 (9th Cir. 1989) (quoting United

States v. Holtzman, 762 F.2d 720, 725 (9th Cir. 1985)). The

relevant facts may include the length and circumstances of the

delay and the possibility of prejudice to the opposing party.

Id.; Holtzman, 762 F.2d at 725. Thus, relief under Rule 60(b)

should only be granted where the moving party is able to

demonstrate “that circumstances beyond its control prevented

timely action to protect its interests.” Alpine Land & Reservoir, 984 F.2d at 1049. 

[9] In this case, the Trustee’s two-year delay in seeking

clarification of the assumption order is justified by extraordinary circumstances. In fact, the delay resulted from Zurich’s

own conduct. Zurich’s massive pre-petition claims were not

disclosed in the assumption motion or the assumption order,

and in fact did not become known to the bankruptcy court,

Trustee, or most of the creditors until after Zurich filed its

rights. For that reason, the district court held that clarification of the

assumption order was necessary pursuant to Rule 60(b)(4). Because we

find that Rule 60(b)(6) provided a sufficient and proper basis for clarifying

the assumption order, we decline to comment on the district court’s due

process analysis. 

12356 IN RE: INTERNATIONAL FIBERCOM
motion for summary judgment. In fact, Zurich did not even

reveal the extent of its pre-petition claims in its summary

judgment motion. Rather, the Trustee learned on its own that

almost all of Zurich’s claims against IFCI’s post-petition

assets arose from pre-petition injuries. Having discovered this

previously undisclosed information, the Trustee then timely

sought reconsideration of the assumption order. Therefore,

even a two-year delay should not preclude the bankruptcy

court’s reconsideration of the assumption order under Rule

60(b)(6). See, e.g., Holtzman, 762 F.2d at 725 (holding that a

five-year delay was not unreasonable); Washington v. Penwell, 700 F.2d 570, 572-73 (9th Cir. 1983) (holding that a

four-year delay was not unreasonable); Clarke v. Burkle, 570

F.2d 824, 831-32 (9th Cir. 1978) (holding that a six-year

delay was not unreasonable). 

Furthermore, the bankruptcy court properly found that

Zurich was not prejudiced by the delay. Zurich claims it was

prejudiced because it relied on the assumption order in

extending the workers’ compensation insurance policy and

assuming liabilities it otherwise would not have. The bankruptcy court correctly pointed out, however, that Zurich

received a premium of almost $300,000 for a two-month

extension of the policy, and that the assumption order, as clarified, secured all of Zurich’s post-petition reimbursement

claims. According to the bankruptcy court, “Zurich profited

from the extension and undertook virtually no risk.” Int’l

FiberCom, 311 B.R. at 867. Indeed, Zurich was placed “in a

far better position than it would have been in had the Order

never been entered.” Id. at 868. The bankruptcy court’s factual findings are not clearly erroneous. With respect to

Zurich’s pre-petition reimbursement claims, Zurich fails to

demonstrate any detrimental reliance for the reasons already

explained. As a result, Zurich was not prejudiced by the twoyear delay in this case, so the timeliness requirement of Rule

60(b) is satisfied.

IN RE: INTERNATIONAL FIBERCOM 12357
VI.

Zurich also appeals the bankruptcy court’s denial of its

motion for a full evidentiary hearing. In support of its Rule

59(a) motion to alter or amend the order, Zurich proffered

additional documentary evidence, which it supplemented with

oral argument at a preliminary hearing. Under Rule 59(a),

made applicable to bankruptcy proceedings by Federal Rule

of Bankruptcy Procedure 9023, a court has the discretion to

reopen a judgment if one has been entered, take additional

testimony, amend findings of fact and conclusions of law, or

make new findings and conclusions. See Fed R. Civ. P. 59(a);

Defenders of Wildlife, 204 F.3d at 928-29. Zurich sought to

introduce evidence to rebut what it considered “unsupported

conclusions” upon which it felt the bankruptcy court based its

reconsideration of the assumption order. In particular, Zurich

wanted to introduce evidence demonstrating that the Creditors

Committee and the U.S. Trustee were aware of IFCI’s outstanding pre-petition obligations to Zurich, that counsel for

the Creditors Committee had sufficient time to review IFCI’s

assumption motion, that Zurich played no role in the procedural deficiencies in IFCI’s assumption motion, that Zurich

undertook risk in extending the policy, and that Zurich had

not “slept on its rights” regarding IFCI’s failure to establish

the additional collateral account. 

[10] The bankruptcy court did not abuse its discretion in

denying Zurich’s request for a full evidentiary hearing. There

was adequate factual basis for the bankruptcy court’s decision. IFCI’s assumption motion facially failed to comply with

General Order 82. In this regard, the motion speaks for itself.

No further evidence is required. Furthermore, whether the

workers’ compensation insurance policy is an executory contract is a legal issue that can be determined based on the facts

already in the record. Additional evidentiary support is unnecessary. Therefore, the evidence Zurich sought to admit would

have been irrelevant or superfluous. Moreover, Zurich actually did submit evidence relevant to the bankruptcy court’s

12358 IN RE: INTERNATIONAL FIBERCOM
decision. For example, Zurich submitted its own statement of

facts in support of its summary judgment motion, along with

exhibits. Also, when Zurich filed its motion to alter or amend,

it submitted substantial additional factual support pertinent to

the bankruptcy court’s findings. Zurich fails to explain what

more it would have offered during a hearing that it had not

already submitted to the bankruptcy court. Thus, the bankruptcy court properly exercised its discretion in denying

Zurich’s request for a full evidentiary hearing. 

VII.

We conclude that the bankruptcy court did not abuse its

discretion in reconsidering and clarifying its prior order. The

assumption order granted relief not permitted by the Bankruptcy Code, and the motion on which the order was based

violated the bankruptcy court’s notice and conspicuousness

requirements. Reconsideration was therefore proper under

Federal Rule of Civil Procedure 60(b)(6). A full evidentiary

hearing was unnecessary because the bankruptcy court had

ample factual basis for its conclusions. 

AFFIRMED.

IN RE: INTERNATIONAL FIBERCOM 12359