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WEIL, GOTSHAL & MANGES LLP

Stephen Karotkin (pro hac vice)

(stephen.karotkin@weil.com)

Ray C. Schrock, P.C. (pro hac vice)

(ray.schrock@weil.com) 

Jessica Liou (pro hac vice)

(jessica.liou@weil.com) 

Theodore E. Tsekerides (pro hac vice)

(theodore.tsekerides@weil.com)

767 Fifth Avenue

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Tel: 212 310 8000

Fax: 212 310 8007

Attorneys for Debtors 

and Debtors in Possession

KELLER & BENVENUTTI LLP

Tobias S. Keller (#151445)

(tkeller@kellerbenvenutti.com)

Peter J. Benvenutti (#60566)

(pbenvenutti@kellerbenvenutti.com)

Jane Kim (#298192)

(jkim@kellerbenvenutti.com)

650 California Street, Suite 1900

San Francisco, CA 94108

Tel: 415 496 6723

Fax: 650 636 9251

UNITED STATES BANKRUPTCY COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN FRANCISCO DIVISION

In re:

PG&E CORPORATION,

- and -

PACIFIC GAS AND ELECTRIC 

COMPANY,

Debtors.

Case Nos. 19-30088 (DM) (Lead Case)

(Jointly Administered)

DEBTORS’ BRIEF REGARDING APPLICABLE 

RATE OF POSTPETITION INTEREST ON 

ALLOWED UNSECURED CLAIMS AND 

JOINDER OF PG&E SHAREHOLDERS

Date: December 11, 2019

Time: 10:00 am. (Pacific Time)

Place: United States Bankruptcy Court

Courtroom 17, 16th Floor

San Francisco, CA 94102

Opposition Deadline: November 22, 2019

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PG&E Corporation (“PG&E Corp.”) and Pacific Gas and Electric Company (the “Utility”), 

as debtors and debtors in possession (collectively, the “Debtors”) in the above-captioned chapter 11 

cases (the “Chapter 11 Cases”), respectfully submit this Brief Regarding the Applicable Rate of 

Postpetition Interest on Allowed Unsecured Claims. As demonstrated below, binding precedent in the 

Ninth Circuit establishes that the rate of postpetition interest on allowed unsecured claims where a 

debtor is solvent, which the Debtors are presumed to be for purposes of this determination by the 

Court, is the federal judgment rate under 28 U.S.C. § 1961 (the “Federal Judgment Rate”) as of the 

bankruptcy petition date of January 29, 2019 (the “Petition Date”). See In re Cardelucci, 285 F.3d 

1231, 1235 (9th Cir. 2002). Accordingly, regardless of whatever interest rate may exist in any loan, 

indenture, contract, or other agreement between a claimant and the Debtors, and regardless of any 

California statutory rate of interest applicable outside of bankruptcy, a claimant entitled to postpetition 

interest on an allowed unsecured claim may only recover such interest at the Federal Judgment Rate.

The PG&E Shareholders1 join this Brief and reserve the right to participate in argument of the 

matter.

 1 The PG&E Shareholders are the entities identified on Exhibit A to the Fourth Amended Verified Statement Of 

Jones Day Pursuant To Federal Rule Of Bankruptcy Procedure 2019 [Docket No. 4366]. The PG&E 

Shareholders are acting in their individual capacities but authorized the filing of this single submission for the 

purpose of administrative efficiency. Each of the PG&E Shareholders is expressing its independent views, and 

counsel for the PG&E Shareholders does not have the actual or apparent authority to obligate any one entity to 

act in concert with any other entity with respect to PG&E equity securities. The PG&E Shareholders have not 

agreed to act in concert with respect to their respective interests in PG&E equity securities.

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TABLE OF CONTENTS

I. Preliminary Statement..........................................................................................................1

II. Jurisdiction...........................................................................................................................1

III. Background..........................................................................................................................1

IV. Unsecured Creditors of a Solvent Debtor are Only Entitled to Postpetition Interest at 

the Federal Judgment Rate...................................................................................................3

A. Postpetition Interest on Unsecured Claims Against a Solvent Debtor is 

Payable at “the Legal Rate” .....................................................................................3

B. The Ninth Circuit Has Determined that “the Legal Rate” is the Federal 

Judgment Rate..........................................................................................................5

V. Any Attempt to Distinguish Cardelucci Must Be Rejected.................................................8

VI. Conclusion ...........................................................................................................................9

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TABLE OF AUTHORITIES

Page(s)

Cases

In re Beguelin,

220 B.R. 94 (9th Cir. B.A.P. 1998)..............................................................................................5, 7

In re Cardelucci,

285 F.3d 1231 (9th Cir. 2002) ............................................................................................... passim

In re Castillo,

488 B.R. 441 (Bankr. C.D. Cal. 2013).............................................................................................3

In re Comstock Fin. Servs., Inc.,

111 B.R. 849 (Bankr. C.D. Cal. 1990).............................................................................................3

In re Del Mission Ltd.,

998 F.2d 756 (9th Cir. 1993) ...........................................................................................................3

In re Fesco Plastics Corp., Inc.,

996 F.2d 152 (7th Cir. 1993) ...........................................................................................................4

In re Petite Auberge Vill., Inc.,

650 F.2d 192 (9th Cir. 1981) ...........................................................................................................3

In re Robinson,

567 B.R. 644 (Bankr. N.D. Ga. 2017) .........................................................................................4, 5

In re Thompson,

16 F.3d 576 (4th Cir. 1994) .............................................................................................................8

Thompson v. Kentucky Lumber Co., 860 F.2d 674 (6th Cir.1988) ............................................................................................................3

United States v. Ron Pair Enterprises, Inc.,

489 U.S. 235 (1989).........................................................................................................................4

In re Wallace,

No. 04-08560, 2007 WL 321402 (Bankr. E.D. Wash. Jan. 29, 2007).............................................5

In re Washington Mutual, Inc., 461 B.R. 200 (Bankr. D. Del. 2011)................................................................................................2

In re Williams, Love, O’Leary & Powers, P.C. (“WLOP”),

No. 12-02049, 2013 WL 4786322 (D. Or. Sept. 3, 2013) ...........................................................5, 8

Statutes

11 U.S.C. § 502(b)(2) ....................................................................................................................3, 4, 5

11 U.S.C. § 506(b).................................................................................................................................4

11 U.S.C. § 726(a)(5)................................................................................................................... passim

11 U.S.C. §1107(a) ................................................................................................................................1

11 U.S.C. § 1108....................................................................................................................................1

28 U.S.C. § 157......................................................................................................................................1

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28 U.S.C. § 1334....................................................................................................................................1

28 U.S.C. § 1961(a) ..................................................................................................................... passim

Other Authorities

Bankruptcy Rule 1015(b).......................................................................................................................2

Local Rule 5011-1(a).............................................................................................................................1

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MEMORANDUM OF POINTS AND AUTHORITIES

I. PRELIMINARY STATEMENT

On November 4, 2019, the Debtors filed the Debtors’ Joint Chapter 11 Plan of Reorganization 

dated November 4, 2019, Docket No. 4563 (the “Debtors’ Plan”). Pursuant to the Debtors’ Plan and 

consistent with well-settled Ninth Circuit authority, holders of allowed unsecured claims in Classes 2, 

3 and 4, which consist of priority non-tax claims, prepetition unsecured funded debt claims and 

prepetition general unsecured claims (other than wildfire-related claims), are to receive payment in 

full of their claims in cash, plus interest accrued from the commencement date of these Chapter 11 

Cases through the effective date of the Debtors’ Plan at the Federal Judgment Rate. See Debtors’ Plan 

§§ 4.2–4.4, 4.15–4.17. The Federal Judgment Rate is defined in the Debtors’ Plan to be “the interest 

rate of 2.59% as provided under 28 U.S.C. § 1961(a), calculated as of the Petition Date in accordance 

with In re Cardelucci, 285 F.3d 1231 (9th Cir. 2002).” See Debtors’ Plan § 1.68.

As demonstrated below, the issue before the Court cannot be the subject of any legitimate 

dispute. The Ninth Circuit in In re Cardelucci squarely addressed this very same issue and its holding 

is clear and unequivocal – postpetition interest on allowed unsecured claims asserted against a solvent 

chapter 11 debtor is to be paid at the federal judgment rate. And the Ninth Circuit, relying on statutory, 

equitable, and fairness among creditor grounds, expressly rejected the argument that the contract rate 

or any other interest rate should be applied. Cardelucci is dispositive, and the creditors’ arguments 

for higher rates of interest cannot overcome this controlling precedent. 

II. JURISDICTION

This Court has jurisdiction to consider these issues pursuant to 28 U.S.C. §§ 157 and 1334; the 

Order Referring Bankruptcy Cases and Proceedings to Bankruptcy Judges, General Order 24 (N.D. 

Cal.); and Rule 5011-1(a) of the Bankruptcy Local Rules for the United States District Court for the 

Northern District of California. 

III. BACKGROUND

On January 29, 2019, each of the Debtors filed voluntary petitions for relief under chapter 11 

of title 11 of the United States Code (the “Bankruptcy Code”). The Debtors continue to operate their 

businesses and manage their properties as debtors in possession pursuant to sections 1107(a) and 1108 

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of the Bankruptcy Code. No trustee or examiner has been appointed in either of the Chapter 11 Cases. 

The Debtors’ Chapter 11 Cases are being jointly administered for procedural purposes only pursuant 

to Bankruptcy Rule 1015(b).

Prior to the Petition Date, the Debtors were parties to, and had unsecured prepetition 

obligations outstanding under or related to, a number of agreements, including, without limitation, 

prepetition senior bond indentures and notes, term loan agreements, revolving loan agreements, and 

other financial instruments. The documents that govern and set forth the terms of the parties’ 

relationships contain varying rates of interest ranging from 2.45% to 6.05%. The Debtors understand 

that noteholders, lenders, and respective trustees and administrative agents will contend that contract 

rates should apply in determining the rate of postpetition interest on any allowed claims arising under 

their respective funded debt documents. In addition, the Debtors understand that certain trade creditors 

may argue that they are entitled to various rates of interest set forth in their applicable supply 

arrangements with the Debtors and that other trade creditors with contracts or agreements that do not 

provide for an applicable default rate of interest may contend they are entitled to statutory interest 

under certain California state statutes, including section 3289 of the California Civil Code. There 

may also be other general unsecured creditors who claim entitlement to postpetition interest at a rate 

other than the Federal Judgment Rate. This is an important matter. Assuming that the Debtors exit 

chapter 11 on June 30, 2020, the difference in postpetition interest calculated at the Federal Judgment 

Rate and postpetition interest calculated at the various different contract rates on just the Debtors’ 

unsecured funded debt alone will be approximately $500 million.

As shown below, the terms of any prepetition agreement with the Debtors are irrelevant to the 

appropriate rate of postpetition interest to be payable under the Debtors’ Plan. No unsecured creditor 

is entitled to postpetition interest on an allowed unsecured claim at any rate other than the Federal 

Judgment Rate under controlling Ninth Circuit law. The Federal Judgment Rate is calculated under 

28 U.S.C. § 1961(a) as “a rate equal to the weekly average 1-year constant maturity Treasury yield, as 

published by the Board of Governors of the Federal Reserve System, for the calendar week preceding 

the date of the judgment.” For purposes of postpetition interest on an allowed unsecured claim, “the 

date of the judgment” is the bankruptcy petition date. See, e.g., In re Washington Mutual, Inc., 461 

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B.R. 200, 246 (Bankr. D. Del. 2011) (“The case law is uniform in holding that it is the petition date at 

which the federal judgment rate is determined for purposes of awarding interest under section 

726(a)(5).”)). Under 28 U.S.C. § 1961(a), the Federal Judgment Rate on the Petition Date applicable 

to the Debtors’ Plan is 2.59%.

2

IV. UNSECURED CREDITORS OF A SOLVENT DEBTOR ARE ONLY ENTITLED TO

POSTPETITION INTEREST AT THE FEDERAL JUDGMENT RATE 

Under the Debtors’ Plan, holders of Priority Non-Tax Claims, Funded Debt Claims, and 

General Unsecured Claims (as such terms are defined in the Debtors’ Plan) will be paid in full in cash 

for their allowed claims as determined under section 502 of the Bankruptcy Code. In addition, under 

the Debtors’ Plan such holders will receive postpetition interest at the Federal Judgment Rate. See 

Debtors’ Plan §§ 4.2 – 4.4, 4.15 – 4.17. This treatment is mandated by the Bankruptcy Code and 

governing Ninth Circuit authority.

A. Postpetition Interest on Unsecured Claims Against a Solvent Debtor is Payable at

“the Legal Rate”

In a typical chapter 11 case, general unsecured creditors are not entitled to any postpetition 

interest because section 502(b)(2) of the Bankruptcy Code “prohibits claims for postpetition interest 

on unsecured claims.” 11 U.S.C. § 502(b)(2); see In re Del Mission Ltd., 998 F.2d 756, 757 (9th Cir. 

1993) (citations omitted); In re Petite Auberge Vill., Inc., 650 F.2d 192, 196 (9th Cir. 1981) (“[W]e 

will not permit the state to recover tax penalties and post-petition interest by characterizing them as 

‘delinquent taxes.’”); In re Castillo, 488 B.R. 441, 448 (Bankr. C.D. Cal. 2013) (section 502(b)(2) 

disallows claims for postpetition interest); In re Comstock Fin. Servs., Inc., 111 B.R. 849, 860 (Bankr. 

C.D. Cal. 1990) (“11 U.S.C. § 502(b)(2) provides that no claim shall be allowed for unmatured interest. 

This means that it is inappropriate to allow an unsecured creditor payment of postpetition interest on 

an unsecured prepetition claim.”) (citing Thompson v. Kentucky Lumber Co., 860 F.2d 674 (6th 

Cir.1988)); see also 4 Collier on Bankruptcy ¶ 502.03 (16th ed. 2019) (discussing “[t]he principle that 

interest stops running from the date of the filing of the petition”).

 2 U.S. Dep’t of the Treasury, 2019 Daily Treasury Yield Curve Rates https://www.treasury.gov/resourcecenter/data-chart-center/interest-rates/Pages/TextView.aspx?data=yieldYear&year=2019.

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The Bankruptcy Code provides two limited exceptions to this rule prohibiting postpetition 

interest. The first exception, codified in section 506(b) of the Bankruptcy Code and not applicable 

here, occurs when the oversecuritization of a debt permits the collateral held as security to satisfy both 

the principal and interest on a debt. See United States v. Ron Pair Enterprises, Inc., 489 U.S. 235, 

241 (1989); In re Fesco Plastics Corp., Inc., 996 F.2d 152, 156 (7th Cir. 1993). The second narrow 

exception, provided under section 726(a)(5) of the Bankruptcy Code, permits the recovery of 

postpetition interest on allowed unsecured claims at “the legal rate from the date of the filing of the 

petition,” in cases where the debtor is determined to be solvent, as is assumed here. 

The Ninth Circuit has held that, in a chapter 11 case “[w]here 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.” Cardelucci, 285 F.3d at 1234 

(quoting 11 U.S.C. § 726(a)(5)); In re Williams, Love, O'Leary & Powers, P.C. (“WLOP”), 588 F. 

App’x 559, 560 (9th Cir. 2014) (in a chapter 11 case, “[a]s an unsecured creditor, Brann is entitled to 

post-petition interest ‘at the legal rate’”); see 4 Collier on Bankruptcy ¶ 502.03 (16th ed. 2019) (“When 

interest is payable because a debtor proves to be solvent, the proper rate of interest under the statute is 

‘the legal rate.’”). 

Importantly, this limited right to recover postpetition interest on an allowed unsecured claim 

against a solvent debtor does not equate to the allowance of a contractual claim for postpetition 

interest. Section 502(b)(2) disallows all such claims. Instead, the postpetition interest contemplated 

by section 726(a)(5) and Cardelucci is a bankruptcy-specific right to interest, “at the legal rate,” on an 

unsecured claim that has been allowed as of the petition date without consideration of unmatured 

interest. See, e.g., In re Robinson, 567 B.R. 644, 649–50 (Bankr. N.D. Ga. 2017) (“Post-petition 

interest is not part of the allowed claim pursuant to Section 502(b)(2), but the Code provides when 

and at what rate that post-petition interest can be paid on the allowed claim pursuant to 

Section 726(a)(5).”) (emphasis added). The statutory text makes this point clear. Section 502(b)(2) 

disallows a “claim . . . for unmatured interest,” while section 726(a)(5) permits “payment of 

[postpetition] interest . . . on [the allowed] claim.” 11 U.S.C. §§ 502(b)(2), 726(a)(5) (emphasis 

added).

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Accordingly, the “legal rate” contemplated by section 726(a)(5) is separate and distinct from 

the nonbankruptcy entitlements that make up a creditor’s allowed unsecured claim, including any 

contractual rights to a different rate of interest.

B. The Ninth Circuit Has Determined that “the Legal Rate” is the Federal 

Judgment Rate

The Ninth Circuit has interpreted the Bankruptcy Code’s use of the term “the legal rate” and 

concluded that section 726(a)(5) “mandates” application of the federal judgment rate for purposes of 

determining the appropriate rate of postpetition interest on unsecured claims in a chapter 11 case. 

Cardelucci, 285 F.3d at 1233; see also Robinson, 567 B.R. at 645 (“The leading case interpreting this 

phrase . . . is In re Cardelucci.”) (full citation omitted); WLOP, No. 3:12-CV-02049-AA, 2013 WL 

4786322, at *3 (D. Or. Sept. 3, 2013) (“As held by Cardelucci, ‘interest at the legal rate’ under § 

726(a)(5) is the federal judgment rate of interest.”), aff’d, 588 F. App’x 559 (9th Cir. 2014) (“We have 

already held that ‘the legal rate’ means the federal judgment rate.”); In re Beguelin, 220 B.R. 94, 101 

(9th Cir. B.A.P. 1998) (“we hold that the federal judgment rate is the appropriate measure of interest 

under § 726(a)(5)”); In re Wallace, No. 04-08560, 2007 WL 321402, at *7 (Bankr. E.D. Wash. Jan. 

29, 2007) (“The Ninth Circuit . . . has ruled that a single rate of interest should be applied, based on 

the federal statutory rate pursuant to 28 U.S.C. § 1961(a).”) (citing Cardelucci). This conclusion 

cannot be seriously debated and has been the law in this Circuit since at least the Cardelucci decision, 

which adopted the reasoning of the BAP in Beguelin. See Cardelucci, 285 F.3d at 1234.

In Cardelucci, the Ninth Circuit addressed the precise issue now before the Court, and the 

Ninth Circuit’s decision is controlling and dispositive here. In Cardelucci, it was agreed that the 

creditor was entitled to postpetition interest under the debtor’s chapter 11 plan, but the parties disputed 

the applicable interest rate. In affirming that the federal judgment rate applied, the Ninth Circuit made 

two critical holdings. First, as noted above, it held that unsecured creditors’ entitlement to postpetition 

interest in chapter 11 arises from section 726(a)(5). Cardelucci, 285 F.3d at 1234. Second, it held 

that the “legal rate” under section 726(a)(5) is the federal judgment rate:

This appeal presents 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. We conclude that 11 

U.S.C. § 726(a)(5) mandates application of the federal interest rate.

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Id. at 1233. 

In so holding, the Ninth Circuit found that many considerations pointed to the conclusion that 

Congress intended for the federal judgment rate to apply. First and foremost, the statutory text “lend[s] 

strong support to the conclusion that 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. 

The definite article “the” instead of the indefinite “a” or “an” indicates that 

Congress meant for a single source to be used to calculate post-petition 

interest. The use of “legal rate” indicates that Congress intended the single 

source to be statutory because the commonly understood meaning of “at the 

legal rate” at the time the Bankruptcy Code was enacted was a rate fixed by 

statute. Congress’ choice of the phrase “interest at the legal rate” suggests 

that it intended for bankruptcy courts to apply one uniform rate defined by 

federal statute.

Id. at 1234-35 (citations omitted; emphasis added). The Ninth Circuit also observed that the legislative 

history bolsters this conclusion, as “Congress specifically chose the language ‘interest at the legal 

rate,’ replacing the originally proposed language ‘interest on claims allowed.’ . . . Thus, instead of a 

general statement allowing for awards of interest, Congress specified what type and amount of interest 

could be awarded with the specific phrasing ‘at the legal rate.’” Id. at 1234.

The Ninth Circuit found application of the federal judgment rate to be logical because an 

allowed claim in bankruptcy is akin to a judgment and, “[i]n this respect, the purpose of post-petition 

interest makes the award analogous to an award of post-judgment interest.” Id. at 1235. Just as in 

diversity actions in federal court where a prevailing plaintiff may be entitled to pre-judgment interest 

at the state rate but post-judgment interest at the federal rate, “[i]n bankruptcy, an allowed claim 

becomes a federal judgment and therefore entitles the holder of the judgment to an award of interest 

pursuant to federal statute.” Id. 

The Ninth Circuit also was persuaded by the policy considerations outlined by the BAP in 

Beguelin, concluding that “the interests of ‘fairness, equality, and predictability in the distribution of 

interest on creditor claims’ as well as the interest in applying federal law to federal bankruptcy cases 

required application of the federal judgment rate approach.” Id. (quoting Beguelin, 220 B.R. at 100-

01). 

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Further, the Ninth Circuit noted that the federal judgment rate both “promotes uniformity 

within federal law” and within a particular bankruptcy case:

[A]pplying a single, easily determined interest rate to all claims for post- petition interest ensures equitable treatment of creditors. An overriding 

policy consideration in an award of interest to a creditor is the balancing of 

equities among the creditors. See Vanston Bondholders Protective 

Committee v. Green, 329 U.S. 156, 165, 67 S.Ct. 237, 91 L.Ed. 162 (1946) 

(“It is manifest that the touchstone of each decision on allowance of interest 

in bankruptcy, receivership and reorganization has been a balance of 

equities between creditor and creditor or between creditors and the 

debtor.”). By using a uniform interest rate, no single creditor will be eligible 

for a disproportionate share of any remaining assets to the detriment of other 

unsecured creditors. See Beguelin, 220 B.R. at 100 (citing In re Melenyzer,

143 B.R. at 832).

Id. at 1235-36.

Finally, “application of the federal judgment rate is the most judicially efficient and practical 

manner of allocating remaining assets,” particularly where, as here, “[c]alculating the appropriate rate 

and amount of interest to be paid to a myriad of investors has the potential to overwhelm what could 

otherwise be a relatively simple process pursuant to 11 U.S.C. § 726(a)(5).” Id. at 1236; see, e.g., 

Beguelin, 220 B.R. at 1010 (“It is not hard to imagine the administrative nightmare that bankruptcy 

trustees would otherwise face if they were required to calculate a different interest rate, based on a 

different source of interest rate, for each creditor.”). 

Notably, although the Ninth Circuit recognized the potential that “a debtor may receive a 

windfall from the application of a lower federal interest rate,” any effort to modify the rate based on 

alleged countervailing equitable concerns fail because “‘interest at the legal rate’ is a statutory term 

with a definitive meaning that cannot shift depending on the interests invoked by the specific factual 

circumstances before the court.” Cardelucci, 285 F.3d at 1235 (citing In re Thompson, 16 F.3d 576, 

581 (4th Cir. 1994)).

In short, the law in this Circuit—binding on this Court—is clear: where there is a solvent 

chapter 11 debtor as assumed here, a prepetition unsecured creditor is entitled to postpetition interest 

on its allowed claim at the Federal Judgment Rate. See WLOP, 2013 WL 4786322, at *1 (“I find that 

this court is bound by the Ninth Circuit’s ruling in [Cardelucci].”). No other rate applies.

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V. ANY ATTEMPT TO DISTINGUISH CARDELUCCI MUST BE REJECTED

As already has been suggested to the Court in prior hearings, creditors seeking to be paid 

postpetition interest at higher rates no doubt will contend that Cardelucci is distinguishable because it 

is purportedly premised on section 726(a)(5) of the Bankruptcy Code, which they will argue only 

applies in chapter 11 cases to impaired classes of claims via section 1129(a)(7)’s “best interests” test.

The Debtors and PG&E Shareholders will respond fully to any such arguments in their 

opposition briefing, and reserve all rights in this regard. For purposes of this Brief, the Debtors and 

PG&E Shareholders merely note that any attempt to “distinguish” Cardelucci necessarily will conflict 

with the Ninth Circuit’s specific holdings and will amount to nothing more than a disguised effort to 

overrule the decision. To start, both Cardelucci and the Ninth Circuit’s subsequent decision in WLOP

were chapter 11 cases that mandated postpetition interest at the federal judgment rate without 

exception. Neither relied in any way on provisions of the Bankruptcy Code other than 

section 726(a)(5) and neither made any mention of the best interests test. To the contrary, as noted 

above, Cardelucci (followed by WLOP) broadly holds without any caveat or condition that, “[w]here 

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.’” Cardelucci, 285 F.3d at 1234; WLOP, 588 F. App’x 

at 560 (“[a]s an unsecured creditor, Brann is entitled to post-petition interest ‘at the legal rate’”). That 

unequivocal holding is not in any way limited to impaired claims, contingent on application of the best 

interests, or qualified in any other respect. Cardelucci thus cannot be distinguished on the ground that 

the Debtors’ Plan does not impair unsecured claims. 

Further, any attempt to invoke “equitable principles” to evade Cardelucci will run headlong 

into Cardelucci’s unambiguous command that the federal judgment rate is the only rate payable on 

unsecured claims against a solvent debtor – a command “that cannot shift depending on the interests 

invoked by the specific factual circumstances before the court.” Cardelucci, 285 F.3d at 1236. The 

Ninth Circuit already has performed all the equitable balancing that is required, concluding that 

application of a uniform federal judgment rate in chapter 11 “ensures equitable treatment of creditors,” 

“promotes fairness among creditors,” and is “the most judicially efficient and practical manner of 

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allocating remaining assets.” Cardelucci, 285 F.3d at 1236. Cardelucci simply leaves no room for 

consideration of the alleged equities that creditors seeking higher rates of interest are sure to invoke. 

VI. CONCLUSION

For all the foregoing reasons, the Court should follow this Circuit’s binding precedent and hold 

that the Federal Judgment Rate is the only appropriate rate in calculating postpetition interest on any 

allowed unsecured claim in a solvent debtor case under chapter 11, notwithstanding the terms of any 

prepetition contract or agreement that may exist between the Debtors and the holder of an allowed 

unsecured claim and any applicable state law to the contrary. 

Dated: November 8, 2019

WEIL, GOTSHAL & MANGES LLP

KELLER & BENVENUTTI LLP

By: /s/Theodore E. Tsekerides

Theodore E. Tsekerides

Attorneys for Debtors 

and Debtors in Possession

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