F OR P UBLICATION



### UNIT E D ST AT E S CO URT O F APPE AL S FO R T H E NINT H CIRCUIT

I N R E N E W I N V E S T M E N T S , I N C , Debtor.

P A C I F I C A L 51 L L C,

Creditor-Appellant
,

v

.

N E W I N V E S T M E N T S I N C ., Debtor-Appellee. N o. 13-36194

D.C. No. 13-10948-ML B

OPI NI ON

A ppeal from the United States B ankruptcy Court for the W e stern District of W ashing ton Marc B arreca, B ankruptcy J udg e, Presiding

Arg ued and Submitted May 3, 2016 Seattle, W a shing ton

F iled November 4, 2016

B efore: Susan P. Graber, Marsha S. B erz o n, and Mary H. Murg u ia, Circuit J udg es.
Opinion by

J udg e Murg uia; Dissent by J udg e B erz onI N R E N E W I N V E S T M E N T S , I N C

. 2

SUMMARY *

Bankruptcy

The panel r eversed the b a nkruptcy court’s order confirming a d e btor’s Chapter 11 plan of reorg aniz ation,

w h i c h proposed to cure the debtor’s default on a loan by a pay ment that reflected a pre-default i n t erest rate a nd

ex ting uished any other late penalties required u nder the loan
ag reement.

A Chapt e r 11 plan may include a provision authoriz ing the debtor to remedy any b reach of a loan ag reement with a creditor and return to pre-default conditions. Great W

. Bank & Tr. V. Entz-W

hite Lumber & Supply, Inc. ( In re Entz-W

hite Lumber & Supply, Inc.)
, 850 F .2d 1338 (9th Cir. 1988), h eld
t hat a debtor that cures a default is entitled to av o i d a l l
consequences of the default, including hig h er p o st-default interest rates. The p anel h eld that this rule of Entz-W hite
, allowing a curing d ebtor to avoid a contract u al post-default interest rate in a loan ag reement, is no l o n ge r g ood law in lig ht o f later-enacted 11 U.S.C. § 1123(d)
, w h i c h provides that, if a plan pro p oses to cure a default, “the amount necessary to cure the default sh a l l b e determined in accordance w ith the underly in g a g reement and applicable nonbankruptcy law.” The panel remanded the case for f urther proceeding s.

D issenting
, J udg e B erz on wrote that neither 11 U .S.C. § 1123(d) nor any other pr o vision of the B ankruptcy Code

* T h is su m m ary co n stitu

tes n o p art o f th e o pin io n o f th e co u rt. It h as b een p rep ared b y

co u rt staf

f f o r th e co n v en i en ce o f

th e read er.I N R E N E W I N V E S T M E N T S , I N C

. 3

provides a definition of “cure” c o ntrary to the one announced in Entz-W

hite

. A ccording ly
, Ent z

- W hite has not been displaced. J udg e B e rz on w ould a ffirm the bankruptcy court’s order confirming the debtor’ s plan of reorg aniz ation, which ref lects the pre-default interest rate included in the promissory note.

COUNSEL

Dillon E. J a ckson ( arg ued) and Terran ce J

. Keenan, F oster Pepper PL L C, Seattle, W ashing ton; Stuart P. Kastner, Stuart P. K a stner PL L C, Seattle, Washing ton; f or CreditorAppellant.

L awrence K

. Eng e l (arg u ed), B ellev u e , W ashing ton, for Debtor-Appellee.

OP INION

MURGUI A, Circuit J udg e:

I n loan ag reements—and a ny subsequent b ankruptcy proceeding s—a borrower “defaults” on a loan when he f ails
to fulfill a material oblig ation under the terms of the loan
ag reement, such as making a pay ment by a particular date. A default can trig g er certain c onsequences, such as f oreclosure
on any p roperty securing the loan, late f e es and penalties, or “acceleration,” which occurs when the entire unpaid amount of the l o an becomes immediately due and pay able. B ut the borrower can also “cure” the default, most often b y pay ing the arrearag es a

nd bring ing the loan current. A cure g enerally allows the borrower to avoid the consequences of default,I N R E N E W I N V E S T M E N T S , I N C

. 4

restores the loan to its o r ig inal terms, and allows the borrower to keep the property

.

The B ankruptcy Code incor porates the concept of c ure. Chapter 11 p rovides that a debtor’s plan of reorg aniz ation

m u s t “ p r o v i d e a d e q u a t e m e a n s f o r t h e p l a n ’ s imp l e m e ntation,” including the “curing or waiving of any default.” 11 U.S.C. § 1123(a)(5)(G). T h is statute means that

a plan of reorg aniz ation may include a provision authoriz ing the debtor to remedy any b reach of a loan ag reement with a creditor and return to pre-default conditions. Great W

. Bank & Tr. v. Entz-W

hite Lumber & Supply, Inc. ( In re Entz-W

hite Lumber & Supply, Inc.)
, 850 F .2d 1338, 1340 (9th Cir. 1988).

W e held in Entz-W

hite t h a t a debtor who c ures a default “is entitled to avoid all c o nsequences of the default— including hig her post-default interest rates.” Id. at 1342. I n other words, if a loan ag reement provided for a hig her, postd e f a u l t interest rate on arrearag es in the event of default, a debtor who “cures” is entitled to repay the arr e a r a ge s at the lower, pre-default interest rate. W e c o n cluded that “the
power to cure under the B a nkruptcy Code a uthoriz es a p lan
to nullify all consequences of default, including avoidance o f default penalties such as hig h er interest,” e v e n when the
terms o f the loan ag reement called for a hig her interest rate upon default. Id.

Th e c ase before u s requires us to decide whether EntzW hite ’s rule that a debtor may nullify a loan agr e e m en t’s requirement of post-default interest remains g ood law in lig ht of 11 U .S.C. § 1123(d), a provision that Cong r ess e n acted aft e r En tz-W

h ite

. Section 1123(d) provides that, if a p lan
proposes to cure a default, “ the amount n ecessary to cure the default shall be determined in accordance with the underly ingI N R E N E W I N V E S T M E N T S , I N C

. 5

ag reeme nt and applicable nonbankruptcy law.” 11 U .S.C. § 1123(d). W e hold that Entz-W hite ’s rule o f a l l o wing a curing debtor to avoid a contractual post-default interest rate in a loan ag reement is no long er valid in lig ht of § 1123(d).

I

.

New I nvestments, I nc. (“New I nvestments”) borrowed $3,04 5
, 7 60.51 from Pacifica L 51, L L C’s (“Pacifica”)
p r edecessor in interest to purchase a hotel property i n Ki r kland, W ashing ton. The n ote, which was secured by a deed of trust, provided for an interest r ate of 8 percent. The
note also specifically provided that in the event of default, the interest rate would increase by 5 percent.

New I nvestments defaulted on t h e note in 2009. W h en Pacifica commenced non-judicial foreclosure proceeding s, New I n vestments filed for Chapter 11 bankrupt c y

. New I nvestments’s plan of reorg aniz ation p r o p o s ed to c ure the default by selling the property to a third party and using the proceeds o f the sale to p ay the outstanding amount of the loan
at the pre-default interest rate. Pacifica objected to the p lan

on the g round that, under the terms of the note, it was entitled to be paid at the hig h e r , post-default interest rate.

The bankruptcy court confirmed New I nvestments’s p lan

over Pacifica’s objection and authoriz ed the sale of the hotel for $6,890,000. Of the sale p r o ce e d s, $2,830,877.28 would be paid to Pacifica, reflecting the pre-default interest r ate a nd

ex ting uishing an y other late p enalties. Anticipating an appeal, the bankruptcy court ordered that $100,000 o f the proceeds be reserved for Pacifica’s a ttorney ’s fees on appeal and that $670,000 be set a side as a disputed claim reserve forI N R E N E W I N V E S T M E N T S , I N C

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Pacifica. Pacifica timely appeals from t h e c o nfirmation order.

I I

.

W e have jurisdiction under 2 8 U.S.C. § 158( d )
, a n d we review the bankruptcy court’s interpretation of ban kruptcy
statutes d e n o v o. Boyajian v. New Falls Corp. ( I n re Boyajian)
, 564 F .3d 1088, 1090 ( 9 th Cir. 2009). “W h en construing the meaning o f a statute, w e b e g in with the lang uag e of that statute.” Benko v

. Quality Loan Serv. Corp.
, 789 F .3d 1111, 1118 (9th Cir. 2015). “I f the statutory tex t is ambig uous, we employ other tools, such as leg islative history
, to construe the meaning

of ambig uous terms.” Id. “A party contending that leg islative a c tion chang ed settled law has the burden o f showing that the l eg islature intended such a chang e.” Green v. Bock Laundry M a c h. Co.
, 4 90 U.S. 504, 521 (1989).

I I I

. Chapter 11 of t h e B ankruptcy Code provides that a p lan of reorg aniz ation must, among other thing s, “provide adequate means for the plan’s implementation,” including the “curing or waiving of a n y d efault.” 11 U .S.C. § 1123(a)(5 )(G). I n Entz-W hite
, we observed that the B ankruptcy Code did n ot d efine “cure.” 850 F

. 2d at 1340. W e borrowed the Second Circuit’s d efinition: “A default is an event in the debtor-c r e d i t o r r elationship w hich trig g ers c ertain
consequences. Curing a default commonly means taking care of the trig g ering event and returning to pre-default conditions. The consequences are thus nullified. This i s the c oncept o f ‘cure’ u sed throug hout the B a nkruptcy Code.” Id

. (alteration omitted) (quoting Di Pierro v. T a d d eo ( In re Taddeo)
,I N R E N E W I N V E S T M E N T S , I N C

. 7

685 F .2d 24, 2 6–27 (2d Cir. 1982)). W e held that “the power to cure under the B ankruptcy Code au thoriz es a plan to nullify a ll consequences of def a ult, including avoidance o f default p enalties such a s hig h er interest.” Id. a t 1342. A s a result, a d ebtor whose plan proposed to cure a default would allow h im to avoid having to p a y a hig her, post-default interest rate called for in the loan ag reement.

Entz-W h ite was decided in 1 9 88. I n 1 9 9 4, Cong ress amended § 1123 to add subsection (d). Pub. L

. No. 103-394, Title I I
, § 305, Oct. 22, 1994, 108 Stat. 4106. Subsection (d) provides:

Notwithstanding subsection (a) of this section and sections 506(b), 1129(a)(7), and 1129(b) of this title, if it is proposed in a plan to cure

a default the amount n ecessary to cure the default shall be deter

m ined in accordance with the underlying ag reement and applicabl e nonbankruptcy law.

11 U.S.C. § 1123(d).

Subsection § 1123(d) renders void Entz-W h ite ’ s rule that

a debtor who proposes to c u re a default may avoid a hig her, post-default interest rate in a loan ag reement. Subsection (d)
g overns here because New I n v estments’s plan proposes to

cure a default. The underly ing ag r eem e n t

— here, the promissory note—requires the pay ment of a hig h e r i n t erest rate upon default. And “applicable nonban kruptcy law”— here, W ashing ton state law—allows for a hig her interest rateI N R E N E W I N V E S T M E N T S , I N C

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upon default w hen provided for in the loan ag reement. 1 See W a sh. Rev. Code Ann. § 61.24.090(1)(a) (prov i d i n g that a b orrower may cure a monetary d efault by pay ing the trus t e e “[ t] he entire amount then due under the terms of the deed o f
trust a nd the oblig ation s e c u red thereby
, other than such
p o r t i o n of the principal as w ould not then be due h ad no default occurred”). I n other words, under § 1123(d )
, “the
amount n e cessary to cure [ New I nvestments’s] default” is
g overned by the deed of trust and W ashing ton la w , wh i ch respectively require and permit r e p a y ment at a hig her, postdefault interest rate.

The plain lang uag e of § 1123(d) compels the holding that

a debtor cannot nullify a preex isting o blig a t i o n in a loan
ag reeme n t to pay post-default interest solely by proposing a

cure. B ut even if we were to read ambig uity into the statute, the leg islative history would not help New I nvestments. The House Report for the bill that became § 1123( d ) s t a t e s that Cong r ess wa s primarily concerned w ith overruling the S u p r eme Court’s decision in Rake v. W ade
, 508 U.S. 464 (1993). H.R. Rep. No. 1 03-835, at *55 (1994)

. R a k e h ad held that a Chapter 13 debtor who proposed to cure a default

was required to pay interest on his arrearag es to a secured creditor e ven if the underly ing loan ag reement d id not provide for such interest. 5 08 U.S. at 472. Cong ress viewed this as an untoward r esult that allowed for “interest on

1 W e rej ect New In v estm en ts’ s arg u m en t th at W ash in g t on ’ s d eed o f
tru s t law can n o t co n s titu te “ a p p licab le n o n ban k ru p tcy l aw ” u n der § 1 1 2 3 (d ) b ecau s e th e B an k ru p tcy Co d e’ s au to m atic stay w o u l d p rev en t f o reclo su re u n d er W ash in g to n

law

. S ee 1 1 U.S.C. § 3 6 2 (a); W ash . Rev

. Co d e A n n

. § 6 1 .2 4 .0 4 0

. T h is read in g w o u ld ren d er th e p h rase “ ap p licab le

n o n b an k ru p tcy law ” m ean in g less b ecau se th e a u t o m atic stay w ou ld alw ay s tru m

p s tate law f

o reclo s u re p ro v i sio n s, co n trary to th e statu to ry tex t an d in ten t.I N R E N E W I N V E S T M E N T S , I N C

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interest pay

ments” and provided an u nbarg ained-for windfall
to creditors. H .R. Rep. No. 1 03-835, at *55

. The House Report states that § 1123(d) would “limit the secured creditor
to the b enefit of the initial barg ain wi t h no court contrived windfall.” Id. I t further stated that it was “the Committee’s intention that a cure pursuant to a plan should operate to put the debtor in the s a me p osition as if the default had never occurred.” Id.

The fact that Cong ress had a particular purpose in m i n d when e nacting a s t a t u t e d oes not limit the effect of the
st a tute’s tex t, a principle E ntz-W hite itself recog niz ed. See 850 F .2d at 1341 (noting that a Senate Report for the bill that became 11 U.S.C. § 1 124 showed “o n l y t h a t the d rafters in the Senate were concerned p rimarily with defaults resu l ting in a cc eleration; it does not show that they meant to confine the section to that situation”). Rather, “[ t] he fact that Cong r ess may not have foreseen all o f the consequences of a

s t a t utory enactment is not a sufficient reason for refusing to g ive effect to its plain meaning .” Union Bank v. W olas
, 502 U.S. 151, 158 (1991). B y its terms, § 1123(d) tells us to look to the promissory note and W ashing ton law to determine what a mount New I nvestments must pay to cu re its default. H e r e, that analy sis requires the pay ment of post-defau l t interest.

This result is further consistent with the inte n t o f § 1123(d) because it holds the parties to th e b e n e f it o f their barg a in. Moreover, the House Report’s statement “that a cure pursuant to a plan should operate to put the debtor in the same position as if the default had never occurred” i s consistent wit h the concept of cure g e nerally
, w hich § 1123(d) has not altered or attempted to d e f i n e

. See Taddeo
, 685 F .2d at 26–27 (“Curing a default commonly means taking care of theI N R E N E W I N V E S T M E N T S , I N C

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trig g ering event and r eturning to pre-default conditions. The consequences are thus nullified.”).

W h at § 1123(d) affects is h o w a debtor returns to p r e

default conditions, which can include returning to a lower, pre-default interest rate. I n t h e traditional case, a borrower who has defaulted on a loan oblig ation can cure the default b y pay ing arrearag es. See Restatement (Third ) o f Property (Mortg ag es) § 8.1(b) & cmt. c (1997); W ash. Rev. Code Ann. § 61.24.090(a)(1). This p roc edure allows the borrower to avoid acceleration or foreclosure, w hich are some o f the more

common consequence s of default. See Restatement (Third) of Pr o p e r ty (Mortg ag e s) § 8.1(a); Wash. Rev. Code Ann. § 61.24.090(a). However, the borrower d oes not e ffectuate a

cure merely by pay ing past due installments of princip a l at the pre-default interest rate. Rather, the borrower’s cure oblig ations may also include “late charg e s , attorney s’ a nd trustee’s fees, and publication and court costs.” Restatement (Third) of Property (Mortg ag es) § 8.1 cmt. c; see also W a sh. Rev. Code Ann. § 61.24.090(1)(b). I t is o n l y once these penalties are paid that the debtor ca n return to pre-default conditions as to the remainder of the loan oblig ation.

The common law treatment o f cure is consistent with the B ankruptcy Code’s protections for creditors who would have been entitled to rece i v e accelerated pay ment on a defaulted loan. F or a debtor to render such a c r editor “unimpaired” a nd unable to object to the debtor’s plan, P latinum Capital, Inc.

v. Sylmar P laza, L.P. (

I n re Sylmar Plaza, L.P.)
, 314 F .3d 1070, 107 5 (9 t h C ir. 2002); 11 U .S.C. § 1126(f), the debtor
must cure the default but may n o t “otherwise a lter the leg a l, equitable, or contractual rig hts” of the c r e d i t or, 1 1 U .S.C. § 1124(2)(E). Here, one o f t hose rig hts is post-default interest, and New I nvestments’s cure may not alter that rig ht.I N R E N E W I N V E S T M E N T S , I N C

. 11

Consistent with § 1124(2), the d ebtor c an r e t u rn to pred e f a ult conditions, which can include a lower, pre-defau l t interest rate, only by fulfilling the oblig atio n s o f the underly ing loan ag reement a nd ap p l i c able state law. 11 U.S.C. § 1123(d). B y its terms, § 1 123(d) requires that we look to the “ underlying a gr e e m e n t,” not only to the “predefault interest provisions” of the underly ing ag reement. T o read a n y such limitation into § 1123(d) would be “to a dd specific lang uag e that Cong ress did n ot include in a carefully considered s t at ute.” Illinois v. Abbott & Assocs., Inc.
, 460 U .S. 557, 572, (1983); see also United Stat e s v

. Plaza Health Labs., Inc.
, 3 F .3d 643, 6 4 9 ( 2 d Cir. 1993) ( “[ W ] e

c a nnot add to the statute what cong ress did not provide.”). Here, the note provided that upon default, the interest r ate on the loan would increase b y 5 percent. Unfortunately for New I nvestments, the increased interest rate a pplies to the entirety of the note and not just to arrearag es.

W e are mindful that “[ t ] h e principal purpose of the B ankruptcy Code is to g rant a fresh start to the honest but unfortunate debtor.” Marrama v

. Citizens Ban k of M ass. , 549 U.S. 3 65, 367 (2007) (internal quotation marks omitted). And Cong ress wanted to protect debtors ag ainst unbarg ainedfor interest requirements in enacting § 112 3(d). B ut the B ankruptcy Code is not a purely r emedial statute. Fla. Dep’t of Revenue v

. Piccadilly Cafeter i a s , Inc.
, 554 U.S. 33, 51 (2008). “ Rather, Chapter 11 strikes a balance between a debtor’s interest in reorg aniz ing and restructuring its debts and the creditors’ interest i n m a x i miz ing the value of the bankruptcy estate.” Id. I f the loan ag r eement did not require

a hig h e r, post-default interest rate, N ew I nvestments would
not have to pay it. However, t o d a y ’s result holds New I nvestments to its barg ain by adhering to the terms of its loan
ag reement with Pacifica, as required by § 1123(d).I N R E N E W I N V E S T M E N T S , I N C

. 12

B o th the tex t and the leg islative history of § 1123(d) make clear that the provision w as intended to limit part i e s to the benefit o f their b arg ain w hen a debtor seeks to effectuate a

cure a nd return to pre

- d e fault conditions. The parties barg a ined f

or a hig her interest r ate on the note in the event o f default, and Pacifica is entitled to the b enefit of that barg ain under the terms of § 1123(d).

I V.

W e conclude that Pacifica is entitled to receive pay ment of the loan at the pos t

- d ef ault interest rate. W e therefore

reverse the decision of the bankruptcy court and remand for further proceeding s.

REVERSED and REMANDED.

B ERZ ON, Circuit J udg e , dissenting :

Neither 11 U.S.C. § 1123(d) n o r a ny other provision o f the B ankruptcy Code provides a definition of “cure” contrary to the one this Court a

nnou n c e d in Great W

estern B ank & Trust v. Entz-W

hite Lumber & Supply, Inc. ( In re Entz-W

hite Lumber & Supply, Inc. ), 8 50 F .2d 1338, 1340 (9th Cir. 1988). W e are therefore bound by this Court’s precedent, according
to which N ew I nvestments may , in curing its default, pay the pre-default interest rate contained in the promissory note.

I n s t e a d o f abiding by our long standing case law, the majority concludes that Cong ress displaced Entz-W hite when it passed § 1123(d). B ecause ne i t h er t h e tex t of the statuteI N R E N E W I N V E S T M E N T S , I N C

. 13

nor the leg islative history of § 1 123(d) support the majority ’s departure, I

dissent.

I.

Chapter 11 requires that a debtor’s plan of reorg aniz ation “provide a dequate means for the plan’s implementation, such

as

. . . curing or waivi n g o f a ny default.” 11 U .S.C. § 1123(a)(5). I

n the absence of a

ny statutory

definition, this Court held in Entz-W

hite that “[ c] uring a default” means “returning to p r e-default c onditions,” such that any consequences of the default a re “nullified.” 850 F .2d at 1340 (quoting Di Pierro v. Taddeo ( In re Taddeo ), 685 F .2d 24, 26–27 (2d Ci r

. 1 9 8 2 )). B ecause curing a default returns the debtor to the status quo ante, we concluded
, “the power to

cure under the B ankruptcy Code authoriz es a plan to n u llify all consequences of default, including avoidance of default penalties such as hig her interest.” Id. at 1342.

After this C o u rt decided Entz-W hite
, Cong r ess enacted 1 1 U

. S.C. § 1123(d). Section 1123(d), part o f the 1 9 9 4 amendments to the B ankruptcy Code, provides:

Notwithstanding subsection (a) of this section and secti o ns 506(b), 1129(a)(7), and 1129(b) of this title, if it is proposed in a plan to cure

a default the amount necessary to cure the default shall be deter

m ined in accordance with the underlying ag r eement and applicable nonbankruptcy law.

Pacifica maintains—and the majority ag rees—that this provision overruled Entz- W h i te ’s holding that a debtor w ho

cures a de fault, thus “nullify [ ing ] all consequences o f” thatI N R E N E W I N V E S T M E N T S , I N C

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default, may r epay arrearag es at the pre-default interest rate. See 850 F .3d at 1342.

Pacifica bears the burden of showing that Cong r ess , in passing § 1123(d), intend e d t o chang e settled law. Tome v

. United S tates , 513 U.S. 1 50, 163 (1995) (quoting Green v

. Bock Laundry Mach

. C o

. , 4 90 U.S. 504, 521 (1989)). I n determining whether Pacifica h as met this burden, w e “ w ill
not read the B ankruptcy Code to erode past bankruptcy practice absent a clear indication that Cong ress intended such

a departure.” Hamilton v. Lanning
, 5 60 U.S. 505, 5 17 (2010) (citations and internal quotation marks omitted).

Pacifica h a s n ot carried this burden, as both the statutory tex t and the leg islative h istory o f § 1123(d) support the continuing viability of Entz-W hite ’s holding

. The majority opinion errs in concluding o ther wi s e , and, in doing so, wrong ly imposes a seve r e p e nalty o n d e btors in New I nvestments’ situation.

II.

The B ankruptcy Reform Act of 1994, among other thing s, added nearly identical lang uag e reg arding how one cures a default to Chapters 11, 12, and 1 3 of the B ankruptcy Code. Pub. L

. No. 103-394, § 305, 1 08 Stat. 4106 (1994). L ike the subsection here a t issue, 11 U .S.C. § § 1222(d) and 1322(e) provide that, notwithstanding o t h er provisions of the B ankruptcy Code n ot relevant here, “if it is proposed in a p lan
to cure a default, the a mount necessary to cure the d e f a u lt, sha ll be determined in accordance with the underly ing
ag reement and applicable nonbankruptcy law.”I N R E N E W I N V E S T M E N T S , I N C

. 15

Nowhere did the 1994 a mendments define “cure a default” or sug g est that this Circui t ’ s then-operative definition o f “cure” w as incorrect. Rather
, § 1 123(d) indicates which materials the parties may consult in d e t e r mining how to cure a default. According ly
, as a res u l t of the 1994 amendments, the terms of a c ure a re cir c u mscribed by the underly ing ag reement and applicable nonbankruptcy

law.

Neither § 1123(d) nor a n y o ther provision of t he B ankruptcy Code ex plains where in the underlying ag reement to look f or the provisions that apply in the event o f a cure. I f,

as Entz-W h ite held, “[ c] uring a d efault” means “returning to pre-default c o n ditions,” 8 50 F .2d at 1340, the provisions o f the ag reement setting out the pre-default interest rate provide the relevant information. I f “curing a default” means pay ing

a penalty trig g ered b y the default, the provisions of the
ag reement addressing h ig her post-defa u lt interest rates establish the relevant r equirements. B ut in Entz-W hite
, we decisively rejected this alternative definition of “cure.” Id. at 1342. W e called the creditor’s a r g ument in favor of this reading “ spurious,” as it “amount [ e d ] to say ing
, once more, that the hig her rate of interest is not a consequence of default that can be cured.” Id.

I n short, the tex t o f § 1123(d) make s c l e ar that New I nvestments’ cure will be b a sed on the terms o f the promissory note, but o ffers no guidance on which of the note’s provisions g overns here. Entz-W hite prov i d e s that
g uidance, by specify

ing that a “cure” permits the debtor to “avoid all consequences of the d efault.” Id. A p ply ing that understanding
, it is the pre-default interest provisions o f the underly ing ag reement that g o v ern. The majority ’s conclusionI N R E N E W I N V E S T M E N T S , I N C

. 16

that § 1123(d) ov e r r u l ed Entz-W hite has no b asis in the tex t of the statute.

III.

The leg islative history of § 1123(d) c onfi rms that Cong r ess did not mean to disturb this Court’s holding in EntzW hite. I n adding § 1123(d), Cong r ess focused on addressing

an entirely separate matter—the Supreme Court’s h olding in Rake v. W ade
, 508 U.S. 464 (1993). H.R. Rep. No. 103-835,
at 55 (1994); s ee also S. Rep. No. 103-168, at 53 (1993) (discussing the parallel provision included in the Senate bill).

I n Rake
, t h e S u preme Court held that an oversecured creditor was entitled to pre- and post-confirmation interest on mortg ag e arrearag es p aid to c ure a default under a Chapter 13 plan. 508 U .S. at 471–75. This r e ading of the relevant provisions of the B ankruptcy Code, §§ 506(b), 1322(b), and 1325(a)(5), permitted secured creditors to collect interest on top of the interest pay

ments paid by debto r s u n der their mortg ag es. I

d

. at 470–75.

Cong r ess overtly reject ed this result in enacting § 1123(d). H.R. Rep. No. 103-835, at 55. The amendments
to § 1123 were contained in § 305 of the B ankruptcy Reform Act of 1994, which is entitled “I nterest on I nterest.” Pub. L

. No. 103-394, § 305, 1 0 8 S t at. 4106, 4134 (1994). The relevant House Report states that the a mendments “will have the effect of overruling the decision of the Supreme Court in Rake v. W

ade ,” because Rake “ h ad the e ffect o f providing a windfall to secured c redito r s ” b y g iving them “interest on interest pay

ments, a nd i n terest on the late charg es and other fees, even where applicable laws prohibit[ ] such interest a nd

even wh e n it w as something that was n ot contemplated b yI N R E N E W I N V E S T M E N T S , I N C

. 17

either party in the orig inal transaction.” H.R. Rep. No. 103- 835, at 55.

F a r f rom repudiating Entz-W

hite ’s holding
, the House Report r eiterated Entz-W hite ’s interpretation of “cur e , ” stating
, “[ i] t is the Committee’s intention that a cure pursuant to a plan should operate to put the d ebtor in the same position

as if the default had never occurred.” Id

. T h e leg islative history thus indicates, at the very least, that the new provision

was not meant sub silentio to enact a definition o f “ cure” conflicting with that adopted in Entz-W h ite . I t also sug g ests that the relevant provisions of the “underly ing ag reement” for

a “cure” a re those that would have applied “if the default h ad never occurred.” See id.

I n sum, the pertinent 1994 ame n d m e n ts eliminated the possibility of a “ court c ontrive d windfall” f or secured creditors. Id. Pacifica’s challeng e to the B ankruptcy Court’s confirmation order d oes not implicate the conce rn t hat animated C o n gress. L ike the tex t of the statute, the leg islative history in no way sug g ests that E n tz-W hite ’s definition of “cure” is incorrect or was overruled.

Here, the underly ing ag r eement provides both p r e - a nd post-default interest rates. As the statute requires, we look to that ag reement in determining which r ates may a p p l y

. A nd in selecting which provision of the contract g o v erns, we rely

on our precedent and use the pre-defau l t r a te. New I nvestmen t s therefore could cure the default by pay ing interest on the debt at the pre-default rate.I N R E N E W I N V E S T M E N T S , I N C

. 18

IV.

Notwithstanding i t s recitation of the relevant tex t a nd leg islative history
, the majority somehow concludes that Entz-W h ite is n o long er c ontrolling

. Rely ing on an incorrect interpretation of § 1123(d), the majority ’s opinion mistakenly upsets this Circuit’s binding precedent.

A three judg e panel of this Court is “bound by decisions of prior panels unless an en b a n c decision, Supreme Court decision or subsequen t leg islation undermines those decisions.” Gen. Const. Co. v. Castro
, 401 F .3d 9 63, 975 (9th Cir. 2005) (quoting Benny v. U.S. Parole Comm’n
, 295 F .3d 977, 983 (9th Cir. 2 002)). No act of Cong ress or intervening hig her authority justifies the pan el’s departure from our precedent here.

As discussed, Cong ress has not defined “cure the default” in the y ears since w e decided Entz-W hite

. T h e r e i s thus no “clear indication that Cong r ess intended

. . . a d eparture,” Hamilton
, 560 U.S. at 517, f rom this C ourt’s p a st practice. Th e interpretation of the statute best supported by the leg islative record favors c ontinuity

. No intervening c ase law from the Supreme Court o r the Ninth Circuit c alls Entz-W hite into doubt. On the contrary , this Court h as continued to rely

on Entz-W

h ite ’s holdin g

. See Platinum Capital, I nc. v

. Sylmar Plaza, L.P. (

I n re Sylmar Plaza, L.P. ), 314 F .3d 1070, 1075 (9th Cir. 2 002) ( concluding E n tz-W hite precluded a creditor’s arg ument “that a p lan intended to nullify the
consequences of a default (thereby avoiding the hig her postdefault interest ra te) does not meet the purposes of the B ankruptcy Code”); cf. G en. E lec. Capital Corp. v. F u ture Me dia Prods. Inc.
, 5 47 F

. 3d 956, 960–61 (9th Cir. 2 008) ( t r e ating E

ntz-W hite as g ood law, b u t concluding it did n o tI N R E N E W I N V E S T M E N T S , I N C

. 19

a pply to a c laim paid in full as a result of asset sales outside of a Chapter 11 plan).

Stare decisis thus requires us to apply Entz-W hite and hold that N ew I nvestments “is entitled to avoid all
consequences of the defau l t—including hig her post-default interest r ates.” 850 F .2d at 1 342. I w o u l d affirm the B ankruptcy Court order c o nfirming New I nve s t ments’ p lan of reorg aniz ation, which reflects the pre-default interest rate included in the promissory note.