Court Opinion

ID: 905259
Source: CourtListenerOpinion
Date Created: 2013-06-21 20:36:01.515929+00
Date Added: 2024-06-11T12:35:27.151556
License: Public Domain

FILED
                           NOT FOR PUBLICATION                              JUN 21 2013

                                                                        MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                       U .S. C O U R T OF APPE ALS

                             FOR THE NINTH CIRCUIT

In the Matter of: WASHINGTON GROUP               No. 11-17447
INTERNATIONAL, INC.,
                                                 D.C. No. 3:10-cv-00785-ECR-
                                                 WGC
GROUND IMPROVEMENT
TECHNIQUES, INC.,
                                                 MEMORANDUM *
              Petitioner - Appellee,

  v.

THE PLAN COMMITTEE,

              Respondent - Appellant,

  and

WASHINGTON GROUP
INTERNATIONAL, INC., FIREMAN’S
FUND INSURANCE COMPANY,

              Respondents.

                   Appeal from the United States District Court
                            for the District of Nevada
                 Edward C. Reed, Senior District Judge, Presiding

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
                        Argued and Submitted May 17, 2013
                             San Francisco, California

Before: McKEOWN and WATFORD, Circuit Judges, and ZILLY, Senior District
Judge.**

      In litigation between the Department of Energy’s (“DOE”) contractor,

Washington Group International, Inc. (“WGI”), and its subcontractor, Ground

Improvement Techniques, Inc. (“GIT”), GIT was awarded a judgment against WGI

that included post-judgment interest, which continued to accrue after WGI filed for

bankruptcy. The Plan Committee, a fiduciary to the Class 7 claimants in WGI’s

bankruptcy proceeding, now appeals the district court’s order reversing the

bankruptcy court and directing that GIT may collect post-petition interest from the

DOE. We have jurisdiction under 28 U.S.C. §§ 158(d) and 1291. Reviewing de

novo, In re AFI Holding, Inc., 525 F.3d 700, 702 (9th Cir. 2008), we affirm.

      The Bankruptcy Code’s prohibition on claims for “unmatured interest”

under 11 U.S.C. § 502(b)(2) shields the bankruptcy estate but does not protect non-

debtor third parties from post-petition interest. See 11 U.S.C. § 524(e). In Bruning

v. United States, 376 U.S. 358, 362 (1964), the Supreme Court explained that

“[t]he basic reasons for the rule denying post-petition interest as a claim against the

       **
             The Honorable Thomas S. Zilly, Senior District Judge for the U.S.
District Court for the Western District of Washington, sitting by designation.

                                          -2-
bankruptcy estate are the avoidance of unfairness as between competing creditors

and the avoidance of administrative inconvenience.” We agree with the district

court that neither of these reasons is implicated when post-petition interest is

collected from a non-debtor third party who is derivatively responsible for the

obligations of the debtor.

       Here, GIT’s collection of post-petition interest from the DOE does no harm

to WGI’s other creditors and results in no additional administrative inconvenience

to WGI’s estate. We are persuaded by the district court’s analysis that the mere

possibility of GIT making a claim against WGI’s estate in the event that the DOE

cannot or is unwilling to pay the full judgment is not enough to preclude GIT from

collecting post-petition interest from the DOE. Because the prohibition against

post-petition interest is merely a “rule of distribution” that does not change the

“interest bearing quality” of a claim, id. at 362 n.4, § 502(b)(2) does not alter the

liability of a non-debtor third party.

      AFFIRMED.

                                          -3-
                                                                               FILED
In re Washington Group International, Inc., No. 11-17447                        JUN 21 2013

                                                                           MOLLY C. DWYER, CLERK
WATFORD, Circuit Judge, concurring:                                          U .S. C O U R T OF APPE ALS

      The Plan Committee’s principal concern is that, if GIT is unable to collect

the full value of its claim from the DOE, GIT might return to the bankruptcy estate

to seek payment of the deficiency, thereby effectively obtaining post-petition

interest to the detriment of other creditors. While this is a valid concern, I agree

with the district court that it does not affect the outcome here. GIT has conceded

that it cannot collect post-petition interest from the estate. Thus, as the district

court suggested, if GIT recovers $9,842,711.83 (the allowed amount of the GIT

claim) or more from the DOE, GIT will be unable to seek further payment from the

estate. If GIT recovers less than that amount, it may not allocate any portion of the

DOE’s payment to post-petition interest first in an effort to maximize recovery

from the bankruptcy estate, because doing so would be an attempt to circumvent

§ 502(b)(2)’s bar on collection of post-petition interest from the estate. See In re

Nat’l Energy & Gas Transmission, Inc., 492 F.3d 297, 302–03 (4th Cir. 2007).