Ground Improvement Techniques, Inc. v. Plan Committee , 530 F. App'x 650 ( 2013 )

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NOT FOR PUBLICATION JUN 21 2013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.
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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).