Ground Improvement Techniques, Inc. v. The Plan Committee (In re Washington Group International, Inc.)

Summarized by Jamie Edmonson , Robinson & Cole LLP
12 years 8 months ago

Citation:

D.C. No. 3:10-cv-00785ECR-WGC (June 21, 2013) (not for publication and not precedent except as provided by 9th Cir. R. 36-3).

Tag(s):

Ruling:

Affirm ruling of the District Court that section 502(b)(2) does not alter the liability of a non-debtor third party.

Procedural context:

Appeal from the United States District Court for the District of Nevada.

Facts:

Ground Improvement Techniques, Inc. ("GIT") was awarded a judgment against Washington Group International, Inc. ("WGI") that included post-judgment interest, which continued to accrue after WGI filed its chapter 11 petition. The Plan Committee, acting as a fiduciary to the general unsecured claims in WGI's case, appealed the district court's order reversing the bankruptcy court and directing that GIT may collect post-petition interest from the Department of Energy ("DOE") in connection with the payment of its judgment against WGI. Bankrutpcy Code section 502(b)(2) shields a bankruptcy estate from post-petition interest, but it does not protect non-debtor third parties. The Ninth Circuit, citing Bruning v. United States, 376 U.S. 358, 362 (1964), held that there was no unfairness between competing creditors or administrative inconvenience when post-petition interest is collected from a non-debtor third party. Concurring with the opinion, Judge Watford noted that GIT conceded that it cannot collect post-petition interest from WGI's estate. Thus, if GIT collects the full amount of its claim or more from DOE, it will not be able to seek any further payment from WGI's estate. If GIT does not recover the full amount of its claim, it may not allocate any portion of the DOE's payment to post-petition interest in any attempt to circumvent 502(b)(2).

Judge(s):

McKEOWN and WATFORD (Circuit Judges), and ZILLY (Senior District Judge, sitting by designation)

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