614 B.R. 344
N.D. Cal.2020Background
- PG&E Corp. and Pacific Gas & Electric Company filed Chapter 11 on Jan. 29, 2019, driven by wildfire liabilities and large funded-debt obligations; AB 1054 imposed a June 30, 2020 deadline to resolve the utility’s bankruptcy for fund participation.
- The Debtors’ Plan assumes solvency and provides for full cash payment of General Unsecured Claims, with postpetition interest from the petition date through the effective date at the Federal Judgment Rate (2.59%); General Unsecured Claims are unimpaired under the Plan.
- The Ad Hoc Trade Committee (Trade Committee) argued postpetition interest should be set by California law or contract (Cal. Civ. Code § 3289 — 10%), not the Federal Judgment Rate; the Debtors relied on Ninth Circuit precedent in In re Cardelucci.
- The bankruptcy court issued a PPI Memorandum (Dec. 30, 2019) and PPI Order (Feb. 6, 2020) adopting Cardelucci and applying the Federal Judgment Rate to postpetition interest, but did not treat the rulings as final for appeal purposes.
- The Trade Committee moved for leave to appeal the interlocutory PPI Order to the district court under 28 U.S.C. § 158(a)(3); the district court denied leave, holding the PPI Order is not final and interlocutory appeal standards were not met.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Finality: Is the PPI Memorandum/Order a final, appealable order? | Trade Committee: It is final because it conclusively decides the postpetition interest question and contemplates no further proceedings on that issue. | Debtors/Bankruptcy Court: Not final; it is part of the larger plan-confirmation process; finality occurs only with a confirmation order. | Not final; appeal as of right denied (order is interlocutory). |
| Controlling question of law for interlocutory appeal? | Trade Committee: Resolution affects impairment/voting and could materially affect confirmation and creditor recoveries. | Debtors: Ninth Circuit precedent (Cardelucci) likely controls; the issue is one piece of confirmation and does not warrant immediate interlocutory review. | Not shown to be a controlling question that would materially affect the case now. |
| Substantial ground for difference of opinion on the law (Cardelucci applicability)? | Trade Committee: Cardelucci is distinguishable (involved impaired claims) and other circuits diverge, so disagreement exists. | Debtors: Cardelucci is controlling Ninth Circuit precedent; out-of-circuit decisions do not create substantial ground for difference. | No substantial grounds; Cardelucci controls application of the Federal Judgment Rate here. |
| Would an immediate appeal materially advance termination of the litigation? | Trade Committee: Early resolution would clarify liabilities and assist confirmation planning given deadlines. | Debtors: Immediate appeal risks piecemeal litigation, won't materially shorten or simplify confirmation; plan can be amended or confirmed and then appealed. | Immediate appeal would not materially advance the Chapter 11 cases; leave to appeal denied. |
Key Cases Cited
- In re Cardelucci, 285 F.3d 1231 (9th Cir. 2002) (held federal judgment rate governs postpetition interest in solvent-debtor bankruptcy context).
- Ritzen Group, Inc. v. Jackson Masonry, LLC, 140 S. Ct. 582 (2020) (finality in bankruptcy must be assessed for the entire category of proceedings; only orders that fix rights are final).
- Bullard v. Blue Hills Bank, 135 S. Ct. 1686 (2015) (orders in the plan-confirmation process are not final until confirmation or dismissal fixes rights).
- Ocwen Loan Servicing, LLC v. Marino (In re Marino), 949 F.3d 483 (9th Cir. 2020) (bankruptcy finality standards and disfavouring piecemeal appeals).
- In re Cement Antitrust Litig., 673 F.2d 1020 (9th Cir. 1981) (standards for interlocutory appellate certification analogous to 28 U.S.C. § 1292(b)).
- Couch v. Telescope Inc., 611 F.3d 629 (9th Cir. 2010) (explaining when substantial grounds for difference of opinion exist for interlocutory appeals).
- In re PPI Enterprises (U.S.), Inc., 324 F.3d 197 (3d Cir. 2003) (analysis of impairment: examine whether the plan, not nonbankruptcy law, impairs creditor rights).
- Travelers Cas. & Sur. Co. v. Pac. Gas & Elec. Co., 549 U.S. 443 (2007) (creditors’ entitlements arise from substantive nonbankruptcy law, subject to the Bankruptcy Code).