Pg&e Corporation v. Ad Hoc Committee of Holders, 46 F.4th 1047

PG&E filed Chapter 11 in January 2019 while solvent (assets exceeded known liabilities by ~ $20B) to address wildfire liabilities; plan confirmation was time-sensitive due to California A.B. 1054.
The confirmed plan treated trade creditors (Ad Hoc Committee of Holders of Trade Claims) as general unsecured, "unimpaired," and paid principal in full plus postpetition interest at the federal judgment rate (2.59%).
Trade creditors asserted they were entitled to postpetition interest at their contract rates or California default rates (some contracts; Cal. Civ. Code §3289(b) sets 10%) under the common‑law "solvent‑debtor exception."
The bankruptcy court and district court held (relying on In re Cardelucci) that §726(a)(5)/the Code limits postpetition interest in solvent cases to the federal judgment rate even for unimpaired claims.
The Ninth Circuit reversed: it held the solvent‑debtor equitable exception survives the Code for unimpaired creditors, rejected Cardelucci as dispositive here, and remanded for the bankruptcy court to weigh equities and fix the appropriate rate.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Are unimpaired unsecured creditors of a solvent Chapter 11 debtor entitled to postpetition interest at contractual or state default rates (rather than the federal judgment rate)?	Solvent‑debtor exception gives an equitable right to contractual/default postpetition interest; plan that pays only the federal rate alters that right and therefore impairs claims.	Cardelucci and the Code mean postpetition interest in solvent cases is governed by §726(a)(5)/federal judgment rate; unimpaired creditors need only receive what the Code provides.	Ninth Circuit: Solvent‑debtor exception survives; unimpaired creditors have an equitable right to contractual or state default postpetition interest (subject to equitable adjustments); remand to set rate.
Did the Bankruptcy Code (esp. §502(b)(2) and §726(a)(5)) abrogate the pre‑Code solvent‑debtor exception for unimpaired creditors?	The Code did not clearly abrogate the equitable exception; §1124(1) requires plans to leave "legal, equitable, and contractual rights" unaltered, and Congress’s repeal of former §1124(3) supports protection for creditors.	The Code’s recodification of the rule disallowing unmatured interest and the application of §726(a)(5) show Congress intended a uniform, limited postpetition interest regime.	Ninth Circuit: No clear abrogation; statutory text, history, and structure do not unambiguously eliminate the solvent‑debtor exception for unimpaired creditors.

In re Cardelucci, 285 F.3d 1231 (9th Cir. 2002) (construed "interest at the legal rate" in §726(a)(5) to mean the federal judgment rate)
Cohen v. de la Cruz, 523 U.S. 213 (1998) (courts should not read the Code to erode pre‑Code practice absent a clear congressional indication)
In re Dow Corning Corp., 456 F.3d 668 (6th Cir. 2006) (in solvent cases, courts may have to require contractual/default interest to satisfy fairness to objecting impaired creditors)
In re Ultra Petroleum Corp., 943 F.3d 758 (5th Cir. 2019) (recognized solvent‑debtor equitable principle survives and generally enforces contractual rights when debtor is solvent)
Chicago, Milwaukee, St. Paul & Pac. R.R. Co., 791 F.2d 524 (7th Cir. 1986) (pre‑Code precedent enforcing creditors’ contractual rights, including postpetition interest, where debtor proved solvent)
American Iron & Steel Mfg. Co. v. Seaboard Air Line Ry., 233 U.S. 261 (1914) (awarded postpetition interest in receivership where estate sufficed; early authority for solvent‑debtor principle)