Joining other circuits that have considered the question, the Fifth Circuit holds that post-judgment interest is required in adversary proceedings, even though 28 U.S.C. § 1961(a) doesn’t explicitly refer to bankruptcy courts.
In an adversary proceeding, the bankruptcy court originally entered a $2.3 million judgment in favor of the plaintiff, including post-judgment interest. The bankruptcy court later amended the judgment and reduced the award by 96%, to $96,000. The amended judgment did not include an award for post-judgment interest.
The plaintiff appealed the amended judgment, but the district court affirmed. The plaintiff appealed again to the circuit.
In a per curiam opinion, the Fifth Circuit upheld the 96% reduction of the judgment but found error in the failure to award post-judgment interest.
“We have not previously considered the applicability of federal postjudgment interest in bankruptcy adversary proceedings,” the appeals court said in its October 6 opinion.
The governing statute is 28 U.S.C. § 1961(a). In relevant part, it says:
Interest shall be allowed on any money judgment in a civil case recovered in a district court. [Emphasis added.]
Complicating the question, Section 1961(c)(4) says:
This section shall not be construed to affect the interest on any judgment of any court not specified in this section.
Addressing post-petition interest, the circuit court first asked whether “the term ‘district court’ cover[s] the bankruptcy court for the purposes of § 1961.”
The circuit court observed that “Title 28 makes clear that bankruptcy courts exercise jurisdiction as part of and at the sufferance of supervising district courts,” citing Sections 151 and 1934. “Since bankruptcy courts operate as arms of district courts,” the appeals court held with little ado that “statutes governing district courts generally apply to bankruptcy courts, and § 1961(c)(4) follows this general rule.”
Since adversary proceedings are “quintessential civil actions,” the Fifth Circuit held that “the text of 28 U.S.C. § 1961 compels the conclusion that post-judgment interest applies to adversary proceedings in bankruptcy, except in cases where more specific provisions of Title 11 may control.”
The appeals court was reassured in holding that the plaintiff was “entitled to post-judgment interest” by observing that the Third, Fourth, Seventh, Eighth and Eleventh Circuits reached the same conclusion.
The appeals court confronted a final question: The original judgment and the amended judgment were four years apart. When should post-judgment interest on the $96,000 judgment begin to accrue — on the date of the original judgment, or only on entry of the amended judgment?
The appeals court decided that interest must accrue on entry of the original judgment, for two reasons. First, there was only one judgment. “Since the amended judgment is a continuation of the original judgment, we view them as a single entity for purposes of post-judgment interest,” the appeals court said.
Second, awarding interest only from entry of the amended judgment would not give the plaintiff interest on the portion of the original judgment that survived.
Joining other circuits that have considered the question, the Fifth Circuit holds that post-judgment interest is required in adversary proceedings, even though 28 U.S.C. § 1961(a) doesn’t explicitly refer to bankruptcy courts.
In an adversary proceeding, the bankruptcy court originally entered a $2.3 million judgment in favor of the plaintiff, including post-judgment interest. The bankruptcy court later amended the judgment and reduced the award by 96%, to $96,000. The amended judgment did not include an award for post-judgment interest.
The plaintiff appealed the amended judgment, but the district court affirmed. The plaintiff appealed again to the circuit.
In a per curiam opinion, the Fifth Circuit upheld the 96% reduction of the judgment but found error in the failure to award post-judgment interest.