Fifth Circuit Holds that Post-Judgment Interest is Required in Adversary Proceeding Under 28 U.S.C. § 1961(a)

In Matter of Imperial Petroleum Recovery Corp., 84 F.4th 264 (5th Cir. 2023), the Fifth Circuit was asked to address whether 28 U.S.C. § 1961(a) – the federal statute providing for post-judgment interest – applies in adversary proceedings even though 28 U.S.C. § 1961(a) doesn’t explicitly refer to bankruptcy courts.

In joining other circuits that have considered the question, the Fifth Circuit held that section 1961(a) does apply in adversary proceeding. The Fifth Circuit began by examining the text of the statute, which provides: “interest shall be allowed on any money judgment in a civil case recovered in a district court.” According to the court, “[t]he text prompts two questions: (1) does the term ‘district court’ cover the bankruptcy court for the purposes of § 1961?; and (2) does the term ‘civil case’ include bankruptcy adversary proceedings?” Id. at 271.

As to the first question, the court held that section 1961 applies to bankruptcy courts because “Title 28 makes clear that bankruptcy courts exercise jurisdiction as part of and at the sufferance of supervising district courts.” Id.; see 28 U.S.C. § 151 (“In each judicial district, the bankruptcy judges in regular active service shall constitute a unit of the district court to be known as the bankruptcy court for that district.” (emphasis added)); id. § 1334 (“the district courts shall have original and exclusive jurisdiction of all cases under title 11”); id. § 157(a) (permitting a district court to refer Title 11 cases to the bankruptcy court). As a result, the court held that because “bankruptcy courts operate as arms of district courts, statutes governing district courts generally apply to bankruptcy courts, and § 1961(c)(4) follows this general rule.” Imperial Petroleum Recovery Corp., 84 F.4th at 271–72.

As to the second question, the court held that adversary proceedings are “civil” in nature. In so doing, the court relied on Federal Rule of Bankruptcy Procedure 7001’s description of “adversary proceedings” which includes actions to, among other things, “recover money or property,” to “determine the validity ... of a lien,” to “obtain an injunction,” and to “obtain a declaratory judgment.” The court found that these to be “quintessential civil actions” Id. The court also relied on various provisions of Title 28 and Title 11 to bolster the civil nature of bankruptcy cases. Id.; see 28 U.S.C. § 1334(b) (“all civil proceedings arising under title 11”) (emphasis added); id. § 1452 (permitting removal of claims “in a civil action”) (emphasis added); 11 U.S.C. § 108(c) (referencing “civil action”); id. § 110(j) (same); id. § 526(c)(5)(B) (referencing “civil” penalties); id. § 707(b) (same).

The court concluded by holding: “[W]e think 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.” Imperial Petroleum Recovery Corp., 84 F.4th at 272.

The Fifth Circuit’s decision is in line with numerous other Circuit Court decisions that have addressed the issue. See In re Riebesell, 586 F.3d 782, 794 (10th Cir. 2009) (“Because a bankruptcy court is part of the district court, [§ 1961] applies to bankruptcy proceedings.”) (quoting In re Pester Refin. Co., 964 F.2d 842, 849 (8th Cir. 1992)); In re Resyn Corp., 945 F.2d 1279, 1284 (3d. Cir. 1991) (similar); see also In re Williams, 11 F. App'x 344, 347 n.8 (4th Cir. 2001) (per curiam) (noting § 1961 applied in an adversary proceeding); see also Ocasek v. Manville Corp. Asbestos Disease Comp. Fund, 956 F.2d 152, 154 (7th Cir. 1992) (noting that § 1961 applies generally in bankruptcy court, but applying Title 11's more specific provision to the case); In re Celotex Corp., 613 F.3d 1318, 1320–23, 1322 n.3 (11th Cir. 2010) (agreeing that 28 U.S.C. § 1961 applies in bankruptcy court, but applying 11 U.S.C. §§ 524 and 1141's more specific provisions).