Fourth Circuit holds that subcontractors do not have right to interpleaded funds owed to a government contractor

IN RE: BALTIMORE MARINE INDUSTRIES, the Fourth Circuit considered whether unpaid subcontractors have an absolute right to interpleaded funds owed to a government contractor, when the contractor has petitioned for bankruptcy. The panel answered the question in the negative. Because an unpaid subcontractor is not subrogated to the contractor's interest in the funds, the contractor's interest remains and must be included in the bankruptcy estate. Consequently, funds cannot be awarded directly to the contractor.