Court Opinion

ID: 9686755
Source: CourtListenerOpinion
Date Created: 2023-08-24 16:04:52.295408+00
Date Added: 2024-06-11T18:18:21.888547
License: Public Domain

MEYERS, Bankruptcy Judge,
concurring:
I concur with the decision announced by Judge Russell. We must reverse the confirmation order because the plan discriminates unfairly in its disparate treatment of the unsecured claims in violation of § 1129(b)(1), and the debtor has not satisfied the new value exception to the absolute priority rule under § 112 9(b)(2) (B) (ii).
However, I write separately so as to disavow the discussion in the majority opinion dealing with “improper classification.” I do not believe it is necessary for us to add our voice to the continuing debate over the proper approach on the classification of similar claims. There are two primary schools of thought on classification. See In re Washington Associates, 147 B.R. 827, 830-31 (E.D.N.Y.1992); In re Boston Harbor Marina Co., 157 B.R. 726, 739 (Bkrtcy.D.Mass.1993). One school generally adheres to the view that § 1122(a) requires that similarly situated claims must be classified in accordance with the legal priority of the claims. See Granada Wines v. New England Teamsters and Trucking, 748 F.2d 42, 46 (1st Cir.1984). The other school notes that, when read literally, § 1122(a) requires only that if a claim is placed in a given class, all other claims in that class must be substantially similar, so that it does not, by its terms, require that similarly situated claims be classified together. Meltzer, Disenfranchising The Dissenting Creditor Through Artificial Classification or Artificial Impairment, 66 Am.Bankr.L.J. 281, 290 (1992).
As the Panel noted in In re Johnston, 140 B.R. 526 (9th Cir. BAP 1992), § 1122:
“expressly provides that only substantially similar claims may be placed in the same class ..., it does not expressly prohibit similar claims from being placed in separate classes. Many courts, while recognizing that Section 1122 does not explicitly forbid a debtor from placing similar claims in separate classes, have imposed limits on the debtor’s power to do so.”
140 B.R. at 529. Given the plain language of § 1122 I believe that the limits to be imposed regarding classification of similar claims should be based on the dictates of other statutory provisions and should be the exception to the rule, not the rule itself. An example of an appropriate limitation would be one that restricts a plan proponent’s power to classify claims to the extent that classifications are designed to manipulate class voting (“gerrymandering”). See In re Greystone III Joint Venture, 995 F.2d 1274, 1279 (5th Cir.1991); In re U.S. Truck Co. Inc., 800 F.2d 581, 586 (6th Cir.1986).
My disagreement with the majority is that by seeming to adopt the Granada Wines approach, the Panel is making separate classification suspect on its face, when the plain language of the statute would not so suggest.