Amicus Curiae Brief — Bank of America Nat. Trust and Sav. Assn. v. 203 North LaSalle Street Partnership

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No. 97-1418 AUG 1 7 1998

OF THE CLERK

In THE —etaentreennensee!

Supreme Court of the United States

OCTOBER TERM, 1997

BANK OF AMERICA NATIONAL TRUST

AND SAVINGS ASSOCIATION,

SUCCESSOR BY MERGER TO BANK OF AMERICA ILLINOIS,

~ Petitioner,

203 NORTH LASALLE STREET PARTNERSHIP,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals

for the Seventh Circuit

BRIEF AMICUS CURIAE OF THE

NATIONAL ASSOCIATION OF CREDIT MANAGEMENT

IN SUPPORT OF RESPONDENT

Of Counsel: CHARLES M. TATELBAUM

PROF. ELIZABETH WARREN Counsel of Record

Cambridge, MA CUMMINGS & LOCKWooD

(617) 495-3101 P.O. Box 413032

Naples, FL 34101-3032

JOHN F. CARBERRY (941) 262-6092

JOSHUA W. COHEN

CUMMINGS & LOCKWOOD

Four Stamford Plaza

P.O. Box 120

Stamford, CT 06904-0120

(203) 327-1700

WILSON - EPES PRINTING Co.. INC. - 789-0096 - WASHINGTON. D.C. 20001

TABLE OF CONTENTS

TABLE OF AUTHORITIES

INTEREST OF AMICUS CURIAE

SUMMARY OF ARGUMENT

ARGUMENT ............

I. CONGRESS CAREFULLY BALANCED THE

INTERESTS OF COMPETING CREDITORS,

WITH A STATED AIM FAVORING REOR-

GANIZATION OF TROUBLED BUSINESSES

THE CONGRESSIONAL SCHEME IS PREDI-

CATED ON AMPLE ACCESS TO CAPITAL

TO PROMOTE SUCCESSFUL REORGANIZA-

TIONS

Ill. THE CONGRESSIONAL SCHEME DOES NOT

REQUIRE THAT REORGANIZATION PLANS

BE AUCTIONS

CONCLUSION ....

TABLE OF AUTHORITIES

CASES Page

Figter Limited v. Teachers Ins. and Annuity Ass'n

of America (In re Figter Limited), 118 F.3d 635

(9th Cir.), cert. denied, 118 S. Ct. 561 (1997)... 23

255 Park Plaza Assoc. Limited Partnership v.

Connecticut General Life Ins. Co. (In re 255

Park Plaza Assoc. Limited Partnership), 100

a 23

Kansas City Terminal Ry. Co. v. Central Union

Trust Co., 271 U.S. 445 (1926) . 15

NLRB v. Bildisco & Bildisco, 465 U. S. 513 r 1984). 9

Northern Pac. Ry. Co. v. Boyd, 228 U.S. 482

ET SRE SS Ie ae 8

Norwest Bank Worthington v. Ahlers, 485 U.S. 197

SEANAD OR ITS Ee oO 13, 18

United Savings Ass’n of Texas v. Timbers of In-

wood Forest Assoc. Ltd., 484 U.S. 365 (1988)... 22

United States v. Whiting Pools, Inc., 462 U.S. 198

EE REISER GE EE 9

In re Woodbrook Assoc., 19 F.3d 312 (7th Cir.

SEL SE a ee ll

STATUTES

EE ESE SS 7

ES EN a SEE 6

|)” Eee Se aaa 4, 17,19

sini lia 17, 20

i ssinduibdeciueinns >

ke |) eee 0 aE NS 9, 24

a ee TSR 4

11 U.S.C. § 1129... EL Ee TTR Sy 4

11 U.S.C. § 1129(a) (10) ere ee Vath at eae a 6

Le Re |. eee hiiiiiiibeds PE eee 9

i cmtnans ..B-4, 6, 10

Be ee PIED CIED CAD ooccceeceerccccecccecececevsscvercerees 7

33 U.S.C. § 1089 (B) (3) CB) (hi) «2.22... .ccccece.ee-----e 10, 16

SEE A 17

MISCELLANEOUS

Charles W. Adams, New Capital for Bankrupt Re-

organizations: It’s the Amount that Counts, 89

Nw. U. L. Rev. 411 (1995) 2.00.0 18

iii

TABLE OF AUTHORITIES—Continued

Varouj A. Aivazian & Jeffrey L. Callen, Corporate

Leverage and Growth, 8 L Fin. Econ. 379

TEES Tt Ea nae ar ee Sela

Gordon Berman & Ed Flynn, Bankruptcy By the

Numbers, Outcomes of Chapter 11 Cases: U.S.

Trustee Database Sheds New Light on Old Ques-

tions, Am. Bankr. J. 8 (February 1998)

Martin J. Bienenstock, Symposium—Contemporary

Issues in Bankruptcy and Corporate Law: Con-

flicts Between Management and the Debtor in

Possession’s Fiduciary Duties, 61 U. Cin. L. Rev.

— Be Se a ee

Barkley Clark, The Law of Secured Transactions

Under the Uniform Commercial Code * 4.09[2]

SG WA I nek a

7 Collier on Bankruptcy © 1121.06[1] (Lawrence

P. King ed., 15th ed. 1998)...

124 Cong. Rec. 32,392 (Sept. 28, 1978) (statement

OT SI cei nai a

124 Cong. Rec. 33,990 (Oct. % 1978) (statement

of Sen. DeConcini) .

Michelle Craig, Note & Comment: The New Value

Exception: A Plea for Modification or Elimina-

tion, 11 Bankr. Dev. J. 781 (1995)

2 Grant Gilmore, Security Interests in Personal

Property § 44.6 (1965) ....... NS dae MNT FBS

H.R. Rep. No. 95-595 (1977), reprinted in 1978

Page

12-13

ees UNE sietrasigutinithnienssinncingiiamintesaitial 5, 8-9, 20

Michael J. Herbert & Domenic E. Pacitti, Down

and Out in Richmond, Virginia: The Distribu-

tion of Assets in Chapter 7 Bankruptcy Pro-

ceedings Closed During 1984-87, 22 U. Rich. L.

Bs CY CD di ccestecisschtalaniheiiaeiia da iad ate ata

Lynn LoPucki, The Debtor In Full Control—Sys-

tem Failure Under Chapter 11 of the Bankruptcy

Code?, 57 Am. Bankr. L. J. 247 (1983)

Bruce Markell, Claims and Opinions: Clueless on

Classification: Toward Removing Artificial Lim-

its on Chapter 11 Claim Classification, 11 Bankr.

FS FRIES. ESE Ses

TABLE OF AUTHORITIES—Continued

Bruce Markell, Owners, Auctions, and Absolute

Priority in Bankruptcy, 44 Stan. L. Rev. 69

SSE

oh The Choice Between Equity and Debt: An

Empirical Study, 37 J. Fin. 121 (1982) -.............

Robert F. Reilly, Value and Cents: Valuation—Big

Businesses vs. Small Businesses, 1995 Am.

Bankr. Ins. J. 126 (Sept. 1995) .

S. Rep. No. 95-989 (1978), reprinted | in "1978

ORS yy —————————————E

Alan Schwartz, A Theory of Loan Priorities, J.

Legal Stud. 209 (1986) ..

Robert Scott, A Relational Theory ‘of Secured Fi-

nancing, 86 Colum. L. Rev. 901 (1986) ...........

Elizabeth Warren, A Theory of Absolute Priority,

1991 Ann. Surv. Am. L., 1991 N.Y.U. School of

Law 9 .

Elizabeth Warren, The Untenable Case for Repeal

of Chapter 11, 102 Yale L. J. 437 (1992) ......

James J. White & Robert S. Summers, Uniform

Commercial Code § 25-9 (3d ed. 1988) ...............

Page

In THE

Supreme Court of the United States

OcTOBER TERM, 1997

No. 97-1418

BANK OF AMERICA NATIONAL TRUST

AND SAVINGS ASSOCIATION,

SUCCESSOR BY MERGER TO BANK OF AMERICA ILLINOIS,

. Petitioner,

203 NorTH LASALLE STREET PARTNERSHIP,

Respondent.

On Writ of Certiorari to the

United States Court of Appeals

for the Seventh Circuit

BRIEF AMICUS CURIAE OF THE

NATIONAL ASSOCIATION OF CREDIT MANAGEMENT

IN SUPPORT OF RESPONDENT

The National Association of Credit Management

(“NACM”) respectfully submits this brief amicus curiae

in support of Respondent.' Petitioner (the “Bank”) and

respondent (“Reorganized LaSalle”) have consented to

the filing of this brief, and their letters of consent have

been filed with the Clerk of the Court.

1 In accordance with Supreme Court Rule 37.6, NACM represents

that no party other than counsel for NACM authored this brief, in

whole or in part, and no person or entity, other than NACM, has

made a monetary contribution to the preparation or submission of

this brief.

INTEREST OF AMICUS CURIAE

NACM is a non-profit professional trade association

comprising approximately 30,000 members who are un-

secured credit grantors involved in all aspects of the

granting and extension of commercial credit. For more

than 100 years, NACM has been the single trade asso-

ciation representing the interests of unsecured credit

grantors in commercial transactions. NACM’s member-

ship represents the entire spectrum of those who extend

commercial credit, from representatives of the largest

publicly held national corporations to small local manu-

facturers, wholesalers, distributors and retailers.

Members of NACM participate in virtually every case

commenced under Chapter 11 of the Bankruptcy Code

that involves a business entity. In significant Chapter 11

reorganizations under the Bankruptcy Code since its en-

actment in 1978, NACM members have chaired and par-

ticipated in nearly all creditors’ committees, which are

chosen to represent the unsecured creditor body. The

interests of NACM members often diverge from the

interests of secured creditors, especially in cases involv-

ing the question at issue in this appeal. Unlike secured

creditors that have a mortgage or other security interest

in property of the debtor, NACM’s members provide

unsecured credit to the debtor pre-bankruptcy and then

provide unsecured trade credit to continue the operation

of the debtor business. Thus, NACM members are essen-

tial to a company’s ongoing viability as debtor in pos-

session and later as a reorganized entity post-confirmation.

Unlike some of the amici .a behalf of the Bank,

NACM’s members are involved in almost every type of

Chapter 11 reorganization proceeding, not just those in-

volving real property. Because the outcome of this case

will affect the entire spectrum of bankruptcy reorganiza-

tion proceedings, from the smallest case to the largest ~

case and in every business sector, the Court's review of

the instant case will profoundly affect all unsecured com-

mercial credit grantors.

SUMMARY OF ARGUMENT

1. This Court need not venture beyond the language

of the Bankruptcy Code to resolve the issue before it.

When, as in this case, two classes of unsecured creditors

are not paid in full and one class votes in favor of the

proposed plan while the other class votes against the plan,

the Code requires confirmation of the plan supported by

the class voting in favor of it if additional conditions

are met. 11 U.S.C. § 1129(b)(1). When one class votes

against the plan, equity owners of the pre-bankruptcy

debtor are barred from receiving property under a con-

firmed reorganization plan only if such property is given

on account of their equity ownership in the pre-petition

business. No section of the Code prohibits any group—

past creditors, past equity owners or complete strangers—

from purchasing either assets or equity ownership in the

newly reorganized debtor through a Chapter 11 plan.

2. Both the principle and practice that some owners

of the pre-bankruptcy business purchase stakes in the

newly-reorganized business was well established under

the Bankruptcy Act of 1898. The Supreme Court made

clear that no one was barred from purchasing equity in

a reorganizing business, if they paid fair consideration for

their purchase. Northern Pac. Ry. Co. v. Boyd, 271 US.

445 (1926). If Congress had intended to overrule this

long-established view, it could easily have done so by

explicitly prohibiting the participation of previous inves-

ar in any subsequent plan of reorganization. Congress

id not.

3. The plain language of the Code reflects a coherent

view of bankruptcy policy. Chapter 11 favors debtor re-

habilitation over liquidation, so long as the creditors are

adequately protected. When creditor groups differ over

whether a plan should be confirmed, the Code requires

confirmation with the added restrictions that the plan not

“unfairly discriminate” among the classes that accepted

and rejected the plan and that the plan be “fair and

equitable.” 11 U.S.C. § 1129(b)(1). In recognition of

the frequent need for cash infusions in business reorgani-

zations, Congress did not bar anyone from pirchasing

property or equitable ownership of the business. Those

who make no contribution are barred from taking value

unless higher priority classes either are paid in full or

consent to such an arrangement. But a single class of cred-

itors does not have the power to defeat a plan that other

creditors support and that meets the numerous require-

ments for plan confirmation solely because the dissenting

class objects to the source of the funds contributed by

one or more investors in the soon-to-be-reorganized

company.

If dissenting creditors wish to object to the tems of a

purchase and sale under a reorganization plan, the Code

provides a number of mechanisms for doing so. 11

U.S.C. §§ 1123, 1129 (specifying more than 30 elements

of a plan eligible for confirmation). If a creditor wishes

to object to a debtor’s exclusive right to propose a plan

and to propose its own plan, it may do so. Additionally,

it may object to the confirmation of any plan proposed

by any party. 11 U.S.C. $$ 1121(b), 1128(b). But

automatic disqualification of any plan based on who in-

vests in the reorganized company presents a novel argu-

ment that is contrary to long-established bankruptcy

policy.

ARGUMENT

I. CONGRESS CAREFULLY BALANCED THE INTER-

ESTS OF COMPETING CREDITORS, WITH A

STATED AIM FAVORING REORGANIZATION OF

TROUBLED BUSINESSES.

Plan confirmation is not a two-party negotiation be-

tween a debtor and a creditor. Characterizing the issue

as a competition between the rights of the debtor and the

rights of the creditor misapprehends the central function

of business reorganization: Chapter 11 is a court-imposed

settlement of multiple relationships affecting a number of

parties. Some parties are direct stakeholders in the case,

including secured creditors, unsecured creditors, and equity

holders. Managers of the debtor and trustees are identi-

fied parties in interest. In addition, employees who may

lose jobs, communities that may lose important businesses.

taxing authorities that may lose sources of revenue and

other businesses that may lose critical customers or sup-

pliers were very much in the mind of Cong ss as it

determined how many hurdles would be erected to the

reorganization of a potentially viable business. See, ¢.z.,

124 Cong. Rec. 32,392 (Sept. 28, 1978) (statement of

Rep. Edwards) (discussing policies in the new Code to

“protect the investing public, protect jobs, and help save

troubled businesses”); H.R. Rep. No. 95-595, 53-62

(Sept. 8, 1977), reprinted in 1978 U.S.C.C.A.N. 6014,

6023 (discussing concern about the community impact of

business failure); 124 Cong. Rec. 33,990 (Oct. 5, 1978)

(statement of Sen. DeConcini) (discussing “the public

interest” beyond the interests of the disputing parties).

The question before this Court is whether Congress de-

cided that a single class of creditors could prevent the

confirmation of a feasible plan of reorganization because

any part of the funds for reorganization came from a

party who had an equitable ownership interest in the pre-

filing business.

The Solicitor General suggests that if a plan is a good

plan, then the creditors will vote for it. Solicitor’s Brief

at 27. This is undoubtedly true, and it may be the reason

that Congress required that at least one class of impaired

creditors vote in favor of a plan of reorganization before

it can be adopted over the objection of a dissenting class.

But the problem is not, as the Solicitor General’s brief

seems to suggest, what to do when no creditors favor a

plan the debtor proposes; those plans cannot be con-

firmed as a matter of law. 11 U.S.C. §§ 1129(a)(10),

(b)(1). The problem occurs when one class of creditors

supports the plan while another class rejects it.

The problem of choosing between classes of creditors

that support the plan and classes that oppose the plan is

particularly acute because some creditors vote strategi-

cally in Chapter 11 cases. Some creditors appear in only

one class, while other creditors appear in two classes.

This happens because of the claims calculation procedure

in the Code. When a secured creditor is owed more

money than the value of the collateral securing the loan,

the claim is bifurcated into its secured and unsecured por-

tions, each portion of which is treated separately under

the plan. 11 U.S.C. § 506.

Secured creditors frequently favor liquidation so that

they can seize control of specific assets, knowing they can

rely on these assets for payment rather than on a stream

of payments from the ongoing business. For some se-

cured creditors, the seizure of assets results not just in

repayment of the debt, but in substantial profits: UCC

9-504 permits a creditor to seize collateral subject to a

security interest and, after proper notification to the debtor,

re-sell the assets and keep all the proceeds, even if they

exceed the value of the loan.* In addition, through fore-

closure of the assets, secured creditors can sometimes

effectively seize an entire business and maintain oper-

ations, free of the claims of unsecured creditors and the

old owners. In recognition of this fact, Congress decided

that secured creditors may not exercise their contractual

2 Barkley Clark, The Law of Secured Transactions Under the

Uniform Commercial Code § 4.09[2] (rev. ed. 1993) ; James J. White

& Robert S. Summers, Uniform Commercial Code § 25-9 (3d ed.

1988); 2 Grant Gilmore, Security Interests in Personal Property

§ 44.6 (1965).

rights to seize collateral when the debtor is in default, so

long as the debtor can provide adequate protection of the

value of the collateral. 11 U.S.C. § 362(d). In the same

vein, Congress decided that secured creditors may not

block a reorganization, so long as they are paid the pres-

ent value of the collateral under the plan. 11 U.S.C.

§ 1129(b)(2)(A).

Because their bankruptcy claims are bifurcated into

secured and unsecured portions, undersecured creditors

get the chance to vote the unsecured portion of their

claims. Such creditors may willingly give up any chance

at a distribution as unsecured creditors in order to liqui-

date assets or take control of the business in their role

as secured creditors. By contrast, some creditors, such

as trade creditors, employees, and tort victims of the

debtor, have no secured claims and no collateral to

call on. They will be paid only if the debtor is reorgan-

ized. When two classes of unsecured creditors vote in a

Chapter 11, one votes its best interests as a secured

creditor while the other votes its best interests as a cred-

itor who can recover only through reorganization.

The interests of secured and unsecured creditors di-

verge in yet another way. Once the debtor is in financial

trouble, the secured creditor has no interest in a con-

tinuing business relationship with the debtor and fre-

quently terminates the business relationship. The secured

creditor hopes to be paid in full and exit without a loss.

For many of the unsecured creditors, however, the rela-

tionship continues. Unsecured creditors, particularly

tradespeople and employees, typically will continue to do

business with the company while it is in bankruptcy and

hope for a future with the company as a customer, sup-

plier, or employer after the reorganization. In effect.

many trade creditors continue to invest in the debtor

by either selling goods on credit or buying goods on credit

after the bankruptcy filing. Even employees invest in the

debtor with labor, wage give ups and loans from employee

pension plans. The view of secured and unsecured cred-

itors often diverge sharply as they consider the possibility

that a troubled business may reorganize in bankruptcy.

Congress provided for bifurcation of claims in order

to limit the leverage of secured creditors, which had

often exceeded their interest in recovering the value of

their collateral. The legislative history explicitly ad-

dressed the policy decision, opting to limit the power of

the secured creditors in order to promote the reorganiza-

tion of failing businesses.* Bifurcation of claims posed

no obvious threat to the debtor's ability to reorganize

because the plan proponent was given the opportunity to

confirm a plan that had the backing of at least one im-

3 Congress provided for bifurcated claims to try to limit the power

exercised by secured creditors, particularly those creditors with

undersecured loans. The Report of the Committee of the Whole

House on the State of the Union states:

Unlike current law, H.R. 8200 distinguishes between secured

and unsecured claims, rather than between secured and unse-

cured creditors .... Current law is ambiguous and vague,

especially under Chapter XIII, on whether an undersecured

creditor is to be treated as a secured creditor, or as a partially

secured and partially unsecured creditor. By addressing the

problem in terms of claims, the bill makes clear that an underse-

cured creditor is to be treated as having a secured claim to the

extent of the value of the collateral, and an unsecured claim

for the balance of his claim against the debtor. . . . Becau«

of the uncertain treatment of secured creditors under current

law, the debtor is often required to err on the side of over-

protection when formulating a reorganization or repaymen‘

plan. Secured creditors have exercised great leverage by virtue

of the uncertainty, and have made reorganization and individ-

ual repayment plans more difficult to consummate than would

be the case under this bill. Since a successful reorganization or

Chapter XIII plan inures to the benefit of all creditors, the

change under the bill should increase recoveries by creditors

generally.

H.R. Rep. No. 95-595. As this language illustrates, it was not the

intent of Congress to create a veto power for undersecured creditors.

paired class of unsecured creditors—even if the plan was

opposed by another class of creditors. 11 U.S.C.

§ 1129(b). This mechanism sharply curtails the power

of a dissenting class of unsecured (or undersecured) cred-

itors to derail an otherwise-confirmable plan.

The overall scheme of the Code is consistent: Dissent-

ing creditors within a class are overridden if the class

votes to accept the plan, making it possible to confirm

a plan “by consent” even when some creditors object. 11

U.S.C. § 1126(c). Similarly, dissenting classes are over-

ridden if another class accepts the plan and the other

requirements of section 1129 are met. 11 U.S.C.

§ 1129(b).

In favoring reorganization, the Code expresses the delib-

erate policy choices made by Congress. “It is more eco-

nomically efficient to reorganize than to liquidate, because

it preserves jobs and assets.” H.R. Rep. No. 95-595,

reprinted in 1978 U.S.C.C.A.N. 6014, 6179. This Court

has also consistently recognized that principle: “The

fundamental purpose of reorganization is to prevent a

debtor from going into liquidation, with an attendant

loss of jobs and possible misuse of economic resources.”

NLRB vy. Bildisco & Bildisco, 465 U.S. 513, 528 (1984).

“By permitting reorganization, Congress anticipated that

the business would continue to provide jobs, to satisfy

creditors’ claims, and to produce a return for its owners.

... Congress presumed that the assets of the debtor would

be more valuable if used in a rehabilitated business than

if ‘sold for scrap’ United States v. Whiting Pools, Inc.,

462 U.S. 198, 203 (1983).

The Code balances the interests of accepting and dis-

senting creditors by imposing specific requirements before

a plan may be adopted over the objection of a dissenting

creditor: the plan may not unfairly discriminate among

classes, the plan must be fair and equitable, and the plan

may not distribute any value to pre-petition equity holders

on account of their ownership claims over the objections

of a dissenting creditor class. 11 U.S.C. §§ 1129(b)(1),

(2)(B) (ii). If the plan proponent can satisfy these three

requirements, in addition to all other requirements in 1123

and 1129(a), then the plan must be confirmed. Congress

understood the divergence among different stakeholders,

emphasizing that protection for those other stakeholders

“should not be left to a plan negotiated by a debtor in

distress and senior or institutional creditors who will have

their own best interest to look after.” S. Rep. 95-989,

reprinted in 1978 U.S.C.C.A.N. 5787, 5796. The Code

tilts toward confirmation of a plan that is both supported

by one or more creditor groups and is otherwise equitable

in its treatment of the dissenting creditors; the Code denies

a single undersecured creditor the power to deplete the re-

maining value of a failing business.

The Code neither restricts the source of funds for the

reorganization of the debtor nor gives any party the right

to stop a reorganization because it objects to the source

of the funds to be used in the reorganization. To do so

would enhance the power of dissenting classes, giving

secured creditors with bifurcated claims a much greater

opportunity to force liquidation of viable companies or

to seize control of such companies, thereby wiping out

the interests of the unsecured creditors and equity. Such

a rule would re-create the “hold-out” problem that the

1978 Code was designed to correct. Under the Act, a

4 Efforts to deal with the holdout problem in reorganizing a fail-

ing business long pre-date the adoption of the 1978 Bankruptcy

Code. Professor Markell explains:

Starting in 1874, federal legislation attempted to foster compo-

sitions by providing that, if certain procedural requirements

were met, a less than unanimous composition could be con-

firmed by a bankruptcy court. Its terms would then become

binding on all creditors, even those who did not agree with the

composition. The 1874 legislation, which had its roots in

English and Scottish law, bound dissenting creditors if two

requirements were met: first, approval by a majority of credi-

creditor who refused to go along with a plan supported

by other creditors could hold out, threatening to vote no

unless the other creditors or new equity investors paid

something more to the holdout. To curb the holdout

problem, the 1978 Code provided both that creditors vote

by class and that no single class block a plan, thereby

sharply curtailing the veto power of a single creditor or

small group of creditors. Because their power to block

a plan has been reduced, the holdout creditor's negotiat-

ing leverage during the course of a Chapter 11 case is

also checked.°

The briefs make clear that the secured creditors want

more power in a business reorganization than the Code

currently gives them. The unsecured creditors, for whom

tors, holding three-quarters of the debt owed, who were present

at a duly convened meeting of creditors, and second, written

confirmation of the earlier approval by at least two-thirds of all

the debtor’s creditors who themselves held at least a majority

of the debt owed by the debtor.

Bruce Markell, Claims and Opinions: Clueless on Classification:

Toward Removing Artificial Limits on Chapter 11 Claim Classifica-

tion, 11 Bankr. Dev. J. 1 (1994/95) (footnotes omitted).

Finance specialists note that Chapter 11 reorganizations enjoy

an advantage over workouts outside bankruptcy because they can

solve the holdout problem. See, e.g., Varouj A. Aivazian & Jeffrey

L. Callen, Corporate Leverage and Growth, 8 J. Fin. Econ. 379,

397 (1980).

5In the instant case, the secured creditor negotiated for a non-

recourse loan, voluntarily restricting its recovery to the collateral

itself. It has a voting position in this case only by operation of

section 1111(b), which was added to the Code in 1978 to protect

nonrecourse secured creditors from having “consensual” plans im-

posed on them. Section 1111(b) allows undersecured creditors to

vote the unsecured portions of their claims. The Seventh Circuit

requires those claims to be separately classified. In re Woodbrovk

Assoc., 19 F.3d 312, 319 (7th Cir. 1994). The secured creditors

in this case propose to take that opportunity to vote and turn it

into a sword to block any plan they do not support. There is no

suggestion in any part of the legislative history that Congress

intended them to enjoy such power by virtue of their new-found

voting rights.

the reorganization effort is largely directed, oppose this

effort to shift the balance carefully constructed by

Congress.

Il. THE CONGRESSIONAL SCHEME IS PREDICATED

ON AMPLE ACCESS TO CAPITAL TO PROMOTE

SUCCESSFUL REORGANIZATIONS.

Most businesses undergoing financial reorganization

need access to new capital. Some will use the money to

modernize their facilities. Others will use the new capital

to make their payroll and pay the costs of operation

until the business generates sufficient revenue to pay its

own bills. It is a rare business in Chapter 11 that does

not need a new source of funds as part of its reorganiza-

tion plan.

For very large companies, access to the capital markets

may be largely unrestricted. Because of the bankruptcy, the

costs of funds may be high, but they are likely to be avail-

able. For smaller businesses, however, capital is more

difficult to find,® a problem that is magnified for the small

business in bankruptcy.’ The market for debt for dis-

6 Robert F. Reilly, Value and Cents: Valuation—Big Businesses

vs. Small Businesses, 1995 Am. Bankr. Ins. J. 126 (September 1995),

observes: “Generally, big businesses have debt financing available,

regardless of the credit worthiness of the owners, whereas it is not

generally available for the smaller business. Alternative sources of

financing, such as the owner's capital, are necded. In addition, per-

sonal guarantees are typically required for debt financing for small

businesses.” See also Alan Schwartz, A Theory of Loan Priorities,

J. Legal Stud. 209 (1986); Robert Scott, A Relational Theory of

Secured Financing, 86 Colum. L. Rev. 901 (1986); Marsh, The

Choice Between Equity, and Debt: An Empirical Study, 87 J. Fin.

121 (1982).

7As one analyst observed, the argument that modern capital

markets provide adequate access to funds needed for reorganization

might apply to large entities filing Chapter 11, but “it ignores the

difficulty that small businesses may encounter when trying to raise

substantial new capital. Small business owners may not have the

tressed small businesses is so limited that old owners of

the business may be the only source for new capital.*

There are a number of reasons that old equity may be

more inclined to finance a small business than a stranger

would be.® Information costs for small companies are

high, and old equity may know more about the distressed

company than new investors. In some cases, old equity

actually runs the business. Preservation of the business

may mean preservation of jobs for the owner or family

members. In other cases, such as the instant case, old

equity will derive some tax advantages if the business is

not liquidated. In still other cases, equity will have made

personal guarantees to one or two creditors, and they

hope that by making an additional investment in the

business that it will survive to pay the guaranteed loans.

Sometimes old equity will make a new investment in

the business because they can make unique contributions,

such as business contacts, that would be lost if the busi-

ness were owned by strangers. Whatever the specific rea-

son, most owners of small businesses continue in their

ownership position after a Chapter 11 reorganization,

often with the consent of their creditors. Lynn LoPucki.,

The Debtor in Full Control—Systems Failure under Chap-

ter 11 of the Bankruptcy Code?, 57 Am. Bankr. LJ.

247, 267-68 (1983).

collateral and resources available to larger corporations making it

more difficult for them to borrow money in today’s capital markets.”

(footnotes omitted). Michelle Craig, Note & Comment: The New

Value Exception: A Plea For Modification or Elimination, 11 Bankr.

Dev. J. 781 (1995), in a discussion of the briefs filed in Norwest

Bank Worthington v. Ahlers, 485 U.S. 197 (1988). See also Charles

W. Adams, New Capital For Bankrupt Reorganizations: It’s The

Amount That Counts, 89 Nw. U.L. Rev. 411, 426 (1995) (stating

that “an insolvent corporation’s former owners are often the only

feasible source of new capital”).

8 Elizabeth Warren, A Theory of Absolute Priority, 1991 Ann.

Surv. Am. L., 1991 N.Y.U. School of Law 9, 15-16, 19-22.

9 Jd. at 19-22.

Small businesses with restricted access to capital make

up the bulk of the companies that use Chapter 11. In

the eleven year period from 1980 to 1991, for example,

publicly traded companies represented less than one-tenth

of 1% of all Chapter 11 cases (0.000936 of the cases)."°

For many of the 99.9% private companies in bankruptcy,

access to capital infusions from former owners of the

business may be the only hope for survival of the business.

When Congress drafted Chapter 11, it planned to cover

all types of business with a single scheme, replacing the

three-part business reorganization system of the 1898

Act. Under the Act, after 1952, neither Chapter XI (for

small businesses) nor Chapter XII (for real estate enti-

ties) had an absolute priority rule. Absolute priority was

recognized only in Chapter X, for publicly traded com-

panies, and then only with its new value corrollary. It

would have been a quite remarkable step for Congress

to deny access to capital in the largest bulk of cases to

be covered by the new Chapter || with no debate, no

legislative history and no direct language to make clear

that a sea-change in reorganization law was taking place."'

The practical advantages of permitting old equity the

opportunity to participate in a reorganized business in

return for a cash contribution has infused the develop-

ment of reorganization law. Early courts recognized that

everyone may benefit when the creditors make deals with

the equity owners to get a business back on its feet.

Neither the bankruptcy law nor common law required

that equity be barred from any participation in the post-

bankruptcy business. In 1926, this Court stated:

Generally additional funds will be essential to the

success of the undertaking, and it may be impossible

10 Elizabeth Warren, The Untenable Case for Repeal of Chapter

11, 102 Yale L.J. 437, 441 (1992).

11 See Bruce Markell, Owners, Auctions, and Absolute Priority

in Bankruptcy, 44 Stan. L. Rev. 69, 101-02 (1991).

to obtain them unless stockholders are permitted to

contribute and retain an interest sufficiently valuable

to move them. In such or similar cases, the chan-

cellor may exercise an informed discretion concerning

the practical adjustment of the several rights.”

If Congress had not wanted old equity to continue to par-

ticipate in plans of reorganization, it could have easily

said so. It could have barred equity participation, either

directly or by permitting a single class of creditors to

block any plan to which it objected—thus permitting

equity participation and confirmation of a plan only with

the consent of every class. The amicus brief of the law

professors specifically proposes that this be made the law:

The code puts the reorganization decision in the

hands of the creditors who are the residual owners

of the insolvent firm. Here those creditors have

decided to reject the plan proposed by the prepetition

equity holders. . . . If the equity holders cannot

convince the creditors that such a concession is in

the creditors’ own interest, it makes little sense to

allow a bankruptcy court to substitute its opinion for

that of the creditors.

Law Professors’ Brief at 4. Both the Bank and the Solici-

tor General endorse this approach, asserting that “cred-

itor consent” is a prerequisite for confirmation. Petition-

er's Brief at 30; Solicitors’ Brief at 27. This approach

reads section 1129(b)- out of the Code, substituting in-

stead a scheme that permits a single creditor class to veto

a plan. But Congress specifically permitted plans to be

confirmed with the support of one class of creditors and

the objection of another.

The Code does not bar participation of old equity in

business reorganizations. Despite the fact that small busi-

nesses have gone back to their equity owners for addi-

tional infusions of cash throughout this century, Congress

12 Kansas City Terminal Ry. Co. v. Central Union Trust Co.,

271 U.S. 445 (1926).

elected to restrict the participation of equity in plans only

by saying that equity could not “receive or retain under the

plan on account of such junior claim or interest any prop-

erty.” 11 U.S.C. §1129(b)(2)(B)(ii). The Code un-

ambiguously permits old equity to participate if it receives

something other than “property” or if it receives property

in some way other than “under the plan” or if it receives

value “on account of” something other than its pre-bank-

ruptcy claim.

Ill. THE CONGRESSIONAL SCHEME DOES NOT RE-

QUIRE THAT REORGANIZATION PLANS BE

AUCTIONS.

New value plans propose an exchange: equity owner-

ship in the post-reorganization entity in return for a con-

tribution of fresh capital. Because the new value is given

in exchange for the new equity ownership, there is no vio-

lation of the absolute priority rule articulated in section

1129(b)(2)(B)(ii) which requires that old equity “not

receive or retain under the plan on account of such junior

interest any property.” The Bank does not deny that a

cash contribution in return for an equitable ownership

does not violate section 1129(b)(2)(B)(ii). Instead,

the Bank and amici ask this Court to impose an auction

of the equitable interest any time a cramdown plan in-

volves an equity contribution.

The fact that the plan proposed a specific sale price to

a specified party that had had a previous ownership in-

terest in the debtor is the Bank’s basis for claiming a

violation of 1129(b)(2)(B) (ii). The Bank explains re-

peatedly and with emphasis: “[T]he plan of reorganiza-

tion gave the debtor’s pre-bankruptcy equity holders the

exclusive right to retain their ownership interests in the

debtor if they contributed new capital.” [emphasis in

original] Petitioner's Brief at 6. This exclusive right

under the plan is the same as in any purchase agreement:

a statement of the sale price for equitable ownership,

identification of the buyer and specification of the finance

ri tn -

terms. The Bank claims that any plan that proposes to

sell equity in the reorganized business directly to a former

equity owner is automatically ineligible for confirmation if

one class of credtiors objects.

The Bank makes an interesting concession early in its

brief: “We concede that the argument that pre-petition

equity holders enjoy their post-petition interest ‘on ac-

count of their prior interests loses much of its force when

an open auction is held ... .” Petitioner's Brief at 11,

n.6. The Bank is quick to point out that it is not com-

plaining about the fact that the plan was proposed during

a time when the debtor had an exclusive right to propose

a plan. Petitioner's Brief at 6, n.4. Recognizing that

sections 1121(b) and (d) grant an exclusive period to

the debtor to propose a plan and that plans can—and

should—be confirmed during this period, the Bank ac-

knowledges that cramdown plans do not involve a transfer

“under the plan” of any “property” interest simply be-

cause they are proposed during the period of exclusivity.

[The Bank’s argument] is not to be confused, and

the Seventh Circuit did not confuse it, with the de-

feasible exclusivity of the debtor's right to propose a

plan. See 11 U.S.C. §1121(b). All that anyone

other than old equity holders can gain if the latter

exclusivity is terminated is the right to ask the judge

to confirm a plan other than that proposed by the

debtor, which may allow someone other than old

equity holders to bid on the new equity. The judge

is still permitted to confirm only one plan, and that

plan must still satisfy the requirements of the statute.

11 U.S.C. § 1129(c) [emphasis in original]

Petitioner's Brief at 6, n.4.

Since the Code clearly contemplates the exchange of

property for money and the proposal of cramdown plans

during the period of exclusivity, in order to prevail, the

Bank asks this Court to impose a new rule in cramdown

cases: a requirement that each cramdown plan itself must

provide for an auction of the equity interest. The Bank

| a ee

cites no statutory language imposing such a requirement.

Nor does the Bank cite any legislative history that sug-

gests Congress had in mind auctions in all cases involving

old equity. Nor does the Bank cite to a single pre-Code

case in which an auction was required to permit equity

participation in a plan of reorganization.

There is no evidence that, under the Act, courts required

the use of auctions to transfer equity interests in new

value cases. In the only new value case to reach this

Court after the adoption of the Code, the old owners pro-

posed to exchange their future labor for equity ownership

of the post-reorganization business, which this Court ruled

was not a cash equivalent. Northwest Bank Worthing-

ton v. Ahlers, 485 U.S. 197 (1988). No one—including

this Court—suggested in that case that the failure to pro-

pose an auction was fatal to the adoption of the plan

or mentioned auctions in any connection.

The Bank reveals the novelty of its position by admit-

ting in a footnote that, while it is sure that the Code

requires that auctions be held if new value plans are to

be adopted, it is not entirely certain that the bankruptcy

court can hold such auctions or that the statute provides

any foundation for the terms on which they might be

conducted:

The separate question whether the bankruptcy court

has the authority to hold such an auction, however—

particularly on its own motion and not in the context

of a plan that sets forth in detail the procedures that

will purportedly govern any such “auction”—raises

issues involving construction of a number of different

Provisions of the Code. Because no auction was

held or proposed in this case, however, the question

is not before the Court.

Petitioner's Brief at 11, n.6. The Bank neither specifies

any of the “number of different provisions of the Code”

that would be invoked to confirm every new value plan

nor identifies any statutory sections that contemplate that

auctions are a necéssary ingredient in new value plans.

The Bank’s logic is tangled. Because the Bank cuts its

argument loose from the exclusive right to propose a plan,

the Bank’s proposal would apply even if a dozen parties

proposed plans of reorganization, each of which identified

a different purchaser of the post-reorganization business.

By the rule proposed by the Bank, all the plans could be

confirmed, even over the objection of one class of credi-

tors, except the one that proposed an equity buyer—even

if the equity buyer were the highest bidder. The Bank

takes pains to avoid hinging its argument on the los-

ing proposition that exclusivity granted under section

1121(b) becomes “property” transferred “under the plan”

“on account of” the equity interest. In doing so, it cre-

ates the conundrum that a highest-value plan chosen from

among competing plans would not be eligible for con-

firmation because it conveyed “property” to equity by

Proposing a specific sale price to an old equity owner

rather than proposing an auction to any bidder.

As the Bank’s and amici’s briefs reveal, there is no

colorable violation of absolute priority without an ex-

clusivity claim. But the rules governing the exclusive

right to propose a plan lie elsewhere in the Code. 11

U.S.C. § 1121(b). In fact, the Bank filed a motion in the

bankruptcy court seeking to terminate the Debtor's ex-

clusive right to file a plan and sought leave to file its own

liquidation plan, which the bankruptcy court denied. The

Bank neither appealed that denial nor raised that denial

as an issue On appeal when the Debtor’s Plan was con-

firmed. Presumably the motion to terminate exclusivity

was properly denied by the bankruptcy court under the

terms of the statute. Congress has addressed the question

of debtor exclusivity in section 1121(b). The Bank

asks this Court to make an end-run around that provi-

sion to make the grant of exclusivity useless in any case in

which the debtor offers to finance any portion of the post-

reorganization business.

Secured creditors in Chapter 11 cases are not unhappy

with equity’s purchase of an interest in the reorganized

entity; they are unhappy that any plan can be confirmed

over their objections. They ignore the value exchanged by

equity for ownership in the reorganized business, focusing

their argument instead on exclusivity granted to the debtor

under the Code. Once again, the congressional decision to

permit a debtor an extended period of exclusivity is part

of the deliberate scheme to balance the competing inter-

ests of creditors and to promote the likelihood of a suc-

cessful reorganization. Congress recognized that if credi-

tors could propose competing plans of reorganization, the

plan confirmation process would be more chaotic and the

likelihood that any plan would be confirmed would decline

sharply.'* Congress also recognized that having the exclu-

sive right to propose a plan put leverage in the hands of

the Debtor—leverage to confirm a plan on terms different

from those proposed by the most powerful creditor, lever-

age to confirm plans that would pay unsecured creditors

some return on their debt rather than forcing them to

stand by with nothing while the secured creditors took all

the assets of the business, and leverage to maintain the

business and its accompanying jobs and other benefits for

the local communities. By putting this power in the hands

of the Debtor, the Debtor was given the opportunity to

confirm plans of reorganization for businesses that other-

wise would have been liquidated.

The exclusive right to propose a plan is not unrestricted.

The court may “reduce or increase” the period of exclu-

sivity “for cause.” 11 U.S.C. § 1121(d). Any creditor is

free to bring such a motion at any time. Jd. There is a

rich and detailed case law and academic literature about

the circumstances under which plan exclusivity should be

13“Proposed Chapter 11 recognizes the need for the debtor to

remain in control to some degree, or else debtors will avoid the

reorganization provisions in the bill until it would be too late for

them to be an effective remedy.” H.R. Rep. No. 95-595, reprinted

in 1978 U.S.C.C.A.N. at 6191.

terminated."* Secured creditors may believe that courts

have given Debtors too much leverage by extending plan

exclusivity, while Debtors and unsecured creditors may

think that courts are unrealistically restrictive in their

willingness to grant exclusivity. Whether either party is

right is not relevant to this case. The tension between the

two demonstrates the bargaining dynamic deliberately cre-

ated by Congress to push cases toward reorganization.

The secured creditor in this case hopes to make an end-

run after losing its fight to have exclusivity terminated:

it hopes to persuade a court to rule as a matter of law

that it can veto any plan proposed during the period of

exclusivity. If it could do so, it would increase the lever-

age of undersecured creditors far beyond what Congress

contemplated, thereby upsetting the balance carefully

achieved between all the competing parties who are deal-

ing with a failing company.

Undersecured creditors may have a legitimate com-

plaint; perhaps they should have greater power to liqui-

date or take over troubled companies. Of course, un-

secured creditors would see that differently; they believe

that undersecured creditors already exercise too much

power in Chapter 11 cases, leaving trade debt, tort debt,

employee retirement funds and other such creditors with

too little recovery. In either case, however, the question

of drawing the boundaries between debtors and creditors

is one left to Congress.

Secured creditors have pressed their agenda, asking for

limits on exclusivity, an absolute right to veto plans and

increased powers to determine classification among differ-

ent creditor groups. Thus far, Congress has rebuffed their

14 See, e.g., 7 Collier on Bankruptcy, §1121.06[1] (Lawrence

P. King ed., 15th ed. 1998); Martin J. Bienenstock, Symposium—

Contemporary Issues in Bankruptcy and Corporate Law; Confiicts

Between Management and the Debtor in Possession’s Fiduciary

Duties, 61 U. Cin. L. Rev. 543, 560-61 (1992).

22°

efforts. They now ask this Court to re-balance the bank-

ruptcy laws in their favor.

In the instant case, the undersecured Bank holding a

non-recourse loan asks for even more leverage than a

fully secured creditor would have had in the same case.

Fully secured creditors have no unsecured debt and hence

no power to vote to block a plan. The provisions for

confirmation of a plan over a secured creditor’s dissent

do not bar old equity owners from receiving or retaining

property under the plan on account of their old interests.

If undersecured credtiors are given the power to block

plans by voting the unsecured portion of their claims, they

will have more leverage in bankruptcy proceedings than

their fully secured counterparts.

If undersecured creditors have greater leverage than

secured creditors, the incentives for marginally secured

creditors to under-value property increases. Petitioner asks

this Court for a rule in which the ability to control a Chap-

ter 11 rises with the amount of undersecurity a creditor

can assert. This undercuts every established commercial

law principle—both in bankruptcy and out—to treat fully

secured creditors better than all other creditors and to

encourage secured creditors to take adequate collateral to

cover their loans.”

Using the leverage they enjoy through exclusivity and

a number of other Code provisions and frequently calling

on old equity for infusions of new cash, more than a

quarter of the Chapter 11 cases filed from 1989 through

15 Section 506(c), for example, permits an oversecured creditor

to collect interest during the pendency of a bankruptcy while deny-

ing interest to the undersecured creditor. In United Savings Ass’n

of Texas v. Timbers of Inwood Forest Assoc. Ltd., 484 U.S. 365

(1988), this Court refused to expand the leverage of undersecured

creditors to liquidate a business by requiring interim interest pay-

ments. The Court stated, “Section 506(b)’s denial of post-petition

interest to undersecured creditors merely codified pre-Code bank-

ruptcy law, in which that denial was part of the conscious alloca-

tion of reorganization benefits and losses between undersecured and

unsecured creditors.” Jd. at 373.

—

1995 have resulted in confirmed plans. Gordon Bermant

and Ed Flynn, Bankruptcy by the Numbers, Outcomes of

Chapter 11 Cases: U.S. Trustee Database Sheds New

Light on Old Questions, Am. Bankr. Inst. J. 8, 32 (Feb-

ruary 1998). Although their recoveries are often limited,

unsecured creditors recognize that without reorganization,

they would have had little chance of collecting anything

in many of these cases. Only about 5% of Chapter 7

cases produce any assets for distribution to unsecured

creditors. Michael J. Herbert and Domenic E. Pacitti,

Down and Out in Richmond, Virginia: The Distribution

of Assets in Chapter 7 Bankruptcy Proceedings Closed

During 1984-87, 22 U. Rich. L. Rev. 303, 315-16

(1988). Often unsecured creditors support a reorganiza-

tion even with a small payout because they hope to keep

a valuable customer in the future. If this Court increases

the leverage of dissenting creditors at the expense of credi-

tors who support a plan of reorganization, liquidations

will increase.

The long-term effects of eliminating new value plans

would fall squarely on unsecured creditors. The leverage

that comes from a debtors’ opportunity to propose a plan

and offer an infusion of new cash currently stimulates

many secured creditors to buy up unsecured claims in the

hopes of controlling the reorganization. This directly

benefits the unsecured creditors, even at the expense of

old equity.’® If this Court rebuffs the new value principle,

unsecured creditors will get nothing unless the debtor has

unencumbered assets or is solvent. Similarly, the creditor

in the instant case proposes to pay off the trade debt to

16 Among the many examples of secured creditors buying the

claims of unsecured creditors so that they could control the Chapter

11 process are Figter Limited v. Teachers Insurance and Annuity

Association of America (In re Figter Limited), 118 F.3d 635,

638-39 (9th Cir.), cert. denied, 118 S. Ct. 561 (1997): 255 Park

Plaza Associates Limited Partnership v. Connecticut General Life

Insurance Company (In re 255 Park Plaza Associates Limited

Partnership), 100 F.3d 1214 (6th Cir. 1996). The returns to the

unsecured creditors in these cases can be substantial.

make its petition more attractive, but if this Court estab-

lishes the principle that undersecured credtiors can termi-

nate a reorganization effort and seize all the assets of the

business, there will be no need to pay anything to any

unsecured creditors in the future.

In the instant case, trade debt was a relatively small

part of the business—$160,000 versus a $93 million

dollar loan from a secured lender."’ But if the secured

lender can foreclose on all the assets of this business and

leave nothing for the trade debt, their loss will be com-

plete. For some tradespeople, including some of the 45

trade creditors involved in this case, the loss of $5,000

may be more difficult to recover from than the loss of

millions for a creditor in the business of making loans

and sharing loan participation. Congress constructed the

Bankruptcy Code to make certain that a single dominant

creditor could not control the reorganization process,

requiring that voting within a class be based both on

dollar amount of debt and number of separate creditors.

11 U.S.C. § 1126(c). The protection for smaller creditors

will be written out of the statutory scheme if this Court

permits a single large secured creditor to form a separate

class to block a reorganization supported by another class

of unsecured creditors.

Any ruling from this case will apply in a wide variety

of factual settings, including those where the relative posi-

tion of undersecured and unsecured creditors is reversed.

The petitioner urges this court to follow a rule in which

trade creditors with $93 million in outstanding debt would

lose everything while a secured creditor with a $90,000

deficiency on a loan voted its unsecured debt in a separate

class to block any reorganization in which part of the

infusion of capital came from old equity. The ruling

17 This characterization skips over the point that the general

partner of the debtor and an affiliate held allowed unsecured claims

totaling $7.7 million; the general partner held another claim based

upon an $11.3 million second mortgage. App. 103a, 129a.

a ew Oe

made by this Court will also affect efforts to reorganize

businesses of all sizes, large and small. It will affect credi-

tors with small claims and those with enormous interests,

such as claimants in mass tort cases and environmental

liability cases. It will also affect the reorganization possi-

bility for nonprofit corporations and owner-managed busi-

nesses. When this Court addresses the balance to be

struck among the many parties competing for payments

from a troubled company, the implications will be felt by

every stakeholder—secured creditors, unsecured creditors

and equity—as well as every employee, every local taxing

authority, every community, every supplier, and every cus-

tomer of a business in trouble.

CONCLUSION

For the foregoing reasons, the NACM respectfully re-

quests that the Court affirm the degision of the Seventh

Circuit.

Respectfully submitted,

Of Counsel: CHARLES M. TATELBAUM

Pror. ELIZABETH WARREN Counsel of Record

Cambridge, MA CUMMINGS & LocKWoopD