Amicus Curiae Brief — Czyzewski v. Jevic Holding Corp., 136 S. Ct. 2541 (2016) (No. 15-649)
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IN THE
Supreme Court of the Anited States
(‘ASIMIR CZYEWSKI, et al.,
Petitioners,
Vv.
JKVIC HOLDING CORP., et al.,
Respondents.
oo
On Writ of Certiorari to the
United States Court of Appeals
for the Third Circuit
BitIEKF FOR AMICI CURIAE
LAW PROFESSORS IN SUPPORT
OF RESPONDENTS
DAVID R. KUNEY
Counsel of Record
WHITEFORD, TAYLOR &
PRESTON, LLP
1800 M. Street. N.W.
Suite 450 North
Washington, D.C. 20036
(202) 659-6807
dkuney@wtplaw.com
October 17, 2016
Wit San Fees PRINTING CO Ine (202) 789-0096 — WASHINGTON. D C 20002
TABLE OF CONTENTS
TABLE OF AUTHORITIES.........................0000084
INTEREST OF AMICI CURIAE ..................0.0..
SUMMARY OF ARGUMENT ........0000000...... eee.
I.
Il.
Il.
Petitioners have overstated the scope
and historical role of the absolute priority
PI cickieecsaisistoasecsiteictiatahdestarapnsistieithadeninteeiitiguedthina
A. The absolute priority rule was limited
by Congress in 1978 to apply only to a
plan of reorganization .........................
The absolute priority rule in 11 U.S.C.
§ 1129%b) does not pertain to this case
and does not govern settlements..............
A. Both the U.S. Trustee and the
Solicitor General have acknowledged
that this case does not involve
application of the absolute priority
rule of section 1129(b), as it pertains
only to plans of reorganization, not
ERS SS TI ASE
B. The Code permits distributions and
dispositions outside of the “statutory
priority scheme” of section 507 ...........
Petitioners seek an unwarranted
expansion of the absolute priority rule
that could harm both other commercial
and individual bankruptcy cases .............
i cieetncscrpnodanisnnsemsnaiacinadjeininnccinenss
16
16
19
23
29
il
TABLE OF AUTHORITIES
CASES Page(s)
Bank of Am. v. Caulketi,
ee IE ei ccgictreinscciecrbeisnisasscceievenss 1
Bank of Am. Nat'l Trust & Sav. Ass’n. v.
203 N. LaSalle St. Pt’ship.,
PES I Cr encvcccencssossccssercsessseeses passim
Case v. Los Angeles Lumber Products Co,
Se A CP I Phcsccccccscccscosccsansssesceseses passim
In re Extended Stay Inc.,
435 B.R. 139 (Bankr. S.D.N.Y. 2010) ............ 23
In re General Growth Properties, Inc.,
409 B.R. 43 (Bankr. S.D.N.Y. 2009)............... 23
In re Genesis Health Ventures, Inc,,
266 B.R. 591 (Bankr. D. Del. 2001)................ 18
In re Innkeepers USA Trust,
448 B.R. 131 (Bankr. S.D.N.Y. 2011)............. 23
In re Iridium Operating LLC,
478 F.3d 452 (2d Cir. 2007)................ 20, 21, 22
In re Jevic Holding Corp.,
787 F.3d 173 (3rd Cir. 2015)..................... 20, 23
In re Jevic Holding Corp,
2014 WL 268613 (D.Del. Jan. 24, 2014) .. 16, 19
In re Martin,
01 F.3d 360 (3d Cir. 1906) .............................. 22
In re MSR Resort Golf Course LLC,
471 B.R. 783 (Bankr. S.D.N.Y. 2012) ............ 23
In re O’Neal,
490 B.R. 837 (Bankr. W.D. Ark., 2013).......... 28
TABLE OF AUTHORITIES—Continued
In re Red Mountain Mach. Co..,
448 B.R. 1 (Bankr. D. Ariz. 2011), affd,
471 B.R. 242 (D. Ariz. 2012)...................
Northern Pacific Railway Co. v. Boyd,
228 U.S. 482 (1913)...............cccceeeeeeeeeeeees
Northwest Bank Worthington v. Ahlers,
485 U.S. 197 (1988)................ccccceeeeeeeeeees
Protective Committee for Independent
Stockholders of TMT Trailer Ferry, Inc.
v. Anderson,
390 U.S. 414 (1968)............ cc cccceccceeeee eee ees
Sec. & Exch. Comm'n v. Am. Trailer
Rentals Co.,
379 U.S. 594 (19G6B)...............::ccccesceeeeeeneee
U.S. Bancorp Mortgage Co. v.
Bonner Mall Pt’ship,
I ncinnsscsontesaensesnesevensses
Zachary v. California Bank & Trust,
811 F.3d 1191 (9th Cir. 2016).................
CONSTITUTION, STATUTES, AND RULES
Bankruptcy Code:
Bankruptcy Reform Act of 1978, Pub. L.
95-598, 92 Stat. 2549, 11 U.S.C. § 101
Page(s)
OF I, devrnsebsnsitunnsntnviocenseccviasssvosnsenenessenpas passim
BE CEB, F BUD cecccscccccccccccescsscveeseones
Re ty TE becointavcsccsceccnschisecosvoncctanl
11 U.S.C. § 701 ef 8€q......cccccccceseeseeeeee
iv
TABLE OF AUTHORITIES—Continued
Page(s)
Be rs eB Oe BD oe necissscscecnesecteng passim
Be Oe Balt vettscncisatinessciecidisninves 16, 22
ee ee BT i cicieichidnnsicicssecossusoens 8,9
11 U.S.C. § 1129 bX 2 BYii) ................ passim
Bankruptcy Act:
Act of July 1, 1898, ch. 541, 30 Stat. 544
SSR TET Fe A cea 10
Act of July 7, 1952, ch. 578, § 366, 66
Stat. 429, 433 (1952) (repealed 1979) ....8, 14
Act of June 7, 1934, ch. 424, 48 Stat.
912-22, 11 U.S.C. § 207 (1934)
ER al EE a 10
I Shs siciedtszenc cerita liddesaictnsmridonei 10, 11, 13
BESET Re aha N 10
Chandler Act of June 22, 1938, Pub. L.
No. 75-696, ch. 575, 52 Stat. 840
a casuais 8,13
Ch. X, 52 Stat. 883, § 101 et segq.,
11 U.S.C. § 501 et seg.................. 8, 13, 14, 22
Ch. XI, 52 Stat. 912 § 301 et segq.,
11 U.S.C. § 701 et seg. ................ 8, 13, 14, 22
§ 366(2), 11 U.S.C. § 766(2)...................... 14
§ 366(3), 11 U.S.C. § 766(3).......0. 14
Vv
TABLE OF AUTHORITIES—Continued
OTHER AUTHORITIES Page(s)
American Bankruptcy Institute Commis-
sion to Study the Reform of Chapter 11,
Final Report and Recommendations
Ayer, John D., Rethinking Absolute Priority
After Ahlers, 87 Mich. L. Rev. 963
Ei Tucsnahiudissanndbeuniaatetasamdinddaibidennass 11, 14, 15
Baird, Douglas G., Elements of Bankruptcy
SIE SII ici dch cddrkcntbsestinancneioncempiainientenineseseces 8
Balbus, Andrew G., Continued Disagree-
ments Over the Application of the
Absolute Priority Rule to Individuals in
Chapter 11: Friedman and Maharaj, 21
NORTON BANKR. L. & PRAC. 755 (2012) .......... 28
Carlson, David Gray & Jack F. Williams,
The Truth About the New Value
Exception to Bankruptcy’s Absolute
Priority Rule, 21 CARDOZO L. REV. 1303
Kirkland & Ellis, LLP, Recent Develop-
ments in Bankruptcy Law Leave Many
Real Estate Finance Issues Unresolved
(March 2012), https:/Awww.kirkland.com/
siteFilea/Publications/Alert_031212.pdf........ 23
Klee, Kenneth N., One Size Fits Some:
Single Asset Real Estate Cases, 22
+. UT A). 24
Klee, Kenneth N. and Whitman L. Holt,
Bankruptcy and the Supreme Court:
1801-2014 (West, 2015) ...............::000008 9, 10, 14
vi
TABLE OF AUTHORITIES—Continued
Page(s)
Kuney, David R., Chapter 11 Cases
Involving Real Estate Business, in
COLLIER GUIDE TO CHAPTER 11, KEY
TOPICS AND SELECTED INDUSTRIES
(Alan Resnick and Henry J. Sommer,
Genie er See er: _, 23
Lewis, Paul B., 203 N. Lasalle Five Years
Later: Answers to the Open Questions, 38
J. MARSHALL L. REV. 61 (2004)................. 24, 26
LoPucki, Lynn M. & William C. Whitford,
Preemptive Cram Down, 65 AM. BANKR.
4 | __. PRRIRRSSSERONS oe 25
Lubben, Stephen J., The Overstated
Absolute Priority Rule, 21 FORDHAM J.
Corp. & FIN. L. 581 (2016). ...........0cc0000. passim
Tabb, Charles Jordan, The History of the
Bankruptcy Laws in the United States,
3 AM. BANKR. INST. L. REV. 5 (1995)..... 8, 10, 14
H.R. Rep. No. 95-595 (1977)..........ccccccccccssseseeee, 15
S. Rep. No. 1995, 82d Cong., 2d Sess.
_____ERREERTIRE SER 5 Sat Alt OAT of SEES Sc tear 14
INTEREST OF THE AMICI CURIAE'
The amici curiae, whose names are set forth below
are law professors at various universities, where they
teach courses on bankruptcy law, conduct research,
and are frequent speakers and lecturers at seminars
and conferences on bankruptcy law. Professor
Carlson was recently cited by this Court in Bank of
America v. Caulkett, 135 S.Ct. 1995 (2015). They
write based solely on their concern about the effect
that this Court’s opinion may have more broadly on
bankruptcy jurisprudence and other cases.
Professor David Gray Carlson
Benjamin N. Cardozo School of Law
New York, New York
Professor Jack F. Williams
Georgia State University
Atlanta, Georgia
David R. Kuney
Adjunct Professor
Georgetown University Law Center
Washington, D.C.
Petitioners ask this Court to rule that the absolute
priority rule, as now codified in 11 U.S.C. § 1129(b), is
a mandatory requirement for approval of the bank-
ruptcy settlement and dismissal which occurred
below. The Third Circuit correctly ruled that it is an
' Pursuant to this Court’s Rule 37.Xa), all parties submitted
letters to the Clerk granting blanket consent to amicus curiae
briefs. Pursuant to Rule 37.6, amici affirm that no counsel for a
party authored this brief in whole or in part, and that no person
other than amici or their counsel contributed any money to fund
its preparation or submission.
2
important consideration only, but is not mandated by
statute. We agree.
The amici, as law professors, submit this brief to
address the overbroad and misstated notion of the
role of the absolute priority rule in bankruptcy
jurisprudence, which is deeply misstated as framed
by Petitioners. In so doing, they have presented a
portrayal of the absolute priority rule as an over-
arching principle of chapter 11 that controls all
dispositions. It does not. Instead, it has historically
developed as a limited doctrine, as recently summa-
rized: “[T]here is no absolute priority rule of the kind
described in the literature under current law. It is not
clear that there ever has been such a rule. And even
if there were, adopting such a rule would be incon-
sistent with chapter 11, or any other sensible system
of reorganization.”
Indeed, the U.S. Trustee has argued that the
statutory absolute priority rule of section 1129(b) is
not the proper issue here, and that in the decisions
below there was a “conflation” of section 507 with
section 112%b).* This “conflation” in truth worked an
important distortion in the arguments of Petitioners,
as these two sections are profoundly different. Thus,
the United States Trustee’s position supports our
view here that this is not a proper case to expand
the role of absolute priority, either in the context
? Stephen J. Lubben, The Overstated Absolute Priority Rule,
21 FORDHAM J. Corp. & FIN. L. 581 (2016).
* See infra for discussion on the improper “conflation” of
absolute priority with the significantly different issue of the
application of § 507 in this case.
3
presented here, nor as an overarching principle
applicable in other business and individual cases.
We also write out of a concern that the arguments
advanced here, which seek an expansive view of
absolute priority, will have harmful consequences in
other areas of bankruptcy practice. The absolute
priority rule, and its “new value” corollary, controls
the outcome in many business cases, such as single
asset real estate cases, and is currently the subject of
divided judicial decisions in individual chapter 11
cases.‘ This case, however, is not the appropriate
vehicle for addressing broader concerns about the
scope of the absolute priority rule. The development
of the doctrine of absolute priority in those contexts
should await a more proper vehicle for addressing this
important issue.
Accordingly, the amici submit this brief in support
of affirmance of the Third Circuit decision. Chapter
11 settlements should be permitted without a manda-
tory requirement that such settlements comply with
the absolute priority rule.
SUMMARY OF THE ARGUMENT
The central issue in this case is whether the
distribution of settlement proceeds in bankruptcy
cases must always comply with the Code’s priority
* See e.g., Zachary v. California Bank & Trust, 811 F.3d 1191,
1196 (9th Cir. 2016) noting, “A significant split of authorities has
developed nationally among the bankruptcy courts” regarding
application of the absolute priority rule to individual chapter 11
debtors.
4
scheme.® History and precedent make clear the
answer is no.
First, Petitioners seek to engraft the absolute prior-
ity rule onto settlements and dismissals by construct-
ing an argument that relies almost entirely on an
overstated and historically inaccurate view of the
role of absolute priority. Thus, they write, “the single
most important principle of Chapter 11 is the rule
of absolute priority. . .” (Cert. pet. 3.) Absolute
priority is, at some points, framed as the dispositive
issue: “[S]trict adherence to absolute priority when
distributing settlement proceeds is critical. . .” (Cert.
pet. 25.)
The absolute priority rule, however, is not the most
important principle of Chapter 11, nor does it have
the meaning ascribed to it by Petitioners. The devel-
opment of the doctrine of absolute priority has been
far more restrained and limited than urged by
Petitioners, and has consistently been limited by
“equitable” and “pragmatic” considerations. It was
not, as urged here, an unbending and inflexible
doctrine.
Second, the plain meaning of the Code demon-
strates that absolute priority only applies in the
context of a plan of reorganization. Both the United
States Trustee, as amicus, and the Solicitor General,
acknowledged that the absolute priority issues had
been “conflated” (in the litigation below) with the
* The question presented is, “Whether a bankruptcy court may
authorize the distribution of settlement proceeds in a manner
that violates the statutory priority scheme.” (Cert. pet. (i)).
While the Petitioners address other priority sections, its view of
the absolute priority rule dominates much of its argument.
5
priority scheme in section 507.6 This argument
acknowledges that the absolute priority under section
1129%b) only applies to a plan of reorganization, and
that therefore this case does not raise an issue as to
the meaning of the absolute priority rule.
Third, nor is section 507 necessarily implicated
here, which is the foundation for the Petitioner's
“statutory scheme” argument (as distinct from “abso-
lute priority”). However, as a leading scholar writes,
the Code contemplates numerous pre-plan disposi-
tions, such as sales and settlements, none of which
are expressly or impliedly tied to section 507.’
Fourth, a needless expansion of the absolute
priority rule would adversely affect both business
cases and individual cases by hampering the ability of
debtors to reorganize. The full import of the absolute
priority rule has been the subject of substantial
controversy, both in business cases and individual
chapter 11 cases. This case should not be a stalking
horse to address the full scope of absolute priority. Its
full meaning should await a case which squarely
addresses the doctrine.
Accordingly, we urge the Court to affirm that the
legal standard for testing settlements and dismissals
in Chapter 11 does not embrace the absolute priority
rule.
* The United States Trustee argued that, “it appears that
the bankruptcy court conflated section 507 with the absolute
priority rule codified in section 112% bX2XBXii).” Resp. Sup. Br,,
App. 8a.
’ Lubben, supra note 2.
6
ARGUMENT
I. Petitioners have overstated the scope and
historical role of the absolute priority
rule.
A. The absolute priority rule was limited
by Congress in 1978 to apply only to a
plan of reorganization.
Petitioners assert that this Court need not reach
the underlying issue of whether a structured dismis-
sal can ever be permitted.’ Instead, they initially
focused this appeal on the narrow issue of whether,
when permitted, a bankruptcy court must test the
settlement by a mandatory application of the absolute
priority rule, which they argue is found in 11 U.S.C.
§ 1129(b\X2BXii) of the Code (“112%b)”).* Their
argument, in short, is that the protections afforded
creditors in a formal plan of reorganization somehow
must apply in a vastly different disposition, namely a
settlement coupled with dismissal.
* Neither party asks this Court to address the threshold
question of whether structured dismissals are, or are not permit-
ted by the Code. (“It is not necessary to reach that broader
question. ” Cert pet. 20). Accordingly, Petitioners have con-
ceded that structured dismissals are permitted in some cases.
* In their principal brief, Petitioners shifted the weight of their
argument from “absolute priority” to the priority scheme found
in section 507. (See discussion below.) Neither pertain here. Yet,
this important shift also underscores that the issue before this
Court does not require resolution of the full meaning of the
absolute priority rule.
7
The foundation of Petitioners’ argument may be
seen in two key statements. They write, “the single
most important principle of Chapter 11 is the rule of
absolute priority. . .” (Cert. pet. 3.) Petitioners also
write, “Strict adherence to absolute priority when
distributing settlement proceeds is critical to effectu-
ate and protect the choices Congress made in
affording some claims priority over others.” (Cert. pet.
25.) A substantial portion of its certiorari petition is
devoted to this argument. See cert. pet. 23 et seq.
Thus, Petitioners seek to unmoor absolute priority
from section 112%b) and to make it a universal
concept governing all dispositions of estate property.
These foundational assertions are incorrect. They
vastly overstate the role of absolute priority in
bankruptcy jurisprudence, and therefore wrongly
attempt to engraft a limited statutory concept onto a
procedural device that does not reflect nor require
applying the absolute priority rule. “The academic
conception of the absolute priority rule in corporate
reorganization is based on a world that does not exist.
. . . Reorganization in reality is fundamentally
inconsistent with heartfelt fondness for a strict
absolute priority rule.” Lubben, supra, at 585.
The error in Petitioners’ position may be seen in the
long history of the absolute priority rule, which is a
steady march against the overly rigid and broad
application of the rule. A brief summary is as follows:
the phrase “absolute priority” was never used in
any version of the Bankruptcy Act or the Code:
instead, the concept of “fair and equitable” was a
judge made principle that had its origins in the
railroad receivership cases of the early twentieth
8
century, '° and was designed to prevent collusion
between shareholders and bondholders. The “fair and
equitable” concept initially prevented any agreement
which did not pay senior creditors before junior
creditors, even where a large majority of the class of
creditors had otherwise voted for a plan. The doctrine
developed over two distinct paths (later Chapter X
and X]J);'' initially overstrict and unbending, absolute
priority was historically an impediment to reorgan-
ization and was expressly deleted in 1952 from former
Chapter XI. After the complete overhaul of the
Bankruptcy Code in 1978 the absolute priority rule
was consciously limited by Congress to apply only in
certain contexts related to a formal plan of reorgan-
ization, but one which permitted a class of creditors
to outvote a dissident provided it received at least
what it would have received in a Chapter 7 liquida-
tion. See Bank of Am. Nat'l Trust & Sav. Ass’n. v. 203
N. LaSalle St. Pt’ship., 526 U.S. 434, 448 (1999); see
also Douglas G. Baird, Elements of Bankruptcy, 240-
43 (6th ed. 2014\describing plan confirmation
process). Thus, the “best interest” test of 11 U.S.C.
§ 1129%aX7) is the statutory protection for a
'° “Federal courts entered the reorganization business with
the advent of the equity receivership. Use of this device blos-
somed in the late nineteenth century as a means to keep the
railroads running. . . Court supervised receiverships remained
the predominant means of corporate reorganization for about a
half century until federal reorganizations laws were enacted
during the Great Depression.” Charles Jordan Tabb, The History
of the Bankruptcy Laws in the United States, 3 AM. BANKR. INST.
L. REV. 5 (1995) (“History”).
'' Chapter X of the prior [Chandler Act] and Chapter XI of the
prior Act, each of which were later merged into modern Chapter
XI under the Code. See Tabb, History, id.
9
dissenting creditor who was outvoted, and not the
absolute priority rule. '”
The absolute priority rule had its “genesis in the
judicial construction of the undefined phrase “fair and
equitable,” and it is commonly traced to the equity
receivership case of Northern Pacific Railway Co. v.
Boyd, 228 U.S. 482 (1913).” The fair and equitable
doctrine as initially framed in Boyd demonstrated the
persistent problem with the doctrine, and why today
it is not the overarching principle suggested by
Petitioners. Its literal application would have pre-
cluded any agreed upon restructuring, despite over-
whelming support by most creditors, where even a
single creditor objected. “If purposely or uninten-
tionally a single creditor was not paid, or provided for
in the reorganization, he could assert his superior
rights against the subordinate interests of the old
stockholders in the property transferred to the new
company.” Boyd, 228 U.S. at 502. Justice Lurton
dissented, noting that it was unfair for a “single credi-
tor who comes forward many years after a judicial
sale” and objects based on priority of distribution. Id
at 511-512. This narrow view of “fair and equitable”
(not yet so named) was soundly criticized by leading
members of the bar as impeding reorganizations. '°
'? Section 112% aX7) provides that with respect to an impaired
class, it must either have accepted the plan or “each holder of a
claim” of such class “will receive or retain under the plan.
not less than the amount that such holder would so receive or
retain if the debtor were liquidated under chapter 7 of this title
on such date. .”
'S This strict view was attacked by a leading New York reor-
ganization lawyer, Paul Cravath, who stated that it materially
reduced the opportunities for stockholders to participate in a
reorganization. Kenneth N. Klee and Whitman L. Holt,
10
The phrase “fair and equitable” first appears in a
bankruptcy statute in § 77B of the prior Bankruptcy
Act, 48 Stat. 912, 11 U.S.C. § 207 The stricter view
of “fair and equitable” in prior section 77B(f) required
both class approval of a plan and compliance with the
fair and equitable standard. Jd. at 8. This meant that
a plan could not be approved even if accepted by the
required votes of the class of creditors; a single credi-
tor had veto power over a plan of reorganization. It
was this stultifying view that was to lead to its
shrinkage and challenge, continuing through today.
In the early interpretation of “fair and equitable”
Justice Douglas used the phrase “absolute priority”
when discussing “fair and equitable,” thus creating
some needless confusion between the two. The first
major “fair and equitable” case in which the Court
interpreted Bankruptcy Act § 77B, was Case v. Los
Bankruptcy and the Supreme Court: 1801-2014, p. 294-295
(West, 2015). Cravath noted that in most large reorganizaticns
it was still the preference of bondholders’ committee’s to afford
stockholders participation in order to avoid litigation and delay
and “partly to secure new capital.” Id. at 295.
'* “The Bankruptcy Act of 1898 marked the beginning of the
era of permanent federal bankruptcy legislation. The 1898 Act
remained in effect for eighty years, until being replaced by the
Bankruptcy Reform Act of 1978 (the “Code”). History, supra at
23.
Section 77B sub. f of the Bankruptcy Act provided in part,
“After hearing such objections as may be made to the plan, the
judge shall confirm the plan if satisfied that (1) it is fair and
equitable and does not discriminate unfairly in favor of any class
of creditors or stockholders, and is feasible; (2) it complies with
the provisions of subdivision (b) of this section; (3) it has been
accepted as required by the provisions of subdivision (e), clause
(1) of this section .. .” Bankruptcy Act, § 77B, Act of June 7, 1934,
ch. 424, § 77B, 48 Stat. 912-22, 11 U.S.C. § 207 (1934).
11
Angeles Lumber Products Co, 308 U.S. 106 (1939).
Section 77B “nowhere states that claims must be paid
by a principle of absolute priority.”'* However, Justice
Douglas stated that the phrase “fair and equitable”
were words of art that had acquired a meaning in the
railroad receivership cases. Thus, he held that a plan
was not fair and equitable, even though approved
by the required class votes under section 77B if it
violated the notion that “stockholders’ interest in the
property is subordinate to the rights of creditors. . .”
Id. at 116.'* Justice Douglas’ statement that fair and
equitable required absolute priority in payment based
on prior decisions has since been questioned by some
leading scholars."’
Even in Case, however, this Court did not require
absolute compliance with absolute priority, and held
that the doctrine must give way to practical con-
siderations. The decision in Case acknowledged the
power of a small group of dissenting creditors to
prevent an otherwise agreed upon restructuring."* A
© John D. Ayer, Rethinking Absolute Priority After Ahlers, 87
Mich. L. Rev. 963, 974 (1989).
'6 “Any arrangement of the parties by which the subordinate
rights and interests of stockholders are attempted to be secured
at the expense of the prior rights of either class of creditors
comes within judicial denunciation.”
'’ Professor Ayer writes that the notion that “fair and
equitable” had come to reflect the absolute priority rule was
“strictly speaking. . . poppycock, and Justice Douglas knew it.
None of the Supreme Court’s absolute priority cases used that
particular phrase in that particular way.” Ayer, supra at 975.
'® The objecting creditors held $18,500 face amount of bonds
in a class which had claims totaling $3,807,071. 80% of the
bondholders and 90% of the stockholders approved the pian. Id.
at 110-112.
12
minority group of dissenting creditors could veto a
plan that was otherwise essential based on strict
compliance with absolute priority. Thus, Justice
Douglas acknowledged that there were “circum-
stances under which stockholders may participate in
a plan of reorganization of an insolvent debtor” even
where senior creditors were not paid in full (or any-
thing). Id. at 121.
In application of this rule of full or absolute
priority this Court recognized certain
practical considerations and made it clear
that such rule did not ‘require the
impossible, and make it necessary to pay an
unsecured creditor in cash . . . And it also
recognized the necessity at times of permit-
ting the inclusion of stockholders on payment
of contributions. . In such or similar cases
the chancellor may exercise an informed
discretion concerning the practical adjust-
ment of the several rights. Jd. at 117
(emphasis added).
This of course was the genesis of the “new value”
corollary,'* but more importantly, the recognition that
'® See Bank of Am. Nat'l Trust & Sav. Ass'n. v. 203 N. LaSalle
St. Pt’ship., 526 U.S. 434, 449 (1999):
The upshot is that this history does nothing to
disparage the possibility apparent in the statutory
text, that the absolute priority rule now on the books
as subsection (bX2XBXii) may carry a new value
corollary. Although there is no literal reference to
“new value” in the phrase “on account of such junior
claim,” the phrase could arguably carry such an
implication in modifying the prohibition against
receipt by junior claimants of any interest under a
13
still stands today: a Chapter 11 plan can be confirmed
which does not comply with the notion that senior
creditors must always be paid in full before junior
creditors. It was an essential part of the development
away from single creditor or minority creditor veto
power. “Practical considerations,” “discretion” and
“practical adjustments” may be required, and are
permitted.
Thus, long before this Court found a textual basis
in the 1978 Code for the “new value corollary,” Justice
Douglas had held that absolute priority is not always
mandated, and must, at times, give way to practical
necessity. His ruling, in this sense, is deeply con-
sistent with the Bankruptcy Court’s ruling that
absolute priority is a “consideration” but not a barrier
to effective relief in all cases.
Ultimately, the fair and equitable standard was
deleted from a major portion of the bankruptcy laws.
Section 77B of the Bankruptcy Act was amended in
1938 by Chapter X, 52 Stat. 883, 11 U.S.C. § 501 et
seq. (The Chandler Act).” Two distinct kinds of
business reorganizations now emerged, with two
profoundly different views of absolute priority. One
was Chapter X which governed corporate reorganiza-
tions, and the other Chapter XI which governed
plan while a senior class of unconsenting creditors
goes leas than fully paid.
” “The fury of bankruptcy legislation in the 1930's came to a
head in 1938 with the passage of the comprehensive Chandler
Act.” History, supra at 29. “The Chandler Act, c.10, 52 Stat. 840,
893, § 101 et seq. 11 U.S.C.A. § 501 et seg. approved June 22,
1938 now supplants § 77B.” Boyd, supra at 119, n 14.
14
arrangements.*' Chapter XI deleted the fair and
equitable test altogether “because its presence
impaired or made valueless the relief provided by
those Chapters.” Klee at 304, n. 2368, citing S. Rep.
No. 1995, 82d Cong., 2d Sess. 11 (1952).””
Absolute priority was not the most important
doctrine of bankruptcy law under prior Chapter XI.
See generally Ayer, supra at 976-77. “This absolute
priority rule had never been a principle of composition
law. Quite the contrary, the point was that a creditor
might be bound to anything he agreed to in a compo-
sition. This was part and parcel of the theory of
composition: if you had to pay the full going concern
value of the enterprise to your creditors, even though
*! History, supra at 30. For a brief discussion of “arrangement”
under former Chapter XI see Sec. & Exch. Comm'n v. Am. Trailer
Rentals Co., 379 U.S. 594, 605—06 (1965), stating as follows:
Chapter X] is a statutory variation of the common-law
composition of creditors and, unlike the broader scope
of Chapter X, is limited to an adjustment of unsecured
debts. .
(Chapter XI was] a quick and economical means of
facilitating simple compositions among general
creditors who have been deemed by Congress to need
only the minimal disinterested protection provided by
that Chapter.
* “Before the 1952 Amendment to Chapter XI, Bankruptcy
Act of 1938 § 366(3), 11 U.S.C. § 766(3) (1940) provided that the
bankruptcy court could confirm the Chapter XI plan of arrange-
ment only if, inter alia, it is “fair and equitable.” Pub. L. No. 75-
696, ch. 575 (§ 366(3) 52 Stat. 840, 912 (1938). The 1952
amendment, however, deleted the fair and equitable test and
moved the feasibility test into paragraph (2) of Bankruptcy Act
§ 366.” Klee, supra note 13, at 304, n. 2386.
15
they might agree to accept less, composition was
never possible.” Id. at 978.
In 1978 Congress adopted the current Code, merg-
ing Chapter X and Chapter XI into the modern Chap-
ter 11. The Report of the Bankruptcy Commission,
acting as the “fountainhead of learning,” “proposed to
emasculate substantially the absolute priority rule.””
While Congress did not accept this proposal, neither
did it “codify any authoritative pre-Code version of
the absolute priority rule.” Bank of Am. Nat Trust
& Sav. Ass’n v. 203 N. LaSalle St. Pt’ship., 526 U.S.
at 448 (1999). The 1978 Code adopted “a modified
absolute priority rule.” Ayer, supra at 978. The
House Report states that “[t]he elements of the [fair
and equitable] test are new(,] departing from both the
absolute priority rule and the best interests of the
creditors found under the Bankruptcy Act.” H.R. Rep.
No. 95-595 (1977).
This history is at best equivocal and uneven; it
offers no basis to conclude that Congress meant to
enlarge either the “fair and equitable” doctrine or the
statutory absolute priority rule. Absolute priority is
not an overarching application that must be applied
in every form of disposition, nor without concern for
pragmatic concerns. It does not support the founda-
tional argument advanced here that the absolute
priority rule is the “most important principle” of
Chapter 11. Absolute priority was expressly limited to
plan confirmation, and nothing else. The absolute
priority rule should not be applied to this case, nor to
any context outside of a plan of reorganization.
* Ayer, supra at 978.
16
Il. The absolute priority rule in 11 U.S.C.
§ 1129(b) does not pertain to this case and
does not govern settlements.
A. Both the U.S. Trustee and the Solicitor
General have acknowledged that this
case does not involve application of the
absolute priority rule of section
1129(b).
The plain meaning of the Code is straightforward:
absolute priority only applies to a plan of reorganiza-
tion, and nothing more. This of course was one of the
core rulings by the Bankruptcy Court and District
Court below and is unassailable. In re Jevic Holding
Corp, Pet. App. 58a. (“[T]he settlement does not follow
the absolute priority rule. However, this is not a bar
to the approval of the settlement as it is not a
reorganization plan.” (Pet. Cert. Br. 42a. (Emphasis
added.)
That section 1129(b) and the statutory absolute
priority rule is not the controlling standard for this
case is consistent with arguments made below by the
U.S. Trustee and later the Solicitor General before
this Court. Thus, in its amicus brief to the Third
Circuit, the U.S. Trustee wrote: “it appears that the
bankruptcy court conflated section 507 with the
absolute priority rule codified in section 1129(bX2\BXii).
Under the absolute priority rule, general unsecured
creditors may not receive any distributions under a
plan unless objecting priority creditors have been
paid in full.” Resp. Sup. Br. App. 8a. (Emphasis
added. )
At oral argument, the U.S. Trustee made the same
argument, stating that “there was an undue focus
or—or a conflation between Section 1129, which sets
17
out a somewhat different Absolute Priority Rule as-
as it applies to plans.” (Resp. Supp. Br., App. 30a-
31a)emphasis added).
The Solicitor General likewise made the same
acknowledgment, and described this conflation as
follows:
In discussing the governing legal principles,
the court below referred repeatedly to the
“absolute priority rule.” See Pet. App. 16a-
17a. The term “absolute priority” is most
accurately used to refer to the requirements
in 11 U.S.C. § 112%b) that junior classes
of creditors may not be paid through a plan
of reorganization unless senior classes of
creditors either are paid in full or consent to
an impairment of their rights.
Brief for the United States as amicus, in support of
cert., p. 14, n.2.
And lastly, in its principal amicus brief, the United
States again acknowledged this underlying confusion
in terminology, noting that the “absolute priority
rule’ is most accurately used to refer to the
requirement in 11 U.S.C. § 1129(b)” and that for some
reason this section was used to “encompass the
additional rule” found in § 507. Brief for United
States, at 22.
The absolute priority rule however, is more than
“somewhat different” than section 507, and it is not
“encompassed” within section 507 in any fashion. Nor
was it merely the court below that conflated the
statutory terminology. This oft repeated conflation
runs throughout the Petitioners’ certiorari petition.
In their petition, Petitioners expressly argued that
18
the Second and Third Circuit’s rule (approving settle-
ments) “is also discordant with this Court’s case law
addressing absolute priority, a central structural
feature of the Bankruptcy Code.” Pet. 23. This argu-
ment concerning the dispositive role of absolute
priority forms a significant portion of the petition for
certiorari. See Pet. 25 et. seq.
This “conflation” is not inconsequential. It puts in
focus that the true issue is not the absolute priority
rule. In view of the briefing subsequent to the petition
for certiorari, it is now unlikely that any party will
contend that the statutory absolute priority rule, with
its unique history (see above) is the actual issue in
this case. At most, this is a case about the applicabii-
ity, if any, of section 507 to settlements.
A second layer of conflation throughout this case
occurs when Petitioners argue that “fair and equita-
ble” somehow always imports “absolute priority.” It
does not. As a matter of statutory interpretation, the
phrase “fair and equitable’ does not mean the same
as the “absolute priority rule.”* This Court said as
** It may be accurate that absolute priority was “incorporated”
into a statutory standard for Chapter 11 plan confirmation, but
the broader suggestion that “absolute priority” is always baked
into the judicial “fair and equitable” standard, and that any
reference, in any context to “fair and equitable” (settlement or
other) must therefore mean compliance with absolute priority is
required is simply incorrect. See In re Genesis Health Ventures,
Inc,, 266 B.R. 691, 612 (Bankr. D. Del. 2001) explaining that
the condition that “a plan be fair and equitable with respect
to a class includes the following requirements.” 11 U.S.C.
§ 112&%bX2) (emphasis added). The statute offers illustrative
ways to satisfy the fair and equitable standard for classes
of secured and unsecured creditors, as well as for a class
of interests.”
19
much: “The elements of the [fair and equitable) test
are new/|,] departing from both the absolute priority
rule and the best interests of creditors tests found
under the Bankruptcy Act”). Bank of Am. Nat'l Trust
& Sav. Ass’n v. 203 N. LaSalle St. P’ship, 526 U.S. at
449.
The U.S. Trustee and the Solicitor General were
correct that section 1129(b) is not the governing
section in this matter, and thus we urge this Court
not to frame its decision in terms of the statutory
absolute priority rule. That section 507 does not
control here is addressed below.
B. The Code permits distributions and
dispositions outside of the “statutory
priority scheme” of section 507.
Where we part ways with the U.S. Trustee and the
Solicitor General is the conclusion that since section
112%b) is not controlling in this case, that section
507 must be the governing section, which they argue
prohibits distributions that do not strictly comply.
This of course is the foundation of the argument by
Petitioners that what was violated here was, if not the
absolute priority rule, then at least the “statutory
priority scheme.” Section 507, however, is not vio-
lated by the approval of the settlement in this case.
As the Third Circuit below held, there is no indica-
tion that Congress legislated with settlements in
mind, nor that settlements must comply with section
507. Jevic, Pet. App. 16a, n. 7. (“If § 103(a) meant that
all distributions in Chapter 11 must comply with the
priorities of § 507, there would have been no
need for Congress to codify the absolute priority rule
specifically in the plan confirmation context.”)
20
Equally important, in framing its ultimate ruling,
the Third Circuit referred not to section 112%b), but
rather to section 507, holding that a bankruptcy court
may “approve settlements that deviate from the
priority scheme of § 507 of the Bankruptcy Code only
if they have ‘specific and credible grounds to justify
[the] deviation.” 787 F.3d at 184, citing Iridium, 478
F.3d at 466. A key part of this ruling is that the focus
is on section 507, and not on section 1129(b) and the
statutory “absolute priority rule.”
Pre-plan distributions, such as in a sale or settle-
ment do not necessarily implicate section 507 nor any
other “priority scheme.” As Professor Lubben points
out, the Code may allow the debtor to distribute
assets before the confirmation of a plan, and without
reference to any notion of absolute priority or the
distribution scheme in section 507. He gives numer-
ous examples of situations in which parties are
exempt from the normal rules of distributions, or
otherwise are permitted to opt out of “standard”
priority schemes, including counter-parties to execu-
tory contracts, and critical vendors. Id. at 596.
Holders of swaps and derivatives are largely exempt
from the bankruptcy process. Id. at 597. Ironically,
the very “priority” which the Petitioners seek in this
case is one example of deviation in which one group of
unsecured creditors is paid before other unsecured
creditors.
Further, Professor Lubben correctly demonstrates
that interim distribution, as here, before plan confir-
mation, which are part of a settlement are a form of
distribution and value allocation that are done
without any determination of absolute priority. “A
debtor in litigation with a counterparty might enter
21
into a settlement, and that settlement might ulti-
mately provide a greater recovery than the creditor-
counterparty would have received if the debtor was
liquidated.” Id. at 597. “The debtor-firm’s assets at
the end-point of the case are subject to the rule, but
those assets might have been significantly reshaped
before that point. Moreover, that reshaping may have
allowed substantial deviation from the absolute
priority rule that would have governed on the day the
bankruptcy case commenced.” Id. at 598.
Thus, the notion that all distribution schemes
require adherence to the “statutory priority” scheme
is not accurate. Settlements and sales, by their very
nature, and interim timing, are the most pertinent
examples and govern here.
To a limited extent, this Court has addressed the
issues of settlements, although not in the context
presented here, and under an entirely different
code section. Thus, in Protective Committee for
Independent Stockholders of TMT Trailer Ferry, Inc.
v. Anderson, 390 U.S. 414 (1968) (“TMT”) the Court
was asked to decide whether a bankruptcy court could
approve a “proposed compromise forming part of a
reorganization plan [as being) fair and equitable.”
Id. at 425. This Court did state that the “require-
ment ... that plans be both “fair and equitable”
appllies} to compromises as to other aspects of
reorganizations.” Id. at 424.
This Court’s other rulings in TMT demonstrate that
settlements may be approved without any showing of
“absolute priority” and that the “fair and equitable”
doctrine directs a court to consider various equitable
factors. For example, in TMT this Court stated that
if the record had shown an “adequate and intelligent
22
consideration of the merits of the claims, the difficul-
ties of pursuing them .. . and the fairness of the terms
of the settlement. . .” then “it would without question
have been justifiable to approve the proposed compro-
mises.” Id. at 434.
TMT is not dispositive. First, it was decided under
a prior statutory scheme for former Chapter X, (id. at
418) and gives no recognition to the deletion of the
“fair and equitable” standard in former Chapter XI. It
was also ruling only on a settlement that “form[ed]
part of a reorganization plan.” Jd. at 425. The Second
Circuit squarely rejected the notion that TMT applies
to a settlement “presented for court approval apart
from a reorganization plan,” stating that in such cases
the priority rule of 11 U.S.C. § 1129 is not necessarily
implicated. In re Iridium Operating LLC, 478 F.3d
452, 463 (2d Cir. 2007).
What is required, therefore, in order to pass muster
with the fair and equitable test, is an adequate
and informed consideration of the fairness of the
settlement, among other factors.” We submit this
pragmatic test is the core holding, and is more
pertinent to this dispute. Because the bankruptcy
court below did in fact, conduct such an investigation,
and did make adequate and informed findings, its
ruling should not be disturbed. “Here, the Drivers
mount no real challenge to the Bankruptcy Court’s
* “We recognize four criteria that a bankruptcy court should
consider in striking this balance: (1) the probability of success
in litigation; (2) the likely difficulties in collection; (3) the com-
plexity of the litigation involved, and the expense, inconven-
ience, and delay necessarily attending it; and (4) the paramount
interest of creditors.” Jn re Martin, 91 F.3d at 393. Respondents
challenge whether Martin is correct. Even if it does apply, the
standards it announces are satisfied in this case.
23
findings that there was no prospect of a confirmable
plan and that conversion to Chapter 7 was a bridge to
nowhere.” Jn re Jevic Holding Corp., Pet. App. 14-15a.
Ill. Petitioners seek an unwarranted
expansion of the absolute priority rule
that could harm both other commercial
and individual bankruptcy cases.
The unwarranted expansion of the absolute priority
rule, sought here by Petitioners, would be harmful
to modern bankruptcy practice, and would almost
certainly injure numerous business debtors as well as
individual chapter 11 cases. In short, this case has
potent.al consequences far beyond the Drivers.
One area of potential harm from an undue expan-
sion of absolute priority would occur in the context of
commercial real estate cases. Modern bankruptcy
practice currently addresses a large number of com-
mercial real estate cases.” One report states that,
“Since [2012] the volume of real estate restructurings
has risen significantly, including the high profile
chapter 11 case In re General Growth, Inc.; In re
Extended Stay Inc.; In re Innkeepers USA Trust; and
In re MSR Resorts Golf Course LLC.” Facilitation of
restructuring of commercial real estate, (mostly
* See generally, David R. Kuney, Chapter 11 Cases Involving
Real Estate Business, in COLLIER GUIDE TO CHAPTER 11, KEY
TOPICS AND SELECTED INDUSTRIES, ¥ 21.07[8).p 21.114 (Alan
Resnick and Henry J. Sommer, ed., 2013).
*" Kirkland & Ellis, LLP, Recent Developments in Bankruptcy
Law Leave Many Real Estate Finance Issues Unresolved (March
2012), https://Awww.kirkland.com/siteFiles/Publicationa/Alert_
031212. pdf.
24
“single asset real estate cases”) has been shown to
serve valid policies and macro-economic concerns. ”
The absolute priority rule and its “new value corol-
lary” is now a dominant consideration in the financial
restructuring of commercial real estate cases, both
large and small.” Real estate restructurings typically
look to the new value corollary as the foundation for
their restructurings. This is generally true because
former owners frequently seek to retain their equity
* Professor Ken Klee writes as follows:
Contrary to the claim that the common pool problem
is the sole or primary basis to evaluate the desirability
of allowing SARE debtors access to chapter 11, three
principal arguments, developed below, powerfully
favor access to chapter 11 to allow SARE debtors an
opportunity to reorganize: First, chapter 11 smoothes
out market inefficiencies, particularly during massive
real estate downturns. Second, federal public policy
supports giving property owners a chance to save
their investments. Third, macro-economic and social
policies favor reorganization of SARE debtors.
Kenneth N. Klee, One Size Fits Some: Single Asset Real Estate
Cases, 22 CORNELL L. REV. 1 (2002).
* Paul B. Lewis, 203 N. Lasalle Five Years Later: Answers to
the Open Questions, 38 J. MARSHALL L. REV. 61, 96 (2004), who
writes aa follows:
In practice, the new value exception is overwhelm-
ingly employed in single-asset real estate cases. See
David Gray Carlson & Jack F. Williams, The Truth
About the New Value Exception to Bankruptcy’s
Absolute Priority Rule, 21 CARDOZO L. REV. 1303,
1305 n.10 (2000) (noting that an empirical survey of
post-Ahlers cases shows ninety-two percent of new
value cases involve real estate); Lynn M. LoPucki &
William C. Whitford, Preemptive Cram Down, 65 AM.
BANKR. L.J. 625, 645 n.91 (1991).”
25
ownership through contributing the necessary capital
to the debtor entity.
Just as in the railroad cases earlier, the new value
corollary is now the key factor at work in commercial
real estate restructurings. It permits equity holders
to participate in a reorganizs.ion and to retain their
equity interests, even when unsecured creditors were
not paid in full, provided that they agree to provide
the necessary capital to restore the debtor to an
economically viable entity. On-going value is
preserved and liquidation avoided.
Despite the broad application of this corollary to the
absolute priority rule, this Court has not issued any
definitive ruling on whether the corollary survived
the enactment of the 1978 Code. In 203 North
LaSalle, this Court was confronted with a large scale
commercial real estate case in which the principal
issue was whether the absolute priority rule was
subject to the “new value” exception or corollary,
which had developed under pre-Code law. This, of
course, was the core ruling of Case v. Los Angeles
Lumber. Justice Douglas had declared that equity
holders could participate, even without compliance
with the absolute priority rule, when they made an
equity contribution that was necessary and essential
to the reorganization.
26
Most commentators agree that this Court implicitly
held that the corollary continues to be valid.* Lower
courts also continue to use it.”
Nevertheless, it would not be surprising, that
Petitioners, and some of their amici, would favor
using a decision here as a stepping stone to a hoped-
for retreat from this Court’s broader view of new value
and absolute priority as a way of closing the door to
otherwise worthy chapter 11 debtors.
Significantly, both in this case, and others, the
United States (as Solicitor General, and as the U.S.
Trustee) has challenged the existence of the new
” Paul B. Lewis, 203 N. Lasalle Five Years Later: Answers to
the Open Questions, 38 J. MARSHALL L. REV. 61, 83-84 (2004).
(“Courts and commentators have interpreted the Supreme
Court's opinion as an implicit recognition of the ongoing viability
of the new value exception.”)
" See e.g. In re Red Mountain Mach. Co., 448 B.R. 1, 14-15
(Bankr. D. Ariz. 2011), aff'd, 471 B.R. 242 (D. Ariz. 2012):
The Supreme Court has addressed the absolute
priority rule at least twice since the Ninth Circuit's
holding in Bonner Mail. First, in the Bonner Mall case
itself the Supreme Court expressly declined to vacate
the Ninth Circuit’s opinion. Second, although given
the opportunity to overrule the new value corollary as
recognized by both the Seventh and Ninth Circuits,
the Court expressly declined to do so in 203 North
LaSalle. Instead of overruling their interpretations of
the new value corollary, the Supreme Court held that
one or two of the five elements of the new value
corollary could not be satisfied when old equity retains
the exclusive right to contribute the new value
. .[Tlhe Supreme Court’s holding in 203 North
LaSalle \eaves intact the Ninth Circuit’s holding in
Bonner Mall whenever exclusivity has terminated, as
it nas here.
27
value corollary, stating its rigid view of absolute
priority. In Ahlers, similar to its view here, it urged
this Court to “hold that codification of the absolute
priority rule has eliminated any ‘exception’ to that
rule suggested by Los Angeles Lumber.” Northwest
Bank Worthington v. Ahlers, 485 U.S. 197, n.3 (1988).
A similar argument was made in 203 North LaSalle.
This Court, however, found the view of the United
States, to be “starchy” and declined to adopt it.*”
The absolute priority rule is also a matter of
national dispute among the various courts a applied
in individual chapter 11 cases. Here the issue is
whether individual debtors can retain some of their
assets [acquired after the bankruptcy case] even if
creditors are not paid in full. Thus, the American
Bankruptcy Institute recently concluded in its multi-
year study of bankruptcy as follows:
Finally, the issue of the applicability of the
absolute priority rule in individual chapter
11 cases has been a fundamental-yet-trou-
blesome issues addressed by the courts.
Currently, there is no judicial consensus on
whether (and to what extent) the BAPCPA
Amendments abrogated the absolute priority
rule by excepting postpetition property
“We understand the Government, as amicus curiae, to take
the starchy position not only that any degree of causation
between earlier interests and retained property will activate the
bar to a plan providing for later property, Brief for United States
as Amicus Curiae 11—15, but also that whenever the holders of
equity in the Debtor end up with some property there will be
some causation. . .” Bank of Am. Nat. Trust & Sav. Ass'n v. 203
N. LaSalle St. P’ship, 526 U.S. 434, 451, (1999).
28
and earnings from amended 11 U.S.C.
§ 112% b\( 2 Bii).”
Thus, the universe of debtors who have a major
stake in this case, is large, and in particular, if the
decision adopts a rigid view of absolute priority. Not
only does this case not require any application of the
absolute priority rule, but even if it did, it would not
require the rigid and overarching doctrine that
permeates the arguments of Petitioners.
This case is not the correct vehicle to address the
full scope and application of the absolute priority rule.
Nevertheless, because Petitioners have used the
absolute priority rule as a key part of their
foundational argument, they seem to have invited
this Court to adopt broad based views on absolute
priority which may well spill over, intended or not,
into another major area of bankruptcy law without a
chance to perceive its full consequences of doing so.
We urge this Court not to frame its decision on the
basis of “absolute priority.”
* American Bankruptcy Institute Commission to Study the
Reform of Chapter 11, Final Report and Recommendations 318
(2014). See also, In re O’Neal, 490 B.R. 837 (Bankr. W.D. Ark.,
2013) citing, Andrew G. Balbus, Continued Disagreements Over
the Application of the Absolute Priority Rule to Individuals in
Chapter 11: Friedman and Maharaj, 21 NORTON BANKR. L. &
Prac. 755, 761 (2012).
29
CONCLUSION
For the foregoing reasons, the decision of the Third
Circuit should be affirmed.
Dated: October 17, 2016
Respectfully submitted,
DAVID R. KUNEY
Counsel of Record
WHITEFORD, TAYLOR &
PRESTON, LLP
1800 M. Street. N.W.
Suite 450 North
Washington, D.C. 20036
(202) 659-6807
dkuney@wtplaw.com
Attorneys for Amici Curiae
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