(4) A number of scholars have written about the evolution of the absolute priority rule
. See, e.g., John D.
Roenfeldt, "Security Pricing and Deviations from the Absolute Priority Rule
in Bankruptcy Proceedings," Journal of Finance (December 1990), pp.
Part I examines the origin of the absolute priority rule
from its beginnings in railroad bankruptcy to its current codification in the Code.(12) Part II traces the historical development of the new value exception from its origins in Case v.
Again, GM and Chrysler's failure was economically, and politically, untenable, but in reworking the companies outside of established law, the government's intervention in these two cases framed a conflict between the absolute priority rule
and the reality that strict adherence to that rule might not work for the best.
The absolute priority rule
in Chapter 11 provides that the shareholders (or any junior class of creditors) may not retain any interest or receive any distribution unless a more senior class is either paid in full or consents.
Under the Bankruptcy Act, a plan which permitted the debtor's stockholders to receive stock in the reorganized debtor in exchange for contributions of added capital could under certain conditions satisfy the absolute priority rule
and be considered "fair and equitable" even though a senior class was not paid in full.
Since under the proposed plan the Creditor was not actually offered 100 cents on the dollar, yet provided that the Debtor would retain certain property, the Ninth Circuit found the absolute priority rule
Strict adherence to the Absolute Priority Rule
is not the goal of Chapter 11.
Anyone with an internet connection now can learn how the firm's attorneys think about disgorgement ("The word that strikes knee-knocking terror in the minds and hearts of bankruptcy professionals"), a 105 injunction ("The last (and often the first) refuge of a scoundrel"), a 2004 examination ("Synonym: fishing expedition"), the absolute priority rule
("The Hammer of the (Unsecured Creditor) Gods"), and the United States Trustee ("The hall monitor of the bankruptcy process").
traditionalists, on the other hand, the absolute priority rule
to the absolute priority rule
, (27) even though none of the Supreme
at 100-01 ("[A]lthough Congress did soften the absolute priority rule
in some ways, it did not create any exception for 'gifts' like the one at issue here").