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§ 1129(b)(1) is superfluous unless Congress contemplated that unsecured creditors could be separately classified and, since it is not drafted as an exception to § 1122, this implies that § 1122 was not intended to require all claims of equal rank to be classified together.
As noted above, the examples of senior and subordinated debt used in the legislative history involve claims that all have the same legal rights against the debtor, and are distinguishable only by their rights vis a vis other parties, in this case other creditors.123 But if subordination agreements among creditors, which do not affect their legal rights against the debtor, are sufficient basis for separate classification, then so could be the existence or nonexistence of a guarantee, or a right of recourse against a debtor's general partner, or a right of recourse other than against the bankruptcy estate, as in Johnston.124 Indeed, these were precisely the kinds of situations for which separate classification was recognized as appropriate under the Act.
a. "Legal Nature" of Claims Determines Similarity
The first circuit court opinion to consider the classification issue under the Code simply assumed without careful analysis that § 1122(a) was derived from chapter X, and thus "all creditors of equal rank with claims against the same property should be placed in the same class."125 This conclusion was reinforced by the Fifth Circuit's Greystone opinion,126 which has been followed uncritically by many courts since. For example, the Second Circuit without analysis apparently adopted the "legal nature" test of similarity in concluding that "the different origins of the FDIC's unsecured deficiency claim and general unsecured trade claims, claims which enjoy similar rights and privileges within the Bankruptcy Code, do not
123
This is precisely why the Congressional Record refers to "classes of equal claims," because they are equal in their rights against the debtor. The House report discussion specifically recognizes that these classes have equal rights vis a vis the debtor: "One aspect of this test that is not obvious is that whether one class is senior, equal or junior to another class is relative and not absolute. Thus from the perspective of trade creditors holding unsecured claims, claims of senior and subordinated debentures may be entitled to share on an equal basis with trade claims." House Report, supra. The same is true from the perspective of the debtor.
124
In re Johnston, 21 F.3d 323 (9th Cir. 1994).
125
E.g., Granada Wines, Inc. v. New England Teamsters & Trucking Indus. Pension Fund, 748 F.2d 42, 46 (1st Cir. 1984), quoting Los Angeles Land and Scherk v. Newton, supra.
126
In re Greystone III Joint Venture, 948 F.2d 134 (5th Cir. 1991), cert. denied, 113 S. Ct. 72 (1992).
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