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gerrymandering has resulted in a rewriting of that section." Moreover, the court concluded that issues of gerrymandering should be addressed as part of the unfair discrimination analysis under § 1129(b), which was not at issue before the court because every class had accepted the plan. "In summary, there is no requirement in § 1122 that similar claims be classified together."
In the Dow Corning reorganization, the bankruptcy court held that contingent claims could be classified separately from noncontingent claims, and that tort claims could be classified separately from contract claims.159 In arriving at that conclusion the court extensively analyzed the "legitimate business reason" requirement and strongly urged that the requirement be rejected. The District Court affirmed and went even further in rejecting the necessity for justification of separate classification, concluding that "the only inquiry a bankruptcy court is required to make under §1122(a) is whether the claims within a class are substantially similar," and "if similar claims are placed in separate classes the classes are properly constituted." Thus any additional objection that the classification is improper must occur under the good faith standard of § 1129(a)(3) or the unfair discrimination prohibition of § 1129(b), but these provisions do not necessarily require a legitimate business reason for the classification, according to the District Court. The District Court also indicated that the suggestion in In re U.S. Truck160 that a classification designed to obtain an accepting class would be inappropriate was merely dictum, since that court had concluded such was not the purpose of the classification before it.
If some justification is necessary for separate classification of similar claims, what justifications may suffice? Courts have generally considered three categories of proposed justifications: (1) different legal rights, (2) debtor's business needs, and (3) creditors' interests. The "different legal rights" justification, however, usually succeeds only if the court deems the legal rights to be sufficiently different that the claims are not similar. That is not really a justification for separate classification of similar claims, however, nor is a justification necessary on that conclusion, since § 1122 explicitly prohibits classification of
D. Colo. 1995)(chapter 9 case).
159 In re Dow Corning Corporation, 244 B.R. 634 (Bankr. E.D. Mich. 1999),aff'd, 2000 U.S. Dist. LEXIS 16385 (E.D. Mich. 2000).
160 In re U.S. Truck Co., 800 F.2d 581 (6th Cir. 1986). 34
