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be classified separately from identical claims still held by the debtor's employees. The "legitimate business reason" justifying this separate classification, and preferential treatment of the employees' claims, was that if not so treated the employees "would react so negatively as to jeopardize peaceful labor relations," while the insurance company held no such threat.
The Fifth Circuit subsequently upheld an arguably gerrymandered classification scheme on the "business justification" rationale, even though the separate classes were treated identically. This ruling in Briscoe168 is discussed more fully in the next section since it was in reality a creditors' interests rationale, focusing on the creditor's interests rather than the debtor's business needs. The Seventh Circuit's Wabash opinion also referred to a "business reasons" justification for separate classification but was in reality based on the creditor's interests rather than the debtor's, so it is also discussed in the next section.
In U.S. Truck,169 the Sixth Circuit allowed separate classification of the Teamsters' Union claims because the union had a "different stake [than other creditors] in the future viability of the reorganized company" and because its vote might be affected by a "noncreditor" interest in the ongoing employment relationship.170 On this analysis of the creditors' relative interests, it might not be improper to provide separate classification of the secured creditor's deficiency claim on the ground that the vote of such claim will be uniquely affected by the treatment of the secured claim and by the fact that the deficiency claimant has a foreclosure remedy, if confirmation is denied, which general unsecured creditors lack.
There is legislative history to support this analysis. As noted above, the unfair discrimination analysis contemplated separate classes of equal rank as against the debtor but of differing "relative" rights.171 Moreover, the original House bill contained a provision permitting the court to designate any claim held by a creditor with a conflict of interest, "for
167
In re Chateaugay Corp., 89 F.3d 942 (2d Cir. 1996).
168
In re Briscoe Enterprises, Ltd., II, 994 F.2d 1160 (5th Cir.), cert. denied, 126 L ED. 2d 451 (1993).
169
In re U.S. Truck, 800 F.2d 581, 587 (6th Cir. 1986).
170
See also In re Jersey City Medical Center, 817 F.2d 055, 1061 (3d Cir. 1987)(chapter 9 case, upholding separate classification of unsecured claims of physicians, medical malpractice claimants, employee benefit plan participants and trade creditors, where the first two classes would be paid from a nondebtor fund and the latter two classes received equal treatment).
171
See Section III(A)(3), "Implications from the Code's Legislative History" supra.
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