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creditors' relative interests to justify separate classification.197 A North Carolina bankruptcy court suggested that the deficiency claimant's "non-creditor" interests, such as the fact that it had a guaranty and sought to foreclose its secured debt, might justify separate classification, but not where it would receive the same treatment as other unsecured claims.198
Other courts, however, reject the creditors' relative interests argument and conclude the purpose of § 1111(b) was to permit the undersecured creditor to dominate the unsecured class vote.199 For example, an Illinois bankruptcy court applied Johnston in concluding that the finding of substantial similarity is a fact issue, but ultimately concluded that a tort claim was substantially similar to trade debt contract claims and rejected an argument that the claim holders' differing motivations for voting was a legitimate factor to consider.200 New Mexico and Massachusetts bankruptcy courts continue to rely on the argument that trade debts may not be separately classified where the purpose is gerrymandering.201
One of the separate classification justifications, referred to above as the "business reasons" rationale, is generally rejected by courts unless the separate classes are treated differently. Greystone called this attempted justification "specious" unless there was a business necessity of providing differing treatment.202 If a plan proponent were to provide different treatment, however, this would raise the separate question of whether that treatment violated the 1129(b) prohibition on unfair discrimination. Although this is not per se a
197
In re Creekside Landing Ltd., 140 B.R. 713, 715 (Bankr. M.D. Tenn. 1992)(separate classification upheld on voting incentive rationale, but confirmation denied due to insufficient new value contribution).
198 In re Deep River Warehouse, Inc., 2005 WL 2319201 (Bankr. M.D.N.C. 2005).
199
In re 500 Fifth Avenue Associates, 148 B.R. 1010 (Bankr. S.D.N.Y. 1993). Accord, John Hancock Mutual Life Ins. v. Route 37 Business Park Assoc., 987 F.2d 154 (3d Cir. 1993).
200
In re Bloomingdale Partners, 170 B.R. 984 (Bankr. N.D. Ill. 1994)(contains an excellent, thorough analysis of the history, structure and case law underlying § 1122, ultimately adopts a "restrictive classification" method and rejects both a "gerrymander/reasonableness" standard and a "flexible classification" standard).
201
In re National/Northway Ltd. Ptshp., 279 B.R. 17 (Bankr. D. Mass. 2002)(that creditors might have different economic incentives is irrelevant to classification); In re Dean, 166 B.R. 949 (Bankr.
202
948 F.2d at 141.
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