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class retains its interest either for "dividends or only for purposes of control." 223
The Ninth Circuit adopted and applied the Wabash analysis in holding that an international labor union should not be treated as an equity owner of a local union that was a chapter 11 debtor, even though the international received dues from the local.224
Another classification strategy that has been attempted, so far without success, is to classify an undersecured claim as fully secured. The secured creditor who wishes to exercise the veto power of its deficiency claim vote objects to such treatment on the ground that the § 1111(b) election is for the creditor to make, not the debtor, and that the creditor is "entitled" to have an unsecured deficiency claim pursuant to § 506. This argument has prevailed in at least four reported cases.225
These opinions ignore the clear legislative history that § 1111(b) was enacted to prevent cash out at an appraised value, not to provide a veto power. Nor is there any provision of §§ 506 or 1129 that would prevent such treatment, provided the unsecured creditor classes do not object. The cases thus rest solely on the negative implication of § 1111(b) that because it is the creditor's election to make, the debtor cannot make it for the creditor. Perhaps it could also be argued that § 1122 requires classification based on the nature of the claim as of the petition date, not as of the effective date of the plan.
Another way to deal with the secured creditor's potential domination of the unsecured creditor class, at least if the secured claim is nonrecourse, is to avoid the creation of the § 1111(b) deficiency claim. This can be done if the plan provides for sale of the collateral, at which the secured creditor is provided the right to credit bid, because Code does
223 Northern Pac. Ry. Co. v. Boyd, 228 U.S. 482, 508, 33 S. Ct. 554, 561 (1913).
224 Security Farms v. General Teamsters, Warehousemen and Helpers Union Local 890, 265 F.3d 869 (9th Cir. 2001).
In re Coventry Commons Associates, 155 B.R. 446 (E.D. Mich. 1993); In re B&B West 164th Street Corp., 147 B.R. 832 (Bankr. E.D.N.Y. 1992); In re 266 Washington Associates, 141 B.R. 275 (Bankr. E.D.N.Y. 1992)("[The Amended Plan bunches the entire Citibank claim and would force Citibank to accept treatment as a fully secured creditor. While this proposed treatment may at first appear magnanimous on the Debtor's part it is, in fact, in direct violation of 11 U.S.C. §§ 506(a) and 1111(b). The practical effect of such classification is to vitiate Citibank's rights of suffrage as an unsecured creditor."); In re Channel Realty Associates Limited Partnership, 142 B.R. 597 (Bankr. D. Mass. 1992)("A debtor who is proposing a plan cannot on its own initiative make the section 1111(b)(2) election and place an undersecured creditor into a single secured class.").
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