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Then in 1997 the Seventh Circuit joined the Ninth Circuit's Bonner Mall opinion in holding that the new value corollary survived the adoption of the Code, in 203 N. LaSalle.379 In that single asset case the secured creditor was owed $93 million and the real property collateral was worth $56 million. The debtor proposed a new value plan in which the partners would contribute $3 million on the effective date of the plan and five annual installments of $625,000 each thereafter. The bankruptcy court found the present value of the contributions to total $4.1 million, and confirmed the plan. The Seventh Circuit affirmed and the Supreme Court granted certiorari.
Unfortunately the Supreme Court's 203 North LaSalle380 opinion fails to answer the question the Court had raised ten years earlier, whether the new value corollary exists under the Code. The Court noted that the Code's "partial codification of the absolute priority rule" "does not codify any authoritative pre-Code version of the absolute priority rule."381 It analyzed the history of the concept under the Act and the legislative history of the adoption of the Code's partial codification, but reached only the weak double-negative conclusion that "this history does nothing to disparage the possibility apparent in the statutory text, that the absolute priority rule now on the books as subsection 1129(b)(2)(B)(ii) may carry a new value corollary."382 It considered at length but ultimately declined to resolve whether "on account of" refers to a "but for" causation test, which was the government's "starchy position,"383 or a stronger proximate cause, as the debtor urged. The Court concluded that even under the latter interpretation the plan before it was "doomed" "by its provision for vesting equity in the reorganized business in the Debtor's partners without extending an opportunity to anyone else either to compete for that equity or to propose a competing
378 In re Coltex Loop Central Three Partners, L.P., 138 F.3d 39 (2nd Cir. 1998). This adoption of the reasoning in Bryson is hardly surprising since the judge who authored Coltex is the same judge who authored Bryson, Judge Jane Restani of the United States Court of International Trade, sitting by designation in both cases.
In re 203 N. LaSalle Street Partnership, 126 F.3d 955 (7th Cir. 1997).
380 Bank of America v. 203 N. LaSalle St. Ptshp., 119 S. Ct. 1411 (1999)
381 119 S. Ct. at 1419.
382 Id. at 1419.
383 Id. at 1420.
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