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In Case, the Supreme Court stated that contributions of cash or an acceptable cash substitute might satisfy the requirement, but it rejected the owners' contribution of financial standing or management services because they had "no place in the asset column of the balance sheet" and simply reflected "vague hopes or possibilities."400 More recently, in Ahlers,401 the Court explained that the value offered must be tangible, alienable, enforceable, and something of value to the creditors at the time the plan is confirmed. The debtor's promise of "free" future labor does not suffice.402
The contribution must be capable of being valued.403 It need not be cash, as a contribution of real property may suffice.404 But a release of an unsecured claim by an insider or affiliated party is not sufficient, even though it improves the balance sheet.405 Pledge of the reorganized debtor's equity is even less protection than the new value principle itself.406
400 Case v. Los Angeles Lumber, 308 U.S. at 122-23, 60 S. Ct. at 10-11.
401 Norwest Bank Worthington v. Ahlers, 485 U.S. 197, 204, 108 S. Ct. 963, 99 L. Ed. 2d 169 (1988).
402 Accord Unruh v. Rushville State Bank, 987 F.2d 1506, 1510 (10th Cir. 1993); In re 8315 Fourth Avenue Corp., 172 B.R. 725, 738 (Bankr. E.D.N.Y. 1994) (shareholders' commitment to provide labor for renovation and operation of the estate's hotel not new value); In re Woodmere Investors Limited Partnership, 178 B.R. 346 (Bankr. S.D.N.Y. 1995). Earlier cases described the contribution as requiring an element of economic risk. In re Potter Material Service, Inc., 781 F.2d 99, 103 (7th Cir. 1986) (the contributor must also bear an economic risk of loss). The debtor in In re Green, 98 B.R. 981 (Bankr. 9th Cir. 1989), sought to retain up to a 50% interest in litigation. The court would assign him an interest upon completion of the lawsuit, determined with reference to the debtor's "substantial contribution" in prosecuting the action. The plan did not satisfy the Case v. Los Angeles Lumber exception.
403 Stegall, 865 F.2d at 142-44 (the contribution of one hundred pigs among other farm related items of unknown value does not satisfy the new value exception). Judge Posner's opinion speaks in terms of a "leviable" asset.
404 In re Treasure Bay Corp, 212 B.R. 520 (Bankr. S.D. Miss. 1997).
405 Sun Valley Newspapers, 171 B.R. at 77-78. In the lower court's opinion in Snyder, the debtor's father's release of his claims did not constitute a contribution of new value. In re Snyder, 99 B.R. 885, 890 (Bankr. C.D. Ill. 1989), aff'd, 144 B.R. 393 (C.D. Ill. 1990), aff'd, 967 F.2d 1126 (7th Cir. 1992). In Lettick Typografic, 103 B.R. at 37, the offer to waive an insider's unsecured claim had little value to an unsecured creditor class which would be paid only on a pro-rata basis. To the contrary is In re Future Energy Corp., 83 B.R. 470, 498 (Bankr. S.D. Ohio 1988), where the plan proponent acquired two secured claims at a discount then released them as part of its new contribution. In the court's view, a transaction which benefits the debtor and is a real economic detriment to the shareholder may be new value.
406 8315 Fourth Avenue Corp., 172 B.R. at 739.
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