CHAPTER 11 PLAN CONFIRMATION

could never profit from their status. That conclusion may have been somewhat facile. While it is true coop members cannot legally profit from the distribution of dividends, they could profit in another sense, by utilizing assets at a cost below their true acquisition cost, and below the debt service they would have to pay if all unsecured debt were paid in full. That was not the case in Wabash because (1) the nuclear power plant had been abandoned and was not providing the debtor any value, and (2) utilities are regulated and the utility commission had already denied the coop's petition to raise rates to cover the cost of its abandoned nuclear power plant. But that may not be the case with other kinds of entities that could similarly rely on such non-equity status to retain control of a debtor and its assets while not paying objecting creditors in full, such as municipalities and nonprofit corporations.

The municipality example is well illustrated by a recent chapter 9 plan in which payments to creditors were to be derived from tax assessments. The unsecured creditors' committee objected that the debtor should be required to raise taxes to pay its debts in full. Nonetheless, the court followed Wabash that there was no equity class because the "residents of the District have no ownership interest in the debtor akin to that of shareholders of a corporation." While the residents of the hospital district obviously cannot earn dividends, the opinion ignores the fact that in another sense they earn financial benefits from the use of a hospital whose debts they are not required to pay. The analysis also ignores the Supreme Court's holding in Boyd that the absolute priority rule applies equally whether the "equity" class retains its interest either for "dividends or only for purposes of control."

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.