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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."
A Texas court has rejected the analysis of Wabash and Corcoran, concluding that cooperative members' interests do constitute equity for purposes of the absolute priority rule. And a Florida bankruptcy court concluded that for an individual chapter 11 debtor, the absolute priority rules means that he cannot even keep exempt property, because the prohibition is against the retention of "any property."
Both Los Angeles Lumber and Kansas City Terminal had noted that it would not be a violation of the absolute priority rule if equity holders gave new value to retain their interests. This has often been called the "new value exception," although lately it has more properly been recognized as a corollary of the general rule.
A footnote in the Supreme Court's Ahlers opinion raised the question of whether the new value corollary had survived the Code's partial codification of the absolute priority rule. This led to years of circuit court dictum on the issue before the Ninth Circuit held in Bonner Mall, the first on-point decision after Ahlers, that the new value corollary had survived the Code's partial codification of the absolute priority rule. It appeared to be headed for resolution by the Supreme Court when it granted certiorari, but the parties settled before it was argued, and the Supreme Court ultimately decided the Ninth Circuit's opinion should not be vacated. In the meantime the Fourth Circuit weighed in with the conclusion that if a new value corollary survived, it requires that the opportunity to contribute the new value be put up for auction so that old equity does not retain the exclusive right to contribute. The Second Circuit agreed with that analysis in Coltex.
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. 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
