Richard M. Hynes & Steven D. Walt
37 Campbell L. Rev. 25 (2015)
ABSTRACT. Some bankrupt municipalities have proposed plans of reorganization that offer substantially greater recoveries to active workers and retirees than those offered to other creditors.Because these greater recoveries are not mandated by a priority enjoyed by the active workers and retirees, a judge can only approve such a plan if it does not “discriminate unfairly” against a class of disfavored creditors that votes against the plan. This Article describes the law defining the unfair discrimination standard, identifies the categories of circumstances in which discrimination between coequal classes is permitted, and argues that the claims of retirees and active workers do not fall into any of these categories. The Article concludes that the current law does not allow a judge to approve a reorganization plan that provides retirees and active workers with a greater recovery.
AUTHORS. Richard M. Hynes is the Nicholas E. Chimicles Research Professor in Business Law and Regulation at the University of Virginia School of Law. Steven D. Walt is the Percy Brown, Jr. Professor of Law and the John V. Ray Research Professor of Law at the University of Virginia School of Law.