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BANK OF AMERICA NAT. TRUST AND SAV. ASSN. v. 203 NORTH LaSALLE STREET PARTNERSHIP Case Brief
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Case Brief Summary & Legal Analysis
tl;dr: A debtor’s old equity holders proposed a Chapter 11 plan giving them the exclusive right to contribute new capital to retain ownership. The Supreme Court held this exclusive opportunity was “property” received “on account of” their prior interest, violating the absolute priority rule.
Legal Significance: The case established that a reorganization plan giving old equity an exclusive opportunity to buy into the new entity, without market testing, violates the absolute priority rule. It sidestepped deciding the viability of the “new value” corollary itself, focusing instead on procedural fairness.
BANK OF AMERICA NAT. TRUST AND SAV. ASSN. v. 203 NORTH LaSALLE STREET PARTNERSHIP Law School Study Guide
Use this case brief structure for your own legal analysis. Focus on the IRAC methodology to excel in law school exams and cold calls.
Case Facts & Court Holding
Key Facts & Case Background
The debtor, 203 North LaSalle Street Partnership, filed for Chapter 11 bankruptcy after defaulting on a $93 million nonrecourse loan from Bank of America. The loan was secured by property valued at only $54.5 million, leaving the Bank with a large unsecured deficiency claim of $38.5 million. The debtor proposed a reorganization plan under which its existing partners—the old equity holders—would contribute new capital of approximately $6.125 million in exchange for retaining full ownership of the reorganized entity. This arrangement was designed to prevent the partners from incurring substantial personal tax liabilities that would arise from a foreclosure. The opportunity to contribute new capital and acquire the equity was granted exclusively to the old partners; no other party could bid for the equity or propose a competing plan. The Bank, as the primary impaired unsecured creditor, objected to the plan, arguing it violated the absolute priority rule under 11 U.S.C. § 1129(b)(2)(B)(ii) because its unsecured claim was not being paid in full, yet the junior equity holders were retaining property. The lower courts confirmed the plan, applying a “new value” exception to the absolute priority rule.
Court Holding & Legal Precedent
Issue: Does a Chapter 11 reorganization plan that grants a debtor’s old equity holders the exclusive right to contribute new capital and receive ownership in the reorganized entity violate the absolute priority rule of 11 U.S.C. § 1129(b)(2)(B)(ii) when a senior class of impaired creditors objects and is not paid in full?
Yes. The Court held that the plan could not be confirmed because Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmo
IRAC Legal Analysis
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Legal Issue
Does a Chapter 11 reorganization plan that grants a debtor’s old equity holders the exclusive right to contribute new capital and receive ownership in the reorganized entity violate the absolute priority rule of 11 U.S.C. § 1129(b)(2)(B)(ii) when a senior class of impaired creditors objects and is not paid in full?
Conclusion
The decision significantly constrained the application of the new value concept by Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate veli
Legal Rule
Under the absolute priority rule, 11 U.S.C. § 1129(b)(2)(B)(ii), a plan cannot Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidata
Legal Analysis
The Court's analysis centered on the meaning of the phrase "on account Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim ad minim veniam, quis nostrud exercitation ullamco laboris nisi ut aliquip ex ea commodo consequat. Duis aute irure dolor in reprehenderit in voluptate velit esse cillum dolore eu fugiat nulla pariatur. Excepteur sint occaecat cupidatat non proident, sunt in culpa qui officia deserunt mollit anim id est laborum. Lorem ipsum dolor sit amet, consectetur adipiscing elit, sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut enim a
Flash-to-Full Case Opinions
Flash Summary
- A Chapter 11 plan giving old equity the exclusive right to