In 2007 and 2008, a number of related entities (the "Chicago Debtors") borrowed in excess of $150 million to build a hotel and convention center near Chicago's O'Hare Airport. Their lenders designated Amalgamated Bank as administrative agent and trustee. At about the same time, another group of related entities (the "Los Angeles Debtors") borrowed in excess of $140 million to purchase a hotel and build a parking garage near the Los Angeles’ LAX Airport. Their lenders also designated Amalgamated Bank as administrative agent and trustee. Both the Chicago Debtors and the Los Angeles Debtors ran into financial trouble and filed Chapter 11 petitions in August of 2009. Both groups of debtors filed a similar reorganization plans. Under both plans, the debtors proposed to sell their assets and distribute the proceeds among their creditors. They also proposed procedures for conducting the sales, which included selling the assets free and clear of liens without allowing the lenders to bid their credit at the sales. Bankruptcy Judge Black (N.D. Ill.) ruled that the plans could not be confirmed because they did not comply with § 1129(b)(2)(A). Both groups of debtors requested and received certifications for direct appeal to the Seventh Circuit.

In their opinion, Judges Cudahy, Manion, and Hamilton affirmed. The only real issue on appeal was the proper construction of the Bankruptcy Code’s § 1129 and, specifically, the exceptions to the requirement that a reorganization plan must either be accepted by the claimants or leave their claims unimpaired. Subsection (b)(1) requires those plans to be "fair and equitable." Subsection (b)(2)(A) defines "fair and equitable." Historically, most debtors that propose plans that are not accepted by the claimants (known as cramdown plans) have sought approval under subsection (b)(2)(A)(ii). But subsection (ii) requires that any asset sale permit credit bidding (where secured claimants can offset their claims against the assets’ purchase price). Neither plan at issue in this appeal allows credit bidding so neither plan can be confirmed under subsection (ii). Instead, the debtors seek confirmation under subsection (b)(2)(A)(iii). That subsection allows confirmation if the claimants receive the "indubitable equivalent" of their claims. The Court addressed two questions -- whether any plan could be confirmed under subsection (iii) or only those that fell outside the scope of (i) and (ii), and if the former, whether the debtors' plans met the "indubitable equivalent" test. On the first of those issues, the Court noted that the Fifth and Third Circuits have recently held that subsection (iii) can be used for any plan. But the Court's own analysis of the statute differed. First, it found that the statute did not unambiguously allow confirmation of the debtors' plans. In fact, it found that the better reading of the statute was that subsection (iii) defined "fair and equitable" only for those plans that did not fit the descriptions in subsections (i) or (ii). It concluded, therefore, that the Code contemplated that an asset sale meeting the subsection (ii) description must satisfy the subsection (ii) requirements. These plans did not.