In re U.S. Truck Co.

U.S. Truck Company, Inc. (U.S. Truck) (defendant), which was in the business of intrastate shipping, filed a Chapter 11 petition in June 1982. The bankruptcy court approved U.S. Truck’s rejection of its collective bargaining agreement. All of the local unions that had participated in the rejected agreement negotiated new agreements with U.S. Truck except for one dissenter. With the presiding bankruptcy judge having resigned, U.S. Truck sought confirmation of its reorganization plan in the district court. The Teamsters National Freight Industry Negotiating Committee (the Teamsters) (plaintiff), whose unsecured claim was based on U.S. Truck’s rejection of the collective bargaining agreement, objected to plan confirmation on the grounds that U.S. Truck had gerrymandered classes of impaired creditors in order to ensure a favorable vote, in violation of 11 U.S.C. § 1129. The Teamsters’ claim, for example, was placed in its own class (Class IX), distinct from a class encompassing all unsecured creditors holding claims above $200 and including claims arising from the rejection of executory contracts (Class XI). The district court held that U.S. Truck’s plan did not violate § 1129, concluding that the separate classification of the Teamsters’ claim was warranted because its interests were substantially different than the interests of Class XI. The Teamsters appealed.