Rethinking Absolute Priority After Ahlers

There was no evident reason why the Supreme Court granted certiorari in Norwest Bank Worthington v. Ahlers. It can be conceded that the issue was important: in the midst of an agricultural depression, a farmer was trying to hang onto his farm without paying the full amount of his bank debt. The farmer argued that he ought to be able to do so because he was offering to contribute “new value” beyond what he was obliged to contribute – specifically, his efforts as a farmer.

For Ahlers is a case with a past, as well as a future. Thus, in Part II, I sketch the history of the absolute priority doctrine. I undertake to show also how the Supreme Court had available two very different paths to its result – one constitutional, one statutory. And I offer a few thoughts on the relationship between the two. In Part III, I address myself directly to the new value rule. I try to show that it is a rule whose parentage is at best questionable. I also try to give an account of what a new value rule might look like. In that context, I suggest that Justice White may have invalidated any new value rule that did exist, and indeed, that there may never have been any adequate basis for such a principle.