In Re Loop 76, LLC, 442 B.R. 713

Loop 76 LLC, the debtor, owns a single-asset office/retail complex with Wells Fargo undersecured and a secured claim of about $23 million; plan splits Wells Fargo into a secured class (class 2) and an unsecured deficiency class (class 8B) of about $6 million.
Genesee Funding has a secured claim of $7.865 million and is in class 3, while unsecured trade vendor claims are in class 8A, both allegedly accepted the plan.
Wells Fargo objects to class 8B separately from class 8A, arguing separate classification is improper under § 1122 and related Ninth Circuit rule on gerrymandering.
The court previously overruled Wells Fargo’s objections to the Genesee Funding classification in class 3, and Wells Fargo appealed that ruling.
The core legal question is whether a guaranteed deficiency claim may be dissimilar to non-guaranteed vendor claims and thus placed in a separate class.
The judge will assess, at confirmation, whether the guaranteed claim’s non-debtor source of repayment renders it dissimilar enough to require separate classification.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Wells Fargo's guaranteed deficiency claim is substantially similar to trade vendor claims.	Wells Fargo argues similarity; classification should group similar unsecured claims.	Loop 76 contends disparity due to guarantee and non-debtor recovery.	Not decided as law; fact question; dissimilarity possible if non-debtor source shown.
Whether § 1122(a) permits flexible, non-priority-based classifications for § 1129(a)(10) purposes.	Flexibility supports separate classification to reflect interests and remedies.	Classification should reflect traditional 'nature' or priority without broad discretion.	Yes; classification may reflect interests beyond priority for § 1129(a)(10).
Whether Barakat controls the similarity analysis or Johnston governs the ruling.	Barakat supports limits on separate classification of similar claims.	Johnston governs; non-debtor repayment source factors can render claims dissimilar.	Johnston controls; Barakat distinguished; factual similarity analysis remains key.

In re Barakat, 99 F.3d 1520 (9th Cir. 1996) (addressed limits on separate classification of similar unsecured claims)
In re Johnston, 21 F.3d 323 (9th Cir. 1994) (held similarity is a factual question; non-debtor source can render claims dissimilar)
In re Greystone III Joint Venture, 995 F.2d 1274 (5th Cir. 1991) (chapter X context; classification aims and voting implications)
In re U.S. Truck Co., Inc., 800 F.2d 581 (6th Cir. 1986) (discusses classification and treatment of unsecured claims)
In re Boston Post Road, Ltd., 21 F.3d 477 (2d Cir. 1994) (classification and plan acceptance considerations under § 1122)