Turning the Page: The Demise of the “Queenan Doctrine” Requiring the Adoption of a Foreclosure Valuation Methodology in Chapter 11 Cases

This Article traces the evolution of the default standard applied by bankruptcy courts to valuing a secured lender’s collateral under section 506(a) for purposes of determining whether a “diminution in value” has occurred sufficient to trigger the need for adequate protection. Historically, bankruptcy courts applied a standard premised on the scholarship of Judge Queenan of the Bankruptcy Court for the District of Massachusetts. That standard called for, absent contractual language to the contrary, application of a foreclosure valuation methodology regardless of the actual or anticipated use of such collateral during the chapter 11 cases. In recent years, there has been a trend away from Judge Queenan’s rigid methodology in favor of a more flexible standard that takes its cue from the particular facts relating to the collateral’s use in each chapter 11 case—leading, typically, to the application of a fair market value standard