In the 1924 case of Wallace Benedict, Receiver v. Ratner, the U.S Supreme Court ruled on a matter concerning bankruptcy law and equitable subordination. The dispute arose when Mr. Ratner loaned money to a company that subsequently went bankrupt and then sought repayment as an unsecured creditor in the bankruptcy proceedings. However, it was discovered that he had knowledge about the firm's insolvency at the time of lending which led other creditors to challenge his claim arguing for its subordination due to unfair conduct or inequitable behavior under what is now known as "equitable subordination". The court agreed with this argument stating that since Ratner knew about the company's financial status before lending money, he should not be treated like other ordinary creditors who were unaware of such facts during their transactions with debtor firms. Therefore, his claim was equitably subordinated making him last in line for payment after all other claims by regular creditors were satisfied.

In the dissenting opinion for Wallace Benedict, Receiver v. Ratner (1924), Justice McReynolds argued that the majority's decision was a departure from established legal principles and precedent. He believed that the court had overstepped its bounds by interpreting bankruptcy law in a way that allowed an insolvent debtor to prefer one creditor over another. According to him, this interpretation undermined the fundamental purpose of bankruptcy laws which is to ensure equitable distribution of assets among all creditors. Furthermore, he contended that such decisions could potentially lead to fraudulent practices where debtors collude with certain creditors at the expense of others. Therefore, he disagreed with allowing Ratner's claim on grounds it violated both statutory law and common fairness.