In the 1939 case of Case et al. v. Los Angeles Lumber Products Co., Ltd., the United States Supreme Court was tasked with deciding on a dispute over corporate reorganization under Section 77B of the Bankruptcy Act, which had been enacted by Congress in 1934 to help corporations financially recover during the Great Depression. The main issue revolved around whether or not stockholders' interests should be considered before creditors' claims in such reorganizations. The court ruled that while both parties have legitimate interests, priority must be given to secured and unsecured creditors over equity holders (stockholders) when distributing assets from a bankrupt company's estate as part of its financial restructuring plan under bankruptcy laws. This decision established an important precedent for future cases involving similar issues about creditor and shareholder rights in corporate bankruptcies.

In the dissenting opinion for Case et al. v. Los Angeles Lumber Products Co., Ltd., Justice Black disagreed with the majority's view that a reorganization plan under Section 77B of the Bankruptcy Act could be confirmed even if it impaired or altered rights of secured creditors without their consent. He argued that this interpretation was inconsistent with both the language and legislative history of Section 77B, which he believed required voluntary acceptance by each class of creditors affected by a proposed plan before it could be approved by court order. Furthermore, Justice Black expressed concern about potential abuse in bankruptcy proceedings, warning against allowing courts to force changes on unwilling minority groups through judicially sanctioned majoritarian processes. In his view, such practices threatened fundamental principles of fairness and due process enshrined in American law.