On March 22, 2017, the Supreme Court issued its opinion in Czyzewski v. Jevic Holding,1 Case No. 15-649, 580 U.S. ___ (2017). In its decision, the court concluded that the bankruptcy court does not have the power to order, in connection with the dismissal of a Chapter 11 case, a distribution scheme that deviates from the basic priority provisions of the Bankruptcy Code without the consent of the parties negatively impacted by the deviation. While the decision does not put an end to so-called “structured dismissals”2 in bankruptcy, the decision restricts the dismissal of a Chapter 11 case when combined with a final distribution to creditors that skips over a class of creditors without the latter’s consent. Jevic leaves intact structured dismissals of Chapter 11 cases that adhere to the priority scheme, as well as structured dismissals that deviate therefrom with the consent of the affected creditors.
Case Summary
Jevic Transportation, a trucking company, was the target of a leveraged buyout in 2006. The buyer borrowed money from a lending institution to finance the purchase, leaving Jevic with more than $50 million of new secured debt obligations to the lender and the buyer. Within two years, Jevic ceased all operations, terminated substantially all of its employees, and filed a bankruptcy petition under Chapter 11 of the Bankruptcy Code.
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