In Czyzewski v. Jevic Holding, 580 U.S. __ (2017), decided on March 22, the U.S. Supreme Court held that, without the consent of impaired creditors, a bankruptcy court cannot approve a ”structured dismissal” that provides for distributions deviating from the ordinary priority scheme of the Bankruptcy Code. The ruling reverses the decisions of the U.S. Bankruptcy Court for the District of Delaware, the U.S. District Court for the District of Delaware, and the U.S. Court of Appeals for the Third Circuit, and carries with it implications that may affect both pending and future bankruptcy proceedings.
Factual Background
In 2006, Jevic Transportation Inc., a New Jersey trucking company, was acquired by Sun Capital Partners through a leveraged buyout. Sun Capital financed the buyout with funds loaned from a group of lenders led by the CIT Group. By May 2008, Jevic’s financial situation had worsened significantly, and Jevic’s board ultimately authorized a bankruptcy filing. At that point, the company halted almost all operations and, on May 19, 2008, notified its employees of their imminent termination. The next day, Jevic filed a petition for relief under Chapter 11 of the U.S. Bankruptcy Code. At the time of filing, Jevic owed $53 million to senior secured creditors Sun Capital and CIT, and over $20 million to general unsecured creditors and taxing authorities.
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