On December 7, 2016, the Supreme Court heard oral argument in Czyzewski v. Jevic Holding Corporation. Jevic Transportation, Inc., a trucking company headquartered in New Jersey, was purchased by a subsidiary of Sun Capital Partners in 2006. In 2008 Jevic filed for bankruptcy under Chapter 11 of the Bankruptcy Code, at which that point it owed about $73 million to various creditors. Jevic’s former truck drivers then sued it for violating federal and state Worker Adjustment and Retraining Notification Acts, by failing to provide the requisite 60 days’ notice before a layoff. Separately, unsecured creditors filed a fraudulent conveyance action. In March 2012, representatives of all the major parties met to negotiate a settlement of the fraudulent conveyance suit. The representatives--except for the drivers’ representative--agreed to a settlement that would provide for payment of legal and administrative fees, a schedule for the payment of various creditors (though not the drivers), and ultimately a “structured dismissal” of the Chapter 11 bankruptcy.
The drivers and US Trustee objected, arguing that the settlement would improperly distribute estate property to creditors with lower priority than the drivers, in violation of the Bankruptcy Code. The Bankruptcy Court rejected these objections and approved the proposed settlement. The U.S. District Court and then the U.S. Court of Appeals for the Third Circuit affirmed, holding that the Bankruptcy Court had not abused its discretion in approving a structured dismissal that did not adhere strictly to the Bankruptcy Code’s priority scheme.
The question now before the U.S. Supreme Court is whether a bankruptcy court may authorize the distribution of settlement proceeds in a manner that violates the statutory priority scheme.
To discuss the case, we have Thomas Plank, who is the Joel A. Katz Distinguished Professor of Law at the University of Tennessee College of Law.