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Absolute Priority


May 2, 2017 | Posted by Alana Katz | Permalink

The Bottom Line
In one of the first of many cases to determine the scope of the Supreme Court’s recent decision in Jevic, the Bankruptcy Court for the Eastern District of Tennessee denied a proposed settlement by the Debtor that the court found would circumvent certain of the Bankruptcy Code’s protections and priority scheme. Interestingly, the court relied on the Supreme Court’s dicta, rather than the holding, in Jevic in making its ruling. The case did not involve a structured dismissal, but rather a settlement during a chapter 11 case (although the effect of implementing the settlement would have resulted in a distribution to a secured creditor and likely led to a dismissal or conversion).

Why This Case is Interesting
Each case immediately interpreting Jevic is going to be reviewed carefully as bankruptcy courts examine how their brethren are assessing the scope of the Supreme Court’s ruling and its applications. In this case, dismissal or conversion was not part of the settlement but was viewed as a likely “next step” since confirmation of a plan was not practicable. On the one hand, the settlement enabled both a sale of assets and provided for a distribution of proceeds outside of a plan – always a caution area because of sub rosa plan concerns. However, the court expressly relied upon the Jevic decision’s dicta on when and how “interim” distributions should be allowed to “violate” priorities. The decision may also lead to other courts applying the “serves a significant Code-related objective” standard not only to settlements under Bankruptcy Rule 9019 but also to other more routine “interim” case relief (such as “first day” orders).

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April 1, 2017 | Posted by Kramer Levin | Permalink
Corporate Restructuring and Bankruptcy partner Adam C. Rogoff joined Debtwire legal analysts Richard Goldman and Paul Gunther for a podcast discussion of the Supreme Court’s highly anticipated decision in Jevic Transportation. read more