Bankruptcy payment priorities
Czyzewski v. Jevic Holding
In brief
The Supreme Court ruled that bankruptcy courts cannot approve structured dismissals with out-of-order payments unless affected creditors agree.
- Where it stands
- Decided
Decided 6-2 · March 22, 2017 · Opinion by Justice Breyer
- What it’s about
- The dispute concerned a settlement in Jevic Holding Corp.’s bankruptcy that did not follow the Bankruptcy Code’s usual order for paying creditors.
- Who it affects
- Affected creditors must agree before a bankruptcy court can approve a structured dismissal that pays creditors outside the usual order.
Summary: written with AI from the case record.
What it's about
The Supreme Court ruled that a bankruptcy court cannot approve such a settlement in a structured dismissal without affected creditors’ consent, overturned the appeals court, and sent the case back (remanded).
The Bankruptcy Code sets the usual order in which creditors are paid during bankruptcy.
Question presented
Can a bankruptcy court authorize a distribution of settlement proceeds in a manner that does not comply with the Bankruptcy Code’s priority distribution scheme?
What the Court decided
Holding
1. Petitioners have Article III standing. Respondents argue that petitioners have not “suffered an injury in fact,” or at least one “likely to be redressed by a favorable judicial decision,” Spokeo, Inc. v. Robins, 578 U. S. ___, ___, because petitioners would have gotten nothing even if the Bankruptcy Court had never approved the structured dismissal and will still get nothing if the structured dismissal is undone now. That argument rests upon the assumptions that (1) without a violation of ordinary priority rules, there will be no settlement, and (2) without a settlement, the fraudulent-conveyance lawsuit has no value. 2. Bankruptcy courts may not approve structured dismissals that provide for distributions that do not follow ordinary priority rules without the consent of affected creditors. 787 F. 3d 173, reversed and remanded.
- Result
- Reversed
The vote
From the opinions
“In light of that switch, I would dismiss the writ of certiorari as improvidently granted.”
What's next
The case returns to the lower court for further proceedings under the Supreme Court’s ruling. The Court did not decide how those proceedings must end.
Documents
Opinions
Docket activity
New analysis added
AI analysis generated: Case Briefing
New analysis added
AI analysis generated: Impact Analysis
AI analysis generated: Opinion Summary
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AI analysis generated: Decision Record
Case data updated: summary, question_presented, generation_metadata
Case data updated: question_presented, extraction_metadata
Opinion added: Czyzewski
More questions
- Did the settlement challengers have the legal right to sue?
- Yes. The Court decided that the challengers had the legal right to sue.
- Why did Justice Thomas disagree?
- He said the challengers asked the Court to hear one question but argued a different one, so only one side had briefed the issue the Court decided.
Sources
Primary materials plus reporting. Best-effort analysis: this explainer relies on a mix of primary materials and trusted secondary sources. Official filings and opinions remain authoritative.