Czyzewski v. Jevic Holding Corp., 137 S. Ct. 973

Jevic Transportation filed Chapter 11 after a leveraged buyout left it insolvent; secured lenders (Sun, CIT) held senior liens and unsecured creditors (including former employees) had claims, including WARN Act wage claims totaling about $12.4 million (with $8.3 million entitled to mid-level priority).
The estate’s remaining assets consisted mainly of a fraudulent-transfer/ preference claim against Sun and CIT and $1.7 million cash subject to Sun’s lien.
Committee and respondents negotiated a settlement that (1) dismissed the adversary claim, (2) paid committee fees, (3) assigned Sun’s lien and distributed remaining cash to general unsecured creditors, and (4) dismissed Jevic’s Chapter 11 — but the settlement expressly skipped the mid-priority WARN claimants (petitioners).
Bankruptcy Court approved the structured dismissal despite acknowledging it violated ordinary priority rules; District Court affirmed; Third Circuit upheld the approval for "rare cases." Petitioners sought review.
The Supreme Court granted certiorari to decide whether a bankruptcy court may approve a structured dismissal that orders distributions that skip higher-priority objecting creditors.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether a bankruptcy court may approve a structured dismissal that orders final distributions deviating from the Code's priority scheme without affected creditors' consent	Jevic petitioners: structured dismissal that skips mid-priority creditors usurps the Code’s priority protections and is unauthorized; petitioners were injured by loss of settlement/litigation opportunity	Respondents: structured dismissals are permissible; the dismissal here produced distributions that would not have been available otherwise, and petitioners suffered no redressable injury because reversal would eliminate any settlement value	Held: No. A bankruptcy court may not, over objecting affected creditors, order final distributions in connection with dismissal that violate the statutory priority scheme; structured dismissals cannot effect nonconsensual priority-skipping final distributions absent clear congressional authorization

Jevic Holding Corp. v. In re, 787 F.3d 173 (3d Cir. 2015) (Third Circuit opinion below affirming structured dismissal in a "rare case")
Iridium Operating LLC v. In re, 478 F.3d 452 (2d Cir. 2007) (discusses interim distributions and limits of applying priority rules preplan)
In re Kmart Corp., 359 F.3d 866 (7th Cir. 2004) (justifications for critical-vendor and similar interim priority deviations)
Whitman v. American Trucking Assns., Inc., 531 U.S. 457 (2001) (canon that Congress does not hide major changes in ambiguous text)
Law v. Siegel, 571 U.S. 415 (2014) (courts may not alter the statutory balance set by the Code)
Toibb v. Radloff, 501 U.S. 157 (1991) (purposes of business reorganizations under Chapter 11)
Bank of America Nat'l Trust & Sav. Ass'n v. 203 N. LaSalle St. P'ship, 526 U.S. 434 (1999) (background on absolute-priority concerns and insider leverage)
Kelly v. Robinson, 479 U.S. 36 (1986) (statutory interpretation requires reading provisions in context and with regard to the Code's policy)