SCOTUS: Payments Made Under Structured Dismissals Can't Violate Absolute Priority Rule

The Supreme Court ruled on March 22, 2017 in Czyzewski v. Jevic Holding Corp. that payments made to creditors pursuant to structured dismissals of bankruptcy cases cannot violate the Bankruptcy Code's absolute priority rule without the consent of the affected creditors.¹ The decision is important for its primary holding, but also because it also represents a de facto approval of structured dismissals as a way to conclude unsuccessful bankruptcy cases.

Jevic Holding Corp. ("Jevic") was a trucking company acquired in 2006 by Sun Capital Partners, a private equity firm ("Sun Capital"), with CIT Corp. ("CIT") providing debt financing. The transaction was a failure and approximately two years later, Jevic filed a chapter 11 petition in the bankruptcy court for the District of Delaware (the "Bankruptcy Court"). Immediately prior to filing its chapter 11 case, Jevic terminated a number of truck drivers who became the plaintiffs in this action, and who contended