Czyzewski v. Jevic Holding Corp. (15-649)
argument 15-649Czyzewski v. Jevic Holding Corp.
Supreme Court of the United States
1h 1m
5 speakers
8 chapters
transcribed 5 days ago
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What is the legal issue surrounding the structured dismissal in Czyzewski v. Jevic Holding Corp.?
We'll hear argument this morning in Case 15-649, Cheseski v. Jevik Holding Corporation. Ms. Spinelli?
Mr. Chief Justice, and may it please the Court, Chapter 11 provides one way to distribute estate assets to creditors on account of their pre-petition claims, through a confirmed plan that adheres to the Code's priority scheme. If a Chapter 11 plan can't be confirmed and the bankruptcy court can convert the case to Chapter 7, which also requires that creditors be paid in order of priority. Or it can simply dismiss the case without distributing assets to creditors at all, returning all parties to their pre-bankruptcy position. No provision of the Bankruptcy Code permits what happened here, an order dismissing a Chapter 11 case that distributed all the estate's assets to creditors but deliberately skipped over our client's priority claims.
May I ask you, did the settlement bar you from suing the debtor for the Wormack claims?
No, it
did
not.
And there was no money left to the debtor, so did it bar you from suing Sun Life for a fraudulent transfer?
It
did. It did.
It did, Justice Sotomayor, and I think that's critical. What this settlement did is it took away our client's right to pursue either the debtor or Sun and CIT on account of their undisputed WARN Act claims, which were in the area of $12 million. All
right. Are you — in the court below, I understand that you represented that if this settlement went through — that you would have — I'm sorry, that without the settlement, you would really have nothing because there was no money in the estate. So are you representing that your client intends to sue Sun Life? Because that's the only way to get money
here. Well, let me — let me respond to that, Justice Sotomayor. There are a few things that could happen if this Court reverses the order below and the case is remanded. That's fine.
Tell me which one you're going to do.
Well, that's really up to the bankruptcy court. All right. So
what are you going to ask them to
do? What we had asked for before, and what may well make the most sense, is conversion to Chapter 7, in which case either the Chapter 7 trustee could pursue the fraudulent transfer claim.
But there's no money in the estate to do that. So how will the trustee do that?
the trustee would have to retain contingency counsel, and that does happen. I was involved in a Chapter 7 case where the trustee pursued an avoidance action successfully with contingency counsel. Failing that, if the trustee decided not to do that, After the bankruptcy is over, the fraudulent transfer claim would revest in the creditors, and our clients could then bring that claim themselves. There's a
difference. There seems to be a difference between what you have said on this point in your briefs and in your argument this morning and what you told the Third Circuit. Did your firm appear in the Third Circuit?
Not until the rehearing stage.
Well, in the Third Circuit oral argument, it was said over and over, well, we just want to make sure that the law is followed. That's what we're interested in. Isn't that right?
We certainly do want to make sure that the law is followed.
But you were pressed as to what practical difference the case meant to you. And the answer was, we want to uphold the law.
Justice Alito, I don't believe that's the case. The case does make a practical difference. It always has made a practical difference. That's the only reason our clients have been pursuing it. And the practical difference it makes is that on remand, they will have an opportunity to recover on account of their undisputed WARN Act claims, which as of now, they've been deprived of.
Can you point to anything you said in the Third Circuit in writing or orally along those lines? that there was some practical course of action that you, some tangible thing that you were going to pursue?
What we told the Third Circuit is that if this case went back on remand and were converted to Chapter 7, then the fraudulent transfer action could be pursued. I believe that's what That's the argument that we made below.
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Chapters
8 chapters
1
What is the legal issue surrounding the structured dismissal in Czyzewski v. Jevic Holding Corp.?
0:00–7:41
2
How does the Bankruptcy Code’s priority scheme affect the distribution of estate assets in Chapter 11?
7:41–16:39
3
Why does the petitioner argue that the settlement violated the absolute priority rule?
16:39–24:54
4
What are the arguments for converting the case to Chapter 7 versus dismissing it?
24:54–31:34
5
How do the Third and Second Circuits’ precedents influence the Court’s analysis of settlement distributions?
31:34–38:13
6
What role does Section 363B play in judicial review of asset sales and settlements?
38:13–45:02
7
When, if ever, can a bankruptcy court deviate from the absolute priority rule before a plan is confirmed?
45:02–53:04
8
What would be the practical consequences if the Court allows distributions that bypass the priority scheme?
53:04–1:01:15