## Facts

- Jevic Transportation Corp., a trucking company, was acquired in a leveraged buyout financed by CIT Group and arranged by Sun Capital Partners.
- Jevic later filed for Chapter 11 bankruptcy in the District of Delaware owing substantial secured, tax, and unsecured debts.
- Former Jevic drivers sued under the WARN Acts and obtained a judgment; about $8.3 million of that judgment qualified as priority wage claims under 11 U.S.C. § 507(a)(4).
- An unsecured creditors’ committee sued Sun and CIT alleging fraudulent transfer arising from the leveraged buyout.
- Jevic, Sun, CIT, and the committee negotiated a settlement resolving the fraudulent-transfer litigation and proposed ending the Chapter 11 case through a “structured dismissal.”
- The structured dismissal’s distribution scheme paid certain administrative and tax claims and made a pro rata distribution to general unsecured creditors, but paid nothing to the drivers’ priority wage claims.
- The drivers objected that the settlement and dismissal skipped their higher-priority claims in favor of lower-priority creditors without their consent.

## Issues

1. Whether the Bankruptcy Code permits a bankruptcy court to approve a structured dismissal that makes final distributions deviating from ordinary priority rules without the consent of affected priority creditors.
2. Whether § 349(b)’s “for cause” authority to modify the effects of dismissal authorizes priority-violating distributions at the end of a Chapter 11 case.

## Decision

- The Supreme Court reversed the Third Circuit and remanded.
- Bankruptcy courts may not approve structured dismissals that provide for distributions that do not follow ordinary priority rules without the consent of affected creditors.
- The Court limited its decision to nonconsensual, priority-skipping structured dismissals involving final distributions; it did not bar structured dismissals generally or decide the permissibility of consensual deviations.

## Legal Principles

- The Bankruptcy Code’s priority framework governing distributions is a core constraint on case-ending distributions in bankruptcy.
- In Chapter 11, absent consent, a court cannot confirm a plan that distributes value in violation of priority over the objection of impaired creditors; a structured dismissal cannot be used to achieve the same result indirectly.
- Section 349(b)’s power to alter dismissal’s ordinary consequences “for cause” does not supply a general license to reorder statutory priorities in a final distribution.
- Limited, context-specific deviations from priority (e.g., interim or facilitating payments) do not justify a permanent, nonconsensual reordering of priorities when dismissing a case.

## Conclusion

The Court held that a structured dismissal cannot be approved over the objection of affected priority creditors when it makes final distributions that skip statutory priority levels, reaffirming that end-of-case distributions must follow the Bankruptcy Code’s priority rules absent consent or clear statutory authorization.


Czyzewski v. Jevic Holding Corp., 580 U.S. 451 (2017)