Life After Jevic: An End to Priority-Skipping Distributions?

"32 Thus, like Fryar, the bankruptcy court found no evidence that the proposed distribution of sale proceeds promoted a reorganization purpose.33 The Constellation decision is also notable for its critical observation that Jevic involved non-estate assets. [...]the court suggested that Jevic co...

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Bibliographic Details
Published in:American Bankruptcy Institute journal 2017-09, Vol.36 (9), p.12
Main Authors: Keach, Robert J, Helman, Andrew C
Format: Article
Language:English
Subjects:
Bankruptcy
Bankruptcy laws
Bankruptcy reorganization
Committees
Consent
Court hearings & proceedings
Debt
Evidence
Federal court decisions
Federal courts
LBO
Leveraged buyouts
Litigation
Petitions
State court decisions
Supreme Court decisions
Truck drivers
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Summary:"32 Thus, like Fryar, the bankruptcy court found no evidence that the proposed distribution of sale proceeds promoted a reorganization purpose.33 The Constellation decision is also notable for its critical observation that Jevic involved non-estate assets. [...]the court suggested that Jevic could apply to an out-of-priority distribution, or one that discriminates unfairly, regardless of whether it involves non-estate property, such as assets of a purchaser or creditor, or where a nondebtor entity controlled or dictated the distribution. According to the bankruptcy court: [T]here were non-estate property elements of that settlement that were not ... approved, and the Court really didn't delve into it one way or another, but a distinction that simply says Jevic doesn't apply because none of the property here is property of the estate, I think that goes too far. [...]the bankruptcy court's decision in In re Pioneer Health Services Inc. provides another data point on Jevic's reach.39 In that case, the bankruptcy court denied a health care debtor's request to treat certain physician creditors as critical vendors who could be paid on account of their pre-petition claims.40 While the debtor argued that the physicians would refuse to continue providing medical services to patients without payment of their pre-petition claims, the bankruptcy court found this argument to be unpersuasive due to insufficient evidence.41 Pioneer Health is notable because the Jevic opinion apparently blessed most critical-vendor payments as having a reorganization-related purpose. Early decisions applying Jevic arguably do not distinguish between priority-skipping distributions based simply on whether the estate has title to the assets. [...]Jevic might spell the end of "gifting" - both inside and outside of plans, and particu larly in all asset-sale transactions.
ISSN:1931-7522