Czyzewski v. Jevic Holding Corp. Page 19

Czyzewski v. Jevic Holding Corp. general information

Media for Czyzewski v. Jevic Holding Corp.

Audio Transcription for Oral Argument - December 07, 2016 in Czyzewski v. Jevic Holding Corp.

Christopher Landau:

So again, it goes to, can you -- what are the constraints on using the estate assets? And I -- I really encourage you to look at the very tight way in which the Second Circuit in Iridium said, we want to be super careful in this.

To say we want to be super careful is not to say -- is just to say that the Fifth Circuit overstated it by saying you can never do it.

In other words, the Fifth Circuit has an absolute bright-line rule.

We don't care how Pareto-optimal --

Stephen G. Breyer:

Right.

Christopher Landau:

-- this is. And I think the basic point was made by the bankruptcy court here.

The Bankruptcy Code is not a suicide pact.

So if, in fact, you have a situation where the settlement or -- and the distribution proposed makes others better without making these folks worse off, there is nothing in the Code that prohibits that.

John G. Roberts, Jr.:

Thank you, counsel.

Christopher Landau:

Thank you.

John G. Roberts, Jr.:

Two minutes, Ms. Spinelli.

Danielle Spinelli:

Respondents' position fails because Section 363(b) is not a means of distributing estate assets.

The -- the 363(b) discretion that Mr. Landau referred to is discretion to approve a settlement or a sale of an estate asset, not to distribute the settlement or sale proceeds in violation of priority. Assets are distributed under Chapter 11 through a Chapter 11 plan.

That's it.

And our fundamental point here is that those assets cannot be distributed on account of prepetition claims in violation of priority. To the extent there is a potential exception for the Doctrine of Necessity, that's hotly disputed. Courts disagree about whether that exception exists. And that's not an issue this Court needs to resolve because the Doctrine of Necessity, by its nature, is designed for situations in which a payment to prepetition creditors is necessary to the reorganization of the debtor.

There is no dispute that that wasn't the case here.

And as for our first-day order paying the wages of the drivers, that was consented to, and no one is saying that you're not allowed to consent to a priority violation. The only point we are making about structured dismissals is that there is no superpower associated with structured dismissals that provides for an exception to that general rule that one cannot distribute estate property on account of prepetition claims in violation of priority. Respondents' rule would wreak havoc on the basic process of bankruptcy.

If debtors could distribute estate property to creditors at any time without regard to the priority scheme before a plan, there wouldn't be much left of the scheme.

Debtors could simply reach a deal with junior creditors and distribute property leaving inadequate resources to pay senior creditors.

John G. Roberts, Jr.:

Thank you, counsel. The case is submitted.