Czyzewski v. Jevic Holding Corp. Page 2

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.

Samuel A. Alito, Jr.:

If you were pressed as to what practical difference the case meant to you and -- and the answer was, we -- you know, we want to uphold the law.

Danielle Spinelli:

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're -- they have been deprived of.

Samuel A. Alito, Jr.:

But can you point to anything you said in the Third Circuit, in writing or orally, that -- along those lines, that you -- that there was some practical course of action that -- that you -- some tangible thing that you were going to pursue?

Danielle Spinelli:

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.

Samuel A. Alito, Jr.:

Can I ask one other -- one other thing? Something strange seems to have happened between the petition stage and the briefing stage in the case. The question that you asked us to take was whether a bankruptcy court may authorize the distribution of settlement proceeds in a manner that violates the statutory priority scheme.

And you said there's a square conflict on that issue, with the Second Circuit and the Third Circuit on one side and the Fifth Circuit on the other side.

Danielle Spinelli:

Correct.

Samuel A. Alito, Jr.:

And we took the case. But then the question that you address in your brief refers to "structured dismissal." There is nothing about structured dismissal in the question that you asked us to take, and there is no conflict on the question of structured dismissal, is there?

Danielle Spinelli:

And, Justice Alito, we're not asking this Court to decide the question of whether structured dismissals are valid.

We did not change the substance of the question presented here.

Samuel A. Alito, Jr.:

Now, you're not asking us to decide the broad question whether there can ever be a structured dismissal.

But you are asking us to decide whether the priorities have to be followed in a structural dismissal, and unless the answer to that question follows from the answer to the question that you presented in your petition, you have changed the question that you have asked us to decide.

Danielle Spinelli:

We did not change the substance of the question presented.

In the petition, we had a paragraph of background explaining that this was done through a structured dismissal.

We then asked the question, does the Bankruptcy Code -- may a bankruptcy court authorize the distribution of settlement proceeds in a manner that violates the Code's priority scheme? In the brief, we condensed that a bit so that we didn't have the paragraph of background, and we said, may a structured dismissal distribute estate assets in violation of the priority scheme? There is no substantive difference there.

The authorization in this case was done through a structured dismissal. Settlement proceeds are estate assets. The basic question in this case has always been the same: Was the bankruptcy court entitled under the Bankruptcy Code to authorize this distribution of settlement proceeds, which are estate assets, in violation of priority?

Stephen G. Breyer:

Exactly.

So what forbids it? You started out by saying there is nothing in the Code that permits this kind of settlement, which in fact leaves out -- if -- it gives some money to lower-ranking creditors without giving them to your client. I think you're right.

I don't see anything permits it.

The problem: What forbids it?

Danielle Spinelli:

The structure of the Code forbids it, Justice Breyer.

Stephen G. Breyer:

The structure of the Code --

Danielle Spinelli:

If we --

Stephen G. Breyer:

-- forbids it.

Danielle Spinelli:

If we -- the structure and the text of the Code.

If we take a step back for a moment, the way business bankruptcies work is that the debtor files a petition. That creates an estate, which includes all the debtor's property, and it also includes causes of action belonging to the estate. That estate is then held in trust, essentially for the benefit of creditors.