High Court Restricts Ch. 11 ‘Structured Dismissals’

Bankruptcy courts don’t have the power to order a priority-skipping distribution scheme in connection with the dismissal of a Chapter 11 business bankruptcy case, the U.S. Supreme Court ruled March 22 (Czyzewski v. Jevic Holding Corp., 2017 BL 89680, U.S., 15-649, reversed and remanded 3/22/17).

A distribution scheme can’t, without the consent of the affected parties, “deviate from the basic priority rules that apply under the primary mechanisms” the Bankruptcy Code establishes for final distributions in business bankruptcy proceedings, the court said in a 6-2 ruling by Justice Stephen G. Breyer.

The decision is important because of the ...