August 21, 2017

August 21, 2017

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Constellation’s Settlement Curtailed after Jevic

In our recent article, Jevic: Breathing New Life Into Priority Disputes, we discussed the then-pending motions for settlement and dismissal in In re Constellation Enterprises LLC, et al.,16-bk- 11213 (CSS) (D. Del.). Constellation’s settlement motion proposed to transfer assets to the General Unsecured Creditor Trust over the claims of priority creditors and faced strong opposition in the wake of the Supreme Court’s ruling in Czyzewski et al., v. Jevic Holding Corp., et al., 137 S. Ct. 973, 985 (2017) (“Jevic”). On May 16, 2017, Judge Sontchi denied Constellation’s settlement motion. The one page order gives no insight into the reasoning behind the denial, however, the court’s statements during a hearing on the same day suggest that Jevic was a strong guidepost (“I am going to deny the settlement motion, and I do it with some reluctance. Doing this takes money away from creditors and keeps it in the hands of the purchaser . . . however, I am constrained to do so by the facts and by the law.”). The ruling in Constellation is a warning to debtors and others -- settlement proposals that deviate from the Code’s priority scheme are subject to rejection as “priority-skipping gifts of non-estate property.”

© 2017 Bracewell LLP


About this Author

Kurt Mayr, Restructuring, Insolvency Lawyer, Bracewell law firm
Managing Partner, Connecticut

Mr. Mayr, recently named by Turnaround & Workouts as one of only 12 outstanding young restructuring partners in the U.S., represents a wide range of parties in domestic and international insolvency/restructuring matters, including creditors, debtors, acquirers and other interested parties in transactions both out-of-court and under court supervision. Mr. Mayr's practice focuses upon representing ad hoc and official creditor committees and groups in connection with Chapter 11 proceedings and ancillary proceedings under section 304 of the Bankruptcy Code. In addition,...

Shannon Wolf, Bracewell Law Firm, Financial Restructuring and Litigation Attorney

Shannon Wolf counsels clients in domestic and international restructuring and insolvency matters, including creditors, debtors and acquirers. She represents ad hoc and official creditor committees and groups in connection with out-of-court workouts and Chapter 11 proceedings. Shannon’s experience includes representing clients in complex commercial litigation in federal and state courts, as well as regulatory enforcement defense and internal investigations for corporate and institutional clients.

Prior to joining Bracewell, Shannon served as a law clerk to the Honorable Peter W. Hall of the United States Court of Appeals for the Second Circuit, and the Honorable Stefan R. Underhill for the United States District Court for the District of Connecticut. During law school, she served as a judicial intern for the Honorable Janet C. Hall of the United States District Court for the District of Connecticut.