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The Bankruptcy Protector

July 31, 2019

Applying Jevic (Part 2): How Courts Are Interpreting and Applying the Supreme Court’s Ruling on Structured Dismissals and Priority Skipping

By Thomas Conerty, John T. Baxter, Shane G. Ramsey

Back in December of 2017, the Bankruptcy Protector provided a succinct summary of all cases decided post-Jevic through November 17, 2017. In this update, we discuss the cases decided between November 17, 2017 and May 10, 2019.

The chart below includes the case name, date, and citation; a brief description of the nature of the case; and a brief description of how the Court applied the Jevic.

Please note that this chart focuses only on cases where Jevic priority skipping issues are raised and adjudicated.  The intent of the Jevic Files is to focus only on cases that directly relate to priority skipping issues, not decisions that merely cite Jevic.

Case

Description

Application of Jevic

Hinson v. Bank of Am., Civil Case No. 5:16-CV-00958-RE, 2018 WL 4289316 (E.D.N.C. September 7, 2018)

Here, a chapter 7 debtor moved to set aside an order approving the compromise of litigation between the trustee and a bank.

 

The debtor in part argued that the compromise violated Jevic, but the court found the case inapplicable to the “compromise of one secured creditor's claim in an individual debtor's Chapter 7 proceeding.”

In re Lum Lung, Case No.: 13-14964-MKN, 2018 WL 6980928 (Bankr. D. Nev. Dec. 6, 2018)

This is a Chapter 7 case in which a debtor’s residence was sold at a foreclosure sale in violation of an automatic stay. The entity that purchased the property sought annulment of the automatic stay for cause in order to retroactively validate its purchase. On balance of the equities, including debtor factors, non-debtor factors, and common factors, the court granted the retroactive relief.

The court here cited Jevic only briefly in a footnote to define “status quo ante.” The effect of restoring the status quo ante in this case was a factor weighing in favor of granting retroactive relief.

 

In re Alaska Fishing Adventure, L.L.C., 594 B.R. 883 (Bankr. D. Alaska 2018)

 

Here, a Chapter 7 trustee filed a motion to sell the remaining assets in a Chapter 7 estate. Because the proposed sale included litigation claims, which the buyer would not pursue, the court analyzed the sale under both § 363(b) and as a settlement under Fed. R. Bankr. P. 9019. Weighing various factors, the court approved the sale, deferring to the trustee’s sound business judgment.

 

The court referred to Jevic in a footnote to analyze another offer that had been made to purchase the property. Some post-Jevic cases have stated that parties seeking approval of settlements that distribute assets in a manner contrary to the Code’s priority scheme must prove that the settlement is fair and equitable and serves a significant Code-related objective. The proposal would have paid certain claims outside the estate, skewing the order required by § 726(a). However, the court withheld deciding the Jevic issue because the party making the offer appeared without counsel.

In re Way to Grow, Inc., Case No. 18-14330 MER, 2019 WL 669794 (Bankr. D. Colo. Feb. 14, 2019)

This case arose after dismissal of a Chapter 11 bankruptcy. A lessor sought to release funds that had been segregated during the bankruptcy for payment of overdue rent. Relying on § 349(b)(3), the court re-vested the segregated funds in the debtor.

 

The court cited Jevic in a footnote to support its proposition that § 349(b) allows the court to “order a different result from what is provided for pursuant to § 349. Instead, the provision allows the court to craft a dismissal order as necessary to protect rights acquired in connection with the bankruptcy. 

In re Buchanan, Case No. DG 14-06089, 2019 WL 1090167 (Bankr. W.D. Mich. March 7, 2019)

Here, a law firm filed a fee application requesting approval of counsel’s fee for representing the debtors in connection with their Chapter 13 bankruptcy. The application also sought an order directing the trustee to pay the firm using the debtors’ post-confirmation plan payments.

The court cited Jevic in denying the application, reasoning that requiring the trustee to pay the firm rather than the debtor would give the firm a “judicially approved head start” over other claimants, “contrary to the spirit” of Jevic.

 

In re ASPC Corp., Case No. 18-52736, 2019 WL 2082155 (Bankr. S.D. Ohio May 10, 2019).

 

Here, a Chapter 11 debtor and the creditors’ committee objected to an asset purchaser’s designation of the debtor’s firearms distribution agreement as a contract to be assumed by the debtor and assigned to the asset purchaser.

 

Reference to Jevic was made in a footnote. The committee of creditors argued that their objection should be sustained because an agreement between the asset purchaser and Smith & Wesson to distribute over $600,000 worth of free goods to the debtor’s former customers—instead of a distribution of the value of the goods to the debtor’s creditors—would contravene Jevic. The court sustained the debtor’s and creditors’ objection on other grounds and did not address the Jevic question.



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