John Melissinos was quoted in a Law360 article that ran January 2, 2017, discussing the top bankruptcy cases to watch in 2017 and the issues expected to dominate discussions over the next year including Chapter 11 exit strategies, post-petition interest on bonds and third-party releases.
Czyzewski et al. v. Jevic Holding Corp. et al.
At issue is whether a bankruptcy court may authorize the distribution of settlement proceeds in a manner that violates the statutory priority scheme. In Jevic, a deal was made by the trucking company with its creditors and private equity owner Sun Capital Partners Inc. that allowed money to flow to them, but left employees with a claim for alleged violations of the federal Worker Adjustment and Retraining Notification Act without a recovery.
According to the article, U.S. Bankruptcy Judge Brendan L. Shannon in Delaware approved the deal and allowed for the structured dismissal. The decision was affirmed at both the district court and Third Circuit levels.
If allowed to stand, it would be a ruling that cements some of the more flexible options in Chapter 11.
"As a debtors’ lawyer, I like to see the greater flexibility," said Melissinos. "On the other hand, if you’re only giving lip service to the absolute priority rule, you’re opening up a pretty big hole in the statutory scheme."
Deutsche Bank Trust Company Americas et al. v. Robert R. McCormick Foundation et al.
The U.S. Supreme Court is deciding whether to review a Second Circuit decision that held Tribune Co. creditors couldn’t claw back $8.3 billion in payments to former shareholders in the Tribune Company's leveraged buyout, which led to its 2008 bankruptcy.
According to the article, at issue is how widely or narrowly courts should apply Section 546(e) of the Bankruptcy Code, which prohibits estates from going after transfers from leveraged buyouts or other securities deals unless intentional fraud is shown.
"People use 546(e) all the time as a defense in fraudulent transfer cases, so the issue is crucial," Melissinos said. "I would think the Supreme Court will take that case."