This “skipping” of the priority claims of the drivers would be in violation of the so-called absolute priority rule of chapter 11. Nevertheless, the claim would not be paid under the settlement even though general unsecured creditors would receive at least a partial payment on their claims. A significant portion of that WARN Act claim was entitled to priority over the claims of general unsecured creditors under Bankruptcy Code § 507 (a)(4). Conspicuously absent from the parties who reached the settlement was a group of truck drivers who held an uncontested WARN Act claim against the debtor for its failure to provide the required statutory notice prior to closing the business. The claims against the secured creditors were dismissed with prejudice, and the chapter 11 case was to be dismissed. Any amount remaining after such litigation would be distributed to general unsecured creditors. Under the terms of the settlement, nearly $4 million was made available to the Committee and a litigation trust, with those funds available for use in the pursuit of unrelated litigation in the bankruptcy case. ![]() At that point, the secured creditors, the debtor and the Unsecured Creditors’ Committee agreed to settle the litigation. That litigation lasted for several years, and the Committee’s claim eventually survived a motion to dismiss the case. The Official Committee of Unsecured Creditors, however, challenged the secured creditors’ claims on fraudulent conveyance and preference theories. Its secured creditors were owed millions more than the value of the debtor’s assets. In Jevic, the debtor was woefully insolvent. 2015), the Third Circuit recently considered the propriety of a “structured dismissal” of a chapter 11 case that provided for a distribution of estate assets contrary to the distributional scheme set out in the Bankruptcy Code. (In re Jevic Holding Corp.), 787 F.3d 173 (3d Cir. In Official Committee of Unsecured Creditors v. Furthermore, because the bankruptcy court decisions in these mega cases often involve greater dollar amounts, they are more likely to be appealed, which can result in the Third Circuit being one of the few circuit courts to address a given issue. Consequently, the decisions of the Third Circuit govern that disproportionate number of large and mega chapter 11 cases. The decisions of the Third Circuit are binding on the District Court and Bankruptcy Court for the District of Delaware. § 1408 has led to the disproportionate filing of large and mega chapter 11 bankruptcy cases being filed in the District of Delaware. The liberal venue rule for bankruptcy cases set out in 28 U.S.C. ![]() The United States Court of Appeals for the Third Circuit plays a uniquely important role in the development of the bankruptcy laws. Tweet this post Like this post Email this post Share this post on LinkedIn
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