(U.S. Sup. Ct. Mar. 22, 2017)
The Supreme Court holds that a distribution scheme ordered by the bankruptcy court as part of a dismissal of a Chapter 11 case (i.e., a “structured dismissal”) cannot deviate from the basic priority rules in the bankruptcy code, without the consent of affected parties. The Court recognizes that the code gives a bankruptcy court the power to dismiss a Chapter 11 case, but there is no statutory language that supports a dismissal that includes nonconsensual priority-violating distributions of estate value. The Court further holds that there cannot even be a “rare case” exception where such structured dismissals would be appropriate. Opinion below.
Author: Matt Lindblom