Posted: December 11th, 2022

Case Law Briefing

Case Law Briefing

Czyzewski v. Jevic Holding Corp. – 137 S. Ct. 973 (2017)
Context and relevance of law in a business environment
The parties involved in this case include a group of truck drivers and a trucking company (Jevic Holding Corp). Jevic filed for bankruptcy in the year 2008 under Chapter 11 of the U.S. Bankruptcy Code. At that time, the corporation owed an estimated 53 million dollars to its top priority secured creditors and approximately 20 million dollars to its tax and general unsecured creditors (Miller & Hollowell, 2018).
The truck drivers instigated 2 lawsuits against Jevic in the U.S Bankruptcy Court. One, the plaintiffs claimed that Jevic breached state and federal Worker Adjustment and Retraining Notification (WARN) laws. Those regulations require organizations to provide employees with a minimum of 60 days notice prior to layoffs. Two, a deceptive conveyance was made on the unsecured creditors’ behalf. Notably, 4 years after filing for bankruptcy, the parties to the deceptive conveyance action discussed a settlement that dismissed most of the claims (Miller & Hollowell, 2018). However, the truck drivers were left out of the settlement. The plaintiffs were against the settlement since it allocated property to lower priority creditors under the Bankruptcy Code. Under the payment priority, the plaintiffs held higher priority claims compared to some of the creditors that got payouts under the settlement.
In its ruling, the bankruptcy court approved the settlement. On appeal, the District Court and the Third Circuit Court affirmed. However, the Supreme Court reversed and ruled in favor of the plaintiffs. This court opined that the drivers had a standing to take legal action since a settlement under the regular rules of priority remained a logical possibility. The court also opined that in the event of a lack of consent by the by creditors who were affected, bankruptcy courts are not allowed to approve structured dismissals that adjust the ordinary priority rules of the Bankruptcy Code for making distributions (Miller & Hollowell, 2018). The basis for dissent was procedural and not substantive grounds. The dissenting Justices cited that the parties focused on a different query in their briefs than the one on which the Court gave certiorari. This case is relevant to businesses in that it reiterates the need for companies to adhere to the bankruptcy code’s payment priorities in the event that they file for bankruptcy.
The business impact of the case
The decision of the Supreme Court with regards to the Czyzewski v. Jevic Holding Corp case is perceived as its most vital judgment on corporate reorganization in at least a generation, and this is because it will have various impacts on businesses. There are several positive impacts (Bagley, 2018). For instance, the case paved way for structured dismissals during bankruptcy. These kinds of dismissals are attractive since they are less costly compared to Chapter 11 plans, which need expensive disclosure and creditor voting. Furthermore, they are perceived to be less risky than liquidation, where a trustee may obstruct recoveries by selling assets at a cheap price (Bagley, 2018). Also, the case reiterated the importance of the claims process, which establishes creditors’ treatment in all cases that involve bankruptcy. The treatment offers creditors with bargaining power whose basis is their priority. The most noteworthy negative implication of this case is that most businesses view it as being about “priority,” while in the real sense, it is about process.
The organization chosen is known as PetSmart. About 2 years ago, PetSmart bought Chewy.com for an estimated 3.4 million dollars in what was the biggest e-commerce acquisition at the time. Since then the organization has been experiencing challenges and is currently struggling to pay down approximately 8 billion dollars in debt in the middle of increasing competition online from Target, Walmart, Amazon, etc (Hitt, Ireland & Hoskisson, 2018). In case the organization decides to file for bankruptcy, it should consider adhering to the ordinary priority rules of the Bankruptcy Code; otherwise, it risks lawsuits.
The Czyzewski v. Jevic Holding Corp case will impact PetSmart in that it will strive to adhere to the bankruptcy code by ensuring it conducts structured dismissals and pays out creditors according to priority. This will save the organization extra costs brought about by lawsuits associated with the breach of the bankruptcy code.

References
Bagley, C. E. (2018). Managers and the Legal Environment: Strategies for Business. Boston,
MA: Cengage Learning.
Hitt, M., Ireland, R. D., & Hoskisson, R. (2018). Strategic Management: Competitiveness
and Globalization, Concepts. Boston, MA: Cengage Learning.
Miller, R. L., & Hollowell, W. E. (2018). Business Law: Text & Exercises. Boston, MA:
Cengage Learning.