Be Careful What You Wish For: Jevic Court Denies Chapter 7 Trustee s Substitution Request, Potentially Ending Action Versus Prepetition Lenders - Insolvency/Bankruptcy/Re-structuring mondaq.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from mondaq.com Daily Mail and Mail on Sunday newspapers.
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In re Jevic Holding Corp. chapter 11 case continues to make news. The case is likely best remembered for the 2017 Supreme Court decision holding that the distribution scheme in a structured dismissal of a Chapter 11 case cannot violate the absolute priority rule. The case has since been converted to Chapter 7, and in its most recent development, the Bankruptcy Court in Delaware barred the Chapter 7 trustee from stepping into the shoes of either the former unsecured creditors’ committee or the debtor due to the language in the Final Debtor In Possession Order.
Chapter 7 trustees have the power to pursue claims in the name of debtors, but such power does not apply if the debtor bars itself and its successors from asserting such claims. However, a trustee does not have a right to take over an avoidance claim brought by a creditors’ committee unless the action being pursued is derivative of the debtor’s rights.
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Jevic Ch. 7 Trustee Can t Pursue Ex-Committee s Claims
Law360 (May 6, 2021, 7:36 PM EDT) The Chapter 7 trustee overseeing the bankruptcy of trucking company Jevic Holding Corp. cannot step into the shoes of the plaintiff in a suit brought by the official committee of unsecured creditors, after a Delaware judge said Wednesday that a post-petition financing order limits adversary actions to those brought by the committee only.
In a Wednesday opinion from U.S. Bankruptcy Judge Brendan L. Shannon, the court said that Chapter 7 trustee George Miller could not run with the claims asserted by the official committee dissolved in 2018 when Jevic s bankruptcy was converted from a Chapter 11 proceeding because Miller.