Supreme Court To Review Bankruptcy Deal That Paid Lawyers But Not Truck Drivers

The U.S. Supreme Court announced today that they will review a trucking company’s bankruptcy deal that paid out unsecured creditors and lawyers instead of truck drivers, even through the truckers ranked higher on the payment priority ladder.

Legal Maneuverings Ensure That Lawyer And Creditors Are Paid Instead Of Truckers

According to the Justice Department, New Jersey based trucking company Jevic Holding Corp filed for Chapter 11 bankruptcy protection in May 2008.  As required by federal law following a mass-firing event, the company’s truck drivers were supposed to receive payment for damages after they were laid off.

Jevic, however, used a technique called “structured dismissal” to change the payment structure so that the bankrupt company paid out its unsecured creditors and lawyers, leaving its truck drivers empty handed, even though the truckers ranked higher on the priority ladder. A Delaware bankruptcy court approved the legal maneuver. A federal court and the Third Circuit Court upheld the Delaware bankruptcy court’s decision.

Supreme Court’s Decision To Have Huge Impact On The Future Of Bankruptcy

The Justice Department asked the Supreme Court to overturn the ruling because it sets a precent that allows bankrupt companies to pick and choose who gets paid — and who doesn’t.

Sources:
Bloomberg
The Wall Street Journal
Courthouse News Service