Editor's Note: For a new decision upholding a gift plan despite Jevic, see In re Nuverra Environmental Solutions Inc., 17-1024 (D. Del. Aug. 3, 2017), analyzed in Rochelle's Daily Wire on August 9, 2017.

On May 16, 2017, the U.S. Bankruptcy Court for the District of Delaware denied a settlement motion in In re Constellation Enterprises LLC. Due to the presence of certain class-skipping distributions in the proposed settlement, the court heavily focused on the Supreme Court’s recent ruling in Czyzewski v. Jevic Holding Corp., and the decision of the Third Circuit Court of Appeals in In re ICL Holding Company.

In Jevic, the Supreme Court reversed the lower courts’ approval of a structured dismissal involving a settlement of certain estate causes of action on the grounds that the arrangement provided for distributions to general unsecured creditors, while other higher priority creditors would receive nothing. The Court held, “A distribution scheme ordered in connection with the dismissal of a Chapter 11 case cannot, without the consent of the affected parties, deviate from the basic priority rules....”