On Nov. 2, 2015, the Honorable Vincent F. Papalia, sitting in the United States Bankruptcy Court for the District of New Jersey, issued a 58-page opinion in the In re Petersburg Regency bankruptcy matter, 540 B.R. 508 (Bankr. D.N.J. 2015) (the “Opinion”), whereby the court approved a settlement and structured dismissal of the debtor’s bankruptcy case under the principles of In re Jevic Holding Corp., 787 F.3d 173, 175 (3d Cir. 2015), as amended (Aug. 18, 2015). Jevic is currently on appeal before the Supreme Court in Czyzewski v. Jevic Holding Corp., 136 S. Ct. 2541 (2016).
Background
In Petersburg Regency, all that remained of the debtor was a $10.2 million pool of insurance proceeds resulting from a Virginia hotel that was irretrievably damaged by a hurricane in 2003. The main issue before the court during the bankruptcy case was whether to grant the creditors’ motions to approve a settlement among them that provided for the distribution of the debtor’s only significant asset—the insurance proceeds—under a consensual settlement among those creditors and, thereafter, to dismiss the case. The settling creditors, who represented all secured and unsecured non-insider claims against the debtor, reached a settlement among themselves, consented to the proposed distribution and unanimously opposed the debtor’s and the debtor’s principals’ proposal to proceed with a different distribution scheme under a Chapter 11 plan of liquidation.
