SETTLEMENT

Czyzewski v. Jevic Holding Corp.

Issues

Under the Bankruptcy Code, can a bankruptcy court in a Chapter 11 case approve a settlement that distributes the debtor’s estate to creditors in a way that deviates from the Code’s priority scheme?

Respondents Jevic Holding Corporation et al. (“Jevic”) fired Petitioners Casimir Czyzewski et al., members of a certified class of truck drivers (“the drivers”), when the company filed for bankruptcy in 2008. The drivers were entitled to receive payment on their wage claims before other unsecured creditors received any distribution from Jevic’s bankruptcy estate, but they were skipped over when Jevic’s two largest creditors reached a settlement with Jevic. The drivers argue that the Bankruptcy Code does not authorize a bankruptcy court to approve settlement that differs from the Code’s priority scheme. Jevic counters that the drivers have not presented a case or controversy because the drivers cannot show that a decision in their favor is likely to redress their injury. Further, Jevic argues that the Code does not make the absolute priority rule applicable to Chapter 11 settlements. The outcome of this case could affect the scope of the Bankruptcy Code priority scheme and could disadvantage employees who hold priority wage claims against their bankrupt employer. 

Questions as Framed for the Court by the Parties

Whether a bankruptcy court may authorize a distribution of settlement proceeds that violates the priority scheme established by the Bankruptcy Code, over the objection of priority creditors whose rights are impaired by the proposed distribution.

JEVIC FILES BANKRUPTCY

On May 19, 2008, Jevic Holding Corporation (“Jevic”) fired its 1,800 employees—including Petitioners (“the drivers”), a certified class of truck drivers—without warning. See In re Jevic Holding Corp., et al., No. 14-1465, 5 (3d Cir. May 21, 2015). The next day Jevic, voluntarily filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the District of Delaware.

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Federal Trade Commission v. Watson Pharmaceuticals, Inc.

Solvay Pharmaceuticals, Inc. sued Watson Pharmaceuticals, Inc., a generic drug manufacturer, for infringement of Solvay’s patent for its drug AndroGel. In response, Watson argued that Solvay’s patent was invalid. Before a judgment, however, the parties settled the case. As part of the agreement, Solvay would pay Watson in exchange for Watson’s agreement to delay entering the market with a generic version of AndroGel. The FTC then brought an action against all of the parties to the AndroGel case, contending that the agreement amounted to an anticompetitive attempt to share in the profits afforded by a patent that, but for the settlement agreement, would have been invalidated in court. The District Court dismissed the FTC’s claims and the Court of Appeals affirmed. The Supreme Court’s decision in this case may determine whether agreements such as those in this case, commonly referred to as reverse payments, constitute unfair competition in violation of federal law.

Questions as Framed for the Court by the Parties

Federal competition law generally prohibits an incumbent firm from agreeing to pay a potential competitor to stay out of the market. See Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49-50 (1990). This case concerns agreements between (1) the manufacturer of a brand-name drug on which the manufacturer assertedly holds a patent, and (2) potential generic competitors who, in response to patent-infringement litigation brought against them by the manufacturer, defended on the grounds that their products would not infringe the patent and that the patent was invalid. The patent litigation culminated in a settlement through which the seller of the brand-name drug agreed to pay its would-be generic competitors tens of millions of dollars annually, and those competitors agreed not to sell competing generic drugs for a number of years. Settlements containing that combination of terms are commonly known as "reverse payment" agreements. The question presented is as follows:

Whether reverse payment agreements are per se lawful unless the underlying patent litigation was a sham or the patent was obtained by fraud (as the court below held), or instead are presumptively anticompetitive and unlawful (as the Third Circuit has held).

Issue

Whether a payment by one company to keep a competitor from entering the market with an identical product is always prohibited, or whether such a payment is permissible where the company merely exercises its rights as the holder of a valid patent.

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Perez v. Sturgis Public Schools

Issues

May an individual sue in district court for monetary damages after accepting a settlement offer through administrative proceedings under the Individuals with Disabilities Education Act? 

This case asks the Supreme Court to determine whether settlement with a school satisfies the exhaustion requirement under the Individuals with Disabilities Education Act (“IDEA”) so that a student might bring a claim for monetary damages in a district court. Miguel Luna Perez asserts that IDEA’s exhaustion is satisfied by a settlement with a school, not only by a decision on the merits. Perez further argues that requiring individuals to exhaust their claims in lieu of settlement would be futile. Further, Perez asserts that allowing non-IDEA claims to proceed without IDEA exhaustion would not cause individuals to bypass the administrative IDEA process. Sturgis Public Schools and Sturgis Board of Education (“Sturgis”) counter that settlement is insufficient for exhaustion requirements especially when the individual seeks monetary damages. Sturgis further contends that allowing non-IDEA claims to proceed without IDEA exhaustion might result in parents seeking monetary damages in the courts to the detriment of their child’s free appropriate public education. The outcome of this case has important implications on the substantive rights of children with disabilities in terms of the dispute resolution proceedings between the schools and parents. 

Questions as Framed for the Court by the Parties

(1) Whether, and in what circumstances, courts should excuse further exhaustion of the Individuals with Disabilities Education Act’s administrative proceedings under Section 1415(l) when such proceedings would be futile; and (2) whether Section 1415(l) requires exhaustion of a non-IDEA claim seeking money damages that are not available under the IDEA. 

When Miguel Luna Perez (“Perez”) was nine, he emigrated from Mexico and began school in the Sturgis Public School District. Perez v. Sturgis Public Schools at 2. Since Perez was deaf, the school assigned him an aide to assist him with learning sign language. Id. However, the aide did not know sign language. Id.

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Soto v. United States

Issues

Does 10 U.S.C. § 1413a, a statute that authorizes combat-related special compensation for veterans, provide a settlement mechanism to be used instead of the default mechanism in the Barring Act?

This case asks the Supreme Court to clarify the procedures used when granting combat-related special compensation (“CRSC”)—specifically, whether the statute enacting CRSC also provides a settlement mechanism. Generally, military-related claims are governed by the Barring Act, which has a six-year statute of limitations. Soto argues that the Barring Act does not apply here because the CRSC-enacting statute provides its own mechanism for settling claims, thereby displacing the Barring Act. The United States instead asserts that the Barring Act is only displaced when a statute explicitly grants settlement authority, which is not granted in the CRSC statute, and that applying a different rule would be contrary to prior decisions. This case raises important questions regarding combat-wounded veterans’ access to compensation and the administrative and legal burden on the government. 

Questions as Framed for the Court by the Parties

Given the U.S. Court of Appeals for the Federal Circuit’s holding that a claim for compensation under 10 U.S.C. § 1413a is a claim “involving … retired pay” under 31 U.S.C. § 3702(a)(1)(A), does 10 U.S.C. § 1413a provide a settlement mechanism that displaces the default procedures and limitations set forth in the Barring Act? 

Typically, retired veterans must waive a portion of their retirement pay in order to receive disability pay. Soto v. United States at 2. However, under 10 U.S.C.

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