In a blow to Avianca Group International Ltd., the U.S. Supreme Court on Monday refused to hear the airline’s challenge to a ruling that treated millions in leasing fees as high-priority costs rather than ordinary debts.

A High-Stakes Clash Over Bankruptcy Priorities

The case stemmed from the Second Circuit’s decision that lease-related fees coming due during Avianca’s Chapter 11 restructuring were priority administrative expenses, not general unsecured claims. The distinction—arcane to outsiders but monumental in bankruptcy law—can mean the difference between a creditor being paid in full or left scrambling for scraps.

Avianca, the successor to reorganized Avianca Holdings SA and Latin America’s second-largest carrier, urged the nation’s highest court to step in and resolve a widening split among federal circuits. The dispute centers on a deceptively simple but legally explosive question: Do lease payments “accrue” when a contract is signed, or when the bill actually lands on the debtor’s doorstep?

$4.3 Million in Fees at the Heart of the Fight

The Burnham Sterling Dispute

At issue were $4.3 million in aircraft lease broker fees tied to Burnham Sterling & Co. LLC and Babcock & Brown Securities LLC. Those fees came due while Avianca navigated the turbulence of its 2020 bankruptcy, a period when airlines worldwide were battered by the pandemic.

The Second Circuit concluded that because the charges became payable post-petition, they earned the elevated status of administrative expense claims—effectively putting them toward the front of the line for repayment.

Supreme Court Lets Second Circuit Ruling Stand

On Monday, the Supreme Court, in a brief list of orders, declined to take up Avianca’s petition. The refusal leaves the Second Circuit’s decision intact and cements a precedent that could ripple across future corporate reorganizations.

For Avianca, the outcome marks the end of its bid to shift the fees into the lower-priority pool of unsecured claims. For bankruptcy practitioners, the ruling’s survival adds yet another layer of complexity to an already fragmented landscape—one where timing can prove as decisive as any contract clause.