Recently, courts have been confronted with issues concerning the permissibility of structured dismissals and bankruptcy sales in a way they had not before. In general, a successful case under Chapter 11 of title 11 of the United States Code (the "Bankruptcy Code") culminates in a confirmation of a plan of reorganization, pursuant to which the debtor's liabilities will be addressed. In certain instances, confirmation of a plan may be impossible or cost-prohibitive, but the debtor and its creditors have achieved a consensus regarding the treatment of the debtor's liabilities. There, the debtor and its creditors may agree to the treatment of claims, following which the case will be dismissed through a structured dismissal. While there are "magic words" in the Bankruptcy Code that allow for structured dismissals, "[n]ot much law, statutorily or otherwise, exists regarding structured dismissals."
The Supreme Court addressed structured dismissals in the first instance in Czyzewski v. Jevic Holding Corp. The Court held that a structured dismissal is a permissible means to resolve a Chapter 11 case so long as it does not violate the priority scheme set out in the Bankruptcy Code. Post-Jevic, courts have had to evaluate whether proposed structured dismissals violate the priority scheme in a way that they had not before. Moreover, courts have confronted suggestions to expand Jevic’s limitation on structured dismissals to bankruptcy sales and even beyond conflicts with the priority scheme. However, courts have been reluctant to expand Jevic beyond its core holding.