Another Way Out: Structured Dismissals in Jevic's WakeNorton Bankr. L. Adviser (2015)
In recent years, a peculiar approach to ending a flailing Chapter 11 case — the structured dismissal — has garnered attention and invited this history’s reexamination. A novel construct, a “structured dismissal” has been defined as “a hybrid dismissal and confirmation order” in which a Chapter 11 case’s “dismissal...[is] preceded by other orders of the bankruptcy court (e.g., orders approving settlements, granting releases, and so forth) that remain in effect after[ward].” Whereas dismissal normally returns a debtor to the status quo ante, these newfangled orders override that anodyne presumption; instead, at the parties’ behest, various “bells and whistles” are incorporated into the bankruptcy court’s final edict. Most famously, these orders often authorize the transfer of funds obtained from an under-secured creditor pursuant to a settlement under Rule 9019(a) or a sale per § 363(b) to junior and unsecured claims rather than more senior ones, a result inconsistent with the absolute priority rule. Due in part to this common and divisive extra, controversy dogs the structured dismissal. Each side claims the same sections — § 305, § 349, § 105, and § 1112 — for its own, and the familiar tension between efficiency and fairness central to bankruptcy law has resurfaced in briefs and courtrooms. With the advent of the structured dismissal, then, an historical accord has been disturbed as statutes and policies have dueled.
On May 21, 2015, a split panel of the United States Court of Appeals for the Third Circuit (“Third Circuit”) waded into this maelstrom in Official Committee of Unsecured Creditors v. CIT Group/Business Credit Inc. (In re Jevic Holding Corp.) (“Jevic”). As the first published opinion by an appellate court to authorize a structured dismissal that deviated from the absolute priority rule, the majority joined a growing chorus of lower federal tribunals. Nonetheless, the dissenting judge could find succor in the disapproval of this phenomenon evinced by the Office of the United States Trustee (“UST”) and the American Bankruptcy Institute Commission to the Study the Reform of Chapter 11 (“Commission”), among others, including his own colleagues. Indeed, the Jevic majority gave no full-throated endorsement to this innovation, its approval fraught with nebulous conditions. Simply put, the law has become no clearer, the operative standard no easier to apply, by this latest entry into an incipient and unstructured body of law, as this article exhaustively shows. In thusly highlighting Jevic's weaknesses, this article simultaneously does something more: it lays out a blueprint for judges evaluating such motions and for practitioners seeking to craft such dismissals.
- chapter 11,
- structured dismissal,
Publication DateNovember, 2015
Citation InformationAmir Shachmurove. "Another Way Out: Structured Dismissals in Jevic's Wake" Norton Bankr. L. Adviser (2015)
Available at: http://works.bepress.com/amir_shachmurove/10/