The Third Circuit’s recent holding in In re Jevic Holding Corp.
, raised a number of intriguing topics for us bankruptcy nerds so we could not resist taking a closer look at one of the issues presented in the case – structured dismissals. If you are not familiar with the concept, you are probably not alone, as the use of a structured dismissal as a means to exit bankruptcy is relatively uncommon. Although the main issue in Jevic Holding Corp
. involved whether a settlement, which required a structured dismissal of the case, should be approved notwithstanding that its terms violated the absolute priority rule, we did not want to dismiss
(pun intended!) the issue of permissibility of structured dismissals in a bankruptcy case. So we take this opportunity to provide an overview of structured dismissals and how they work in a bankruptcy case. Stay tuned for Part II of our In re Jevic Holding Corp.
case study where we’ll examine the Third Circuit’s ruling with respect to deviations from the Bankruptcy Code’s priority scheme. For now, though, we’ll turn to structured dismissals.
Structured Dismissals Generally