Structured Dismissal: The "Least Bad Alternative"

The Third Circuit, in Official Committee of Unsecured Creditors v. CIT Group/Business Credit Inc. (In re Jevic Holding Corp.),¹ became the first court of appeals to approve the settlement and dismissal of a chapter 11 case. Structured dismissals, as understood by the Third Circuit, are "simply dismissals that are preceded by other orders of the bankruptcy court (e.g., orders approving settlements, granting releases, and so forth)." This decision may provide flexibility in future bankruptcy resolutions as structured dismissals may become a tool for parties and judges, and deviation from the Bankruptcy Code's claim priority scheme can be permitted in rare situations.

In 2006 Jevic Transportation, Inc. ("Jevic"), a New Jersey trucking company, was acquired by a subsidiary of Sun Capital Partners ("Sun") in a leveraged buyout led by CIT Group ("CIT"). Two years later, Jevic filed a voluntary chapter 11 petition in the United States Bankruptcy Court for the District of