On June 9, 2021, U.S. Bankruptcy Judge Martin Glenn for the Southern District of New York issued a decision in In re KG Winddown, which clarified some unresolved issues about structured dismissals in Chapter 11 bankruptcy cases that stemmed from the 2017 U.S. Supreme Court decision in Czyewski v. Jevic Holding (Jevic). Jevic held that bankruptcy courts may not approve structured dismissals that provide for distributions that do not follow ordinary priority rules without the consent of affected creditors.
The Jevic court noted that although the Bankruptcy Code does not expressly mention structured dismissals, their use in bankruptcy cases appears to be increasingly common. The court, however, expressed no view about the legality of structured dismissals generally and instead chose to limit its decision to the facts presented in the case.
