On May 21, 2015, the United States Court of Appeals for the Third Circuit affirmed a decision of the United States Bankruptcy Court for the District of Delaware, which had approved the structured dismissal of the Chapter 11 cases of Jevic Holding Corp., et al. The Court of Appeals first held that structured dismissals are not prohibited by the Bankruptcy Code, and then upheld the structured dismissal in the Jevic case, despite the fact that the settlement embodied in the structured dismissal order deviated from the Bankruptcy Code’s priority scheme.

Background -

Jevic Transportation, Inc. was acquired by a subsidiary of Sun Capital Partners in a leveraged buyout financed by a group of lenders led by CIT Group. Jevic eventually had to reach a forbearance agreement with CIT, which agreement provided for a $2 million guarantee by Sun Capital, in order prevent CIT from foreclosing on the assets securing the loans. When Jevic filed for Chapter 11 bankruptcy protection, it owed $53 million to CIT and Sun Capital, and over $20 million to its tax and general unsecured creditors.