## Facts

- Buffet Partners, L.P. (BP) filed for Chapter 11 bankruptcy.
- The United States Trustee (UST) oversaw the case and appointed the Official Committee of Unsecured Creditors (the Committee) to represent unsecured creditors.
- Early in the case, the bankruptcy court approved a sale process and entered an order under 11 U.S.C. § 363 authorizing the sale of substantially all of BP’s assets outside the ordinary course of business.
- A public auction was held, and Chatham Credit Management III, LLC (CCM) submitted the winning bid and purchased substantially all of BP’s assets under the § 363 sale order.
- After the asset sale, BP and the Committee negotiated a settlement to resolve remaining disputes in the bankruptcy case.
- The bankruptcy court approved the settlement. The settlement preserved the payment priority of higher-ranked claims and provided a meaningful distribution to BP’s unsecured creditors.
- BP and the Committee then jointly moved to dismiss the Chapter 11 case and submitted a proposed “structured dismissal” order.
- The proposed structured dismissal contemplated that, after payment of required fees and completion of the settlement distributions, BP could wind down and dissolve without further ongoing bankruptcy-court supervision.
- The UST objected, arguing dismissal was not appropriate and that the case should instead be converted to Chapter 7 or proceed through confirmation and implementation of a Chapter 11 plan.
- No creditors objected to the proposed dismissal.

## Issues

1. Whether, after a § 363 sale and court-approved settlement, the bankruptcy court may dismiss a Chapter 11 case through a structured dismissal that implements the settlement’s distribution and wind-down steps, despite the UST’s objection.
2. Whether the Bankruptcy Code permits dismissal on conditions that modify the ordinary effects of dismissal (including carrying out agreed distributions and allowing an orderly dissolution) when the conditions preserve statutory priority and serve creditor interests.

## Decision

- The court approved the joint motion and entered the proposed structured dismissal order.
- The court rejected the UST’s argument that the case had to be converted to Chapter 7 or resolved through confirmation of a Chapter 11 plan in order to carry out the settlement outcome.
- The court determined that dismissal, as structured, served the interests of creditors and the estate given the posture of the case following the completed § 363 sale and the approved settlement.
- The court found it significant that no creditors objected to the structured dismissal and that the settlement framework preserved payment priority while providing a recovery to unsecured creditors.
- The court allowed the case to be dismissed with provisions designed to complete payment of required fees and consummate the settlement and wind-down steps.

## Legal Principles

- Under 11 U.S.C. § 1112(b), once “cause” exists, the bankruptcy court chooses among dismissal, conversion, or other relief based on what best serves creditors and the estate.
- Dismissal under 11 U.S.C. § 349(b) does not always require a full return to the prepetition status quo; the court may, for cause, order a different result to carry out appropriate case-specific terms.
- A structured dismissal may be permissible where it functions as a controlled exit from Chapter 11 following major case events (such as a § 363 sale), especially when it implements a court-approved settlement.
- A dismissal order implementing settlement distributions is more readily supported when it maintains the Bankruptcy Code’s priority scheme and when stakeholders with economic interests do not object.
- The UST’s objection is considered, but the court may still approve dismissal if the selected outcome is supported by the record and better serves creditor interests than conversion or plan confirmation in the particular circumstances.

## Conclusion

The court approved BP’s and the Committee’s proposed structured dismissal following a § 363 sale and an approved settlement, holding that dismissal on tailored conditions could be authorized to complete required payments and wind down the debtor where the settlement preserved priority and no creditor objected, notwithstanding the UST’s request for conversion or a plan process.


In re Buffet Partners, L.P., 59 Bankr. Ct. Dec 232, 2014 WL 3735804 (2014)