In a highly anticipated decision issued last Thursday (on December 19, 2019), the United States Court of Appeals for the Third Circuit held in In re Millennium Lab Holdings II, LLC that a bankruptcy court may constitutionally confirm a chapter 11 plan of reorganization that contains nonconsensual third-party releases. The court considered whether, pursuant to the United States Supreme Court’s decision in Stern v. Marshall, 564 U.S. 462 (2011), Article III of the United States Constitution prohibits a bankruptcy court from granting such releases.

The United States Supreme Court (the “Court”) recently issued a long-awaited decision in Czyzewski v. Jevic Holding Corp. (“Jevic”), which limits the use of “structured dismissals” in Chapter 11 bankruptcy cases, requiring structured dismissals pursuant to which final distributions are made to comply with the Bankruptcy Code’s priority scheme, or the consent of all affected parties to be obtained.1

What is a Structured Dismissal?

Nearly four years after its decision in Stern v. Marshall raised new doubts about the place of bankruptcy courts in our legal system, the Supreme Court has finally put those doubts to rest. This week, in Wellness International Network, Ltd. v. Sharif, No. 13-935, the Court held that even for claims that must otherwise be resolved by an Article III court, a bankruptcy court may still adjudicate the matter based on consent.

The case of Executive Benefits Insurance Agency v. Arkison (In re Bellingham Ins. Agency), No. 12- 1200, was easily one of the most closely watched bankruptcy cases in many years. Last week’s decision in that case, however, was far less dramatic than  some practitioners feared it might be. The Supreme Court answered two important questions regarding the power of bankruptcy courts that it left open three years ago in Stern v. Marshall.