Reno City Center Owner LLC won approval from a federal bankruptcy appeals panel to dismiss its Chapter 11 case and pursue alternative financing outside of bankruptcy, as a three-judge panel rejected arguments that the dismissal improperly prioritized certain creditors over others in violation of Supreme Court precedent.
The United States Bankruptcy Appellate Panel of the Ninth Circuit issued a memorandum decision on December 12, 2025, affirming the bankruptcy court's February 26, 2025 order dismissing the downtown Reno real estate development case. The ruling represents an interpretation of the Supreme Court's 2017 decision in Czyzewski v. Jevic Holdings Corp., which placed restrictions on so-called structured dismissals that deviate from bankruptcy priority rules.
Background on the Project
The dispute centered on a multi-use development project in downtown Reno, Nevada, originally acquired by Reno City Center, LLC in September 2020. The project was planned to include apartments, office and retail space, restaurants, and climate-controlled storage facilities. The project was controlled through a manager and related entities from September 2020 to approximately May 2023.
The Refinancing and Default
In June 2022, the project was refinanced with Delphi CRE Funding, LLC, taking out a loan that ultimately totaled more than $106 million. As part of that refinancing, Delphi required the creation of two new entities, including Reno City Center Owner LLC, which became the named borrower.
By April 2023, Delphi declared a default under the loan, citing a funding shortfall of approximately $59.5 million. The ownership group subsequently removed the manager, alleging mismanagement and misappropriation of loan proceeds. Delphi commenced foreclosure proceedings in January 2024, and sought appointment of a receiver on February 5, 2024. The debtor filed for Chapter 11 bankruptcy protection on February 16, 2024, designating the case as a single asset real estate proceeding.
The Settlement with Delphi
A turning point came in October 2024 when the bankruptcy court approved a settlement between the debtor and Delphi that reduced the secured claim from $106.4 million to $47.5 million. Under the settlement terms, the debtor agreed to pay $10 million before October 16, 2024, and a final payment of $37.5 million before January 1, 2025, later extended to March 1, 2025. In exchange, Delphi agreed to release its deed of trust and accepted an assignment of potential causes of action against the former manager and affiliated entities.
The debtor made the initial $10 million payment on time but struggled to secure financing for the final payment of $37.5 million.
Competing Plans
The situation became more complicated when a former project manager filed a competing Chapter 11 plan on February 7, 2025, proposing that a controlled entity would purchase substantially all of the debtor's assets for $75 million. However, the plan proponent had not secured financing for that purchase and the plan did not address how the final payment to Delphi would be satisfied.
Facing a March 1, 2025 deadline and unable to confirm a plan due to the competing proposals, the debtor found a willing lender in Madison Capital Group LLC, which offered to provide $42 million in financing. Madison required dismissal of the bankruptcy case before it would fund the loan.
The Dismissal Motion
On February 11, 2025, the debtor filed a motion to dismiss its Chapter 11 case, arguing that dismissal was necessary to consummate the Madison refinancing and make the timely final payment to Delphi. The debtor contended that without the refinancing, the entire Delphi debt would be reinstated to more than $110 million, foreclosure would proceed, and creditors would receive diminished recoveries.
Under the terms outlined in Madison's letter of intent, the $42 million in loan proceeds would be distributed to pay the final Delphi payment of $37.5 million, approximately $835,000 in administrative expenses from the bankruptcy case, and $2.2 million to 18 identified allowed unsecured creditors.
The Opposition
The dismissal motion drew opposition from the former manager and affiliated entities, who had filed approximately $141 million in disputed claims in the bankruptcy case. These appellants argued that the dismissal order violated the Supreme Court's holding in Jevic because it would permit payment of lower-priority general unsecured creditors while bypassing their higher-priority claims. None of the appellants' claims were included in the list of creditors to be paid, as the debtor continued to dispute their validity.
The Bankruptcy Court's Decision
At a February 19, 2025 hearing, the bankruptcy judge found cause to dismiss the case under Section 1112(b) of the Bankruptcy Code, determining that the debtor could not effectuate a plan and had no reasonable likelihood of rehabilitation. The court stated that continuing the Chapter 11 case would result in further delay, additional administrative expenses, and a lesser recovery to creditors without a clear path to resolution.
The court specifically addressed the Jevic issue, stating that the dismissal did not deviate from bankruptcy priority rules because the court was not ordering payment of certain creditors over others as a condition of dismissal, except as it related to Delphi under the previously approved settlement.
The dismissal order, entered on February 26, 2025, became effective immediately upon entry. While the order authorized the debtor to implement the Madison refinancing and stated that the debtor was authorized to make certain payments from the refinancing proceeds, the order explicitly stated that the court was not approving the terms of the refinancing transaction and was not ordering the debtor to make those payments.
The Appeal
On appeal, the appellants focused exclusively on their argument that the dismissal constituted an improper structured dismissal under Jevic. They did not challenge the bankruptcy court's finding of cause to dismiss or its determination that dismissal, rather than conversion to Chapter 7 liquidation, was in the best interests of creditors and the estate.
The Appellate Panel's Analysis
The Bankruptcy Appellate Panel disagreed with the appellants' interpretation. Writing for the unanimous three-judge panel, the court distinguished the case from Jevic on the grounds that the dismissal was not conditioned on payments to specific creditors. The panel emphasized that unlike in Jevic, where the dismissal was expressly contingent on satisfaction of settlement payments that violated priority rules, this dismissal order clearly stated it was effective immediately upon entry and did not require specific payments as a condition.
The panel rejected the appellants' argument that the authorization language in the dismissal order was equivalent to an order requiring payments. The court noted that the dismissal order expressly stated the court was not approving the terms of the refinancing transaction and was not ordering the contemplated payments. The panel characterized this as a straight dismissal under Section 349 of the Bankruptcy Code, which revests estate property in the debtor and allows the appellants to retain their rights and remedies under state law.
The panel stated that to accept the appellants' argument would require disregarding the bankruptcy court's written order, which expressly provided for a straight dismissal. The panel noted that while the dismissal order contemplated certain payments by the debtor post-dismissal, the debtor's intent post-dismissal did not change the effect of the dismissal order.
Support for Dismissal
The bankruptcy court had found that Delphi was the primary secured creditor and that allowing the debtor to pursue the Madison refinancing would provide an opportunity to stave off foreclosure and benefit all creditors. The court noted that most stakeholders, including the official committee of unsecured creditors and the United States Trustee, supported the dismissal.
The bankruptcy court had also considered alternatives to dismissal, including converting the case to Chapter 7 or appointing a Chapter 11 trustee, and determined that dismissal was the only viable option. The court stated that converting the case or appointing a trustee would ensure that the debtor could not make the Delphi payment, enabling Delphi to foreclose.
Case Details
The case was filed in the United States Bankruptcy Court for the District of Nevada under case number 24-50152-hlb. The appeal was docketed as BAP No. NV-25-1050-CNB before the United States Bankruptcy Appellate Panel of the Ninth Circuit.
The appellate panel's decision was designated as not for publication and has no precedential value under Ninth Circuit BAP rules, though it may be cited for its persuasive value. The ruling affirmed the dismissal order and allows the debtor to proceed with its refinancing plans outside of bankruptcy court supervision.
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