We use the framework of institutional pluralism to provide new insights into a controversial process of market-based reform—school closures. School closure is a shock that highlights the dynamics and definitions of failure and surfaces values and meanings that might otherwise be hidden from consideration. Using qualitative data from a closing urban school, we disaggregate stakeholders’ competing conceptions of legitimacy and argue that failure is an interpretive process. We find that this school was closed based on the evaluative criteria of district administrators, occasioning disruptions for teachers, parents, and students that ultimately run counter to some goals of district administration.