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Bernard Madoff’s victims shouldn’t expect to recover all $17 billion they lost now that the U.S. Supreme Court has refused to hear a case involving money that went to some customers more than two years before his scam collapsed, Bloomberg News reported yesterday. Irving Picard, the trustee unwinding Madoff’s firm, was seeking to reverse a December decision by the Manhattan-based U.S. Court of Appeals that shut off some older recoveries. In a June 22 order, the justices declined to take the case. They gave no explanation. The New York court had ruled that the “stockbroker defense,” also known as the safe harbor, barred lawsuits seeking to recover fictitious profits that lucky customers withdrew from Madoff’s firm as far back as six years before his Ponzi scheme was uncovered.

Southfield, Mich.-based Chassix Holdings Inc. could have trouble winning approval from a class of trade creditors for its plan to exit bankruptcy if Indianapolis-based Allison Transmission Inc. can get its litigation claim against Chassix temporarily valued at $1.1 billion, Crain’s Detroit Business reported today. Chassix, which reported annual revenue of about $1.4 billion in a statement this year, awaits a hearing Wednesday before Bankruptcy Judge Michael Wiles on Allison's request to give its pending lawsuit claim in Marion County, Ind., a temporary value. Creditors were supposed to vote by Friday on whether to approve the payment terms in Chassix's April 24 reorganization plan before a confirmation hearing June 30. But Allison will get an extension until Judge Wiles can hear arguments and decide on the breach-of-contract suit.

The trustee seeking money for Bernard Madoff's victims on Friday said they will receive $140 million from a feeder fund that ignored "glaring" red flags that the swindler was running a Ponzi scheme, Reuters reported on Friday. Plaza Investments International Ltd. will make the payment to end a lawsuit brought by Irving Picard, the trustee liquidating the former Bernard L. Madoff Investment Securities LLC. The accord would boost to nearly $10.9 billion the sum that Picard has recovered for Madoff customers, who he estimates lost $17.5 billion of principal. According to settlement papers filed with the U.S. bankruptcy court in Manhattan, Picard will deem valid about $405 million of Plaza's claims against Madoff's former firm.

A bankruptcy judge rejected a winning bid to sell Family Christian LLC, a retailer of religious books and church supplies, to an investment group led by Atlanta businessman Richard Jackson, the Wall Street Journal reported on Saturday. Bankruptcy Judge John Gregg on Thursday suggested that the Michigan-based retailer’s bankruptcy lawyers hold another auction for the 266-store chain, saying in a 48-page decision the marathon event in May was “nothing short of chaotic.” Family Christian’s bankruptcy lawyers had declared a $46.8 million offer from Jackson, who promised to keep the 3,100-worker chain alive, to be the winner. Two liquidation firms who proposed shutting down the chain — Gordon Brothers Retail Partners LLC and Hilco Merchant Resources LLC—argued that their offer would provide more money to pay the bankrupt retailer’s debts. In his opinion, Judge Gregg didn't say which bid he thought best. Instead, he rejected all offers after going over a series of mistakes that unfolded during the auction, which began on May 21, recessed several times amid confusion over the bidding process and ended at 2 a.m. on May 27. Read more. (Subscription required.) 

Cited in Judge Gregg’s opinion was one of ABI’s newest titles, Credit Bidding in Bankruptcy Sales: A Guide for Lenders, Creditors, and Distressed-Debt Investors. Pick up your copy today.

Texas Attorney General Ken Paxton in a court filing yesterday asked a bankruptcy judge to provide holders of an estimated $43 million in gift cards priority status to collect and asked that the state be granted permission to file a claim on behalf of its citizens for any amount not redeemed, the Fort Worth (Texas) Star-Telegram reported today. According to the filing, the RadioShack gift cards did not list an expiration date and the company continued to tell customers after filing for bankruptcy that they do not expire. But in court proceedings, an expiration date of March 31 was established for redemption. The state contends that RadioShack made no effort to provide cardholders with information on how to file a claim in bankruptcy court for any unredeemed amount. Now, the company should not be allowed to distribute the consumer funds to other creditors, the state contends.

Nextel's bankrupt Latin American arm gained U.S. court approval on Thursday of a plan to exit Chapter 11 bankruptcy under the control of bondholders including Aurelius Capital Management, the company's lawyer said, Reuters reported yesterday. NII Holdings, a telecom operator for the Nextel brand in Brazil, got approval for the contested $4.35 billion turnaround plan from Bankruptcy Judge Shelley Chapman, concluding a trial that began earlier this month, NII attorney Scott Greenberg said yesterday. The plan, which will cede control to Aurelius and other holders of $4.35 billion in bonds, is based on a series of settlements of complex legal disputes over the validity of inter-company transfers. While most creditors supported the deal, a bondholder subset known as the CapCo group called it a sweetheart deal for Aurelius that reduced CapCo's payout by $150 million — more than a third of its total recovery.

The Roman Catholic Archdiocese of St. Paul and Minneapolis has asked a bankruptcy judge for permission to hire a criminal defense team, after prosecutors in Minnesota filed charges against the archdiocese for allegedly failing to protect children from abusive priests, the Wall Street Journal reported today. In court papers filed on Tuesday, the archdiocese asked Bankruptcy Judge Robert Kressel to approve its application to employ two attorneys from Fredrikson & Byron P.A., a Minneapolis-based law firm. The archdiocese, home to 187 parishes and 825,000 parishioners, filed for chapter 11 protection in January in the face of mounting abuse-related lawsuits. The bankruptcy stemmed largely from the passage of the Minnesota Child Victims Act in 2013, which eliminated the statute of limitations for child sexual-abuse cases and opened a three-year window during which alleged victims can file civil lawsuits demanding compensation.

U.S. Trustee Judy Robbins has filed an objection to the proposed bidding procedures for Patriot Coal, including the stalking-horse bid from Blackhawk Mining, saying they would “likely chill the bidding process,” Forbes.com reported yesterday. Robbins objected to the deal’s breakup fee and potential expense reimbursements for Blackhawk that could reach as high as $24 million, as well as the level of discretion and “unfettered ability” the procedures provide to the company to determine who would constitute a “qualified bidder,” determine what information to provide bidders, and alter the bidding procedures as they see fit, “all without any real oversight or consultation except for, in limited circumstances, in consultation with the DIP lenders.” With respect to the bid protections, Robbins said that they should be denied by the bankruptcy court because the amount is excessive; the bidding process contemplates Blackhawk being permitted to credit bid the amount of the protections in an overbid, thus creating an unleveled playing field for competing bids; and the protections are triggered by termination events other than an alternative transaction, such as a failure to close the transaction by the Sept. 25 milestone deadline. A hearing on the sale procedures is scheduled for June 23.

The United Mine Workers of America has expressed its opposition to Patriot Coal’s bankruptcy plans to sell several of its West Virginia coal mines to another producer unwilling to take on labor liabilities, the Pittsburgh Post Gazette reported today. In a Monday court filing, the UMWA called the plan “déjà vu all over again.” Patriot Coal emerged from its first chapter 11 filing less than two years ago with “painful and significant negotiated concessions from the UMWA,” including employee benefit and wage reductions and about $130 million in cuts of retiree health care and other benefit obligations, the UMWA’s statement reads. But the company filed again for Chapter 11 in May, blaming competition from natural gas coupled with a decline in demand, in part because stricter environmental regulations on electric power plants, according to bankruptcy documents filed last month by Patriot.

Bondholders of gun maker Colt ripped into the bankrupt company's private equity owner in a court hearing yesterday, saying that the firm sped up its decline by starving it of cash and investment, Reuters reported yesterday. A Colt lawyer also told a U.S. bankruptcy judge that the gun maker may ditch its plan to sell itself to its current owner, Sciens Management, and wipe out $250 million of bond debt. Colt had planned to use the hearing to seek approval to borrow $20 million from its current lenders. John Rapisardi, an attorney with O'Melveny & Myers, which is representing Colt, said the company needed cash to make payroll.