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Lawyers for the Archdiocese of Milwaukee and creditors in its bankruptcy have postponed until June a decision about whether to seek mediation in a lawsuit over the estimated $66 million it holds in a trust to care for its cemeteries, the Milwaukee Journal Sentinel. At a brief hearing yesterday, U.S. District Judge Lynn Adelman offered to mediate the lawsuit or find a retired magistrate to do so. James Stang, attorney for the creditors committee, which is composed of clergy sex abuse victims but represents all creditors, said he was open to Adelman's offer. But archdiocese attorney Frank LoCoco suggested the parties remain too far apart for negotiations to be successful. The Archdiocese of Milwaukee filed for Chapter 11 bankruptcy protection in January 2011 to address its sexual abuse liabilities dating back decades. Adelman scheduled a June 16 hearing to pose the mediation question again.

A U.S. appeals court yesterday upheld the dismissal of a lawsuit by the United Auto Workers union claiming that General Motors Co. was required to pay $450 million to cover medical benefits for an affiliate's retirees, Reuters reported. A three-judge panel of the U.S. Court of Appeals for the Sixth Circuit said that GM assumed the obligation for the payment two years prior to its 2009 bankruptcy but that a subsequent agreement with the union extinguished the company's responsibility. The payment had been part of a 2007 contract between the old GM, bankrupt auto parts maker Delphi Automotive and the UAW. It was not, however, included in a different contract on medical benefits signed in 2009 by the GM that emerged from chapter 11 bankruptcy. The UAW claimed that the new GM owed the money by virtue of Delphi's own emergence from bankruptcy in October 2009. The Sixth Circuit, affirming a lower court, said the language of the 2009 agreement made clear that GM did not owe the payment.

Lehman Brothers Holdings Inc. is suing the Federal Home Loan Bank of New York for more than $150 million over dozens of soured interest-rate swaps, the Wall Street Journal reported today. Lehman and its Special Financing unit sued Federal Home Loan Bank, or FHLBNY, on Wednesday in bankruptcy court over payments it says are due from its position on 356 swaps and options transactions. Lehman says it was in the money on the swaps at the time of its 2008 bankruptcy filing. Although Lehman officially exited bankruptcy protection in 2012, its derivatives team is still wrangling with creditors over billions of dollars in disputed claims. FHLBNY, which had entered into replacement swaps with other counterparties after Lehman’s collapse, initially said Lehman owes it about $64.5 million. The bank, which said it was impossible to properly value the swaps in the days after Lehman’s collapse, later amended the amount Lehman allegedly owed to $44.9 million.

The “Furthering Asbestos Claim Transparency (FACT) Act of 2015,” a Republican-backed bill that aims to reduce fraud in asbestos lawsuits, was approved (19-9) by the House Judiciary Committee yesterday, The Hill reported today. Bankrupt manufacturers and their insurers under the Bankruptcy Code are able to create bankruptcy trusts to compensate workers and their family members who were injured by the company’s manufacturing of asbestos. With roughly 60 asbestos trust funds and nearly $40 billion in assets, lawmakers said opportunistic individuals are able to seek multiple payouts by filing conflicting claims with numerous trusts. To protect these finite trusts from paying out money for fraudulent or inflated claims, the bill would require trusts to file quarterly reports on their public bankruptcy dockets that include information on demands for payments and the basis for payments made.  Read more.

For more on litigation and litigation trusts in bankruptcy, be sure to pick up a copy of ABI’s A Practitioner's Guide to Liquidation and Litigation Trusts. 

A judge has rejected a $6.7 million bankruptcy plan by Freedom Industries, the company behind a January 2014 chemical spill in West Virginia, the Associated Press reported yesterday. Bankruptcy Judge Ronald Pearson said in his ruling yesterday that Freedom Industries and state environmental regulators haven't agreed on cleanup terms at the Charleston spill site, and ordered Freedom to comply with state cleanup orders. Freedom's plan would have offered spill victims $2.7 million. The spill contaminated 300,000 residents' tap water for days. Businesses that couldn't operate without water, including restaurants, and individuals are seeking compensation.

Two top U.S. banks are preparing to delete negative credit reporting records for some borrowers who filed for bankruptcy, after facing accusations of letting poor marks for unpaid debt haunt borrowers’ credit even after the debt was canceled, the Wall Street Journal reported today. At a hearing last week, lawyers for Bank of America Corp. and JPMorgan Chase & Co. announced that bank officials are preparing to delete notices they sent to credit reporting agencies that a borrower’s account was “past due” and/or “charged off,” according to a court transcript viewed by the Wall Street Journal. The announcement came after the banks, along with Credit One Bank N.A., General Electric’s Synchrony Bank and Citigroup Inc., were sued by people who had filed for bankruptcy and gotten their debts canceled with a discharge order but still had notices on their credit reports that their old credit card debt had been “charged off.”

The Canadian and U.S. judges charged with dividing the $7.3 billion from the liquidation of Nortel Networks rejected proposals from former regional businesses and opted for a pro rata split of the money, Reuters reported yesterday. Judges on the U.S. Bankruptcy Court in Wilmington, Del., and Ontario Superior Court of Justice held an unprecedented joint cross-border trial on the dispute, with the courtrooms linked by video. Nortel filed for bankruptcy in 2009 and sold its global operations and patents, raising the cash in dispute. In the years that corporate entities in Canada, the United States and Europe have fought over the funds, retirees and bond investors have awaited repayment. Bankruptcy Judge Kevin Gross and Justice Frank Newbould said in separate opinions that each regional business would receive cash to pay its creditors based on their claims against it as a percentage of the overall claims worldwide. The judges said in their simultaneous opinions that a pro rata division was the most fair and satisfactory way to split the money.  Read more.

For more information on cross-border proceedings, be sure to pick up a copy of ABI’s Chapter 15 for Foreign Debtors. 

The federal government is collecting $9 million from Global Computer Enterprises in the form of a False Claims Act settlement, FederalNewsRadio.com reported yesterday. After GCE filed chapter 11 protection in September, the Labor Department and the General Services Administration had to pay the company $23 million to get access to financial systems and data. The Justice Department brought up charges against GCE and its owner Raed Muslimani claiming that the company "misrepresented and/or concealed that it was utilizing engineers and other employees who were expressly prohibited from working on the contracts due to their citizenship/immigration statuses," in contracts with Labor, the Equal Employment Opportunity Commission (EEOC), GSA, the Secret Service and the Coast Guard. DoJ said in a May 7 press release that GCE and Muslimani do not admit to any wrongdoing, but agreed to pay the $9 million fine.

Lawyers for an ad-hoc student group, seeking to represent the interests of about 500,000 former students of the recently collapsed Corinthian Colleges Inc., have asked that a special committee be formed to press the students’ claims and ensure their participation in bankruptcy proceedings that will affect their futures, the New York Times reported today. Scott Gautier, bankruptcy counsel for the ad hoc student group, estimated the students’ claims at $25 billion or more, and said that an official student creditors’ committee would help the students focus on redress, including student loan forgiveness or programs to help them with education and job placement. “We believe that collective treatment is not only proper, but the most efficient and effective way” to handle the claims, he said.

A pool of close to 1,000 New Yorkers has been culled down to a group of 12 jurors and eight alternates who will sit for the trial of now-defunct Dewey & LeBoeuf’s former leaders: chairman Steven Davis, executive director Stephen DiCarmine and chief financial officer Joel Sanders, the American Law Daily reported today. Seven women and five men make up the panel of jurors who will decide whether to convict or exonerate the three former executives, who face dozens of criminal charges, including accusations of scheming to defraud, grand larceny, falsifying business records and conspiracy. The selection process began almost two weeks ago when the first round of potential jurors filled out a survey to determine whether they could sit for the trial that New York County Supreme Court Justice Robert Stolz has told them may continue well into the fall.