%1

Restructuring lawyer Richard Davis will likely lead an investigation into transactions by the operating unit of Caesars Entertainment Corp., which filed for chapter 11 this year, Reuters reported yesterday. The Executive Office for U.S. Trustees recommended Davis as the examiner in the case, asking a judge to consider approval of the pick at a hearing on Wednesday. Davis, a former partner at bankruptcy powerhouse Weil Gotshal & Manges, has served in several investigative roles both in and out of bankruptcy. Most recently he was tasked with probing the dealings of bankrupt hedge fund Fletcher International, whose founder, Alphonse "Buddy" Fletcher, is the husband of Ellen Pao, the plaintiff in a high-profile gender discrimination lawsuit against venture capital firm Kleiner Perkins Caufield & Byers. Caesars Entertainment Operating Co. filed for bankruptcy in January to cut its debt by $10 billion. Prior to filing, it transferred a number of its most valuable properties to affiliates of its parent as it struggled to overhaul operations. Creditors have alleged the moves were illegal efforts by the parent to place the assets beyond the reach of creditors.

The holdout creditor in Stockton, Calif.’s bankruptcy case filed its opening brief in an appeal of the city's reorganization plan yesterday, claiming that "no bondholder has ever received so little in the history of municipal bankruptcy,” Reuters reported yesterday. The creditor, two funds managed by Franklin Templeton Investments, said that Stockton's plan to exit chapter 9 bankruptcy was discriminatory and punitive. Franklin said that it would receive less than 1 percent of its $30.5 million unsecured claim in the case, now before the U.S. Bankruptcy Appellate Panel of the Ninth Circuit. The brief claimed that by confirming a plan providing such a small distribution, compared with recoveries of 52 percent to 100 percent for other unsecured claims, U.S. Bankruptcy Judge Christopher Klein erred in backing Stockton's exit plan. Suffering a steep decline in revenue, Stockton filed for bankruptcy protection from its creditors in 2012. The Northern California city of about 300,000 residents received approval from Judge Klein to exit chapter 9 last fall over objections by Franklin's legal team.

The Supreme Court today will hear consolidated oral argument in the cases of Bank of America v. Caulkett and Bank of America v. Toledo-Cardona. The two cases, deal with a common scenario in the wake of the housing crisis, according to a SCOTUS Blog argument preview: a homeowner who files for chapter 7 bankruptcy has two mortgages, but the value of the house is less than the primary mortgage. Does the Bankruptcy Code allow courts to void the second mortgage, which is essentially worthless? The Supreme Court’s answer, according to the blog could hurt the bottom line of banks that have issued second mortgages or, alternatively, reduce the flexibility of debtors and banks holding first mortgages to work together to stave off foreclosures and keep the homeowners in their houses. Click here to read the full post.

For further information on the cases, including petitions and amicus briefs filed before the Supreme Court, be sure to visit ABI’s Newsroom.

Atlantic City’s Revel Casino Hotel yesterday asked a bankruptcy judge for more breathing room in a bid to move forward with a sale after the judge said she couldn’t sign off on a heavily discounted $82 million deal to Glenn Straub, a Florida-based developer, the Wall Street Journal reported today. The judge’s decision has left the $2.4 billion resort without a clear path toward resolving its financial woes, even as millions of dollars in legal and operational expenses continue to mount. During a hearing yesterday, John Cunningham, a lawyer for Revel, mentioned several paths Revel could take, but each comes with its own set of difficult complications. One option is for Straub to buy the casino under an earlier, court-approved $95 million deal stemming from a bankruptcy auction last year, but that appears increasingly unlikely. “I’m not going to pay the 95.4,” Straub said, referring to his original $95.4 million offer. The Florida property developer failed to meet a Feb. 9 deadline to close the $95.4 million sale, after a string of 11th-hour appeals from the resort’s former tenants and other creditors muddied the terms of the deal.

While General Motors has settled one potentially explosive lawsuit related to defective ignition switches, the company still faces the possibility of depositions of its employees in a broader class-action case, the New York Times reported today. A number of current and former GM employees are scheduled to be questioned under oath, beginning in May, in a sweeping case in federal court in New York. GM avoided depositions in the wrongful-death case settled last week with the parents of Brooke Melton, 29, a Georgia woman who was killed in a crash in a Chevrolet Cobalt equipped with a faulty ignition switch. But the lawyers who represented Melton’s parents said yesterday that legal efforts to collect internal GM documents and depose employees would continue nonetheless. The lawyers said that the discovery process begun in Ms. Melton’s case had accelerated similar efforts in the so-called multidistrict litigation, which consolidates a number of lawsuits for injury and death cases, as well as economic losses sustained by owners of defective vehicles. http://www.nytimes.com/2015/03/17/business/gm-will-face-further-discovery-in-broader-class-action-case.html?ref=business

For further insight into litigation trusts in bankruptcy, be sure to pick up a copy of ABI’s newest publication, A Practitioner's Guide to Liquidation and Litigation Trusts, available now from the ABI Bookstore. http://www.abi.org/bookstore/practitioners-guide-liquidation-and-litigation-trusts

Longview Power LLC, the operator of a 700-megawatt, coal-fired power plant in West Virginia, won court approval yesterday to exit bankruptcy with a plan that relies on a key settlement reached with contractors and an insurer, Dow Jones Daily Bankruptcy Review reported today. The plan restructures more than $1 billion in debt and gives Longview $275 million in new financing to fund its exit from bankruptcy. The money is crucial, an official for the company said in a court filing, because the West Virginia plant is undergoing repairs and not generating electricity to sell. Current funds are also dwindling, according to the filing. The lynchpin of the plan is a settlement that resulted from lengthy arbitration with Norwegian construction firm Kvaerner ASA and Siemens AG, which built portions of the power plant. The dispute was over more than $335 million in liens the builders had argued were superior to Longview's top-ranking debt. The settlement also ended litigation between Longview and insurer First American Title Insurance Co. over the payout of a policy covering the builders' senior claims.

Two former owners of Freedom Industries pleaded guilty yesterday to environmental violations stemming from last year's Charleston chemical spill that prompted a temporary tap water ban for 300,000 residents, the Associated Press reported yesterday. At separate hearings, William Tis and Charles Herzing entered the pleas to causing an unlawful discharge of a coal-cleaning agent into the Elk River. Each faces up to a year in prison when sentenced June 22. They also face fines of $25,000 per day per violation, or $100,000 — whichever is greater.

Defending its plan to fully repay its debts to CalPERS, the bankrupt city of San Bernardino has asked a judge to dismiss a lawsuit by creditors demanding equal treatment, the Sacramento Bee reported today. The city’s motion is the latest chapter in the ongoing saga over public pensions in California and how they’re treated in bankruptcy. The judge overseeing Stockton, Calif.’s case ruled last fall that municipal pension plans can be altered just like any contract in bankruptcy, but he also approved the city’s plan to keep paying CalPERS in full in order to preserve its retirement program. A similar fight is playing out in San Bernardino, which filed for chapter 9 municipal bankruptcy in 2012. After months of bickering, the city said that it planned to pay its $24 million-a-year CalPERS bill in full and had begun repaying the big pension fund millions of dollars in past-due payments. Two of San Bernardino’s creditors filed suit over that plan in January: Luxembourg bank EEPK and Ambac Assurance Corp., a New York bond insurer. They’re seeking repayment on a $59 million bond issued by the city in 2005.