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A bankruptcy judge in West Virginia is throwing open the courthouse doors to those affected by a chemical-spill disaster last year, inviting them to weigh in on what should happen to the little that remains of Freedom Industries Inc., Dow Jones Daily Bankruptcy Review reported today. Bankruptcy Judge Ronald Pearson scheduled a March 3 status conference in the chapter 11 case of Freedom, which owned the tank that leaked a coal-treatment chemical into the Elk River, contaminating the water supply for 300,000 West Virginians. Cash is running out, professional bills are mounting and company ex-president Gary Southern, one of the former Freedom leaders facing criminal charges, has tied up a $3 million insurance settlement that could help those injured by the spill, the judge said in an order issued Friday. "It is time to have the principal parties in interest...provide input with respect to how this case should be administered," Judge Pearson wrote.

Puerto Rico yesterday said that it would appeal a U.S. ruling that voided the island's restructuring law, saying that it left the U.S. commonwealth in legal limbo, Reuters reported yesterday. Late on Friday a U.S. federal judge ruled that Puerto Rico's so-called Recovery Act, which made some of its agencies eligible for court-supervised debt restructuring, violated the U.S. constitution by allowing a state government to modify municipal debt. "We believe that it is incorrect in law and has the effect of leaving Puerto Rico without a legal framework to allow our public corporations to comply with their obligations in an orderly manner without affecting the continuity of essential services that the citizenry receive," Puerto Rico Justice Secretary Cesar Miranda said.

Bankruptcy Judge Christopher Klein’s opinion last week confirming the city of Stockton, Calif.’s bankruptcy exit plan is as incisive in its rebuke of the California Public Employees’ Retirement System (CalPERS) as it is instructive about U.S. bankruptcy law, according to an editorial in today’s Wall Street Journal. Stockton declared chapter 9 bankruptcy in 2012, and it has since rewritten labor contracts and asked creditors for writedowns. Yet after being browbeaten by CalPERS, the giant public-pension fund, the city held pensions harmless, according to the editorial. CalPERS argued that the California constitution’s guarantee of contracts shielded pensions from cuts in bankruptcy. The fund also asserted sovereign immunity and police powers as an “arm of the state,” including a lien on municipal assets. Judge Klein upheld Stockton’s bankruptcy plan but not before effectively throwing CalPERS out of court. “It is doubtful that CalPERS even has standing,” he writes. “It does not bear financial risk from reductions by the City in its funding payments because state law requires CalPERS to pass along the reductions to pensioners in the form of reduced pensions.” As the judge explains, “CalPERS has bullied its way about in this case with an iron fist.” Calpers’s arguments are “constitutionally infirm in the face of the exclusive power of Congress to enact uniform laws on the subject of bankruptcy under Article I, Section 8, of the U.S. Constitution—the essence of which laws is the impairment of contracts—and of the Supremacy Clause.”

A federal judge in New Jersey yesterday called a temporary halt to the pending sale of bankrupt Revel Casino in Atlantic City and scheduled a hearing today on a motion to block some of the terms of the $94.5 million deal, Reuters reported today. U.S. District Court Judge Jerome B. Simandle ordered an emergency hearing in the proposed sale of the property to Florida developer Glen Straub, who could lose his $10 million deposit if the deal does not close by Monday's deadline. Straub is trying to buy the casino without any obligations to leases held by bars, clubs and restaurants that operated in the casino's hotel. Some of those tenants have gone to court to block the deal unless it protects their property rights. An appeals court on Friday ruled in favor of one of the tenants, prompting others to file motions on Saturday to get similar treatment. Judge Simandle ruled in their favor in setting the hearing for Monday. Revel, which cost $2.4 billion to build and opened two years ago, closed on Sept. 2 after filing for bankruptcy three months earlier.

A U.S. judge dismissed the bulk of two lawsuits by bankrupt wireless venture LightSquared and equity owner Harbinger Capital Partners accusing Deere & Co and other GPS firms of misleading them about interference concerns and hastening the company's insolvency, Reuters reported yesterday. In an opinion rendered yesterday in Manhattan federal court, U.S. District Judge Richard Berman threw out Harbinger's lawsuit, and nixed nine of 11 claims asserted by LightSquared, serving a blow to its hope for hefty damages that could help salvage its business. LightSquared has been in bankruptcy since 2012, when the Federal Communications Commission revoked its license to build a planned wireless network over fears it could interfere with GPS systems. Harbinger, the hedge fund run by Phil Falcone, would have to give up much of its equity and all of its operational control of LightSquared under a restructuring plan being voted on by creditors. The lawsuits alleged that Deere, Garmin International, Trimble Navigation Ltd., and a GPS industry group led LightSquared to believe the planned network would not pose an interference risk. It wasn't until LightSquared had pumped $4 billion into the project, the plaintiffs argued, that the GPS industry voiced their concerns. Judge Berman dismissed many claims from both plaintiffs, including breach of contract and civil conspiracy, leaving alive only LightSquared's claims for negligent misrepresentation and constructive fraud.

JPMorgan Chase & Co. asked an appeals to reconsider a negative ruling on its $1.5 billion loan to General Motors Co.’s bankrupt predecessor, saying that the decision caused a “seismic” shift in the law, Bloomberg News reported yesterday. The bank’s lawyers accidentally gave up its rights to security for the loan and JPMorgan says that it wants its collateral back because the lawyers weren’t authorized to act on the deal. The appeals court last month sided with GM’s creditors. “This case is about a clerical error that has triggered a seismic shift in agency law,” JPMorgan said in court papers in the U.S. appeals court in Manhattan. The biggest U.S. bank also accused the court of causing “a potentially staggering loss on the basis of an acknowledged drafting error.” Creditors of GM’s forerunner company are fighting for the collateral securing the loan so they can divide the assets themselves. The ruling upended a 2013 decision by U.S. Bankruptcy Judge Robert Gerber in Manhattan. The old GM, saddled with leftover assets after the automaker’s 2009 bankruptcy and U.S. bailout, has little money to pay creditors. JPMorgan’s collateral might add a small amount, creditors have said.

http://www.bloomberg.com/news/articles/2015-02-05/jpmorgan-seeks-rehear…

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U.S. Bancorp agreed to pay $18 million to former customers of Peregrine Financial Group Inc. to resolve claims that the large U.S. bank aided a massive fraud by the failed futures brokerage's now-imprisoned founder, Russell Wasendorf Sr., Reuters reported yesterday. A consent order approved yesterday resolves claims by the U.S. Commodity Futures Trading Commission that the Minneapolis-based lender's U.S. Bank NA unit let Wasendorf treat an account meant to hold Peregrine customer funds as his "personal piggy bank." The regulator's June 2013 lawsuit against U.S. Bancorp, one of the 10 largest U.S. banks by assets, was its first against a bank following Peregrine's bankruptcy 11 months earlier. Prosecutors said that Peregrine, which was also known as PFGBest, collapsed after Wasendorf stole roughly $215 million from more than 13,000 victims over nearly 20 years, covering his tracks by forging bank statements and submitting false regulatory reports. The CFTC said about $36 million of the funds misappropriated by Wasendorf came from a U.S. Bank NA account. Peregrine had been based in Cedar Falls, Iowa.

Creditors of Caesars Entertainment Operating Co. are gathering in Chicago to jockey for spots on a court-sponsored panel that will determine whether the bankrupt casino company must contend with a loyal opposition or its most intractable foes as it tries to cut billions of dollars in debt, Bloomberg News reported today. In cases of this size, the U.S. Trustee’s Office appoints an official committee to look out for the interests of unsecured creditors including suppliers, pensioners and low-ranking bondholders. That process is scheduled to begin Wednesday. Caesars’ main operating unit filed for bankruptcy protection Jan. 15 in Chicago, weighed down by debt taken on when Apollo Global Management and TPG Capital took the company private in 2008 for $30.7 billion.

New Jersey's shuttered Revel Casino yesterday asked a federal judge to lift a stay on its pending sale to a Florida investor, arguing in a filing that creditors will be harmed if the deal does not go through soon, Reuters reported yesterday. IDEA Boardwalk LLC, which operated a bar and a nightclub at Revel — one of four Atlantic City casinos that closed down last year — has sued to block the sale, saying that it will lose $16 million in investments under the deal. On Friday, U.S. Circuit Court Judge Thomas Ambro ordered the sale delayed while he studies legal challenges. Revel Casino said in its filing yesterday that the deal must close by Feb. 9 or it could collapse. That would be "catastrophic," the filing said, because it would destroy $100 million of creditor value, based on the sale price plus additional costs to liquidate assets.

The trustee representing bankrupt Universal Health Care Group Inc. has filed at least 11 lawsuits, seeking to recover nearly $5.9 million from vendors, the Tampa Bay Business Journal reported today. In some cases the payments to the vendors were made while Universal and a related company, American Managed Care LLC, were insolvent, while in other cases, the payments caused the companies to become insolvent, according to the lawsuits. Universal Health, a St. Petersburg-based holding company that provided health insurance and managed care through its subsidiaries, filed for chapter 11 protection in February 2013. AMC, which handled finances for Universal, filed for bankruptcy three months later. The company was shut down and nearly 700 employees laid off when federal and state investigators raided Universal Health and seized records. After allegations of mismanagement, fraud, dishonesty and inside deals, Soneet Kapila was appointed chapter 11 trustee.