A bankruptcy judge on Friday granted Rudy Giuliani, the former New York City mayor and ex-lawyer for Donald Trump, permission to challenge a $148 million defamation verdict, WSJ Pro Bankruptcy reported. Giuliani filed for chapter 11 protection last month in the U.S. Bankruptcy Court for the Southern District of New York, after a federal district court ordered him to pay the damages to Georgia election workers Ruby Freeman and her daughter Shaye Moss. They had sued Giuliani for defamation after he accused them of meddling with President Trump’s 2020 election results in the state. Earlier this month, Giuliani asked the bankruptcy court for permission to allow him to take steps to fight or reduce the $148 million judgment, to potentially seek a new trial in district court, and, if need be, to file an appeal. Bankruptcy Judge Sean Lane on Friday agreed to Giuliani’s request to seek a new trial or to ask that the damages be reduced. Lane, however, stopped short of granting Giuliani permission to seek a full appeal. Lane stressed that the district court should have much discretion in deciding how to handle or whether to grant the request.
Creditor groups and several law professors on Friday called for an end to what they call "judge shopping" in a Houston, Texas, bankruptcy court that directs all large cases to a couple of judges, saying that the practice creates "the perception of a two-tiered justice system," Reuters reported. The group asked the federal judiciary to adopt a nationwide rule change that would require new "mega" bankruptcy cases with more than $100 million in debt to be randomly assigned among all judges within the district where they are filed. A uniform rule would reinforce the "impartiality" of the federal court system and prevent bankruptcy courts from competing "to attract the largest and most high-profile bankruptcy cases," the group wrote. Rules proposed from outside the judiciary are subject to many layers of review before they can potentially be adopted, a process that generally takes at least three years, a spokesman for the administrative office of the courts said on Friday. Bankruptcy courts currently have wide latitude in how they assign cases, which has sometimes allowed bankrupt companies to "effectively pick and choose the judge of their choice," according to a letter signed by eight law professors, two creditor groups and Cliff White, a former director of the U.S. Department of Justice's bankruptcy watchdog.
Spirit Airlines raised its fourth-quarter guidance and outlined steps it is taking to shore up liquidity, after a ruling blocking its sale to JetBlue Airways raised questions about Spirit’s financial future, the Wall Street Journal reported. Spirit also is considering refinancing $1.1 billion in debt due in 2025, the company said in a regulatory filing Friday. The news boosted Spirit’s shares, which had been badly beaten down in recent days following the judge’s ruling, and had slid over the past year as airlines endured escalating costs. Budget carriers in particular have grappled with weaker demand, and an engine problem expected to keep dozens of Spirit planes on the ground this year poses another challenge. Spirit shares were 24% higher in midday trading on Friday after closing at an all-time low on Thursday. Over the three months leading up to Thursday’s close, Spirit’s stock had lost about 57% of its value, according to FactSet data. The Florida-based carrier’s announcements came after U.S. District Judge William Young on Tuesday ruled that JetBlue can’t go forward with its planned $3.8 billion acquisition of Spirit, leaving both carriers facing an uncertain path. The airlines can appeal the ruling but haven’t yet said whether they plan to do so, and some analysts have said challenging the decision would likely be an uphill battle.
Lawyers for prisoners suing Corizon Health over allegedly substandard medical care in U.S. prisons have asked a bankruptcy judge to toss the chapter 11 case of a Corizon subsidiary, saying the prison healthcare provider's bankruptcy was a fraud from the start, Reuters reported. The Corizon subsidiary, Tehum Care, was created solely to get rid of medical malpractice and wrongful death lawsuits for "pennies on the dollar" through the chapter 11 process, while allowing Corizon to rebrand itself as YesCare, according to a Tuesday filing in Houston bankruptcy court by the official tort committee that represents about 200 prisoners, former prisoners, and family members suing Corizon. Tehum does not intend to reorganize its business, and is instead using its bankruptcy to stop lawsuits against Corizon, its owners and key employees, according to the committee. "There is no possible rehabilitation here," the committee said in the filing. "This case was a fraud from its inception." Tehum Care, which filed for bankruptcy in February, has been pursuing a mediated bankruptcy settlement which would allocate roughly $8.5 million to settle prisoners' and former prisoners' claims.
Spirit Airlines is examining options to address its financial challenges after a federal judge blocked the low-cost carrier’s deal to be acquired by JetBlue Airways, WSJ Pro Bankruptcy reported. Spirit plans to discuss with advisers a path forward as it faces near-term debt maturities, the people said. The company has roughly $1.1 billion in debt due in September 2025 and the risks surrounding its ability to refinance that debt are increasing, according to a Fitch Ratings report on Wednesday. U.S. District Judge William Young in Massachusetts on Tuesday rejected the $3.8 billion JetBlue deal, siding with the Justice Department in saying that the merger would have reduced competition and harmed travelers who rely on Spirit’s low fares. A representative for Spirit on Wednesday said “while we are disappointed with this outcome, we are confident in our strengths and strategy. Spirit has been taking, and will continue to take, prudent steps to ensure the strength of its balance sheet and ongoing operations.” The airlines can appeal the ruling. JetBlue and Spirit said they were evaluating “next steps as part of the legal process” in a joint statement Tuesday.
The world’s largest sovereign-wealth fund is going after the now-defunct Silicon Valley Bank, its management and the Wall Street advisers that aided its rise, the Wall Street Journal reported. Norges Bank Investment Management, which manages Norway’s $1.5 trillion wealth fund, and other former SVB shareholders attacked the failed bank in a legal filing late Tuesday. The filing accused SVB and its executives of concealing the lender’s ailing health from public view, while also ignoring warnings about risks from rising interest rates. The suit said the bank’s board, its auditor KPMG, and four investment banks that helped it raise money — Goldman Sachs, Bank of America BAC, Keefe, Bruyette & Woods and Morgan Stanley — all “ utterly failed in their role as gatekeepers” and “must be held to account for the harm they caused to investors.” The suit said investors lost more than $24 billion in market value. The filing is the main complaint in a large class-action lawsuit from SVB shareholders, who were wiped out in March 2023, when a rapid bank run led to one of the biggest bank failures in U.S. history. In December Norges was made lead plaintiff in the class action, along with a Swedish pension fund. The suit names three executives, including former SVB Chief Executive Greg Becker, and 12 former board members as individual defendants. Read more.
In related news, New York City is trying to collect more than $2.1 million it says Silicon Valley Bank owes in back taxes from before the California-based regional lender collapsed last year, Bloomberg News reported. In a complaint filed yesterday against the Federal Deposit Insurance Corporation, the receiver for the failed bank, the city cites corporation business tax “deficiencies” for 2017 through 2021 and is also seeking interest and penalties. The city said the FDIC in November denied its request to be paid out of remaining bank assets. “The city has a legitimate tax claim against the SVB and is entitled to collect taxes due,” New York’s lawyers said in the complaint, filed in federal court in Washington. “The FDIC, in its capacity as receiver for SVB, is liable for the claim amount.” The March collapse of Silicon Valley Bank, following a wave of withdrawals by the tech startups and venture capital firms that formed its client base, was the biggest U.S. bank failure in more than a decade and presaged a banking crisis that engulfed several other financial institutions. This month, the parent company of Silicon Valley Bank announced it had struck a deal with key creditors in a step toward resolving its bankruptcy case. The arrangement, which requires court approval, involves forming a new company that would hold valuable assets like the firm’s venture capital arm — SVB Capital — and tax attributes potentially worth billions of dollars, according to court papers. Read more.
