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The U.S. Justice Department is unlikely to charge General Motors Co. with bankruptcy fraud, closing off one avenue for bringing a criminal case against the automaker over a deadly ignition-switch defect, the Wall Street Journal reported on Saturday. Prosecutors in the U.S. Attorney’s Office in Manhattan continue to weigh charging GM with criminal wire-fraud after determining the automaker likely made misleading statements and concealed information about the faulty switch in communications with regulators and others. The office has been leading an investigation into GM’s handling of a defect linked to more than 120 deaths. Criminal investigators also were probing whether GM knowingly concealed information about the safety defect from the court where it filed for bankruptcy protection as part of a $50 billion government rescue in 2009 but haven’t uncovered evidence the company did so. The court restructuring shielded the Detroit auto maker from certain lawsuits, spurring complaints among plaintiffs’ lawyers and consumers who lost the ability to sue for damages related to the ignition-switch defect.

Attorneys representing alleged victims of sexual abuse by clergy in the Diocese of Gallup, N.M., have asked a judge to allow civil trials to proceed in three cases as a way to “break logjams” in the diocese’s chapter 11 bankruptcy, the Albuquerque Journal reported today. The request followed the failure of court-ordered mediation talks last month. An attorney for the diocese, meanwhile, is asking Bankruptcy Judge David T. Thuma to order another round of negotiations with a new mediator. The Diocese of Gallup in 2013 became the nation’s ninth Roman Catholic diocese to file for chapter 11 protection in response to a growing number of lawsuits filed by alleged victims of sexual abuse by priests. Motions filed in the case indicate that mediation efforts failed because parties, including the diocese’s insurance companies, could not agree on the value of claims filed against the diocese.

A Quebec judge rejected Canadian Pacific Railway Ltd's challenge to a settlement for victims of the Lac-Megantic crude-by-rail disaster on Monday, helping clear the way for compensation payments, Reuters reported yesterday. Parties previously named in a class action lawsuit, including closely-held Irving Oil, General Electric, Shell Oil Company, ConocoPhillips, Marathon Oil and others, have agreed to contribute to a C$431 million ($338.28 million) compensation fund for victims of the July 6, 2013 rail disaster. Forty-seven people were killed and the downtown core of the town was destroyed following the derailment of a train carrying Bakken crude oil. CP transported the tank cars of oil involved in the accident to Montreal before handing them over to the now insolvent Montreal, Maine & Atlantic railway, which was operating the train at the time of the crash. Unlike other companies targeted by a Lac-Megantic-related class action lawsuit, CP did not agree to the settlement and challenged the provincial court's jurisdiction in approving the deal. CP has 21 days to appeal Monday's rulings, said Patrice Benoit, lawyer for the defunct Montreal, Maine & Atlantic. Before funds from the C$431 million settlement can be disbursed, a U.S. bankruptcy court in Maine must first confirm a related chapter 11 plan for the American parent company of the Montreal, Maine & Atlantic railway. "The plans are integrated and work together," explained Bob Keach, the railway's Chapter 11 trustee. CP could raise similar objections during a U.S. hearing on August 20, Keach said. If no objections to, or appeals of the Canadian and American plans are filed, then "we'll be ready to distribute the funds to the victims" in the fall, he said. Read more.

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Bankruptcy Judge Ronald Pearson yesterday approved a West Virginia Department of Environmental Protection deal with Freedom Industries that sets aside $2.5 million to cover the costs of a yet-to-be-designed final cleanup plan for the site of the January 2014 chemical spill that contaminated drinking water supplies for hundreds of thousands of people across the Kanawha Valley and surrounding communities, the <em>Charleston Gazette</em> reported today. Judge Pearson entered a five-page order that approved the DEP-Freedom settlement, contingent upon the filing with the court of details of the hiring of a new consultant to handle remediation work at the company’s Etowah Terminal on the Elk River, just 1.5 miles upstream from West Virginia American Water’s regional drinking water intake. At the same time, officials have confirmed that Freedom chief restructuring officer Mark Welch’s plan to dispose of contaminated soil from the site at the Charleston city landfill has been approved by both DEP and by Waste Management Inc., which operates the landfill for the city.

The U.S. Supreme Court has been asked to weigh in on a dispute over whether the Roman Catholic Archdiocese of Milwaukee may shield a $55 million cemetery maintenance trust from hundreds of alleged clergy sexual-abuse victims seeking compensation, the Wall Street Journal reported today. A lawyer for the cemetery trust said yesterday that the trust filed a petition asking the Supreme Court for a final ruling on the fate of the cemetery funds. The move aims to appeal a March ruling from the U.S. Court of Appeals for the Seventh Circuit that a trust created to maintain the Archdiocese of Milwaukee’s cemeteries isn’t subject to federal laws protecting religious freedoms. If the Seventh Circuit’s ruling stands, it could help more than 500 victims of alleged sexual abuse by the archdiocese’s clergy argue that the funds should be included in the compensation they will receive as part of the archdiocese’s long-running bankruptcy. Throughout the bankruptcy, the archdiocese has argued that being forced to compensate victims with funds designated for its cemeteries would violate federal laws protecting its free exercise of religion. Victims have argued those laws don’t apply and have accused the archdiocese of funneling money to the trust to keep it out of their reach.

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

Last year, GM agreed to compensate victims killed or hurt when an ignition switch shut off accidentally and cut power to the brakes and steering, a defect hidden from the public for more than a decade, but the compensation fund covers only 2.59 million vehicles with that specific flaw, Bloomberg News reported on Thursday. GM says that a similar defect subsequently detected in an additional 10 million vehicles is ineligible for compensation because the company recalled the cars immediately after discovering the flaw and because employees made no efforts to keep it under wraps. At a congressional hearing last year, Sen. Richard Blumenthal (D-Conn.) encouraged Chief Executive Officer Mary Barra to expand the compensation fund to include more cars recalled for a defective ignition switch. Now, with fund administrator Kenneth Feinberg weeks away from wrapping up, Blumenthal says the omission is all the more glaring. GM spokesman Jim Cain said that the compensation fund’s scope is fair because the ignition switches excluded were a different design and discovered under different circumstances. Barra announced the compensation fund in June 2014 after GM came under fire from lawmakers for taking more than a decade to recall cars with switches that could be jogged accidentally into the off position. Worth as much as $600 million, the Feinberg fund gave victims and their families a route to seek compensation not available to them in the courts because GM has legal immunity from lawsuits related to accidents that occurred before the company emerged from bankruptcy on July 10, 2009. Victims of pre-bankruptcy crashes excluded by Feinberg can’t sue. Read more. 

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Nearly two years after the Lac-Mégantic oil train explosion killed 47 people and levelled the small Quebec town, the Canadian government has laid new criminal charges, the Toronto Globe and Mail reported today. Six former employees of the Montreal, Maine and Atlantic Railway, including the train engineer and the top executive, face charges under the Railway Safety Act and Fisheries Act for their alleged roles in the worst Canadian rail disaster in modern times. The bankrupt company itself has also been charged. The Canadian government said that the accused failed to ensure that the brakes were properly set on the unattended train of 63 oil tank cars that rolled down a hill in the early morning of July 6, 2013, before crashing in a series of explosions that destroyed 40 buildings and killed people in their sleep or as they enjoyed a night out in the village.

The Roman Catholic Archdiocese of Saint Paul and Minneapolis, whose top two officials resigned Monday in wake of criminal charges over the alleged failure to protect children from abusive priests, is facing an unprecedented convergence of litigation that lawyers say will continue to pose serious challenges for the archdiocese’s leadership, the Wall Street Journal reported today. Archbishop John C. Nienstedt, who stepped aside along with Auxiliary Bishop Lee Anthony Piche, said yesterday that he resigned to give the archdiocese a new beginning. The criminal charges against the diocese and the recent resignation of its top officials could give lawyers representing alleged victims added leverage as they negotiate the terms of a bankruptcy-exit plan and compensation package for victims. The archdiocese, its insurance carriers and alleged victims were ordered to begin mediation shortly after filing for chapter 11 protection. The resignations and recent criminal charges come as church leaders across the country continue to grapple with widespread allegations of child sexual abuse at the hands of clergy and related lawsuits. The abuse scandal has cost dioceses and other Catholic institutions in the U.S. nearly $2.9 billion since 2004 in compensation paid out to alleged victims, according to a recent report issued by the U.S. Conference of Catholic Bishops.

A Texas lawyer accused General Motors Co. of conspiring with an outside law firm to cover up faulty ignition switches in millions of vehicles, rendering their communications subject to disclosure in ongoing litigation over the safety defect, the Wall Street Journal reported today. According to court documents filed by Bob Hilliard, a lawyer suing the Detroit automaker in a federal court in New York, GM and law firm King & Spalding LLP committed a “crime-fraud” that exempts certain emails and other communications from attorney-client privilege legal protections. Hilliard was appointed by a federal judge to be the lead lawyer for personal injury and wrongful death cases as part of what’s known as multidistrict litigation arising from GM’s defective switch. Hilliard, citing court cases, said in his legal brief that secrecy between lawyers and clients shouldn’t extend to communications made for the purpose of getting advice for the commission of a crime or fraud. “The plaintiffs’ motion is largely a rehash of issues discussed publicly over a year ago and previously reported in the media,” a GM spokesman said. “Moreover, GM already has produced to plaintiffs substantial amounts of privileged material, including many of the very communications sought in their current motion.”

Some of the world’s biggest oil companies are chipping in to repay victims of a deadly train derailment, but unless a bankruptcy judge says otherwise, the amounts they’re paying will remain secret, the Wall Street Journal reported today. Insurers, oil companies and others will together pay several hundred million dollars to compensate those affected by the 2013 derailment of a crude oil-carrying train in Canada. After the crash, the train operator filed for bankruptcy and began pursuing litigation in an effort to compensate those who were injured, lost their lives or had their businesses damaged when the runaway train crashed into a small Quebec town and exploded. The terms of the settlement aim to shield the specific dollar amount that companies like Royal Dutch Shell PLC , Marathon Oil Corp., ConocoPhillips and Irving Oil Ltd. would each pitch in to what has grown to become a $345 million fund. A Justice Department watchdog urged a bankruptcy judge to expose the dollar amounts, arguing that efforts to keep them secret “violate the strong public policy in favor of public access to documents filed with the bankruptcy court.” The watchdog said that other courts have rejected the argument that making the figures public will hurt the companies’ chances in future litigation. The bankruptcy judge will consider making other companies’ contributions public at a June 23 hearing.