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Some of the country’s top restructuring professionals who contributed to the final report of the ABI Commission to Study the Reform of Chapter 11 released earlier this month made it clear that, aside from strengthening tools for a bankrupt company, they want to make the process cheaper, according to a post yesterday on the Wall Street Journal Bankruptcy Beat blog. “Bankruptcy has always been expensive, and there has always been an effort to rein in excessive costs,” said Prof. Kenneth Klee, who helped engineer the 1978 overhaul and was a member of the Commission. The Commission’s recommendations propose to clarify rules on dozens of issues on which bankruptcy judges have disagreed, giving lawyers — in theory — less to fight about. Two proposals address a big reason why costs can spiral upward: Bankrupt companies have to pay the legal bill for others. Besides their own bankruptcy lawyers, investment bankers, financial advisers, accountants and public relations firms, bankrupt companies are legally obligated to pay the bills of the creditor committee that forms to advocate for vendors, employees and other unsecured creditors. (Subscription required.)
http://blogs.wsj.com/bankruptcy/2014/12/22/proposed-bankruptcy-fixes-wo…

To read a copy of the Commission’s final report and its recommended principles on professional compensation, please click here: http://commission.abi.org.

A Texas jury has found Credit Suisse fraudulently enticed investors to back a $540 million loan for the Lake Las Vegas resort, only to have the borrower quickly default, Reuters reported yesterday. The jury set damages at $40 million, according to court documents filed on Friday in state court in Dallas. Zurich-based Credit Suisse was found to have used inflated appraisals to convince an affiliate of Highland Capital Management in 2007 to refinance the Nevada resort community, which sought chapter 11 protection a year later.

The U.S. Securities and Exchange Commission suffered a setback on Friday in its efforts to collect a bigger judgment against Texas tycoon Sam Wyly and his late brother Charles' estate than the nearly $300 million it has already won, Reuters reported. U.S. District Judge Shira Scheindlin ruled that her initial award in September reflected the "best measure" of the Wylys' ill-gotten gains and said she would not impose an alternative amount unless she was reversed on appeal. The SEC had been seeking $192.7 million plus interest from the Wylys, compared with the $187.7 million before interest the judge previously awarded. While Judge Scheindlin called the SEC's calculations under its latest theory "reasonable," she ordered the figure recalculated to exclude a large amount of alleged gains involving securities that were never sold.

Several major broadcasters refused to back down Friday from attempts to control when and to whom bankrupt Aereo Inc. can sell its technology, Dow Jones Daily Bankruptcy Review reported today. Facing an impasse between the failed TV-streaming service and broadcasters including CBS Corp., Walt Disney Co.'s ABC, Comcast Corp.'s NBC and 21st Century Fox Inc.'s Fox, Bankruptcy Judge Sean Lane held off on approving a proposal outlining how Aereo plans to sell its assets. As of Friday afternoon, Aereo and broadcasters were privately discussing ways to resolve differences on the sale process, including at what point Aereo can begin deleting its servers and how much time broadcasters would have to oppose any prospective buyers.

The Catholic Diocese of Spokane, Wash., can take its legal malpractice claim to trial against a law firm that handled its 2007 bankruptcy over priest sex abuse claims, a federal bankruptcy judge ruled, the Associated Press. The decision on Wednesday means former Spokane bishop Blase Cupich, who now serves as archbishop of Chicago, will likely have to testify in February about his decision to seek $3.6 million in legal fees from the Paine Hamblen law firm. Bishop Cupich contends that Paine Hamblen lawyers underestimated how many victims would come forward with sex abuse claims after the bankruptcy was first resolved. A $1 million fund was created to handle future claims, based on Paine Hamblen's estimates of how much it would cost the diocese to settle the allegations. But the fund was quickly depleted, raising the prospect of foreclosure on some Catholic parishes that had been put up as collateral. In documents submitted to the court, Bishop Cupich said he believed Paine Hamblen bungled the bankruptcy. The bankruptcy was settled before Bishop Cupich became bishop of Spokane.

The trust representing creditors of the bankruptcy General Motors Corp. estate asked a federal judge to reject efforts by “new GM” to pay ignition switch claims using funds set aside for creditors of the “old” Detroit automaker that filed for bankruptcy in 2009, the Detroit News reported today. “These issues will be decided by bankruptcy court,” GM spokesman James Cain said. “Our motion to enforce the sale order sets forth the company’s positions on these issues, which we continue to believe are correct.” Detroit-based General Motors Co. emerged from bankruptcy in July 2009 as a new government-sponsored firm created from the “good assets” of the 100-year-old automaker. The old company remains in bankruptcy as does GM’s liability for incidents before the filing. GM has been sued more than 170 times seeking billions of dollars including for the reduced value of GM cars after its recall of 2.6 million older cars linked to 42 deaths and 58 injuries for ignition switch defects. In May, the company agreed to pay a record-setting $35 million fine to the National Highway Traffic Safety Administration for delaying disclosure of the deadly defects for a decade. It also agreed to intense oversight of up to three years by the agency.

Filing for bankruptcy was supposed to protect Aereo Inc. from broadcasters that killed the TV-streaming company's business after years of litigation. Instead, it has only intensified the fighting, Dow Jones Daily Bankruptcy Review reported today. Aereo, which allowed users to watch and record broadcast TV through the Internet, halted its services in June after the U.S. Supreme Court determined the company was unlawfully exploiting the copyrighted works of major broadcasters without permission or payment. Aereo is down to 12 employees and $3.6 million in cash, an amount it hopes will last long enough to pull off some kind of sale.

LightSquared, the bankrupt wireless venture owned by Phil Falcone's Harbinger Capital Partners, on Thursday submitted a new restructuring plan under which Harbinger would hold onto a sizable stake in the company, Reuters reported yesterday. The plan is the latest in a string of so far unsuccessful restructuring efforts as Harbinger wrangles for control of LightSquared with its largest creditor, satellite mogul Charles Ergen. Throughout LightSquared's two-and-a-half-year journey in chapter 11, the company and creditors have advanced various proposals to fund its exit, some including Harbinger and others all but eliminating it from the capital structure. The latest would give Harbinger a 44 percent equity stake in a reorganized LightSquared, but no board membership or control over day-to-day operations. Fortress Investment Group and Centerbridge Partners, both LightSquared investors, would own 26 percent and 8 percent, respectively. Ergen's $1 billion chunk of LightSquared's loan debt would be repaid via notes.

The chapter 11 trustee in the Creative Recycling Systems' bankruptcy case has filed a notice for voluntary conversion to chapter 7 bankruptcy liquidation, the Tampa Bay Business Journal reported yesterday. The Tampa e-waste recycler filed for chapter 11 bankruptcy protection in late August, after Regions Bank sued the company earlier this year for more than $18 million. The company has since closed all of its facilities around the country and laid off hundreds of employees. Recently, the judge in the case in the U.S. Middle District of Florida ordered that the company could abandon all property burdensome to the estate.

East Millinocket, Maine, will receive six months of wastewater treatment from a bankrupt paper mill, after a federal judge on Thursday allowed the mill’s estate to loan as much as $250,000 to the town to cover treatment plant operations, the Bangor Daily News reported today. U.S. District Court Judge Louis Kornreich granted trustee’s attorney Shawn Doil’s request to offer the $250,000 loan during a brief appearance at the Margaret Chase Smith Federal Building. The money, Doil said, will come from the estate of GNP Holdings, one of two Great Northern Paper Co. corporations that have filed for Chapter 7 bankruptcy protection. That estate has $1.2 million in assets to secure the loan. The town and state have until Aug. 5 to repay it, she said.