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The American Bar Association is the latest group to offer its opinion in litigation aimed at resolving whether law firms that go bust in New York can continue to reap profits on hourly assignments that originated at the firm, the Wall Street Journal reported today. Bankruptcy administrators insist that such assignments are the property of a law firm’s estate and can be monetized, while most of the law firms that inherited the work argue that they shouldn’t owe the bankruptcy estates a penny. In a brief filed with the New York Court of Appeals, the ABA sided with its law firm constituency, arguing that the dissolution of a firm should not impact the long-standing principle “that the client has the right to control its relationship with its attorney, and to select and retain or change counsel at any time.” The filing comes in an appeal stemming from the bankruptcy of Coudert Brothers LLP, a law firm that sought chapter 11 protection in 2006 and is still in the process of paying back creditors. A May 2012 decision by a New York federal district court judge gave Coudert clearance to collect proceeds from unfinished business. Months later, the same court issued a conflicting decision related to the Thelen LLP bankruptcy, and both cases landed before the U.S. Court of Appeals for the Second Circuit.

LightSquared's reorganization plan gives too much to value to the wireless venture's top shareholder, Philip Falcone, and shouldn't be approved, a lawyer for Dish Network Corp. Chairman Charlie Ergen said yesterday, the Wall Street Journal reported today "The debtors can still reorganize, just not under this plan," said Willkie Farr & Gallagher LLP's Rachel S. Strickland, a lawyer for Ergen, LightSquared's largest secured lender. Under the proposed restructuring, Falcone would retain more than a third of LightSquared's equity, a rarity in chapter 11 cases. Falcone has denied in court that the plan treats him too well. LightSquared is seeking court approval of its restructuring plan, but also wants a favorable ruling in a separate trial over its allegations that Ergen improperly acquired nearly $1 billion in the company's debt.

Bankruptcy Judge Robert Gerber on Friday urged settlement talks in a dispute between General Motors Co and plaintiffs seeking compensation for the lost value of their cars stemming from a massive recall over a faulty ignition switch, Reuters reported on Friday. Judge Gerber said that he would welcome the prospect of a resolution that avoided a "monstrous battle." "Frankly, it would be great if whatever money is available for injured people could go to them, and not to litigation costs and attorneys' fees," Gerber said at a court conference with GM and the plaintiffs. Gerber is the same judge who in 2009 oversaw GM's whirlwind chapter 11 bankruptcy case. Now facing dozens of lawsuits over a faulty ignition switch that has led to the recall of some 2.6 million vehicles, GM is asking Judge Gerber to enforce the bankruptcy shield, in a pre-emptive move aimed at staving off dozens of lawsuits from customers who say they took a financial hit from the recall. Under the plan approved by Gerber, GM channeled its liabilities into a shell known as "Old GM," while selling its profitable assets to "New GM," a separate corporate entity that took GM out of bankruptcy and now operates as General Motors Co.

Attorneys for Jon Corzine and other former MF Global officials have an "urgent need" to tap the company's insurance money to continuing defending themselves against a deluge of litigation tied to the brokerage's collapse, Dow Jones Daily Bankruptcy Review reported today. More than a dozen former directors, officers and employees of MF Global Holdings and its defunct brokerage on Tuesday filed a letter urging a bankruptcy judge to let them draw additional insurance proceeds, which a pending legal battle has blocked them from tapping for almost a year.

The official winding down Lehman Brothers Holdings Inc.'s brokerage business says he plans to return more than $4 billion in cash to former employees and other creditors, the Wall Street Journal reported today. James W. Giddens, the court-appointed trustee winding down Lehman's broker-dealer, said yesterday that now that he has made whole the failed brokerage's customers, he can turn his full attention to creditors. "With the return of 100 percent of customers' assets, we are now able to lay out a clear plan for winding down the general estate and distributing assets to general creditors as quickly as possible," Giddens said. The distinction between "customer" and "creditor" is a crucial one in the Lehman case. Individual customers of the U.S. brokerage, which was under the purview of the bankruptcy court but not technically in bankruptcy like Lehman's parent, received all $92.3 billion they were owed almost immediately after Lehman's bankruptcy. But general creditors of Lehman's brokerage are set to recover much less.

General Motors Co. customers, who filed about 50 lawsuits demanding compensation for ignition-switch problems, picked three lawyers to speak for them in bankruptcy court when a judge considers the automaker’s request to pare their claims, Bloomberg News reported yesterday. At a meeting in New York yesterday convened by Edward Weisfelner of Brown Rudnick LLP, about a hundred law firms for GM car owners delegated their host and two others to put their views to Bankruptcy Judge Robert Gerber at a May 2 conference. Sander Esserman of Stutzman, Bromberg, Esserman & Plifka in Dallas and Elihu Inselbuch of Caplin & Drysdale in New York were the other two lawyers selected, Weisfelner said. GM wants Gerber to reaffirm rulings made during its 2009 bankruptcy, saying that customer demands for money aren’t allowed by those orders. The customers say that the Detroit-based carmaker didn’t tell the judge about its ignition-switch problems, so he needn’t renew his rulings.
http://www.bloomberg.com/news/print/2014-04-29/gm-customers-pick-lawyer…

Edward Weisfelner is the author of ABI’s latest book, Advanced Fraudulent Transfers: A Litigation Guide, available for purchase in the ABI Bookstore. http://bookstore.abi.org/advanced-fraudulent-transfers-litigation-guide

U.S. and Canadian customers of failed Tokyo-based bitcoin exchange Mt. Gox have agreed to settle their proposed class action lawsuits that alleged the company defrauded them of hundreds of millions of dollars, Reuters reported today. The class action plaintiffs agreed to support a plan by Sunlot Holdings to buy the shuttered exchange and accept their share of bitcoins still held by Mt. Gox, according to a statement and court filings. Mt. Gox filed for bankruptcy in Japan and the U.S. earlier this year after saying that it lost some 850,000 bitcoins — worth more than $400 million — in a hacking attack. It subsequently said that it found 200,000 bitcoins.

Dish Network Corp. Chairman Charles Ergen said that LightSquared Inc.’s plan to reorganize will improperly benefit lenders including JPMorgan Chase & Co., which will own all of the wireless-spectrum company’s assets after bankruptcy, Bloomberg News reported today. The plan was devised in talks where LightSquared’s controlling shareholder, Philip Falcone, “made it clear that he was interested in using the plan to enrich himself and equity holders,” Ergen said yesterday in a bankruptcy court filing. Falcone stated that he wanted to protect three parties: his investment firm Harbinger Capital Partners LLC, Fortress Investment Group LLC (FIG) and JPMorgan, Ergen said. SP Special Opportunities Inc., an Ergen fund that invested $1 billion in LightSquared debt, made the allegations following an eight-day trial on whether LightSquared can reorganize under a plan that puts Ergen’s debt behind other lenders and equity holders to be repaid.

Women's clothing and accessories retailer Coldwater Creek Inc. on Friday reached an accord with its landlords, many of whom had objected to the terms of a deal the company struck with two liquidators, Dow Jones Daily Bankruptcy Review reported today. To satisfy the landlords, which lease retail shopping center space to Coldwater, the deal was modified so the landlords are not precluded from filing objections later in the case. Though a ruling on the company's proposed bid rules was delayed by Judge Brendan Shannon, the agreement represents a significant step toward an approval. A new hearing to consider the bid rules was scheduled for April 29, at which point Judge Shannon will make a decision on an objection from a newly formed creditors' committee.

General Motors Co.’s request for court protection from car-owner suits seeking compensation for recalled autos with defective ignition switches was attacked as legally “unsupportable,” Bloomberg News reported yesterday. Car owners challenged GM’s position that it may compensate accident victims but not them, claiming in a court filing yesterday that GM committed fraud by not revealing the defects, allegedly known since 2001, or listing either group as creditors in its 2009 bankruptcy. In the reorganization, Bankruptcy Judge Robert Gerber freed GM from most liabilities, leaving intact some warranty obligations and accident responsibility. Bankruptcy lawyers said that it will be hard for car owners to reopen the case, which is good news for GM. Fitch Ratings said last month the automaker faced more risk from recall suits than the cost of fixing millions of cars or fines stemming from a federal regulatory probe.
http://www.bloomberg.com/news/print/2014-04-23/gm-car-owners-attack-aut…

For further analysis, make sure to attend the "Large Complex Trusts: A General Motors Case Study" panel tomorrow at ABI's Annual Spring Meeting. This panel will discuss the General Motors bankruptcy case with an in-depth discussion about the issuance of public units in a major bankruptcy. The session will also include the challenges addressed by the trust such as liability claims. For more information or to register, please click here: http://www.abiworld.org/ASM14/