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Cengage Learning Inc.'s recently proposed bankruptcy-exit plan, meant to resolve a number of creditor protests, drew fire from unsecured creditors and junior bondholders, which insist that the plan is fatally flawed, Dow Jones Daily Bankruptcy Review reported today. The company's unsecured creditors' committee said that unless the company incorporates these changes it would seek to block approval of the disclosure statement. Although the text alterations will satisfy the creditors' committee in the short term, according to court documents, the committee is requesting major changes to the plan before Cengage receives final approval in February.

Residential Capital LLC, the defunct mortgage company, opened a weeklong bankruptcy trial in which it will fight hedge funds including Aurelius Capital Management LP over a liquidation plan that resolves more than $100 billion in claims, Bloomberg News reported yesterday. The company is asking Bankruptcy Judge Martin Glenn to approve a plan to distribute billions of dollars to creditors that ResCap raised by liquidating assets. The assets included a mortgage platform bought by Ocwen Loan Servicing LLC and Green Tree Servicing LLC for $3 billion. All the company’s big creditors voted for the bankruptcy plan except for a group of hedge funds holding about $1 billion in notes, ResCap’s lead attorney, Gary Lee, said today in court. ResCap, which is owned by Detroit-based Ally Financial Inc., filed for bankruptcy in May 2012 with plans to sell its mortgage unit and other assets. The company completed those sales this year, raising about $4.5 billion.

Overseas Shipholding Group yesterday sued its one-time law firm, Proskauer Rose LLP, for bad legal advice that forced the company to restate more than a decade's worth of financial results and ultimately file for bankruptcy protection, Dow Jones Daily Bankruptcy Review reported today. The company, one of the world's largest publicly traded shippers, filed a legal malpractice lawsuit against its former outside law firm in connection with advice the firm gave the company regarding its international tax liabilities. According to the suit, Overseas Shipholding Group relied on Proskauer's "faulty advice" to borrow hundreds of millions of dollars without incurring U.S. tax liabilities.

In what could be the first in a series of suits against former Dewey & LeBoeuf partners, the liquidation trustee overseeing the bankrupt Dewey estate sued William Marcoux late last week in an effort to recover $4.2 million in compensation and other benefits he received after the firm had allegedly become insolvent, American Law Daily reported today. Marcoux is one of several dozen former Dewey partners who opted not to join a $70 million settlement finalized by the defunct firm's estate a year ago that would have insulated him against such litigation. Trustee Alan Jacobs, who took on the role of liquidating the firm's assets in March, said in the complaint that he is seeking the return of $3.6 million in partner distributions made to Marcoux between Jan. 1, 2009 — when he says the firm was already insolvent — and Feb. 2012, when he left the firm to join DLA Piper, as well as $128,000 in unpaid capital contributions and $816,000 in tax payments Dewey made on Marcoux's behalf.

Lehman Brothers Holdings Inc.'s bank subsidiary is suing the Massachusetts Department of Transportation (MassDOT) over soured swaps and options, claiming the state authority manipulated the market-quotation process after Lehman's bankruptcy to reap a windfall of more than $30 million, Dow Jones Daily Bankruptcy Review reported today. Woodlands Commercial Corp., once known as Lehman Brothers Commercial Bank, is suing the agency to recover the tens of millions it says it is owed on half dozen interest rate swaps and option transactions.

Bankrupt wireless communications firm LightSquared Inc. has filed a lawsuit accusing Dish Network Corp. and its chairman, Charles Ergen, of improperly trying to take control of LightSquared's broadband spectrum, Reuters reported yesterday. The lawsuit, filed in bankruptcy court on Friday, is an effort to revive an earlier case by LightSquared's controlling stakeholder, Phil Falcone's Harbinger Capital Partners, that was thrown out last month. LightSquared alleges that Dish, Ergen, and other Ergen-controlled entities made improper trades and violated a key credit agreement in order to become LightSquared's largest creditor, with the intention of taking control of LightSquared's spectrum, the airwaves used for wireless communications.

The U.S. House of Representatives on Wednesday passed H.R. 982, the "Furthering Asbestos Claim Transparency Act" (FACT Act), which would require more transparency from asbestos trusts, Legal Newsline.com reported on Friday. The House voted 221-199 on a party line vote to pass with only five Democrats voting in the majority. The measure would require asbestos trusts, which were established to pay off future claims against asbestos companies, to release quarterly reports about who seeks compensation. Republicans say that the measure would cut fraudulent claims and reduce the number of people trying to double dip and get compensation from active companies as well as these trusts. Democrats, on the other hand, said there is no evidence of such fraud and claim that victims’ personal and medical information would be more public.

A bankruptcy judge on Friday said that a group of Residential Capital LLC's bondholders aren't entitled to interest accrued since the mortgage servicer's bankruptcy filing, at least as of now, Dow Jones Newswires reported on Friday. Bankruptcy Judge Martin Glenn said that ResCap's junior secured noteholders are owed $1.9 billion and thus aren't "oversecured," after the first phase of a trial held last month. If the bondholders are deemed oversecured — which could still happen — they'd be entitled to interest accrued since ResCap's May 2012 bankruptcy filing, which they say is being racked up at $250 million per year. Another phase of the trial could still alter the numbers and render the creditors oversecured. But Judge Glenn said that the bondholders were wrong when they said they are owed $2.22 billion and are actually undersecured by $318 million. He did deal ResCap a blow by saying that the company can't collect $143 million in expenses related to the loans.

A federal judge yesterday shot down Jon S. Corzine's bid to dismiss a shareholder lawsuit against him and other former MF Global Holdings Ltd. executives, saying that the company told investors it was fine despite "dire signs of mounting crisis," Dow Jones Daily Bankruptcy Review reported today. U.S. District Court Judge Victor Marrero's ruling means shareholders, led by the Virginia Retirement System, can continue going after Corzine, the former MF Global chairman and chief executive, as well as former Chief Operating Officer Bradley I. Abelow, former Chief Financial Officer Henri J. Steenkamp and other former executives.

Two professional athletes scored in bankruptcy court this week when a judge allowed them to continue chasing after their former financial adviser, a man they’ve accused of cheating them out of money, the Wall Street Journal reported today. Bankruptcy Judge Christopher B. Latham lifted the shield of bankruptcy that was protecting financial adviser Bill Clay Crafton Jr. from the arbitration proceedings that two of his former clients—retired NFL player Aaron Shea and current Philadelphia Phillies pitcher Cole Hamels—launched last year. The athletes say that they trusted Crafton to invest their funds wisely but claim he was instead reckless with their money, violating state and federal securities laws in the process and committing fraud. Crafton has sought to defend himself against the allegations, which other pro athletes have also brought. Crafton has blamed his bankruptcy filing on the “onslaught” of litigation he’s faced in recent months.