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A lawsuit over $3 billion in claims in the bankruptcy of General Motors Co.'s old assets needs court-ordered mediation, funds owned by Paulson & Co. said on Friday, Bloomberg Briefs reported yesterday. Holders of notes in a Nova Scotia unit of the automaker, including Paulson funds, previously tried to settle a dispute over the claims and failed. Paulson asked Bankruptcy Judge Robert Gerber to reinstate settlement talks, overseen by another bankruptcy judge, according to court papers filed on Friday. Elliott International LP and a unit of Fortress Investment Group LLC are among hedge funds that failed to reach an agreement with the trust liquidating General Motors’ old assets over a $367 million consent fee and a claim of $2.67 billion related to the automaker’s 2009 bankruptcy filing, according to court papers.

If successful, a lawsuit in the Lyondell Chemical Co. case and a nearly identical one stemming from the failed buyout of Tribune Co. could circumvent the legal protections that have generally shielded individual investors when a leveraged buyout goes bust, Reuters reported on Friday. The cases pit sophisticated creditor plaintiffs, such as Aurelius Capital Management, against retirees, money managers, pension funds and family foundations. Investors who had less than $100,000 at stake have been dismissed from the cases. The two lawsuits are pursuing claims under fraudulent conveyance laws. Fraudulent transfer claims are usually brought to claw back dividend payments made to a private equity owner or to challenge an asset sale made just prior to a bankruptcy. But in Lyondell and Tribune, creditor lawyers have come up with a way around a Bankruptcy Code provision that has largely shielded former shareholders from being sued for their role in a fraudulent conveyance.

Lehman Brothers' defunct brokerage told an appeals court yesterday that it was entitled to billions of dollars in cash it says was wrongly included in its 2008 sale to Barclays Plc, Reuters reported yesterday. The arguments in federal appeals court in New York renewed a court battle with huge implications for the brokerage's creditors, including Lehman affiliates and hedge funds. The dispute has its roots in the hectic sale of the brokerage's assets to Barclays in the days following the $639 billion bankruptcy of parent company Lehman Brothers Holdings Inc. in September of 2008. The brokerage contends the $250 million deal did not include the brokerage's cash assets. But Barclays says otherwise, relying on a clarification letter signed after the deal was approved.

Diamond McCarthy's litigation shop has been hired by Dewey & LeBoeuf's liquidation trustee, Alan Jacobs, to pursue claims against former partners from the now-defunct firm, according to court filings made this week, Am Law Daily reported today. The role is a familiar one for Diamond McCarthy, which is currently filling trustee roles in the chapter 11 bankruptcies of Washington, D.C., litigation firm Howrey and convicted Ponzi schemer Marc Dreier's defunct Dreier LLP. Jacobs was appointed trustee in the Dewey bankruptcy following the approval of the firm's chapter 11 liquidation plan in February. In addition to Diamond McCarthy, Jacobs is being advised by Brown Rudnick, which served as counsel to unsecured creditors in the first phase of Dewey's bankruptcy, and New York bankruptcy boutique Togut, Segal & Segal, whose lawyers led work for the debtor as it sought approval of the liquidation plan. In its newest role, which does not require court approval, Diamond McCarthy is responsible for investigating whether to pursue so-called unfinished business claims against former Dewey partners related to work they took with them to their new firms, as well as clawback claims against 115 former partners who did not agree to sign on to a $71 million settlement that became the linchpin of the Dewey liquidation plan.

Eighty-nine New York landowners who once agreed to let Norse Energy Corp. USA drill for natural gas on their property have filed a lawsuit against the struggling company, arguing that its executives have unfairly extended the life of their lease agreements using a legal clause meant for natural disasters and terrorist attacks, Dow Jones Daily Bankruptcy Review reported today. The landowner group said that Norse Energy USA should not be allowed to use what is called force majeure to extend the life of the leases they signed before former New York Gov. David Paterson banned high-volume hydraulic fracturing, or fracking, while state regulators come up with new permitting rules for the drilling process.

The bankrupt units of specialty chemicals maker RPM International Inc. may have to set aside twice as much money for asbestos-related liabilities as the company estimated, after a bankruptcy judge rejected what she called a "novel" theory from the debtor, Reuters reported yesterday. Bankruptcy Judge Judith Fitzgerald ruled that $1.2 billion was an appropriate net present value for current and future asbestos claims for Specialty Products Holding Corp and Bondex International Inc. The two units of RPM had argued that the liability should be between $300 million and $575 million. Specialty Products and Bondex filed for bankruptcy in May 2010 with the intent of creating an asbestos trust that would settle all personal injury claims stemming from the two companies' products. The companies and RPM would then be shielded from any further lawsuits related to those products. Specialty Products argued that the history of asbestos claims brought against the company overstated the number of injuries caused by its products, because it was settling nuisance cases to cut the cost of litigation. If those nuisance settlement costs were stripped out of the estimation process, Specialty Products argued it would need to set aside far less money to cover future claims. Judge Fitzgerald rejected that argument.

A bankruptcy judge said yesterday that he would lift the bankruptcy law’s automatic stay provision to allow an Ohio judge to issue his decision on whether a receiver should take control of the deep-sea exploration company Columbus Exploration LLC, the Wall Street Journal reported yesterday. It would be a “terrible waste of judicial effort to deny the Ohio judge” a chance to render his decision on the receivership bid, Bankruptcy Judge Peter J. Walsh at a court hearing yesterday. The decision is a win for an investor group that has been sparring with fugitive treasure hunter Tommy Thompson for years. The investors—which include the company that owns the Columbus Dispatch newspaper and Ohio businessman Donald Fanta—want a receiver named to take over Columbus Exploration and another Thompson affiliate called Recovery Ltd. Partnership. In 1988, Thompson, an engineer and undersea explorer, began salvaging gold from the wreck of the SS Central America, a U.S. mail steamer that went down off the North Carolina coast in 1857 with 18 tons of gold. By 1990, Thompson had recovered more than three tons of gold, silver and other treasures, estimated to be worth at least $100 million. Thompson’s whereabouts are unknown. He disappeared last year after an Ohio judge issued an order for his arrest for failing to appear in court. (Subscription required.)

Arcapita Bank said that an energy company's fraud claim stemming from Arcapita's sale of Texas natural-gas assets should be pushed behind the claims of other creditors, Dow Jones Daily Bankruptcy Review reported today. In a court filing last week, Arcapita took on Tide Natural Gas Storage LP's contention that Arcapita's bankruptcy plan shouldn't be approved by a judge because of $70 million it says it is owed.

A federal judge expressed “concern” that the U.S. scared off American International Group Inc. from joining a lawsuit by Maurice “Hank” Greenberg, its former chairman, challenging the insurer’s 2008 federal bailout, Bloomberg News reported on Friday. “I had this lingering concern,” Judge Thomas Wheeler said today at a hearing in the U.S. Court of Federal Claims in Washington, D.C., on whether grant a request by AIG and the government to dismiss Greenberg’s lawsuit. Starr, Greenberg’s closely held investment firm and an AIG shareholder, sued the government for $25 billion in 2011, calling the assumption of 80 percent of the company’s stock by the Federal Reserve Bank of New York in September 2008 a violation of the shareholders constitutional rights to due process and equal protection of the law. Starr also claims AIG’s board, which Greenberg said was unduly influenced by the government, failed to conduct a full and independent review of whether to join the lawsuit. Starr asked Judge Wheeler to find the board wrongly decided to stay out of the case. Wheeler declined to dismiss Starr’s complaint in July and reaffirmed his ruling in September. The hearing on Friday was on an amended complaint aimed mainly at the board’s actions on the lawsuit.

An effort by creditors to force defunct investment vehicle TPG Troy into bankruptcy has fallen flat after a judge dismissed the case, citing ongoing litigation over the creditors' claims, Reuters reported yesterday. Tossing out the chapter 7 proceeding on May 9, Bankruptcy Judge Martin Glenn said that there was a "bona fide dispute" over whether TPG Troy, a vehicle of private equity giant TPG Capital, owes the creditors money. The unconventional liquidation was filed on TPG Troy's behalf by a group of hedge fund creditors led by SPQR Capital, which claimed to be owed 111 million euros ($143 million) stemming from TPG Troy's investments in TIM Hellas, a Greek telecommunications company. In February, TPG Troy sought to have the case dismissed, arguing that it could not be in bankruptcy because it had wound down its operations in 2007. It pointed to more than 10 lawsuits filed against it by the creditors over the same alleged debts, saying that the bankruptcy was the latest in a line of creditor attempts at "forum shopping."