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Liquidators of defunct law firm Coudert Brothers are demanding that states turn over thousands of dollars in unclaimed funds, in a case that could help clarify how bankrupt entities recover unclaimed funds in the future, Reuters reported today. Development Specialists Inc. (DSI), the administrator of Coudert's chapter 11 estate, says that it has the right under federal bankruptcy laws to claim money being held on the firm's behalf in so-called "escheat" funds managed by state governments. In a lawsuit filed on Feb. 27 in bankruptcy, DSI asked a judge to order finance leaders in California, New York, Ohio, Colorado, Texas, Pennsylvania and Washington, D.C., to turn over Coudert's escheat funds. According to the complaint, California Controller John Chiang has "repeatedly refused" to release unclaimed property on grounds that only a bankruptcy debtor itself—not the administrator of the entity's estate—may claim such funds. DSI says that policy clashes with federal bankruptcy laws and the U.S. Constitution's supremacy clause.

The bankrupt beauty business Cosmetics Plus cannot recoup a $350,000 settlement that it reached with insurer American International Group because the money belongs to another bankrupt estate—fraudster Marc Dreier's former law firm—a New York appellate court ruled on Thursday, Reuters reported yesterday. In January 2008, Cosmetics Plus procured the settlement after suing AIG when two of its retail stores were destroyed in the Sept. 11 attacks. AIG had refused to pay a claim under a business interruption policy, according to court records. Cosmetics Plus retained attorneys Paul Traub and Steven Fox from the now defunct Dreier firm to obtain the $350,000 settlement and the lawyers transferred the proceeds into an escrow account at the firm, according to the ruling. Dreier collapsed in December 2008 after managing partner Marc Dreier was arrested in connection with a $400 million Ponzi scheme. The firm filed for bankruptcy in January 2009, and the Cosmetics Plus settlement money became part of the bankrupt law firm estate.

A turkey processing plant was placed involuntarily into chapter 7 bankruptcy and has ceased operation in the south-central Nebraska city of Gibbon, the Associated Press reported yesterday. Court documents say that Midwest Meat Packing Facility had not paid Shinn's Turkey Track, of Dunning, $1.45 million for turkeys and had a total debt of more than $4.4 million. It is unclear how many workers have lost their jobs. In March last year, the plant's office manager, Tami Baker, said that the company expected to have close to 100 employees by the end of the year. The previous owners closed the plant in December 2008 because of high feed and fuel costs. The plant reopened in 2010 with an investment from New York-based AMSA International.

Mexico's Vitro said yesterday that it had ended a lengthy legal fight with creditors after a Mexican businessman bought a chunk of the glassmaker's debt held by funds that had led the court fight, Reuters reported yesterday. Under the deal, the Fintech fund will buy all the debt held by U.S. hedge funds that were fighting Vitro in court over payment, the company said in a statement. Fintech will receive a 13 percent stake in a Vitro subsidiary and $235 million in debt with a two-year maturity that will be issued by the same subsidiary, the company said in a filing with the Mexican Stock Exchange. Vitro went through a $3.4 billion bankruptcy reorganization in Mexico in 2011. U.S. creditors opposed that plan, which short-changed creditors while preserving $500 million for shareholders.

MBIA Inc. defeated a lawsuit by Bank of America Corp. and Societe Generale SA that sought to reverse approval of the bond insurer's $5 billion asset-transfer because it cut money available to cover their policy claims, Bloomberg News reported yesterday. Bank of America and Societe Generale had sought to reverse the state approval under New York laws that allow court challenges to state agency decisions. In 2009, New York Insurance Department Superintendent Eric Dinallo approved the split, allowing MBIA to move the company's guarantees on state and municipal bonds out of subsidiary MBIA Insurance Corp., which guaranteed some of Wall Street's most toxic mortgage debt. A second suit over the restructuring is still pending in New York state court.

U.S. Attorney Preet Bharara said that Hostess Brands Inc.'s planned sales of most of its bread business should not be approved as currently structured because the buyers would be improperly released from liabilities and obligations to comply with environmental laws, Bloomberg News reported yesterday. Bharara objected on Friday to agreements reached last week with Flowers Foods Inc., which is set to buy brands including Wonder for about $360 million, and Grupo Bimbo SAB, which plans to buy the Beefsteaks brand for about $31.9 million. Hostess, founded in 1930, is liquidating after failing to reach an agreement with striking bakers on concessions to help the company emerge from its second bankruptcy.

A new type of securities lawsuit against corporations over say-on-pay advisory votes is so similar to shareholder suits filed over mergers and acquisitions that a new M&A litigation study includes a look at the say-on-pay suits, Corporate Counsel reported today. According to "Shareholder Litigation Involving Mergers and Acquisitions," the new suits are being filed by the same plaintiff law firms that file M&A actions. The report, released this week by Cornerstone Research, was written by Olga Koumrian, a principal of Cornerstone, along with Robert Daines, a Stanford law and business professor. The shareholder litigants make the same claims about a company's faulty disclosure, and they pursue the same general strategy of seeking an injunction in hopes of getting a quick settlement, according to Daines, who is also co-director of Stanford’s Rock Center on Corporate Governance. At least 24 of these lawsuits were filed last year, and plaintiff law firms recently announced investigations of 33 more companies, the study states.

The former JPMorgan Chase & Co trader known as the "London Whale" was not responsible for Lehman Brothers Holdings Inc.'s bankruptcy and, according to JPMorgan, should not be dragged into an $8.6 billion lawsuit accusing the largest U.S. bank of causing it, Reuters reported yesterday. In a court filing on Wednesday, JPMorgan said that Lehman knew from documents it produced itself that the trader, Bruno Iksil, had nothing to do with allegedly mismarked derivative trades about which Lehman sought to depose him. JPMorgan also said that Lehman and its unsecured creditors' committee, which also seeks Iksil's testimony, had pointed to nothing that shows the bank's Chief Investment Office had any role in the collateral requests at the center of Lehman's 3-year-old lawsuit.

Bankruptcy Judge Martin Glenn yesterday approved the liquidation plan for failed law firm Dewey & LeBoeuf LLP, setting the stage for the firm's many creditors to begin recovering some of the hundreds of millions they are owed from the largest law firm collapse in U.S. history, the Wall Street Journal reported today. Dewey sought chapter 11 protection on May 28 of last year, after an exodus of partners amid pay disputes and concern about the financial health of the debt-laden firm. In the ensuing nine months, the firm's bankruptcy advisers pressed clients to pay outstanding legal bills, sold off assets and art, and brokered a $71.5 settlement with former partners to help pay off the firm’s lenders, landlords and trade creditors, who have filed more than $550 million in claims. The liquidation plan had the backing of Dewey’s creditors, including lenders who hold liens on some $250 million in bank and bond debt and who have funded the bankruptcy proceedings thus far using their cash collateral.

Residential Capital LLC sued mortgage-bond buyers including AIG Asset Management LLC and Allstate Insurance Co. to prevent them from collecting money ahead of other creditors in the company's bankruptcy, Bloomberg News reported yesterday. Mortgage investors who lost money on securities they bought from ResCap should not be given priority over unsecured creditors, ResCap said in a court filing yesterday. The lawsuit is a response to an attempt by affiliates of AIG, Allstate, Massachusetts Mutual Life Insurance Co. and Prudential Insurance Co. of America to get paid before unsecured creditors, ResCap said. Should the insurers succeed, they may end up collecting twice for almost identical claims at the expense of unsecured creditors, according to ResCap.