%1

After nine months out of the spotlight, former Dewey & LeBoeuf executive director Stephen DiCarmine is set to make an appearance in court next week, the Am Law Daily reported today. DiCarmine—a non-practicing lawyer who held one of the most powerful positions at the now-bankrupt firm—must be available for questioning at a February 27 hearing scheduled to consider Dewey's chapter 11 liquidation plan, Bankruptcy Judge Martin Glenn ruled yesterday. Judge Glenn's decision came in response to an objection to the chapter 11 plan filed late last week by former Dewey partners Andrew Fawbush and Elizabeth Sandza, who argue that the plan should not be confirmed because it does not pass the "good faith" requirement. If the plan is confirmed, the bankruptcy will be taken over by a pair of liquidation trustees whose mission will be to maximize returns to creditors who say they are owed some $600 million.

Several creditors of Commerce Corp. filed an involuntary bankruptcy petition against the Maryland-based distributor of lawn and garden supplies, the Baltimore Sun reported today. In the petition filed last week, five creditors claim they are owed a combined $1.73 million from the Curtis Bay distributor and want it placed in a chapter 7 liquidation. Commerce, founded by CEO Richard Lessans' family in the 1920s, has been under financial stress, and early last month notified the state it was laying off up to 70 employees.

A federal appeals court rejected a bid by former Bernard Madoff investors, including a charitable foundation for Sen. Frank Lautenberg (D-N.J.), to pursue claims against family members of the imprisoned swindler, Reuters reported yesterday. The Lautenberg Foundation, the town of Fairfield, Conn., and other investors had sought to pursue claims against Madoff's brother Peter, as well as Madoff's son Andrew and the estate of his late son, Mark. But a panel of the U.S. Court of Appeals for the Second Circuit upheld a February 2011 injunction issued by Bankruptcy Judge Burton Lifland in favor of Irving Picard, the trustee liquidating Bernard L. Madoff Investment Securities LLC and recovering money for its former customers. "The preliminary injunction serves the legitimate purpose of preserving the debtor's estate for the creditors and funneling claims to one proceeding in the bankruptcy court," the three-judge panel said in an unsigned order.

Gabriel Technologies Corp., a developer of global-positioning technology, filed for chapter 11 bankruptcy last week after a billion dollar lawsuit the company filed in 2008 against Qualcomm Inc. backfired, Bloomberg News reported yesterday. Having sued Qualcomm for patent infringement, Gabriel's doom was sealed in October when a federal district judge dismissed the last of the claims against San Diego-based Qualcomm. Earlier this month Qualcomm won a $12.4 million judgment against Gabriel for pursuit of what Qualcomm called an "objectively baseless" lawsuit brought in "bad faith." Gabriel claimed in the chapter 11 petition that assets and debt both exceed $10 million. The case is In re Gabriel Technologies Corp., 13-30340, U.S. Bankruptcy Court, Northern District California (San Francisco).

Loan programs orchestrated by Dewey & LeBoeuf to help incoming partners cover capital contributions are sparking more litigation, with a former Dewey partner claiming in a lawsuit filed in federal district court yesterday that Barclays Bank and the now-defunct firm entered into a $540,000 loan agreement in his name without his permission, the Am Law Daily reported today. Entertainment lawyer L. Londell McMillan says in the suit that he initiated the action after being contacted in December by Barclays, which demanded repayment of money he says he never borrowed from the bank. McMillan says in his 13-page complaint that the suit is designed "to challenge a fraudulent scheme orchestrated and arranged" by Barclays and Dewey management. Dewey is not named as a defendant.

Two weeks before a judge decides whether to confirm the bankruptcy plan of Dewey & LeBoeuf, several of the law firm's former partners have objected to the proposal and accused former management of fraudulent conduct, the New York Times DealBook blog reported on Friday. Six one-time Dewey partners filed legal papers this week urging a judge to reject the plan, which outlines how the defunct firm intends to pay back its creditors. A hearing before Bankruptcy Judge Martin Glenn is scheduled for Feb. 27.

A class-action lawsuit alleging labor violations has been filed on behalf of the 250 individuals laid off from Hollywood visual effects company Rhythm & Hues last week, the Hollywood Reporter reported on Friday. Los Angeles-based Rhythm & Hues filed for chapter 11 protection on Feb. 13. The workers' lawsuit cites the Worker Adjustment and Retraining Act as requiring 60 days written notice for those terminated without cause as the result of mass layoffs or plant closings. The workers were employed at the company's facility in El Segundo, Calif. The plaintiffs are seeking their unpaid wages, salary, commissions, bonuses, accrued vacation and holiday pay, pension and 401(k) contributions.

The U.S. Trustee Program reached settlements with Capstone Advisory Group LLC and Kaye Scholer LLP in the bankruptcy case of GSC Group, Inc., according to USTP press releases last week. Both settlements are to resolve that both firms failed to make accurate and complete disclosures in the GSC Group bankruptcy. Under the proposed Capstone settlement, the financial adviser will pay $1 million, waive an additional success fee of $2.75 million, adopt policies and procedures approved by an independent monitor to ensure accurate and complete disclosure, including with respect to employment of contractors and conflicts of interest and undergo compliance reviews by the monitor for two years. The proposed Kaye Scholer LLP settlement will have the law firm paying $1.5 million, adopt policies and procedures approved by an independent expert to ensure the accuracy and completeness of disclosure, including checks for conflicts of interest and assurance that attorneys review documents filed in their name, establish a special compliance review committee to certify under penalty of perjury the law firm’s continuing compliance and provide training to its attorneys and other staff to ensure the accuracy and completeness of documents it files in bankruptcy court. The case is In re GSC Group Inc., U.S. Bankruptcy Court, Southern District of New York, No. 10-14653.

A federal bankruptcy judge has given the federal government the nod to pursue $22 million in claims against two entities controlled by former nursing home executive Antonio Giordano's children, the Providence Journal reported today. Bankruptcy Judge William Hillman, sitting in for Judge Diane Finkle, gave the government the approval to seek the money in U.S. District Court from Potter Road Trust and Evergreen Estates Managing Corp. Acting on behalf of the U.S. Department of Housing and Urban Development and the IRS, the government sought the go-ahead following U.S. District Court Chief Judge Mary Lisi's ruling ordering Giordano to pay $13.8 million for diverting millions of dollars from two failing nursing homes and her blistering rebuke that he used the projects as "his own personal piggy bank." The IRS also seeks $8.9 million in payroll taxes.

Florida Medicare and Medicaid provider Universal Health Care Group Inc. is arguing for the right to stay in chapter 11 bankruptcy against the wishes of its secured lender, Dow Jones DBR Small Cap reported today. The company said in court documents that it plans to sell its assets quickly in bankruptcy to protect their value, not diminish it. BankUnited NA asked the court to throw out Universal's chapter 11 case last week, saying that if the company is allowed to stay in chapter 11, the value of the assets securing its $36.5 million in notes would be "vaporized."