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The team winding down the remnants of Lehman Brothers Holdings Inc. has reached a far-ranging settlement resolving Fannie Mae’s $18.9 billion claim stemming from mortgage loans and mortgage-backed securities the failed investment bank sold to Fannie Mae before the financial crisis, the Wall Street Journal reported today. Lehman said yesterday that Fannie Mae would receive a general unsecured claim of $2.15 billion against its holding company’s estate. Under Lehman’s chapter 11 payment plan, Fannie would recover about 25 cents on the dollar, or about $537.5 million. In return Lehman resolves its long-running dispute with the government-backed housing giant, which had argued Lehman was on the hook for the loans, and frees up $5 billion for creditors. A bankruptcy judge had ordered Lehman to set that amount aside pending the outcome of the Fannie dispute when he approved the bank’s chapter 11 plan. In court papers, a Lehman attorney said the settlement, which requires court approval, will allow the estate to dole out an additional $400 million as part of its fifth distribution to creditors. Lehman’s New York-based holding company has already paid creditors nearly $50 billion since it officially exited bankruptcy protection in March 2012. That figure is expected to grow to more than $80 billion, Lehman said earlier this summer.

New York law firm Proskauer Rose LLP is firing back at former client Overseas Shipholding Group, which is suing the firm for bad legal advice, saying the shipping company's own executives' "faulty" decision making and "imprudent" risk-taking led the company into bankruptcy, Dow Jones Daily Bankruptcy Review reported today. Lawyers for Proskauer said in a court filing on Friday that the firm isn't responsible for OSG's restatement of a decade's worth of financial results because its incorrect legal advice was based on key information "furnished to Proskauer by OSG that OSG knew to be false."

Bombarded by lawsuits and under federal investigation, the chemical company that spilled a dangerous solvent into a West Virginia river and fouled the drinking water of 300,000 people filed for chapter 11 protection Friday, the Los Angeles Times reported on Saturday. Freedom Industries Inc., owner of a storage tank that ruptured Jan. 9 and spilled 7,500 gallons of a coal-treatment foaming agent called MCHM into the Elk River, sought protection from creditors under a chapter 11 filing by its parent company, Chemstream Holdings Inc. of Pennsylvania. The spill prompted the governor to order residents of nine counties in the Charleston area not to use tap water for anything but flushing toilets. In court documents, Freedom Industries says a water line break brought on by frigid temperatures may have caused "an object piercing upwards" to punch a hole in the 35,000-gallon storage tank, allowing the chemical to flow down an embankment into the river. In the filing, Freedom estimates its total liabilities and total assets at between $1 million and $10 million each. The company was founded in 1992, but has existed in its current form only since Dec. 31, when it merged with three other companies under the Freedom Industries name.

Bankruptcy Judge George Hodges accepted the $125 million figure proposed by Garlock Sealing Technologies, cutting more than $1 billion from what the company owes to current and future victims, the Charlotte Observer reported yesterday. The amount covers claims for mesothelioma, a rare and deadly cancer of the lining of the lungs and one of a host of diseases linked to asbestos. Attorneys representing current and future mesothelioma victims had asked the court to set liability at $1.3 billion. But in his 65-page order on Friday, Judge Hodges said that the attorneys’ dollar figure did not fairly reflect Garlock’s liability. According to the U.S. Chamber Institute for Legal Reform, an industry advocacy group, Hodges’ ruling marked the first time in more than 80 asbestos bankruptcies stretching back for more than 30 years that a judge refused to accept the plaintiffs’ estimate for future claims.

Anadarko Petroleum Corp. said that it should pay as little as $850 million in damages over the 2005 spinoff of paint materials company Tronox Inc., 94 percent below the maximum amount a federal bankruptcy judge said it might owe, Reuters reported yesterday. The estimate was provided on Monday, one month after Bankruptcy Judge Allan Gropper said that a higher payout of $14.17 billion might be in order because Anadarko's Kerr-McGee Corp unit intended to harm Tronox creditors by saddling the spinoff with unsustainable environmental liabilities. Tronox filed for chapter 11 protection in 2009 and also sued Anadarko and Kerr-McGee, which Anadarko had bought three years earlier, claiming the spinoff was fraudulent because of the environmental liabilities.

The Catholic Diocese of Stockton, Calif., announced yesterday that it will file on Wednesday for chapter 11 protection, the Modesto (Calif.) Bee reported today. The move affects only the diocesan budget and property and will not have an impact on the individually incorporated parishes or ministries, Bishop Stephen Blaire said. The creditors, mostly victims of sexual abuse by priests, are expected to challenge that statement. The Stockton Diocese becomes the tenth in the country and the second in the California to file for chapter 11 protection. In June 2013, Blaire said the diocesan reserve account, which has been used to pay such lawsuits, totaled about $10 million when he took over as bishop in 1999, but has been depleted to less than $1 million. On Monday, diocesan officials said its total assets are about $15 million, with $17 million in liabilities.

A bankruptcy judge yesterday approved a settlement that allows Peregrine Financial Group to avoid dueling legal claims over its collapse and ensures that any litigation proceeds wind up in the hands of the brokerage's customers and creditors, Dow Jones Daily Bankruptcy Review reported today. Bankruptcy Judge Carol A. Doyle signed off on the deal struck last month between the official overseeing Peregrine's liquidation, trustee Ira Bodenstein, and Peregrine's customers. Under the settlement, Bodenstein will stand down in a battle over litigation and will allow Peregrine's customers and creditors to take the lead in pursuing any legal claims Peregrine may have against Peregrine's former president, Russell Wasendorf Jr., related to his father's "misappropriation of customer funds" from Peregrine.

A federal bankruptcy judge granted the Rockets permission yesterday to continue negotiating on behalf of Comcast SportsNet Houston and set Feb. 4 to hear arguments on the Houston Astros’ motion to dismiss an involuntary chapter 11 bankruptcy petition filed against the network last September, the Houston Chronicle reported yesterday. Bankruptcy Judge Marvin Isgur also provided a clearly worded signal indicating that if the Astros-Rockets-Comcast partnership enters bankruptcy, he favors eliminating a controversial clause that requires all three partners to agree on significant decisions. Judge Isgur agreed to extend until next month the Rockets’ power to seek new business for CSNH but also lifted a stay on two undecided motions in the case, the more significant of which is the Astros’ motion to dismiss the involuntary bankruptcy proceeding.

Defunct telecoms equipment maker Nortel Networks Inc. received court approval yesterday for a $75 million deal it called a "significant milestone" in ending its five-year bankruptcy, Reuters reported yesterday. In return for the payment, insolvent Nortel affiliates in Europe will drop claims seeking more than $3 billion from Nortel's U.S. bankruptcy proceeding. Nortel's global business, once worth $250 billion with 93,000 employees, collapsed in January 2009. Its businesses and patents were quickly auctioned off, raising $7.5 billion. Yesterday's settlement resolves some of the biggest claims against the U.S. estate, including that it allegedly short-changed a pension in Britain. The agreement does not affect a looming fight over how to divide the billions in cash among insolvency and bankruptcy proceedings in different countries.

Los Angeles wants a long-running battle over hangar fees with American Airlines to continue outside of bankruptcy court now that the airline has emerged from chapter 11 protection and merged with US Airways Group Inc., the Wall Street Journal reported on Saturday. Papers filed on Jan. 2 in bankruptcy court ask relief from the chapter 11 plan injunction barring continued legal action against American so Los Angeles can take its case to federal court in California. The dispute over how much American should pay for a leased hangar at Los Angeles International Airport started out in federal court in California seven years ago, attorneys for the city noted. American has asked a bankruptcy judge to decide the fight and find that it owes nothing to Los Angeles. The city says that it is owed $21.5 million plus interest, a debt Los Angeles insists must be paid as the new American Airlines Group Inc., the company created by the merger, continues to use the hangar.