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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.

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.

In advance of a hearing today on Residential Capital LLC's request for a 60-day extension to file a reorganization plan, ResCap on Friday aimed to deny an attempt by bondholders to have a bankruptcy court thwart the request in order to file their own reorganization plan, Dow Jones Newswires reported yesterday. The creditors, a group of junior secured bondholders, want a judge to deny ResCap's request for a 60-day extension, through late April, on its exclusive right to file a reorganization plan without the threat of rival proposals. In its Friday filing, ResCap, the mortgage subsidiary of Ally Financial Inc., notes that its unsecured creditors' committee supports the company's bid for more time. Originally, ResCap wanted a 90-day extension but reduced it to 60 days after negotiations with the committee.

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.

Lehman Brothers' U.S. brokerage yesterday finalized settlements with the former financial giant's parent and European entities, resolving nearly $44 billion in customer claims and paving the way for full repayment to the brokerage's former customers, Reuters reported yesterday. Though the deals were initially announced last year, details were ironed out and revealed in court papers and statements by the parties on Tuesday. Lehman's parent will be allowed a $2.3 billion customer claim against the brokerage, down from the $19.9 billion it had initially sought, papers show. Lehman's European unit will receive a $9 billion customer claim, reduced from the $24 billion originally asserted.

Bondholders say allowing Residential Capital LLC to retain control of its stalled restructuring is "the surest path to nuclear war" and urged a judge to allow creditors to propose rival restructuring plans, Dow Jones Daily Bankruptcy Review reported yesterday. A group of junior secured bondholders is asking a bankruptcy judge to deny ResCap's request for a three-month extension of its exclusive right to file the restructuring plan describing how it will pay creditors, settle disputes and exit chapter 11 protection. According to the bondholders, the request is based on the "false assumption" that ResCap's long-running restructuring negotiations will result in a breakthrough that will take the mortgage lender out of bankruptcy. The bondholders say that the plan talks, which have gone to mediation with a sitting bankruptcy judge, have only further entrenched warring creditors in their respective positions.

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.

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.

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.