A Long Island olive importer is asking a bankruptcy judge to decide how much it owes customers for allegedly selling processed olive oil as pure, the Wall Street Journal reported today. Kangadis Food Inc., which is fighting claims that it improperly marketed a chemically treated olive byproduct as “100 percent pure olive oil,” recently sought bankruptcy protection in an attempt to put the brakes on a class-action suit over the alleged mislabeling. The family-owned company filed for chapter 11 Friday in U.S. Bankruptcy Court in Central Islip, New York, saying that the approximately $1.4 million in legal fees it has racked up over the past year and a half have hurt what is otherwise a profitable business. The goal of the filing, according to Kangadis Food’s bankruptcy lawyer, is to avoid paying an estimated $750,000 to $1 million more to defend itself in a class-action suit scheduled to go to trial in September.
In a decision likely to influence future litigation over failed law firms, a federal judge in San Francisco ruled that the defunct Heller Ehrman LLP has no right to profits from unfinished legal work its ex-partners brought to their new firms, the Wall Street Journal reported today. U.S. District Judge Charles Breyer yesterday rejected the theory behind those claims — which bankruptcy trustees have used to recover millions on behalf of creditors left in the lurch when law firms fail — and dismissed the Heller trustee's lawsuits against law firms Davis Wright Tremaine LLP, Jones Day, Foley & Lardner LLP and Orrick, Herrington & Sutcliffe LLP. "Heller ceased to be able to represent its clients, leaving them with no choice but to seek representation elsewhere," Judge Breyer wrote in his order. "Defendants came to the rescue of these clients and provided them with legal services on ongoing matters…. Defendants did the work that generated the fees at issue here. With the defendants those fees should stay." The decision could bolster arguments made by big law firms that hired partners from bankrupt rivals, then pushed back against claims for the profits from legal work that originated at the failed firms. Forcing partners' new employers to pay the money back to a failed firm's creditors, they say, unfairly restricts lawyers' mobility and clients' right to hire whatever lawyers they please. Judge Breyer's ruling goes against a position taken earlier this year by the bankruptcy judge overseeing the Heller case, who rejected attempts to dismiss the unfinished-business claims. Law-firm bankruptcy trustees say unfinished legal work is an asset that rightfully belongs to the failed firm, citing a 1984 case out of California that involved the breakup of a four-partner firm called Jewel, Boxer & Elkind.
A Minnesota liberal arts college that was once a beneficiary of Tom Petters’s largesse will return $600,000 of the $3 million it received, the Wall Street Journal reported today. The College of St. Benedict, of St. Joseph, Minn., in 2003 proudly announced a $3 million gift from Petters, a local businessman, to renovate the school’s 1,078-seat auditorium. The facility was renamed the Petters Auditorium in honor of Petters’s parents. His mother was an alumna of the women’s college, while his father graduated from its brother school, St. John’s University. When Petters was arrested and charged with operating a Ponzi scheme that bilked investors out of several billion dollars. Following his arrest, his business empire — which once encompassed Polaroid and Sun Country Airlines — filed for bankruptcy protection. Officials overseeing the companies’ wind-downs has since sued those to whom Petters made payments of what was ultimately determined to be stolen funds, including charities and other organizations like College of St. Benedict (which ultimately renamed Petters Auditorium). With litigation to recover $2 million of the donated funds reaching as high as a U.S. appeals court, the College of St. Benedict and the bankruptcy trustee demanding the return of the funds participated in mediation in February. The talks yielded a settlement in which the college joined the ranks of other organizations that have agreed to return a portion of their funds.
Trucking company New Century Transportation is shutting down and filing for chapter 7 liquidation, TruckingInfo.com reported yesterday. A copy of a June 9 letter to employees from the New Jersey-based carrier and obtained by TruckingInfo.com says that the decision came when its lender “unexpectedly declined to continue funding regular business operations.” It goes on to say New Century then “immediately took steps to seek financing and other alternatives including a sale of all or part of the company, in order to continue operations, but to date, its efforts have been unsuccessful.” The letter also states advance warning about the bankruptcy to employees was not possible any sooner because New Century says that it would have precluded its ability to secure alternative financing or a sale of the company. The Westampton, N.J.-based carrier specialized in both truckload and less-than-truckload services with a fleet of 2,000 trucks, according to its website. The bankruptcy reportedly puts some 1,500 people out of work.
The bankruptcy trustee unwinding defunct law firm Dewey & LeBoeuf LLP has brought new allegations against two former Dewey executives in a lawsuit seeking the return of more than $21.8 million the two allegedly were paid as the law firm “fell deeper and deeper into insolvency,” the Wall Street Journal reported today. The amended complaint, filed in bankruptcy court on Monday against Dewey’s former executive director, Stephen DiCarmine, and ex-chief financial officer, Joel Sanders, comes six months after Dewey trustee Alan Jacobs first sued the pair. The updated suit incorporates criminal and civil allegations brought against DiCarmine and Sanders in March by the Manhattan district attorney’s office and the Securities and Exchange Commission. Those actions, which also charge Dewey’s former chairman, Steven Davis, and a former lower-level employee, claim that Dewey employees used fraudulent accounting methods to cover up the state of Dewey’s finances for several years leading up to the firm’s 2012 collapse. All four have denied wrongdoing.
A bankruptcy judge yesterday signed off on Dolan Co.'s bankruptcy restructuring plan that hands control of the legal publishing business to the company's lenders, Dow Jones Daily Bankruptcy Review reported today. Bankruptcy Judge Brendan L. Shannon approved Dolan's chapter 11 plan to turn its business over to Bayside Capital Inc. and other lenders despite the protests of shareholders who argued that the deal deliberately undervalued the company in order to strip shareholders of their stakes.
The Supreme Court on Monday clarified a prior ruling that effectively limited bankruptcy judges’ powers but left a bigger question unanswered, the Wall Street Journal reported today. The unanimous ruling in Executive Benefits Insurance Agency v. Peter H. Arkison helps clarify a 2011 ruling that called into question the power of bankruptcy judges to rule on key issues that arise in many bankruptcy cases. The 2011 case, which involved an inheritance battle between the deceased Anna Nicole Smith and the son of her deceased husband, exposed a gap between claims that the bankruptcy court is allowed to issue final judgment on and claims that it isn’t. Executive Benefits, argued in January, required the Supreme Court to confront the claims that fall into the gap. In an opinion delivered by Judge Clarence Thomas, the court said that the bankruptcy court may propose a ruling for review and final judgment by the district court. But the Court didn’t address what many saw as a crucial question: If those involved in litigation agree to let the bankruptcy court issue a final judgment on a matter it is otherwise not allowed to decide, is that consent enough? “What’s most notable about the decision is what it leaves undecided. It does not reach the constitutional questions about whether bankruptcy judges can enter judgment on the basis of litigant consent, which is now an issue that several courts of appeal have decided,” said Douglas Hallward-Driemeier, who represented Executive Benefits in the case. John Pottow, who represented Arkison, the bankruptcy trustee, said that the fact the opinion is “very close and narrow in what it’s saying” likely means the justices took different sides on the issue of consent. But he expects they’ll soon have another chance to revisit the issue. (Subscription required.) http://stream.wsj.com/story/gay-marriage-supreme-court-hearings/SS-2-19…
Gain critical insights into the Supreme Court’s ruling in In re Bellingham at the ABI Workshop Bankruptcy Chief Judges Roundtable on June 16 at the ABI Conference Center in Alexandria, Va. Hear two panels of prominent judges weigh in and more than 50 chief judges from across the nation will attend. Join them in person or via web stream. A networking reception will be included for in-person registrants. Click here for details and registration: http://www.abiworld.org/workshops/2014/abi0616
MF Global Holdings Ltd. wants a judge to slash the claims of former officers being sued over the broker-dealer's bankruptcy, including ex-Chief Executive Jon S. Corzine, so the estate can quickly pay back other creditors, the Wall Street Journal reported on Saturday. In a court filing on Thursday, lawyers for the team winding down MF Global asked Bankruptcy Judge Martin Glenn to cancel certain claims filed by Corzine and others, or at the very least, place them below those of other creditors or estimate the maximum amount the officers could receive. In the filing, administrator winding down MF Global said, without the approval, "these contingent and unliquidated claims will unduly delay the administration of the chapter 11 cases and prevent the plan administrator from making distributions to all creditors." With an approval, some creditors of MF Global's Finance USA unit could see some of their money within weeks, the filing said. A hearing on the matter is set for June 19.
After reaching an agreement with unsecured creditors, Fisker Automotive Inc. will move forward with its bankruptcy-exit plan today, when it will ask the court to approve its disclosure statement, the Wall Street Journal reported on Saturday. The agreement with creditors, reached earlier this week on the terms of a cash-sharing plan, headed off the threat of a major clash during the hearing. An approval from Bankruptcy Judge Kevin Gross would allow Fisker to begin soliciting votes on the plan from creditors ahead of requesting final exit-plan approval. China’s Wanxiang Group bought the former hybrid auto maker during a bankruptcy auction, leaving $149.2 million in cash and stock to be distributed among Fisker creditors. Fisker’s creditors have agreed to support the plan, but it still faces a challenge from a former company backer, which says the bankruptcy voting scheme plan could improperly shield former leaders from an ongoing federal court lawsuit over the auto maker’s failure.
A Chinese consortium that won an auction to buy Brookstone Holdings Corp. out of bankruptcy plans to keep nearly all of the specialty retailer's 240 stores open despite earlier indications that it could close as many as 25 locations, an attorney for Brookstone told a bankruptcy judge on Friday, the Wall Street Journal reported on Saturday. Sailing Innovation US Inc. — a collaboration between Chinese investment firm Sailing Capital Overseas Investment Fund LP and Chinese conglomerate Sanpower Group, with a financing commitment from GE Capital — emerged as the winner for Brookstone at a June 2 auction with a bid valued at about $174 million. The deal includes $137.5 million in cash, $10 million in second-lien notes, and the assumption of about $28 million in liabilities, K&L Gates LLP partner Charles Dale said on Friday during a hearing before Bankruptcy Judge Brendan Shannon.
