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A variety of creditors that do not have a direct stake in the outcome of Patriot Coal Corp.'s bid to shed its union obligations in bankruptcy won court permission to have their voices heard during an upcoming labor trial, Dow Jones Daily Bankruptcy Review reported today. Bankruptcy Judge Kathy A. Surratt-States on Friday cleared parties other than the company and the union it is facing off against during a battle over labor contracts to participate in the trial, to an extent. She opened up some aspects of the legal process to outsiders, allowing them to participate in depositions, submit briefs and make opening and closing statements at the court hearing.

Creditors of bankrupt San Bernardino, Calif., including America's biggest pension fund and Wall Street bondholders, are due to meet in court today in a case bogged down in arguments over the city's disclosure of financial records, Reuters reported yesterday. The slow progress in San Bernardino's case contrasts with that of another California city, Stockton, which last week was declared eligible for municipal bankruptcy in proceedings that have moved relatively swiftly since it filed for chapter 9 in June. For San Bernardino, a city of 210,000 that filed for bankruptcy just a month after Stockton and declared a fiscal emergency to avoid pre-bankruptcy negotiations with creditors, it is still unclear whether the judge will be able to set a trial date to determine the city's eligibility for chapter 9 protection. Last August, San Bernardino stopped paying its $1.2 million, twice-weekly employer contributions to CalPERS—America's biggest pension fund, with assets of $256 billion. The pension fund is opposing the city’s bankruptcy petition.

Patriot Coal Corp. and its creditors' committee want to investigate Peabody Energy Corp.'s 2007 spinoff of the coal producer, saying that the transaction rid Peabody of $600 million in health-care and environmental liabilities, Bloomberg News reported yesterday. Patriot filed for bankruptcy in July, seeking to reorganize and shed some of the $1.6 billion it estimates is owed for lifetime health care for 8,100 retirees. Patriot has already sued to force its former parent to continue paying for the health-care costs of certain retirees whom Peabody employed before the spinoff. The proposed probe would allow Patriot to subpoena documents related to the spinoff, including those that Peabody has refused to share with the company and Patriot’s union, according to court papers. Patriot said that it is considering whether the 2007 transaction that created it "constituted an actual or constructive fraudulent transfer." Under bankruptcy law, companies can make recoveries for distribution to all creditors if money was found to have been improperly transferred out of the estate before the bankruptcy filing.

Patriot Coal Corp. is objecting to a request from shareholders to form an official committee in the coal miner's bankruptcy case, arguing that there is no reason for the holders to receive the special representation, Dow Jones Daily Bankruptcy Review reported today. Shareholders, including investment firm Compass Point Partners, made a request with the court last August to appoint a special committee to protect their interests in Patriot's chapter 11 case, pointing to the "serious decline" in the value of the shares they hold. If the request is granted, Patriot would also be required to cover up to $250,000 in legal bills for the shareholders.

Some former partners of Howrey LLP have agreed to spend the next several months in settlement talks to avoid litigation over the defunct law firm's 2011 collapse, the Wall Street Journal reported today. Under a deal filed in bankruptcy court on Wednesday, several attorneys—including Howrey's former chairman, Robert Ruyak—will not face any litigation until at least Sept. 30. The deal aims to permit the former Howrey partners time to amicably resolve any liability they may face as a result of the firm's March 2011 dissolution, which was followed by the firm's chapter 11 bankruptcy filing.

Documents in 12 major asbestos-related bankruptcies could be unsealed for the first time next month in a novel bid by a manufacturer to bolster its defense against a barrage of claims that its products caused deadly cancer and mesothelioma, Reuters reported yesterday. Garlock Sealing Technologies LLC won access to lists of clients of plaintiffs' attorneys after a federal judge in Delaware on March 1 reversed a bankruptcy court judge who kept the documents from the public. The bankruptcies include Pittsburgh Corning Corp., W.R. Grace & Co., Kaiser Aluminum Corp. and nine others. Law firms that opposed opening the records called the volume of material "staggering" and "of almost unprecedented scope." The order by Delaware District Court Judge Leonard Stark comes amid a push in Congress and state legislatures for greater transparency in the multibillion-dollar world of asbestos litigation, which critics say carries great potential for fraud. Garlock filed for bankruptcy in 2010 under a mounting number of lawsuits claiming the asbestos in its sealants caused deadly cancer and other diseases. It is currently trying to estimate the size of its asbestos liability, which will likely lead to the creation of a trust to pay claimants over the coming years. Garlock hopes the documents from the bankruptcy cases will help to limit the amount of money needed to provide compensation.

To read the bill text of H.R. 982, the "Furthering Asbestos Claim Transparency (FACT) Act of 2013,” please click here. To read the prepared testimony from the House Judiciary Committee's March 13 hearing on the bill, please click here.

Energy Future Holdings Corp., the power company that went private in a record $45 billion buyout only to say last month that it could go bankrupt, is facing a new headache as a unit's creditors have filed a $725 million lawsuit to recover unpaid interest, Reuters reported yesterday. Affiliates of the hedge fund Aurelius Capital Management LP sued seven current and former Energy Future Competitive Holdings Ltd directors, saying that they improperly let the parent once known as TXU Corp. be repaid billions of dollars of fraudulent intra-company loans without ensuring full payment to creditors. Aurelius accused Energy Future Chief Executive John Young and the other directors of showing a "demonstrated indifference" to creditors stemming in part from conflicts of interest, and said that these directors should pay the interest owed.

Creditors of defunct financing vehicles of private equity giant TPG Capital are escalating a battle over whether a dissolved entity can be forced into bankruptcy, Reuters reported yesterday. In court papers filed on Monday, the creditors asked a bankruptcy judge to deny a bid by one of the financing vehicles to have an involuntary chapter 7 petition dismissed. The creditors, a group of hedge funds led by SPQR Capital, filed the bankruptcy petition in December against TPG Troy LLC. TPG Troy argued last month that it could not be in bankruptcy because, essentially, it no longer exists. But SPQR and fellow creditors say that dissolved companies are still liable for their debts. The creditors hold notes issued by subsidiaries of TIM Hellas, a Greek telecommunications company that was owned in part by TPG Troy. They claim they are owed 111 million euros ($143 million) after Hellas defaulted on the notes.

Unsecured creditors of Reader's Digest Association say that its $105 million bankruptcy loan unfairly allows lenders "complete control" over the publisher's restructuring and will tie up assets that the unsecured creditors were counting on for payment, Dow Jones Daily Bankruptcy Review reported today. Reader's Digest's unsecured creditors' committee is specifically eyeing the $45 million "new money" portion of the $105 million loan, the remainder of which will refinance the company's old debt. According to the committee, the new money lenders have structured the financing in a way that will harm unsecured creditors.

Peregrine Financial Group Inc.'s chapter 7 trustee won court approval to create three classes of firm commodity customers, a ruling that he said may lead to full repayment for one class of account holders, Bloomberg News reported yesterday. Bankruptcy Judge Carol A. Doyle yesterday approved trustee Ira Bodenstein's request to divide account holders based on whether they traded on U.S. commodity exchanges, traded on exchanges outside the country, or hold warehouse receipts for taking or making delivery under commodity contracts. Such a division may enable customers who traded on foreign commodities exchanges to be repaid in full, Bodenstein said after the hearing. Peregrine, a Cedar Falls, Iowa-based commodities firm with offices in Chicago, filed to liquidate in July after the National Futures Association said more than $200 million in customer funds were missing.