A federal bankruptcy judge on Tuesday approved a reorganization plan for the Roman Catholic Diocese of Helena, Mont., that includes a $16.4 million settlement for hundreds of people who sued the diocese over clergy sex abuse from the 1940s to the 1970s, the Associated Press reported yesterday. The plan, approved by Bankruptcy Judge Terry Myers, includes another $4.45 million payment from the Ursuline Sisters of the Western Province to settle a lawsuit filed by 45 Native Americans who alleged abuse and sex abuse at the Ursuline Academy in St. Ignatius over the same time period. The plan will now go to a vote of creditors, the 362 plaintiffs in two lawsuits against the Diocese, and the plaintiffs in the Ursuline lawsuit.
The Supreme Court appeared open yesterday to clarifying the powers of nearly 1,000 judges in the federal court system, a group whose constitutional authority has come into question since a 2011 high-court decision involving the late Playboy playmate Anna Nicole Smith, the Wall Street Journal reported today. Depending on how the court rules in Wellness International Network Ltd. v. Sharif, argued yesterday, the bankruptcy court system could remain mired in confusion over when it has the power to offer final judgments on certain issues. By extension, the ruling could also curtail the ability of the federal magistrate system to handle some of the work of district-court judges. Bankruptcy-court judges have worked under a cloud of uncertainty since the Supreme Court’s 2011 decision in Stern v. Marshall, which found bankruptcy judges only have the authority to offer a final ruling on a dispute that “stems from the bankruptcy itself” — a phrase whose definition has generated much debate. Other issues, the court ruled, must be decided by the district court. During arguments Wednesday, the justices questioned why the court should limit the powers of the bankruptcy court when district-court judges routinely sign off on decisions reached by arbitrators — independent parties not affiliated with the court system — that litigants use as an alternative to the courts to settle disputes. To read the transcript from yesterday’s oral argument, please click here: http://www.supremecourt.gov/oral_arguments/argument_transcripts/13-935_…
A bankruptcy judge Tuesday denied a proposal by defunct TV-streaming service Aereo Inc. to pay its remaining employees bonuses if the company is able to drum up at least $4 million from a sale of its technology, the Wall Street Journal reported today. The denial by Bankruptcy Judge Sean Lane followed objections by a group of major broadcasters who insist any sale of Aereo’s assets will infringe on their copyrights and by a government watchdog who said the bonuses don’t seem to be tied to adequate incentives. “The $4 million figure is of concern to me...given that at one point these assets were valued at $20.5 million,” Judge Lane said in court yesterday after listing several reasons why the bonuses don’t pass legal muster. He did leave open the possibility of approving a revised plan if it more clearly laid out why the employees deserve the extra money.
Mississippi pipe manufacturer PSL-North America LLC says it needs more time to divide the proceeds from its $104 million sale to India's Jindal Tubular, Dow Jones Daily Bankruptcy Review reported today. In a filing on Monday in U.S. Bankruptcy Court in Wilmington, Del., PSL said that it needs more time to hash out a consensual plan with creditors to winding down its business following the closing of the sale. PSL is requesting an additional three months, until April 13, to develop the plan. Without an extension of the exclusivity period, creditors and other parties could file competing plans, which at a minimum would complicate the confirmation of PSL's own plan.
LightSquared is seeking to pay a $200 million breakup fee to the backers of its restructuring, including Fortress Investment Group LLC, in case the mobile satellite company’s chapter 11 exit doesn’t pan out as planned, the Wall Street Journal reported on Saturday. LightSquared said in a Wednesday bankruptcy court filing that Fortress would get nearly half the $200 million, payable only if LightSquared opts for an alternative restructuring proposal. Two other backers of the plan, Centerbridge Partners LP and Sig Holdings Inc., would get the rest. Philip Falcone’s Harbinger Capital Partners, which currently controls LightSquared’s equity and is investing new money in the restructuring, wouldn’t get any of the breakup fee.
In the latest settlement struck by Howrey trustee Allan Diamond, a group of former Howrey leaders and a law firm that initially advised the defunct firm on its bankruptcy have agreed to pay $1.85 million, the Wall Street Journal reported today. The deal will see Wiley Rein LLP (whose restructuring lawyers are, in an unrelated development, separating from the firm) contribute $1 million to Howrey’s coffers, according to documents filed Monday in U.S. Bankruptcy Court in San Francisco. It will also see the firm’s onetime dissolution committee, including former chairman Robert Ruyak, chip in another $850,000. The result of more than a year of negotiations, the settlement still requires a court’s approval.
Some of the country’s top restructuring professionals who contributed to the final report of the ABI Commission to Study the Reform of Chapter 11 released earlier this month made it clear that, aside from strengthening tools for a bankrupt company, they want to make the process cheaper, according to a post yesterday on the Wall Street Journal Bankruptcy Beat blog. “Bankruptcy has always been expensive, and there has always been an effort to rein in excessive costs,” said Prof. Kenneth Klee, who helped engineer the 1978 overhaul and was a member of the Commission. The Commission’s recommendations propose to clarify rules on dozens of issues on which bankruptcy judges have disagreed, giving lawyers — in theory — less to fight about. Two proposals address a big reason why costs can spiral upward: Bankrupt companies have to pay the legal bill for others. Besides their own bankruptcy lawyers, investment bankers, financial advisers, accountants and public relations firms, bankrupt companies are legally obligated to pay the bills of the creditor committee that forms to advocate for vendors, employees and other unsecured creditors. (Subscription required.) http://blogs.wsj.com/bankruptcy/2014/12/22/proposed-bankruptcy-fixes-wo…
To read a copy of the Commission’s final report and its recommended principles on professional compensation, please click here: http://commission.abi.org.
The messy collapse of the mega-firm Dewey & LeBoeuf has claimed another casualty, and this time it’s one of the defunct law firm’s leading rainmakers, according to a New York Times analysis on Saturday. John J. Altorelli, now co-head of the U.S. finance practice at DLA Piper, the world’s largest firm measured by revenue, was among Dewey & LeBoeuf’s most important rainmakers, the term used to denote partners who land clients. At his peak, he was credited with generating more than $33 million in annual revenue for the firm. In 2011 alone, his compensation was $6 million. That same year, the firm was so eager to keep him as a partner that it offered a contract guaranteeing him $5 million a year for three years. His departure from Dewey & LeBoeuf in April 2012 was a precipitating factor in the firm’s collapse, which came soon after, in May 2012. Despite all these trappings of success, Altorelli, who is 57, filed for personal bankruptcy protection on Nov. 25 in Connecticut, where he owns a sprawling home currently on the market for $3.9 million. In a cautionary tale for any firm that may be contemplating a bankruptcy filing, the trustee overseeing Dewey & LeBoeuf’s bankruptcy is suing him for $12.9 million. He’s surrounded by lawyers and is personally responsible for his legal fees. He’s been grilled by prosecutors and cited as a potential witness in the pending criminal trial against Dewey & LeBoeuf’s former leaders. The Internal Revenue Service is also investigating him.
Former billionaire Samuel Wyly’s Dallas church is taking on the might of the U.S. government for a some of the businessman’s remaining fortune, Bloomberg News reported yesterday. Wyly, who filed for bankruptcy after losing a fraud lawsuit by the Securities and Exchange Commission, owes $20,000 to the Third Church of Christ, Scientist, under a 2010 pledge to donate $100,000 over five years, the religious organization said in a Nov. 14 filing in U.S. Bankruptcy Court in Dallas. The church, which says it needs the money to finish a building restoration project, argues in the filing that the SEC and the Internal Revenue Service, which seek the most money from Wyly, are trying to silence smaller creditors that can’t match the government’s “unlimited” legal resources.
Partners at Morgan, Lewis & Bockius LLP on Friday voted to hire the majority of partners at troubled Boston law firm Bingham McCutchen LLP, the Wall Street Journal reported on Saturday. The mass transaction is expected to close by the end of November, according to Morgan Lewis. The two firms had been in negotiations for months about a potential combination, talks that Bingham initiated after a rocky 18 months marked by partner exits and disappointing financial results. The deal would boost Morgan Lewis’s headcount to nearly 2,000 lawyers and could vault the firm into the top five U.S. law firms by gross revenue.
