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Residential Capital LLC, as it marches toward exiting bankruptcy, is asking a judge to approve the settlement of a $ 99.7 million class-action lawsuit over alleged improper fees it charged on loans made more than nine years ago, Dow Jones Newswires reported yesterday. ResCap said in a court filing on Tuesday that it will pay $14.5 million to the borrowers, in addition to the $12.9 million it already paid after losing previous court trials on the matter. While the settlement was reached in early 2012, ResCap's bankruptcy case triggered a halt of pending litigation. Now, less than a week away from asking a judge to clear its chapter 11 exit, ResCap is asking him to lift the automatic stay allowed by bankruptcy law so he can approve the deal. The settlement includes 248 loans and about 365 potential borrowers on those loans, ResCap said. The plaintiffs alleged that two ResCap subsidiaries collected improper fees and interest on second mortgages. While those borrowers initially won a $99.7 million judgement, a lower court called for a new trial over much of that money.

Court Square Capital Partners LP’s Physiotherapy Holdings Inc., which provides outpatient rehabilitation and sports-injury therapy, filed for bankruptcy protection with creditor support for a restructuring plan, Bloomberg News reported yesterday. The Exton, Pa.-based company listed debt of as much as $500 million and assets of as much as $1 billion in documents filed yesterday in bankruptcy court. Nearly 50 affiliates also are seeking court protection. Physiotherapy’s restructuring plan is supported by all of the company’s senior secured lenders and 99.7 percent of its bondholders, though terms of the plan were not immediately available.

The Consumer Financial Protection Bureau has filed more lawsuits against lawyers than almost any other group, according to an analysis by the National Law Journal, bringing six suits against legal services providers. Only the banking industry — also the subject of six suits by the CFPB — was equally stung. In addition, the agency has asserted that debt-collection lawyers are subject to its direct supervision, including on-site examination of books and records. The CFPB's first enforcement action was against the Gordon Law Firm in Los Angeles and its founder Chance Gordon in July 2012. Since then, suits against lawyers and law firm support-service providers have been a major part of the CFPB's docket. What makes the actions so surprising is that the Dodd-Frank Act that created the agency specifically exempts lawyers from CFPB oversight. Section 1027 of the act states that the agency "may not exercise any supervisory or enforcement authority with respect to an activity engaged in by an attorney as part of the practice of law." A CFPB spokesman acknowledged that limitation, but said that "nothing prevents the bureau from exercising its authority with respect to a consumer financial product or service offered or that is provided outside of the scope of an attorney-client relationship." Read more.

Pillsbury Winthrop Shaw Pittman LLP and Orrick Herrington & Sutcliffe LLP said they are in talks about merging the San Francisco-based law firms, Bloomberg News reported on Friday. According to trade publication The American Lawyer, Orrick, a 977-lawyer firm, had $866 million in gross revenue last year, making it the 27th wealthiest firm in the country. Pillsbury, with 609 lawyers and $561 million in gross revenue last year, was ranked 56th in terms of wealth, according to The American Lawyer rankings. U.S. law firms have entered 58 mergers so far this year, compared to 60 in all of 2012, according to legal consultant Altman Weil Inc.’s MergerLine.

Hedge funds that invest in bankrupt companies are demanding protection from insider-trading lawsuits before agreeing to take part in restructuring talks — a reaction by the industry’s top performers to an obscure court decision involving the 2008 collapse of Washington Mutual Inc., Bloomberg News reported today. The ruling by Bankruptcy Judge Mary Walrath let shareholders pursue allegations that four hedge funds involved in the bankruptcy traded on inside information about talks between WaMu, JPMorgan Chase & Co. and the Federal Deposit Insurance Corp. While the 2011 decision was ultimately rescinded, some funds and other investors in bankrupt companies have begun to demand “comfort orders” to protect themselves from such liability if they simultaneously trade in an ailing company’s securities and take part in its confidential bankruptcy talks, according to Bankruptcy Judge James Peck. “Funds are suffering from what I call the WaMu effect,” said Peck. Speaking at a ABI/St. John’s University School of Law symposium this month, he said that the ruling “spawned a new normal: Funds first want protection from risks.”

A bankruptcy judge approved a preliminary plan to bring a long-stalled Hawaii resort development out of bankruptcy under the control of an investment group that includes the chairman of retailer Wal-Mart Stores Inc., Dow Jones Newswires reported yesterday. Bankruptcy Judge Robert Faris on Friday signed off on the disclosure document for the developer of the Hokuli'a project on Hawaii's Big Island. The Hokuli'a project is a partnership between William A. Pope, the owner of California real estate investment firm SunChase Holdings, and S. Robson Walton, Wal-Mart's chairman. The chapter 11 plan, backed by $65 million in exit financing from a SunChase affiliate, would bring the real estate project, long dogged by legal challenges and financial woes, out of bankruptcy.

Private mortgage insurer PMI Group Inc. has emerged from chapter 11 protection, the Associated Press reported yesterday. The company filed for bankruptcy protection in November 2011 after two of its subsidiaries were seized by regulators in Arizona. The regulators seized PMI Group's main subsidiaries in the state, PMI Mortgage Insurance Co. and PMI Insurance Co., because the companies did not have enough money on hand to meet state requirements. PMI Group suffered heavy losses once the housing market bubble popped.

A bankruptcy trustee overseeing the liquidation of MF Global Holdings Ltd.'s brokerage operation plans to file a motion as soon that will likely smooth the way for all remaining money to be returned to the firm's U.S. customers, Dow Jones Daily Bankruptcy Review reported today. Trustee James Giddens plans to ask a judge in the motion for the remaining funds to be returned to U.S. customers who traded on domestic exchanges. An estimated $1.6 billion went missing from MF Global customer accounts in the wake of the firm's collapse in October 2011. Since then, Giddens has returned 98 percent of that money to U.S. customers who dealt on U.S. exchanges.

Major U.S. honey supplier Groeb Farms Inc. filed for chapter 11 protection on Tuesday after it was caught illegally buying Chinese honey through other countries to avoid antidumping tariffs imposed by U.S. trade regulators in 2001, the Wall Street Journal reported today. Executives placed the 76-worker company under chapter 11 protection saying that its $2 million settlement with regulators required it "to dispose of any and all Chinese-origin honey in its possession." Company lawyers have filed a reorganization plan that details how the company would hand over ownership to a Texas private equity firm that, in exchange, would forgive at least $27 million worth of debt.

Cloud storage company Nirvanix Inc. on Tuesday filed for chapter 11 protection, the culmination of a startling flop for what was once seen as a high-flier among cloud startups, the Wall Street Journal reported yesterday. The filing comes on the heels of a notice the company posted on its website last week saying that it was working with International Business Machines Corp. to either return customers’ data or help them move it to another cloud storage provider and would try to be available through October 15. Nirvanix had raised more than $70 million in venture capital since its founding in 2007, according to VentureWire records. In May 2012 after the last funding round, which was $25 million, former Chief Executive Scott Genereux told VentureWire that Nirvanix was growing and headed toward profitability and a possible IPO. Its largest equity holders are Khosla Ventures and TriplePoint Capital, which may provide debtor-in-possession financing to keep the company running, according to the bankruptcy filing. The company reported assets of between $10 million and $50 million and liabilities in that same range, according to the filing.