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New York Attorney General Eric Schneiderman persuaded a federal judge to decide a dispute with the Bernard Madoff brokerage trustee over distributing a $415 million settlement with a Ponzi scheme investor to victims of the fraud, Bloomberg News reported on Friday. U.S. District Judge Jed Rakoff said that he was convinced the case, started in bankruptcy court by trustee Irving Picard, requires a ruling by a higher court "after carefully considering the parties' written submissions and oral argument," according to an order filed on Friday. Schneiderman in June agreed to settle a state lawsuit against the former Madoff investor, J. Ezra Merkin, by allotting most of the settlement money to investors in Merkin's hedge funds and the rest to the state. Picard responded by suing Schneiderman in bankruptcy court to stop him from completing the deal, saying that it obstructs his own efforts to collect $500 million from Merkin and his funds for a different group of investors.

Tribune Co., owner of the Chicago Tribune, Los Angeles Times and six other daily papers, emerged from bankruptcy, four years after a doomed leveraged buyout by billionaire Sam Zell led to chapter 11 proceedings, Bloomberg News reported today. Distributions to creditors have been initiated, the Chicago-based company said today. As part of its exit from bankruptcy, Tribune Co. also closed on a new $1.1 billion term loan and a $300 million revolving credit line. Tribune Co. filed for bankruptcy after Zell, a real-estate developer, orchestrated an $8.3 billion leveraged buyout of the company in 2007, just before a global recession and a slump in print advertising devastated the newspaper industry. The buyout loaded Tribune with debt, and Zell failed to pull off a turnaround of the newspapers.

American Realty Trust wants more time behind the shield of bankruptcy to figure out how to pay off a judgment from a failed apartment building sale, Dow Jones DBR Small Cap reported today. Lawyers for American Realty are seeking a six-month extension of its exclusive right to file a chapter 11 plan explaining how it intends to pay off creditors, including a disputed $73 million judgment to a Michigan real estate developer.

American Airlines' pilot union warned that an American Airlines merger with US Airways Group Inc. may not occur during the AMR Corp. unit's bankruptcy unless pilot groups from the carriers agree on interim contract terms, Bloomberg News reported today. If an accord is not reached “in the very near future, in all likelihood there will be no merger before American Airlines exits restructuring,” said Keith Wilson, president of the Allied Pilots Association. The pilot groups, joined by executives from both carriers, began negotiating the accord earlier this month. American, which filed for bankruptcy on Nov. 29, 2011, has said it prefers to assess mergers after it leaves court protection. US Airways has been pushing for a tie-up since January.

The pharmacy linked to a deadly U.S. meningitis outbreak said on Friday that it filed for chapter 11 protection, Reuters reported. New England Compounding Center, the specialty pharmacy shut down after shipping tainted vials of a steroid, said it will seek to establish a fund to compensate meningitis victims. NECC, based in Framingham, Massachusetts, said it made the filing in U.S. Bankruptcy Court for the District of Massachusetts.

Embattled money-management firm Aletheia Research and Management Inc. has reached a deal with its unsecured creditors that would see an independent trustee appointed to manage the company while it attempts to restructure in chapter 11, Dow Jones DBR Small Cap reported today. In court papers filed on Thursday, Aletheia and its unsecured creditors' committee agreed to the appointment of a chapter 11 trustee to "avoid the uncertainty and costs arising from litigation."

A U.S. bankruptcy judge ruled against an attempt by the California Public Employees Retirement System to bypass the bankruptcy court and collect overdue pension payments from the bankrupt city of San Bernardino, Reuters reported on Friday. The decision, while only one step in a highly complex legal proceeding, was a blow to Calpers' argument that pension payments and California law should take precedence in a bankruptcy. Calpers, the largest U.S. pension fund with $241 billion in assets, had been seeking to lift the automatic bar on payment collections that comes with a bankruptcy filing.

To learn more about issues in chapter 9, be sure to pick up the latest ABI publication, Municipalities in Peril: The ABI Guide to Chapter 9, Second Edition, now up for pre-order in ABI's Bookstore.

James Giddens, the trustee for the failed MF Global Inc., announced two key agreements that are expected to accelerate cash payouts to clients and creditors of the failed futures brokerage, Reuters reported on Saturday. Giddens said that he has negotiated deals to resolve disputes with the company's former British affiliate and the parent company, MF Global Holdings Ltd. As a result of the UK agreement, Giddens estimated between $500 million and $600 million could be returned to the MF Global estate if the deal is finalized.

American Airlines parent AMR Corp. and US Airways Group Inc. are moving closer to a merger, and a decision could come early next month, Bloomberg News reported yesterday. Teams from each carrier are discussing how to combine departments, including personnel, compensation and severance. AMR's board will meet on Jan. 9 to decide whether to go ahead, with an announcement possible within days. The push follows AMR's efforts to reorganize in bankruptcy court before a merger and US Airways’s quest to lead a takeover creating the world’s largest airline. The chief unsettled issues pending with AMR's unsecured creditors committee, which must approve any exit plan, are how to divide the equity in a new company and who would run it.

Residential Capital LLC won court approval of a mediator for talks with creditors opposing the bankrupt mortgage company's $750 million settlement with parent Ally Financial Inc., Bloomberg News reported yesterday. Bankruptcy Judge Martin Glenn agreed to appoint fellow judge James Peck to try to resolve a fight over how much Ally should be forced to pay to avoid a lawsuit over what the company did before it put ResCap into bankruptcy and other issues. Unsecured noteholders represented by Wilmington Trust NA say that Ally is offering too little to resolve claims that it stripped ResCap of valuable assets. A bankruptcy examiner is investigating the settlement offer and plans to deliver a report in April.