A federal judge in Los Angeles ruled in favor of O’Melveny & Myers in a case alleging the Biglaw firm was conflicted in its representation a decade ago of a now-defunct investment firm Aletheia Research and Management, reports Bloomberg Law.

The ruling let stand an arbitrator’s August finding that O’Melveny didn’t commit legal malpractice, noting that “only in very unusual circumstances” does this occur and the investment firm’s trustee didn’t meet this standard, according to Bloomberg’s Melissa Heelan Stanzione.

A Chapter 7 estate trustee for Aletheia had argued that the law firm’s failure to recommend that Aletheia hire independent counsel to review the company’s relationship with its founders contributed to the company’s ultimate downfall.

Read the Bloomberg Law article.

Haynes and Boone reports that there has been an uptick in the number of North American oil and gas producer bankruptcies so far this year, with 33 filings as of the end of September. And 27 of those files have come since the beginning of May.

The firm’s Oil Patch Bankruptcy Monitor reports:

“Since our August 12 report, an additional 7 producers have filed bankruptcy with an aggregate amount of total debt in excess of $2.0 billion. This increase in year-over-year filings indicates that the reverberations of the 2015 oil price crash continue to be heard in the industry.”

Read the article.

Although Purdue Pharma LP is based in Connecticut and incorporated in Delaware, the company at the center of the opioid crisis filed for bankruptcy in New York, in a court where its case would be assigned to the only judge who works there, reports The Washington Post.

Bankruptcy Judge Robert Drain, on the bench since 2002, has long experience with complicated bankruptcy cases. On Friday he heard arguments over whether to take the unusual step of halting action in about 25 lawsuits brought by various states against Purdue and members of the Sackler family, which owns the company.

The Post article quoted Lynn M. LoPucki, a professor at the UCLA School of Law: “Of course Purdue strategically picked White Plains over all other courts. That’s like asking whether a chess master has a strategy or just makes moves randomly.”

According to The New York Times, the judge on Friday cited mounting costs of litigation that are siphoning funds that could otherwise go to abate the opioid crisis and ordered a pause in legal action by states against Purdue Pharma and its owners, the Sacklers.

Read the Post article.

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The recently signed “Small Business Reorganization Act of 2019″ creates a subchapter to Chapter 11 for small business debtors, i.e. those with no more than $2,725,625 in secured and unsecured debts combined, to address the unique issues faced by those companies in the bankruptcy process, explains Timothy J. McKeon in a post on Mintz’ website.

In addition to the creation of “subchapter V” to Chapter 11, the SBRA also makes important amendments to statutory provisions governing preference actions.

The new rule requires a debtor or trustee to consider a party’s statutory defenses “based on reasonable due diligence in the circumstances of the case and taking into account a party’s known or reasonably knowable affirmative defenses” prior to commencing an action under section 547, McKeon writes.

Read the article.

In a much-awaited and pivotal decision in the PG&E chapter 11 proceeding, the U.S. Bankruptcy Court for the Northern District of California held that it not only has exclusive jurisdiction over the rejection of wholesale power-purchase agreements, but that the Federal Energy Regulatory Commission has no such jurisdiction and any determinations by FERC to the contrary would be void, according to Holland & Hart.

“While the decision might not be surprising to most bankruptcy practitioners, the proposition that FERC has no jurisdiction over the breach or modification of a power-purchase agreement is not only shocking to energy practitioners, but contrary to well-established authority in the energy arena,” the firm said on its website.

Read the article.

The U.S. Bankruptcy Court for the Northern District of California held that it has exclusive jurisdiction over the rejection of wholesale power-purchase agreements, reports Holland & Hart in an article written by Risa Wolf-Smith.

The court also found that the Federal Energy Regulatory Commission has no such jurisdiction and any determinations by FERC to the contrary would be void.

“While the decision might not be surprising to most bankruptcy practitioners, the proposition that FERC has no jurisdiction over the breach or modification of a power-purchase agreement is not only shocking to energy practitioners, but contrary to well-established authority in the energy arena,” writes Wolf-Smith.

Read the article.

Failed law firm Sedgwick asked a California bankruptcy judge to approve a nearly $1.6 million claw-back settlement with 45 former partners who received equity payouts as the San Francisco-based firm slowly failed throughout 2017, reports Bloomberg Law.

The firm also said there may be viable breach of fiduciary duty claims against other ex-partners who are not part of the proposed settlement, according to Bloomberg’s Roy Strom.

“The partial compromise comes more than eight months after Sedgwick filed for Chapter 11 bankruptcy protection and a year-and-a-half after the 85-year-old firm ceased operations. The firm said confirmation of the deal could lead to the end of its bankruptcy case,” Strom writes.

Read the Bloomberg Law article.

The U.S. Supreme Court has held in Mission Product Holdings, Inc. v. Tempnology, LLC that a trademark licensee may retain certain rights under a trademark licensing agreement even if the licensor enters bankruptcy and rejects the licensing agreement at issue, reports Paul Weiss.

“Relying on the language of section 365(g) of the Bankruptcy Code, the Supreme Court emphasized that a debtor’s rejection of an executory contract has the ‘same effect as a breach of that contract outside bankruptcy’ and that rejection ‘cannot rescind rights that the contract previously granted,’” according to the firm.

“The Supreme Court’s decision has far-ranging implications, as the opinion’s reasoning can be expanded to apply to the vast majority of contracts that may be rejected in bankruptcy,” the article concludes.

Read the article.

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The United States Bankruptcy Court for the Northern District of Texas issued an opinion holding that an unintentional, duplicate obligation remaining under a contract can render the contract executory, even if perhaps in contravention of the plain language of the contract.

Writing for Weil, Gotshal & Manges’ Bankruptcy blog, David Li discusses In re TM Village, Ltd.:

The TM Village opinion framed the issues as whether the parties’ prepetition settlement agreement was an executory contract, and if so, whether the debtor could reject it in its business judgment (the court held in the affirmative on both issues).  The court reaffirmed that the plain language of a contract may be read in a broader context to avoid an “unreasonable, inequitable and oppressive outcome.” The case serves as a cautionary tale that even a simple clerical error may have unintended and prolonged consequences.

Read the article.

Above the Law reports that a U.S. District Judge delivered a benchslap to a Baker Donelson partner and a senior public policy advisor after they tried to jump the line in a receivership situation involving a hundred-million-dollar Ponzi scheme.

The judge had put a hold on any individual victim trying to carve back money in lieu of allowing a receiver to get the maximum recovery for all victims, but then Jon Seawright, the Baker Donelson partner, and Brent Alexander, the firm’s lobbyist, went out and tried to recover some money.

The judge responded with a lecture about the concept of a receivership, using the boarding process on Southwest Airlines as an example, writes Above the Law’s Joe Patrice.

Read the Above the Law article.

Purdue Pharma’s chief executive said the company is considering bankruptcy as it faces a cascade of lawsuits alleging that the drugmaker played a key role in driving the nation’s opioid crisis, including aggressively and deceptively marketing the powerful painkiller OxyContin, reports The Washington Post.

Craig Landau said that the company has not yet decided whether to file bankruptcy, but it is something the company is weighing as it considers the impact of potential legal settlements or jury verdicts that could cost tens of billions of dollars, according to the Post‘s Katie Zezima.

“Declaring bankruptcy could halt litigation against the company, bankruptcy lawyers said, and it can be more difficult for plaintiffs to secure judgments in bankruptcy court than in civil court,” Zezima writes.

Read the Post article.

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In a recent ruling, the Fifth Circuit strongly suggested that claims for make-whole damages be characterized as “unmatured interest” and that claims for postpetition interest on unsecured debt be limited in bankruptcy proceedings, reports Jones Day in a post on its website.

The Fifth Circuit reversed the Bankruptcy Court’s order holding that the debtors’ plan impaired the unsecured noteholders’ claims and vacated and remanded for reconsideration determinations by the bankruptcy court that noteholders were entitled to recover such contractual amounts.

The decision makes the Fifth Circuit unattractive to unsecured or undersecured lenders asserting claims for make-whole payments and default rate postpetition interest, the authors conclude.

Read the article.

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Remington Outdoor Co.’s decision to seek court protection brings up the question of whether people with pre-existing legal claims against the company will be made whole.

Bloomberg reports that lawsuits over firearms defects and the use of its weapons in the Sandy Hook attack were pending when the company filed for bankruptcy, and the company has moved to suspend those cases.

As reporters Eliza Ronalds-Hannon and Polly Mosendz write: “As much as $500 million could hang in the balance. Remington, which is owned by Cerberus Capital Management, is embroiled in litigation over trigger defects on guns such as its iconic Model 700 rifle, as well as another lawsuit by survivors of the children and teachers killed in the 2012 elementary school shooting in Newtown, Connecticut. Bushmaster, owned by Remington, manufactured the firearm used in that massacre, which left 26 dead. ”

Read the Bloomberg article.

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The California Supreme Court has ruled that failed law firms are not entitled to fees earned on legal matters that are in progress – but not completed – at the time the firm closes its doors, reports Bloomberg Law.

“Any expectation the law firm had in continuing the legal matters cannot be deemed sufficiently strong to constitute a property interest allowing it to have an ownership stake in fees earned by its former partners, now situated at new firms, working on what was formerly the dissolved firm’s cases,” according to the court’s opinion.

Reporter Elizabeth Olson writes that the estate of bankrupt Heller Ehrman LLP “brought suit against 49 law firms to recover millions of dollars it said were owed from legal work that the firm’s former partners had taken with them to their next legal workplace. But this ruling appears to let the law firms off the hook.”

Read the Bloomberg article.

CNBC is reporting that an expected bankruptcy filing by Remington could jeopardize a landmark class action settlement involving the company’s iconic Model 700 bolt-action rifle, according to an attorney involved in the case.

The article quotes Mark Lanier, a lead attorney for plaintiffs: “If they file for bankruptcy, it will stay all proceedings.”

Plaintiffs claim that Remington covered up a deadly design defect that allows the rifle — and a dozen similar models — to fire without the trigger being pulled. Remington denies those accusations.

“In 2014, while still maintaining the guns are safe, Remington agreed to replace the trigger mechanisms, free of charge, on millions of guns in order to settle the case. But two Model 700 owners, Richard Denney of Oklahoma and Lewis Frost of Louisiana, appealed the settlement. They argue the agreement deliberately downplays the risks from the guns, and does not do enough to notify the public,” reports Scott Cohn.

Read the CNBC article.

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General Motors Co. said late Tuesday it has asked the U.S. Supreme Court to reverse a 2nd U.S. Circuit Court of Appeals decision that has opened GM to potentially billions of dollars in lawsuits related to pre-bankruptcy claims over defective ignition switches, reports The Detroit News.

Reporter Melissa Burden explains that GM was protected from some liabilities prior to its bankruptcy restructuring, but that protection did not extend to post-restructuring after 2009.

“A number of injury, wrongful death and economic loss lawsuits have been filed against GM over its faulty ignition switches and recall of nearly 2.6 million older vehicles in 2014,” she writes. “GM has admitted it knew of the defect for years but did not recall the cars for more than a decade and has paid fines to the National Highway Traffic Safety Administration and the Department of Justice.”

Read the Detroit News article.

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The U.S. Supreme Court will is hearing arguments in a case that could upend the common practice that ranks lenders, employees and other creditors in order of priority as they try to recover their money when a company files for bankruptcy, according to a New York Times article.

“The case has attracted wide attention from academics, workers’ groups and state tax authorities,” writes Libby Lewis. “A decision could affect how much power bankruptcy courts have to approve settlements that do not follow the conventional order of creditor priority and potentially block some parties, in this case the company’s former employees, from any financial recovery.”

The court is hearing Czyzewski v. Jevic Holding Corporation.

Read the NYT article.

Reuters tells the story of “Chapter 22” companies, oil and gas industry firms that return to bankruptcy court after their first Chapter 11 overhaul failed to fix their problems.

Reporter Jessica DiNapoli describes the scene at Global Geophysical Services LLC, where a few employees are winding down what is left of an oil and gas industry data provider that only three years ago had a staff of more than 1,000 and offices around the world.

“A casualty of high debt and a cash crunch, the company filed for bankruptcy in early 2014 before tumbling oil prices pushed scores of other energy firms over the edge. Last year, it became one of nearly 20 companies that have already exited bankruptcy, but is now one of the first to have filed for creditor protection again,” she explains in the article.

She quotes Edward Altman, a professor emeritus at the Stern School of Business at New York University, as saying that nearly a fifth of all U.S. companies that exit bankruptcy as a going concern seek creditor protection again within about five years.

Read the Reuters story.

A federal judge has ruled that closure of Orlando-based Butler & Hosch law firm was illegal because executives knew it would close and didn’t warn employees in accordance with federal law, reports the Orlando Sentinel.

When the firm closed in 2015, about 700 employees in Dallas, Orlando, Miami, Tampa and other locations were told in a conference call that they would not be paid for their final three weeks at work, writes reporter Paul Brinkmann. Law requires 60-day notice of mass layoffs, but employees were told of the plan on the last day.

“If the company were still functioning, the law says it could be required to pay wages and benefits for 60 days to each employee, plus a fine totaling about $21 million — $500 per day per employee,” according to Brinkmann.  But now that claim becomes part of the firm’s bankruptcy process.

Read the article.

A federal judge rejected PricewaterhouseCoopers’ bid to dismiss a $1 billion lawsuit accusing the accounting firm of professional malpractice for helping cause the October 2011 bankruptcy of brokerage MF Global Holdings Ltd., reports Reuters.

U.S. District Judge Victor Marrero in Manhattan said there remained open questions concerning whether PwC’s alleged bad accounting advice was a substantial cause of MF Global’s rapid demise.

“PwC has not satisfied its burden of demonstrating the absence of any genuine issue of material fact,” Marrero wrote.

“PwC stands by its work for MF Global,” James Cusick, a lawyer for the firm, said in a statement. “MF Global’s collapse was caused by its own business decisions and adverse market events, not any accounting determination.”

Jonathan Stempel reports that MF Global sought Chapter 11 protection after investors grew anxious about a $6.3 billion investment in European sovereign debt, a large quarterly loss, credit rating downgrades, margin calls, and the use of customer funds to shore up liquidity.

Read the article.