Hearing on Eve of Tribune Co. Bankruptcy Mediation to Explore ?Conflicts? of Creditors? Lawyers

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By: Mark Fitzgerald

The judge overseeing Tribune Co.’s Chapter 11 bankruptcy ordered a hearing for today, Wednesday, over allegations that one of the law firms for the unsecured creditors has too many conflicts to  represent them.

The hearing comes as the divided creditors prepare for two days of mediation to craft a reorganization plan acceptable to unsecured creditors who do not want to be left with no payment, senior lenders who are poised to take over the company and current and former manager who could be held responsible for the alleged “fraudulent conveyance” of Tribune’s $8 billion 2007 leveraged buyout. Tribune filed for Chapter 11 reorganization almost exactly a year later in December 2008.

Two days of Mediation  is scheduled to begin Monday, Sept. 26.

At least two of the seven-member committee of unsecured creditors say Chadbourne should be ousted as one of their attorneys because it also represents senior lenders such as JPMorgan Chase in other matters.

In a court filing Tuesday, the Washington-Baltimore Newspaper Guild, representing employees of Tribune-owned The Sun in Baltimore, objected to the motion to bar Chadbourne made by Deutsche Bank and Wilmington Trust, a distressed-debt fund. The union said the unsecured creditors were “well-served by the invaluable guidance provided by Chadbourne.”

In a separate filing, the unsecured creditor committee members Deutsche Bank and Wilmington said: “ “Repeated allegations of conflicts have cast a shadow over this case.”
 
In an order entered Tuesday, U.S. Bankruptcy Judge Kevin Carey in Wilmington, Delaware, today told lawyers with the law firm in question, Chadbourne & Park LLP, to meet with the unsecured creditors who raised the conflict of interest claim.

He also said the committee of unsecured creditors should divide the mediation work between Chadbourne and its other law firm, Zuckerman Spaeder LLP.

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